Draft Financial Statements 2018/19 CONTENTS Narrative Report 1 Annual Governance Statement 14 Independent Auditor’s Report 31 Statement of Accounts Approval of Accounts 34 Statement of Responsibilities 35 Comprehensive Income & Expenditure Statement 36 Movement in Reserves Statement 37 Balance Sheet 38 Cash Flow Statement 39 Notes to the Core Financial Statements 40 The Collection Fund 110 Notes to the Collection Fund 111 Group Accounts 113 Notes to the Group Accounts 118 Glossary of Terms 123 Index 130 Bracknell Forest Council i Draft Financial Statements 2018/19 Bracknell Forest Council ii Draft Financial Statements 2018/19 NARRATIVE REPORT 1 Introduction The Accounts and Audit Regulations 2015 require the Council to produce a Statement of Accounts for each financial year giving certain specified information. This Narrative Report accompanies the accounts and provides a brief explanation of the financial aspects of Bracknell Forest Council’s activities and draws attention to the main characteristics of the Council’s financial position. To assist readers, a glossary of accounting terms is included on pages 123 to 129. Bracknell Forest is a Unitary Council and following the transfer of its housing stock accounts for its expenditure in two distinct categories: General Fund Revenue Account – This includes day to day spending on all services. Expenditure is financed mainly from government grant, a proportion of the Business Rates income collected, charges to users of services, and Council Tax. Capital – All improvements and additions to the Council’s assets and the creation of new assets with a life or more than one year are included in this category. This expenditure is primarily financed from the sale of capital assets, government grants, contributions from developers, and borrowing from internal and external sources. This Narrative Report is followed by: • The Annual Governance Statement which accompanies the accounts and has been signed by the Chief Executive and Leader of the Council, after being approved by the Governance and Audit Committee. It explains the arrangements the Council has for the governance of its affairs and for ensuring that there is a sound system of internal control; • The Independent Auditor’s Report which includes the auditor’s opinion on the Statement of Accounts and assesses the Council’s arrangements for securing economy, efficiency and effectiveness in its use of resources. • The Statement of Accounts which incorporates the following main statements and related notes: • The Statement of Responsibilities which sets out the respective responsibilities of the Council, the Governance and Audit Committee and the Director: Finance. • The Comprehensive Income & Expenditure Statement, which shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from Council Tax. Councils raise Council Tax to cover expenditure in accordance with regulations; this may be different from the accounting cost. The Council Tax position is shown in the Movement in Reserves Statement. • The Movement in Reserves Statement, which shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. • The Balance Sheet, which shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the Council Bracknell Forest Council 1 Draft Financial Statements 2018/19 NARRATIVE REPORT (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves is those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement section ‘Adjustments between accounting basis and funding basis under regulations’. • The Cash Flow Statement, which shows the changes in cash and cash equivalents (investments that mature in three months or less) of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of Council Tax and grant income or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council. • The Collection Fund, which records the Council Tax and Business Rates raised by the Council during the year and how they are subsequently distributed. • The Group Accounts include the group statements and associated notes for the Council and its wholly owned subsidiary Downshire Homes Ltd. 2 Revenue Expenditure The Council, at its meeting on 28 February 2018, set a revenue budget for the 2018/19 financial year of £83.655m. The total authorised General Fund net expenditure for the 2018/19 financial year was £86.910m (including parish precepts of £3.255m). Further increases to service budgets can be approved if they are financed from earmarked and other reserves. When these further budgets are approved an equivalent sum is transferred from the reserve to the revenue account. These transfers do not have an impact on the overall budget. This expenditure was to be met by Government Grant (Revenue Support Grant), a proportion of the Business Rates collected, Council Tax and the use of reserves, as shown in the following chart. The large proportion met from Business Rates reflects the large surplus on the Collection Fund in 2017/18 (-£3.0m), which impacts on the 2018/19 budget, and the Council forming part of the Berkshire Business Rates Pilot which resulted in an increase in Business Rates income, with an associated removal of Revenue Support Grant. The table on page 6 compares actual outturn expenditure incurred with the amended budgets for the year for the General Fund. This table reflects the Council’s directorate structure from 1 September 2018, which is the basis for the internal management of performance against budgets, as does the Comprehensive Income & Expenditure Statement. A new directorate structure was introduced by the Council on that date effectively merging the Children, Young People Bracknell Forest Council 2 Draft Financial Statements 2018/19 NARRATIVE REPORT and Learning and Adult Social Care, Health and Housing departments into the People Directorate with the remaining services split between the Central and Delivery directorates. Changes in capital charges (£12.2m) and pension adjustments (-£3.8m) account for most of the movement on service directorate budgets since the original budget was approved. These are reversed out of the accounts and therefore there is no net change to the overall budget. Other significant adjustments included allocations from the Contingency Fund (£2.1m) and other Council Wide Budgets (-£2.6m). Council spending was within budget for the twenty-first successive year. From the table on page 6 it can be seen that an under spend of -£2.528m occurred on the General Fund. This broadly reflects the position reported during the year that additional one-off income from a refund of VAT from HMRC relating to leisure services would be used to replace the planned use of general reserves to support the budget. The most significant variances from budget are explained in the sections below. 3 Major Revenue Variances The major variances occurred in the following areas: Central • The anticipated increase in bus passenger numbers following the opening of the regenerated town centre did not materialise, resulting in an under spend on Concessionary Fares (-£0.288m). • A lower level of external and internal audit fees within Finance (-£0.095m). • Additional income for the administration of the Community Infrastructure Levy (-0.212m), for Suitable Alternative Natural Greenspaces (SANGS) capacity (-£0.051m) and from streets works permits and penalties (-£0.168m). Delivery • An over spend on Industrial and Commercial Properties, primarily due to vacant properties across the portfolio (£0.205m) partly offset by an under spend on Construction and Maintenance (-£0.052m). • An under spend in the Operations Unit primarily from reduced Home to School Transport costs and additional income (-£0.174m). • The sale of Easthampstead Park Conference Centre was delayed resulting in additional one-off costs being incurred (£0.308m). • An under spend at the Look Out, primarily relating to equipment and additional income (-£0.117m) plus under spends within Customer Services on licences (-£0.072m) and within Member and Mayoral Services (-£0.031m). • An under spend within Legal Services primarily from additional fee income (-£0.203m) and additional income at the Cemetery and Crematorium (-£0.082m). Bracknell Forest Council 3 Draft Financial Statements 2018/19 NARRATIVE REPORT • An under spend in ICT relating to licence and maintenance costs, equipment, mobile telephones and consultants fees (-£0.372m). • An under spend on Waste Management resulting from a VAT adjustment and additional income (-£0.352m). • The Car Parks under achieved on income (£0.357m) and additional running costs were incurred (£0.316m).