Statement of Accounts and Annual Governance Statement 2018/2019
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Statement of Accounts and Annual Governance Statement 2018/2019 Statement of Accounts and Annual Governance Statement 2018/2019 Report of the Treasurer and Chief Executive ..................................................................... 4 Statement of Responsibilities for the Statement of Accounts ............................................. 24 Comprehensive Income and Expenditure Statement ........................................................ 25 Movement in Reserves Statement .................................................................................. 26 Balance Sheet ............................................................................................................. 27 Cash Flow Statement ................................................................................................... 28 Notes to the Accounts .................................................................................................. 29 1. Expenditure and Funding Analysis .......................................................................... 29 2. Statement of Accounting Policies ........................................................................... 31 3. Accounting Standards that have been issued but have not yet been adopted .............. 48 4. Critical judgements in applying Accounting Policies .................................................. 49 5. Assumptions made about the future and other major sources of estimation uncertainty 50 6. Material items of Income and Expenditure .............................................................. 51 7. Events after the Reporting Period .......................................................................... 51 8. Adjustments between accounting basis and funding basis under regulations ............... 52 9. General Fund Balance, Schools and Earmarked Reserves .......................................... 54 10. Notes to the Expenditure and Funding Analysis ....................................................... 55 11. Other Operating Expenditure ................................................................................. 57 12. Financing and Investment Income and Expenditure ................................................. 57 13. Taxation and Non Specific Grant Income ................................................................ 57 14. Expenditure and Income Analysed by Nature .......................................................... 58 15. Revenue from Contracts with Service Recipients ...................................................... 59 16. Property Plant and Equipment (PPE) ...................................................................... 60 17. Long Term Debtors .............................................................................................. 64 18. Financial Instruments ........................................................................................... 65 19. Creditors and Debtors .......................................................................................... 77 20. Provisions ........................................................................................................... 78 21. Cash and Cash Equivalents ................................................................................... 80 22. Assets Held for Sale ............................................................................................. 80 23. Unusable Reserves............................................................................................... 81 24. Other Long Term Liabilities ................................................................................... 84 25. Cash Flow – Adjustments to the deficit on the Provision of Services for non-cash movements ......................................................................................................... 85 26. Cash Flow – Adjustments to the deficit on the Provision of Services for investing and financing activities ............................................................................................... 85 27. Cash Flow - Operating Activities ............................................................................ 85 28. Cash Flow - Investing Activities ............................................................................. 86 29. Cash Flow - Financing Activities ............................................................................. 86 30. Cash Flow - Reconciliation of liabilities arising from financing activities ....................... 86 31. Members’ Allowances ........................................................................................... 87 32. Audit Fees .......................................................................................................... 87 33. Officers' Remuneration ......................................................................................... 88 34. Grant Income ...................................................................................................... 91 35. Capital Expenditure and Capital Financing ............................................................... 94 36. Partnerships and Related Party Transactions ........................................................... 95 37. Private Finance Initiative and Similar Contracts ...................................................... 101 38. Leases and Contract Hire ..................................................................................... 107 39. Pensions ............................................................................................................ 108 40. Contingent Liabilities ........................................................................................... 116 Glossary of Terms ...................................................................................................... 118 Pension Fund Statement of Accounts 2018/19 ................................................................ 127 Annual Governance Statement 2018/19 ........................................................................ 184 Report of the Treasurer and Chief Executive Introduction Welcome to the 2018/19 financial statements for Devon County Council. This report includes a brief overview of the County Council together with highlights of performance for 2018/19. It also provides a summary of the financial performance of the Council as detailed later in the Statement of Accounts. The financial statements have been prepared in accordance with the requirements of the Code of Practice on Local Authority Accounting (the Code) which is based on International Financial Reporting Standards (IFRS). The Devon Pension Fund accounts, although included in this publication, are separate from the accounts of the Council and are subject to a separate audit opinion. The Annual Governance Statement is included within this publication but does not form part of Devon County Council's accounts or those of the Pension Fund. The Annual Governance Statement explains the Council's Governance Framework and the roles of Cabinet and the Scrutiny function and significant governance issues and the challenges faced by the County Council. This report constitutes the Authority's "Narrative Statement" as required by Section 8 of the Accounts and Audit Regulations 2015 (the Regulations). Accounting Policies The accounting policies (Note 2, page 31) establish the principles on which the figures in the financial statements are based. This year the Code adopts two new accounting standards: • IFRS 15 Revenue from Contracts with Service Recipients; and • IFRS 9 Financial Instruments. There is no significant impact on how the Authority recognises or measures assets, liabilities, income or expenditure. However, there are additional disclosures: • Aged debt analysis of debtors for local taxation - business rates and council tax (Note 19) • Additional analysis of revenue from service recipients (Note 15) • How variations in the fair value of investments are accounted for and classified (Note 18) • The Available for Sale Reserve is replaced by the Financial Instruments Revaluation Reserve (Note 18). Summary of Financial statements The financial statements and their purpose are summarised as follows: Comprehensive Income and Expenditure Statement (page 25) This statement 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 taxation. Councils raise taxation to cover expenditure in accordance with regulations: this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement. The Comprehensive Income and Expenditure Account shows a deficit of £29.9 millions in 2018/19 compared with a deficit of £75.7 millions in 2017/18. The reduction in the deficit is 4 mainly due to technical adjustments which can be found in Note 8, pages 52 and 53, which has decreased from £100.2 millions to £51.2 millions, a net change of £49.0 millions. The largest individual movement is the decrease in asset disposals (mainly academy conversions) of £70 millions, offset by other changes including the pension reserve and capital grants. The overall Pension deficit has reduced because of changes to actuarial assumptions, mainly the mortality assumptions that is included in Other Comprehensive Income and Expenditure rather than in the Deficit on the Provision of Services. Movement in Reserves Statement (page 26) This statement shows the movement in year for the reserves held by the Authority analysed into usable reserves (i.e. those