Somerset County Council
Published by: Corporate, Accounting & Technical Section, Statement of accounts Finance Department, Somerset County Council Printed by: 2007/08 SCS Design & Print, Somerset County Council, County Hall, Taunton, Somerset TA1 4DY
Foreword from the Head of Finance
I am pleased to present Somerset County Council’s statement of accounts for 2007/08. This document, together with the authority’s Annual Plan and many of the other plans we must produce by law, provides a commentary on our performance. Making sure we are accountable for our work is extremely important and our financial statements help show how your money has been used.
We have written our statement of accounts using plain, jargon-free English as judged by the Plain English Campaign’s Crystal Mark, which shows that the information is as clear as possible. Using plain English in our publications is one of the steps we take to communicate more effectively with our citizens and other readers of the accounts. We hope the use of plain English will encourage more people to read our publication.
We value diversity, and celebrate cultural and social differences. Our equal-opportunities promise is to provide all services of equal quality which meet your needs and fulfil your rights. You can expect us to treat you fairly, with respect and dignity, whoever you are and whatever your background.
Kevin Nacey CPFA Jill Shortland Head of Finance and Property Chairman 26 September 2008 Special Accounts Committee 24 September 2008
Contents
The Head of Finance’s introduction Page 1
Statement of responsibilities Page 10
Auditor’s report Page 11
Annual Governance Statement Page 14
Statement of accounting policies Page 19
Income and Expenditure Account Page 24
Statement of Movement on the General Fund Balance Page 26
Statement of Total Recognised Gains and Losses Page 27
Balance Sheet Page 28
Cash-flow Statement Page 29
Notes to the Core Financial Statements Page 30
Group Accounts Page 65
The Pension Fund Page 70
Glossary of Terms Page 79
Head of Finance’s introduction
This section highlights some of the most important matters reported in the accounts and comments on any issues that have had a major effect on our finances.
Introduction
The annual statement of accounts sets out a summary of our financial affairs for 2007/08 and shows our financial position on 31 March 2008. It includes the following statements and accounts.
• Income and Expenditure account • Statement of Movement on the General Fund Balance • Statement of Total Recognised Gains and Losses • Balance Sheet • Cash-flow statement • Group accounts • Pension Fund accounts
We use some technical terms in these accounts, which we have explained in the glossary on page 78.
Important developments this year
Format of the accounts
We have made some changes to the content of the accounts this year. These changes have been made to meet the new accounting rules set out in the 2007 Statement of Recommended Practice (SORP), which has been developed by CIPFA and the Accounting Standards Board (ASB). The changes are intended to bring our accounts more in line with UK GAAP (Generally Accepted Accounting Practice). The main changes are as follows.
• We have combined the Capital Financing Account and the Fixed Asset Restatement Account to form the Capital Adjustment Account.
• We have a new Revaluation Reserve, which records all the upward revaluations (where the value of our assets has increased as a result of a revaluation) we have on our assets.
• There is new information we have to reveal relating to financial instruments.
Fire service merger
Following a review of our Fire Services, which was carried out during 2005/06, it was agreed that our Fire Service would merge with Devon Fire & Rescue Services on 1 April 2007 and create a new authority called Devon and Somerset Fire and Rescue Authority. This merger was fully supported by the Government. As a result of this merger, some important transactions took place in 2007/08.
Improving Services in Somerset (ISiS)
During 2007/08, the Improving Services in Somerset (ISiS) programme, part of our local modernisation agenda, took shape and resulted in a contract between SCC, TDBC and IBM. The two councils’ support services functions will now be provided by a company called South West One, created by the councils and IBM. The Avon and Somerset Constabulary also joined the partnership in 2007/08.
Somerset Waste Partnership
During the year, we became the administering authority of the Somerset Waste Partnership. This partnership will take a consistent approach to meeting the responsibilities of both the districts and the county council to collect and manage waste. As the administering authority, the transactions and reserves relating to the partnership will be shown in our accounts. The assets held by the districts for waste collection and so on were transferred to our accounts on 8 October 2007. These are shown in the Balance Sheet under ‘Operational assets’.
4 Star Authority
During the course of this year, it was announced that the Audit Commission – under its Comprehensive Performance Assessment (CPA) – had assessed Somerset County Council as improving strongly and
1 demonstrating a 4-star overall performance. We are extremely pleased to hear that our hard work to continuously improve has been acknowledged by this independent source.
Revenue spending in 2007/08
In February 2007, we agreed our budget at £267 million. This resulted in a band-D Council Tax of £963, which was an increase of £36.16 or 3.9% over the equivalent figure for 2006/07.
The following table shows that our actual spending was £270.5 million. These figures are based on directorate responsibilities, rather than the total cost of providing services (including charges for support services, using assets, and adjustments to show the true cost of providing pensions to employees), which is used in the income and expenditure account on page 23.
2007/08 2007/08 Directorate Budget Actual Variation £millions £millions £millions %
Children's Services 72.0 42.4 -29.6 -41.1 Community Services 114.2 113.7 -0.5 -0.5 Environment 65.2 68.1 2.9 4.5 Chief Executive's Office 3.9 4.0 0.1 2.7 Resources 20.3 18.5 -1.8 -9.0 275.6 246.7 -28.9 -10.5
Non-service items 26.0 23.8 -2.2 -8.5 301.6 270.5 -31.1 -10.3 Transfer to or from (-): the carry-forward fund -29.0 0.9 29.9 revenue reserves which we have set aside -1.8 0.2 2.0 the capital fund -1.9 -5.9 -4.0 general reserves -1.5 1.7 3.2 267.4 267.4 0.0
Funded by: Government grant -11.8 -11.8 0.0 Business Rates -70.3 -70.3 0.0 Council Tax -185.3 -185.3 0.0 -267.4 -267.4 0.0
Carry-forward fund
Services are allowed to spend up to their approved budgets. In 2007/08, this was £275.6 million. Each year services are allowed to save any amounts they have not spent, and they can spend these in future years. This is called the ‘carry-forward fund’. Services also have other reserves, which they have set aside for certain purposes, and they are allowed to spend these on those purposes. On top of this, some spending (for items outside our services’ control) is funded from general reserves. The table on page 3 shows how the carry-forward fund changed during the year.
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Carry-forward fund 2007/08 £millions £millions
Balance on 1 April 2007 26.344 Add: Legal services (now a trading account) 0.280 Add: 2006/07 overspends funded from general reserves 0.883 Add: overspends managed by services 1.513 29.020 Less: 2007/08 approved use of carry-forward reserves -30.408 -1.388 Service budgets (including use of carry-forward fund) 275.613 Less: total service spending -243.204 Net service underspending 32.409 Corporate costs underspending -0.830 Service underspending transferred to reserves set aside for other purposes 0.400 Service underspending transferred to general reserves -2.069 Underspending transferred to the carry-forward fund 29.910
Add: transfers from earmarked reserves -0.213 Carry-forward fund on 31 March 2008 28.309
Of the £28.3 million total carried forward, £29.1 million is for individual school budgets and cannot be used for anything else. This is an increase of £3.7 million over the previous year. It is partly because all schools receive a special grant, which many are saving up to pay for future building work, and also because schools can now carry forward their underspending from the Standards Fund grant.
Financing
The diagrams below show where our money came from, which services we spent it on and how we spent it. It is important to note that the contribution from the local community through the Council Tax represents just 22% of our funding needs.
Analysis of total revenue spending (£822 million)
Where the money came from
Council Tax 22%
Government grants 47%
Fees and charges 21% Revenue Support Grant Business Rates 1% 9%
3
Which services we spent it on
Education 51%
Highways 10%
Other services 9%
Waste services 3% Libraries Social services 1% 26%
How we spent this Capital financing charges 4% Employees Running expenses 48% 48%
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Capital spending in 2007/08
Alongside our day to day costs, we spend money on assets such as buildings, roads, major maintenance, vehicles and information and communication technology (ICT). This is capital spending. During 2007/08, our actual capital spending was £64.0 million (£49.8 million in 2006/07). Of this, we spent £13.8 million on schools and £7.1 million on other services for children and young people including nurseries, children’s centres and the Youth Service. We spent £26.7 million on maintaining and improving our highways and transport services. The following table shows where we spent this money.
Scheme 2007/08 £millions £millions Children Basic-need classrooms - various sites 0.3 and young Removal and replacement of temporary classrooms 2.3 people and associated alterations Children's centres and new nurseries 3.5 Sports facilities - various sites 1.0 School alterations to accommodate extra-curricular activities outside 1.9 the school day Schools access initiative 0.6 Birchfield Community Primary School: new and replacement classrooms 1.4 Brymore School: new accommodation and specialist teaching facilities 2.8 Shepton Mallet Community Infants School: new hall and children's centre 0.6 Facilities for improving school meals 0.4 Learning centres for technical and work related training for 14- to 19- year 2.7 olds Youth Offending Team and pupil referral units: various locations 0.9 Youth Service investment 0.5 18.9 Environment Major new road schemes in Taunton 0.8 New passenger vehicles for school, community and social transport 0.2 Road maintenance 17.1 Road safety, traffic management and lighting schemes 3.4 Buying waste collection vehicles and equipment for Somerset 4.8 Waste Partnership Maintaining and strengthening bridges 2.1 Passenger transport outside main towns 2.3 Improving roads, footpaths and cycling facilities in towns 0.7 31.4 Community Library Service projects 0.3 services Museum of Somerset project 0.4 Minehead small business units and tourist facilities 1.7 Dulverton small business units 1.0 Economic Development projects 0.9 Improving accommodation for people with learning disabilities 1.1 Investing in housing for people with special needs 0.2 5.6 Resources Investment in corporate hardware and software 4.0 Other Other projects 4.1 Total capital spending 64.0
Our total spending was less than originally planned. We originally predicted spending £64.4 million in 2007/08. During the year, this increased by £14.9 million as a result of identifying new resources, including grants and contributions from other organisations. Of the new total of £79.3 million, we did not spend £15.3 million (this is known as ‘slippage’ between years and is quite normal – in 2006/07 there was £8.8 million of expenditure put back into 2007/08). We expect this spending to take place in 2008/09 or later years.
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Analysis of total capital spending (£64.0 million)
Where the money came from
Capital contributions 7% Capital fund 5% Other reserves 1%
Government grants 32%
Loans 47%
Revenue Capital receipts contributions 7% 1%
Which services we spent it on
Children's Services Waste 33% 7%
Other services 15%
Adult Social Care Highways 3% 42%
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How we spent this
Spending on assets Land and buildings we do not own 10% 15%
Vehicles and equipment 14%
Assets currently being built 20% Roads and bridges 41%
Borrowing facilities
Under the Prudential Code, we have set an authorised limit against which our external borrowing is monitored and managed. For 2007/08, the total approval was £457 million (next year’s approval is £544 million). On 31 March 2008, the amount we owed was £376.2 million (£426.5 million in 2007).
On On 31 March 31 March 2007 Borrowing 2008 Restated £millions £millions
114.3 Public works loan board (PWLB) 128.5 212.9 Other long-term loans 185.5 55.0 Somerset Pension Fund 18.9 38.1 Other organisations investing in the Comfund 42.2 6.2 Other organisations and trust funds investing cash surpluses 1.1 426.5 376.2
We have to repay £0.2 million of PWLB loans within 12 months (£0.8 million in 2007).
In line with accounting practice, we must show the ‘fair value’ of our loans. The fair value of the PWLB loan is £135.643 million at 31 March 2008 (£113.269 million at 31 March 2007). The fair value of the other long-term loans is £191.546 million at 31 March 2008.
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Reserves
On 31 March we had the following reserves available.
On On 31 March 31 March 2007 Reserves 2008
£millions £millions
8.5 Capital reserves 13.3 18.6 Revenue reserves set aside for capital 13.8 25.5 Schools' carry-forward fund 29.1 0.9 Services' carry-forward fund -0.9 3.2 Other revenue reserves which we have set aside 7.4 11.7 General reserves (see the note below) 13.3 68.4 76.0
General reserves represent just 4% of the 2008/09 budget. This shows that we need to continue to operate within very strict financial limits.
Looking ahead to 2008/09 and the future
We are developing a reputation for innovation and playing a leading role in the modernising agenda. With the amount of change and transformation we are facing, there is of course opportunity and risk.
We continually improve our services to the public. To improve further over the next 12 months, we will transform our support services by introducing a new financial system, SAP.
We will work with our key partners to make yet more savings from our activities. Under the Pioneer Somerset programme, all Somerset councils will review how they provide services and share services wherever possible.
We have already found a better way of providing our leisure services and will create a leisure trust in 2008/09.
As well as our consistent efforts to improve services and reduce costs, we must deal with the ever-increasing demand for our services. In particular, the number of adults with learning disabilities that we care for is rising steeply, and we are also faced with significant costs associated with replacing worn-out school buildings. Levels of government funding for Somerset are not expected to keep pace with inflation over the next three years, and we are aiming to keep Council Tax down as much as possible. We have a three-year Medium Term Financial Plan in place, which sets out spending pressures, estimated funding and savings for the 2008/09 to 2011/12 period. When we set our budget, we carefully considered the needs of residents who have low and fixed incomes, and the needs of people who depend on our services.
The Council Tax we set for 2008/09 is £999.90 for a band-D property – this is an increase of £36.51 or 3.79% over the 2007/08 Council Tax. This level of Council Tax allowed us to fund inflation (the general rise in prices) by £12 million, provide an extra £20 million for services and for investment in buildings, roads and new systems and to fund an extra £0.4 million of pension costs. To deliver this, however, we had to identify £12 million of savings, around half of which were made through being more efficient in the way we work. We have also used £6 million of reserves to finance one-off investment through the revenue budget.
For 2009/10 and 2010/11 we are planning to invest over £24 million in services, £11 million of which relates to cost pressures in adult social care caused by rising numbers of adults needing social care in Somerset and reductions in government grant funding. Also, inflation is likely to increase in the medium term as the rising cost of raw materials starts to affect social care, transport and construction costs. This means that, although we will receive yearly increases of 5% to 6% in the mainstream 'formula' grant from the Government, we are still predicting a shortfall of £15 million across 2009/10 and 2010/11. We will have to fund this shortfall by making savings, including finding new ways of working that will save us money without affecting front-line services (services that deal with the public direct). We plan to achieve this through our transformation programme (working with the South West One shared service centre) and through new ways of working with our district council partners, which avoid duplication of services.
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Inspection and audit
Before completing the audit, we will make these accounts available for public inspection (from 1 August to 25 August) so that people who pay Council Tax and rates, and other members of the public, can ask the auditor any questions. This is a legal requirement, but my department will answer questions from anyone with an interest at any time.
The Special Accounts Committee will consider these accounts for approval on 27 June. The accounts are due to be audited from 21 July, and, once the audit has been completed, the Audit Commission’s audit report will be published on pages 11 and 12.
Kevin Nacey CPFA Head of Finance and Property 26th September 2008
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Statement of responsibilities
This section explains our responsibilities for our financial affairs and how we make sure we carry out these responsibilities properly.
Our responsibilities
We must:
• make arrangements for the proper administration of our financial affairs and make sure that one of our officers is responsible for managing those affairs (in this case, the Head of Finance is responsible for doing this);
• manage our affairs to use our resources economically, efficiently and effectively and to protect our assets; and
• approve this statement of accounts before 30 June 2008.
The Head of Finance’s responsibilities
The Head of Finance is responsible for preparing our statement of accounts in accordance with the Chartered Institute of Public Finance and Accountancy’s code of practice on local authority accounting in Great Britain. These accounts must present our financial position fairly, including our income and spending for the year.
In preparing this statement of accounts, the Head of Finance has:
• chosen suitable accounting policies and then used them consistently;
• made judgements and estimates that were reasonable and prudent; and
• followed the Local Authority Statement of Recommended Practice (SORP).
The Head of Finance has also:
• kept proper accounting records which are up to date; and
• taken reasonable steps to prevent and detect fraud and other irregularities.
The Head of Finance’s declaration
This statement of accounts presents fairly the financial position of Somerset County Council on 31 March 2008 and our income and spending for the year ending on that date.
Kevin Nacey CPFA Head of Finance and Property 26 September 2008
10
Independent Auditor’s Report
to the Members of Somerset County Council
The audit report will appear here.
11
Independent Auditor’s Report
to the Members of Somerset County Council
The audit report will appear here.
12
Independent Auditor’s Report
to the Members of Somerset County Council
The audit report will appear here.
The Plain English Campaign’s Crystal Mark does not apply to the Independent auditor’s report
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The Annual Governance Statement of Somerset County Council
This section gives the results of our yearly assessment of how well we are managing and controlling risks to achieve our aims and meet the responsibilities we have by law.
Responsibility
We are responsible for making sure that we:
• carry out our business in line with the law and proper standards; • protect public money and account for it properly; and • use public money economically, efficiently and effectively.
We also have a duty under the Local Government Act 1999 to make arrangements to continuously improve the way we work, taking into account a combination of economy, efficiency and effectiveness.
We are responsible for putting in place proper arrangements for managing our affairs and making sure we work as effectively as possible. This includes arrangements for managing risk.
We have approved and adopted a code of corporate governance, which is consistent with the principles of the CIPFA/SOLACE Framework ‘Delivering Good Governance in Local Government’. A copy of the code is on our website at: http://www.somerset.gov.uk/council/board1/2008 May 14 Item 15 Executive Board Recommendations Appendix C.pdfT
Or, you can get a copy by e-mailing Jacky Barnes, Group Manager, Governance, at [email protected].
This statement explains how we have met the requirements of the code and regulation 4(2) of the Accounts and Audit (Amendment) (England) Regulations 2006 in relation to publishing a statement of internal control.
The purpose of the governance framework
The governance framework includes the systems and processes we use to consult and provide services to the community. It also includes the culture of our organisation and our values. The framework allows us to monitor how well we are achieving our aims and consider whether those aims have led to appropriate, cost-effective services.
The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It cannot limit all risk and so can only provide a reasonable guarantee of effectiveness. The system of internal control is based on an ongoing process which is designed to:
• identify and prioritise the risks in relation to our policies, aims and objectives; • assess how likely it is that those risks will become a reality, and the effect this could have; and • manage the risks efficiently, effectively and economically.
The governance framework has been in place at Somerset County Council for the year ended 31 March 2008 and up to the date that the statement of accounts was approved.
The governance framework
On 14 May 2008, we adopted a formal code of corporate governance in line with guidance provided by the Chartered Institute of Public Finance and Accounting (CIPFA) and the Society of Local Authority Chief Executives and Senior Managers (SOLACE). This describes how we meet our responsibilities for putting in place proper arrangements for managing our affairs, and includes the six ‘core principles’ identified by CIPFA and SOLACE. The framework we have in place to make sure we keep to the code is described in more detail below.
Core principle 1 – We aim to focus on our purpose and the outcomes for the community by creating and achieving a vision for the local area. 14 Our strategy is set out in the Annual Plan and the Medium Term Financial Plan (MTFP), a set of strategic plans to shape and direct how we manage ourselves overall. The Annual Plan sets out our aims and priorities for the next three years, and the main actions we plan to take during the next year to deliver them. These will include what we will do to achieve the long-term strategy for Somerset, the Sustainable Community Strategy, which we are developing with our partners in the Somerset Strategic Partnership. Its three-year delivery plan, the Local Area Agreement, has been agreed with the Government and provides a focus for our aims and priorities.
The Government, consultation, agreed policies and commitments and local pressures influence our aims, priorities and actions, which are supported by our duties and responsibilities to deliver particular services. We also link our strategy, plan and other important documents to those of our key partners and other organisations who have an interest in what we do. The aims and priorities in the Annual Plan highlight areas we particularly need to improve or focus on. The plan also briefly sets out our legal responsibilities, so that all our main activities are listed in one document.
Our service managers produce plans each year which show how they are going to deliver the priorities and our legal responsibilities on the council’s behalf. These plans form the basis for team and staff work plans – in this way, all staff are involved in achieving what is important to the Council.
Our performance over the last year is set out in the Annual Plan. This highlights any new or changing aims and priorities and sets targets for future years. The Scrutiny Committee and its subcommittees review our performance in delivering the plan’s priorities and actions throughout the year.
Funding to carry out all these activities is agreed every three years through the Medium Term Financial Plan (MTFP). This will cover both revenue and capital investment. We continue to strengthen the MTFP process by looking at the links between resources and the outcomes we want to achieve, and by providing appropriate information on the processes of dividing resources, decision-making and monitoring. At the moment, we report on our overall performance every four months. Individual services are responsible for regularly monitoring their progress towards achieving the actions they have set out in their plans. They must regularly report to their management teams and provide a summary report for the Scrutiny Committee and Executive Board as part of the current reporting timetable.
We use the combined corporate financial and performance monitoring reports, which we produce every four months, to review how well we are managing our work. These reports show:
• how well we are achieving the aims, priorities and actions in the Annual Plan; • our performance against equality standards; • the results of monitoring the Risk Management Plan; and • how well each service is achieving its aims.
Core principle 2 – We aim to make sure members and officers work together to achieve a common purpose with clearly defined functions and roles. To help us develop policies and make decisions, we have a clear and open constitution which sets out the basic rules controlling our business, including our committee structure, codes of conduct, standing orders, financial regulations and scheme of delegation. We also have procedures for how our members and officers work together, although we could expand these to provide more specific guidance for the most senior roles. We regularly review the constitution to make sure it reflects best practice.
Core principle 3 – We aim to promote our own values and the values of good governance by working to high standards of behaviour. The Standards Committee promotes high standards of behaviour by members, reviewing policies and laws relating to members’ behaviour. In 2007/08 there were two cases of misconduct that needed to be brought to the committee’s attention. The investigations carried out resulted in one member being cleared and the other being found guilty but no further action was taken because it was judged that the member would not offend again. During 2007/08 we introduced a revised code of conduct and provided appropriate training for councillors.
The Propriety Officer Group deals with governance issues and promotes high standards of behaviour by officers. It is responsible for making sure that we have, and follow, an effective governance framework which is in line with our vision. In particular, the group is responsible for making sure that we regularly review and update procedures for standing orders, standing financial instructions, the scheme of delegation, whistle-blowing and complaints, and the notes and manuals that support these procedures.
Managers are responsible for making sure members of staff keep to policies, procedures, laws and regulations and that we include risk management in our work.
15 Core principle 4 – We aim to make informed and open decisions which can be effectively justified and which consider the risks to our business.
To achieve this, we will:
• make sure that we fully involve our members in making important decisions, by allowing them to: o take part in county council meetings, or meetings of our committees, subcommittees and panels; o act as lead members in roles which need specialist knowledge; o act as members in their communities; and o act as members of partnerships and joint working groups between us and other organisations; • make sure that members and officers receive the information they need to make balanced and informed decisions about the matters that are being considered; • make sure that members and officers understand the restrictions to the decision-making process, and consider the consequences of not keeping to them; and • take steps to make our meetings, decisions and minutes open and available to the public.
The Executive Board, as a result of a recommendation by the Strategic Management Board, has the overall responsibility to approve our risk-management strategy and policy statement, and to make sure all our staff are aware of it. We are now regularly reviewing risks that may prevent us from achieving our aims and are making sure that this also happens when we work in partnership with other organisations. We are making progress with a review of the governance of our significant partnerships. This is due to be completed by March 2009.
We also make sure that all our staff are fully aware of risk issues through induction and management training and by including a risk register in every service plan.
A strategic risk management group meets regularly to co-ordinate an ongoing programme for risk management.
The group includes representatives of each directorate and officers who are responsible for making sure that we manage the significant corporate risks of health and safety and business continuity (making sure we can continue to deliver our services if a disaster happens). In response to a number of developments – including a partnership with South West One to deliver back-office services such as IT and finance – we are currently reviewing our business-continuity arrangements. This review is due to be completed by July 2008.
A significant risk to our business, which we will be monitoring during the next financial year, is SAP, our new accounting, payroll and HR system.
The Audit and Resources Scrutiny Sub-Committee acts as our audit committee and has met regularly throughout the year to carry out this role. Its functions are based on CIPFA’s recommendations and include:
• approving Internal Audit’s strategy, plan and performance; • reviewing summaries of Internal Audit’s reports and the main issues from them, and getting guarantees that action has been taken where necessary; • considering the reports of other audit and inspection agencies (in this case, the Audit Commission); • making sure that our statements, including the Statement of Internal Control, properly reflect the risks to our business and any action we need to take to improve them; • making sure that there are effective relationships between Internal Audit’s inspection agencies and other agencies and relevant organisations, and that we actively promote the value of the audit process and effective financial governance; • reviewing the financial statements, the independent auditor’s opinion and reports to members, and monitoring management action in response to the issues raised by the independent auditor; • considering the effectiveness of our risk-management arrangements, the control environment and associated anti-fraud and anti-corruption arrangements; and • getting guarantees that action is being taken on risk-related issues identified by auditors and inspectors.
Internal Audit and the independent auditors work together to review and provide opinions each year on the control framework and governance and how valid the annual accounts are. Other inspection agencies, such as the Audit Commission, also look at specific areas of our business.
Core principle 5 – We aim to develop members’ and officers’ skills so they can carry out their roles effectively.
We have a personal development review process in place for managers to discuss with each member of staff their capability to carry out their role and future roles. Both the managers and members of staff are then jointly responsible for arranging appropriate training and development opportunities. 16
Members also have training provided for them, and in future they will have the option to work to personal performance development plans.
Core principle 6 – We aim to consult local people, and other people who have an interest in our work, to make sure we meet our responsibilities to the public.
We now have a Corporate Consultation and Research Team, with one full-time post specifically devoted to consultation. The team interprets laws for the whole organisation, monitors consultations carried out by all services, and aims to develop consistent consultation methods as much as possible to avoid repeating work and make sure the public have every opportunity to influence the decision-making process. We have also invested in an ICT system called ‘Consultation Finder’, which makes the processes of creating, completing, analysing and sharing information easier and more cost-effective.
We have also made it standard practice to use a size 12 font (or size 10, as a minimum, if this is not practical) for all our public documents. We also provide our documents in other formats if necessary.
We also have strong links with the voluntary sector to make sure that the work we are doing is having the effect we are looking for throughout all of Somerset’s communities.
The Communications Team help us communicate with all sections of the community in Somerset, mainly through the media but also using other communications tools such as marketing and our website. The Communications Team work with our staff to develop plans to promote improvements and changes to services. We also run communications campaigns around specific topics to consult our audiences and help achieve our corporate priorities, such as making our communities safe and delivering value for money.
We aim to have good governance arrangements in relation to partnerships and other group working, as identified by the Audit Commission’s report on the governance of partnerships. These are reflected in our overall governance arrangements, through:
• a Partnership Standard, which sets out what we expect from our partnerships; • a checklist for effective partnership working; and • guidance that supports members and officers who work in partnerships.
Review of effectiveness
We are responsible for reviewing the effectiveness of our governance framework (including the system of internal control) at least once a year. This review is informed by:
• the work of the executive managers within the authority, who have responsibility for developing and maintaining the governance environment; • the Head of Internal Audit’s annual report; and • comments from the independent auditors and other review agencies and inspectorates.
Under the 2008 annual Statement of Governance, we must include associates such as PLUSS within our review.
The full council approved our Code of Governance and a process for assessing the effectiveness of the governance framework each year. The Propriety Officers Group, led by the Monitoring Officer and the Chief Internal Auditor, carried out the review for the 2007/08 statement. The review took account of the following.
• Internal Audit’s annual opinion report for 2007/08 • The Use of Resources Comprehensive Performance Assessment • The annual report of the Monitoring Officer to the Standards Committee • Independent auditors’ comments • Comments from other review agencies and inspectorates • Assurance reviews carried out by each directorate
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We also consulted:
• the Corporate Director of Resources (in their role as the Section 151 Officer); • the Monitoring Officer; • the Head of Finance; • the Risk Officer; and • the Strategic Management Board.
We gave the results of the review to the Audit and Resources Scrutiny Sub-Committee on 13 June 2008 for them to consider, and also included them with the Annual Accounts for consideration at the Special Accounts Committee on 27 June 2008.
The Audit and Resources Scrutiny Sub-Committee (acting as an audit committee) has advised us on how the results of the review affect the governance framework, and a plan to deal with weaknesses and make sure we continuously improve the system is in place.
Significant governance issues
During the year, we reviewed how Internal Audit is run and decided to join the South West Audit Partnership (SWAP). This did have some effect on the number of audits that the auditors carried out but they were still able to carry out enough work to be able to give us an opinion about how well the council’s controls are working. The Chief Internal Auditor brought a number of control issues to the attention of the Audit and Resources Scrutiny Sub-Committee. Internal Audit felt that the control framework was reasonable, although there were a few areas where it was not working well in practice. These included payroll (a newly developed system), Registration Services IT systems and safe recruitment in schools. Internal Audit were pleased to find that managers have already taken action to deal with these issues.
The audit did not find any major control issues, but we found from the annual review of governance that we need to carry out a number of actions during the next financial year to strengthen the control framework. These include:
• publicising and regularly monitoring whether we are keeping to the Code of Corporate Governance; • completing the introduction of the performance management framework within directorates; • updating the constitution at the time of the 2009 elections; • making sure we consider all the risks involved in working in partnership with other organisations; • continuing to deliver the actions in the ‘Use of Resources’ action plan; and • developing an effective business-continuity plan.
Over the coming year, we propose to take steps to deal with the above matters to further improve our governance arrangements. We are satisfied that these steps will tackle the need for improvements that were identified in our review of effectiveness, and we will monitor them as part of our next annual review.
We are aware that we are working on some large projects which will have a significant effect in 2008/09. These include Pioneer Somerset, Building Schools for the Future, and the first wave of the business transformation project. It will also be the first full year of our partnerships with South West One and the Somerset Waste Partnership. We will continue to make sure that we manage the risks from these developments and that our governance arrangements continue to be suitable.
Alan Jones Jill Shortland Chief Executive Leader of the Council 24 September 2008 24 September 2008
Signing on behalf of Somerset County Council 18 Statement of accounting policies
This section summarises the accounting rules and conventions we have used in preparing these accounts.
1 General
The content, layout and general rules we used to prepare these accounts are those recommended by the Chartered Institute of Public Finance and Accountancy (CIPFA) and keep to Statements of Standard Accounting Practice (SSAPs) and Financial Reporting Standards (FRSs) if these apply to local authorities, except where we provide more information below.
We have produced these accounts on the basis of CIPFA’s Code of Practice on Local Authority Accounting 2007: A Statement of Recommended Practice and the Best Value Accounting Code of Practice.
2 The difference between capital and revenue
In broad terms, revenue spending is made up of payments to employees, day-to-day running expenses and repaying debts, whereas we class spending to buy assets, for example, buildings, equipment and vehicles as capital spending.
3 Depreciation
We have reduced the asset values shown in the balance sheet, where appropriate, on a straight-line basis to show how much the assets have reduced in value. We do this with all fixed assets each year, unless we do not think it will be significant to the accounts. All assets with a limited useful life are reduced in value according to the following policies.
• Operational buildings usually reduce in value over a period of 20 to 50 years, depending on the type of building and other operational factors. We normally assume the value of buildings to be nil at the end of their useful life.
• We do not depreciate land values.
• We do not usually depreciate non-operational assets, as we do not use the assets, and they do not generally suffer from wear and tear. However, we review these assets each year to identify any major physical deterioration or other factors, which might reduce the value of the asset. If we find this kind of ‘impairment’, we make a ‘depreciation’ charge. There were no significant problems with these assets in 2007/08.
• We depreciate infrastructure, for example, road improvements, over its estimated useful life. However, in most cases we use a 25-year period.
We depreciate vehicles and equipment individually over their estimated useful lives. Typical periods used are shown below.
• Vehicles 5 to 15 years • Plant 10 years • Mobile classrooms 10 years • IT equipment 5 years • Other equipment 5 years
We mainly depreciate community assets over 10 years.
19
4 Charges to revenue for using assets
We charge lease rentals direct to services, and include the costs in the income and expenditure account.
We show amounts we set aside from revenue to repay loans for capital spending, or as transfers to other reserves, separately in the Income & Expenditure account.
5 Assets
We class any spending on buying, creating or improving fixed assets as capital spending if we will benefit from the asset for more than one year. We record spending on capital assets in our accounts when the work has been carried out or when the assets have been delivered to us, rather than when we actually pay for it. We value assets in the way recommended by CIPFA and in line with Statements of Assets Valuation Practice and Guidance Notes issued by the Royal Institute of Chartered Surveyors (RICS).
If assets are worth more or less than when we paid for them, we add the difference to the Revaluation Reserve. We revalue our assets within a five-year rolling programme.
The assets’ value includes any grants and contributions we receive from central Government or other organisations. We write off grants and contributions over the expected useful life of the asset, and we account for these in the Capital Grants Deferred Account.
A complete list of each type of asset we hold is shown below.
• Operational land and buildings • Infrastructure - mainly road improvements • Vehicles and other equipment • Non-operational property (surplus assets held for disposal) • Community assets, for example, parks and historic buildings • Assets currently being built
Transferring property between services is reflected in the accounts at the current value on the date the transfer takes place. However, we charge certain small items which have an expected life of more than the year of account (for example, library books) to revenue in the year we buy them.
6 Spending on assets we don’t own
The balance sheet includes, as deferred charges, our contributions towards paying for capital spending at voluntary-aided and voluntary-controlled schools (which we do not own), and capital grants to outside organisations. We write these costs down in the year which they apply to and there is no balance of deferred charges in the consolidated balance sheet.
7 Valuing other property and investments
Stock, work-in-progress and investments, including investments in related companies, are generally shown at the cost at which we bought them. We do not include stocks of certain consumable materials (for example, educational materials in schools) in the balance sheet. We also show the fair value of our investments.
8 Leases
There are two categories of leases – finance leases and operating leases.
We account for leases as finance leases when all the risks and rewards relating to the leased property transfer to us. We account for fixed assets recognised under finance leases by using the policies we apply generally to tangible fixed assets, after taking account of the depreciation being charged over the term of the lease if this is shorter than the asset’s estimated useful life.
We account for leases that do not meet the definition of finance lease by treating them as operating leases. We charge rents to the relevant service revenue account on a straight-line basis over the term of the lease.
20
9 Debtors and creditors
The accounts use the ‘accruals’ concept. This is where we show in the accounts amounts owed to or by us for the financial year, even though we have not actually received or paid them by the end of the year. We estimated the amounts included for each area of spending or income. We reflect any difference between the actual figures and those estimates in the accounts the following year. This applies to revenue and capital items.
10 Provisions
We put aside amounts of money to meet specific service payments which we know we must make in the future even though we are not sure how much the payments will be or when we will have to pay them. The only substantial amount we set aside is the amount for insurance. This covers those risks which are not insured through our existing insurance policy.
11 Reserves
We put amounts of money aside to meet specific service payments which we know we must make in future years and to protect us against unexpected events. Reserves include amounts we set aside for specific policy purposes and general reserves which represent resources set aside for purposes such as unexpected or exceptional events and managing our cash flow. By law, schools keep any of their budget which they have not spent. These amounts, which we show separately from other reserves, are called ‘Carry-Forward Reserves’.
The system of capital accounting means we have to include two accounts in the consolidated balance sheet which are technical. These balances are not available to support any extra spending.
• The Revaluation Reserve records any net gain made after 1 April 2007 as a result of revaluing our fixed assets.
• The Capital Adjustment Account reflects the difference between the cost of fixed assets used and the capital financing set aside to pay for them.
We have other specific capital reserves available to support extra spending. These include the following.
• ‘Usable Capital Receipts’ represents the money we have received from selling our land and other property after allowing for repaying of any outstanding debts. We have used most of the money left to help pay for our capital spending. As a result, this reserve is not large.
Over the years, we have also built up various revenue reserves for specific purposes. We use some of these to pay for capital projects.
• We use the ‘Capital Fund’ and the ‘Self-Financing Fund’ to pay for new capital spending. We attach specific conditions to using these funds.
• We originally set up the ‘Economic Development Fund’ by transferring it from ‘usable capital receipts’ to provide a rolling fund to buy, develop and sell suitable properties. The activity on the Fund now mainly relates to the operational costs of the properties we currently hold.
We have set aside other significant reserves for the following purposes.
• Services can carry forward any underspending or overspending from their revenue budgets. The services can then use these carry-forwards in future years.
• Repairing and maintaining buildings.
• Maintaining the level of pension charges to revenue for social services schemes jointly paid for by the health authority.
• Future spending on financial systems projects.
Revenue balances which we have set aside, known as general reserves, are available to support future spending whether planned or not, and for managing cash flow. 21
12 Repaying debts
Gains and losses on borrowing which was repurchased or settled early are credited and debited to ‘Net operating expenditure’ in the Income and Expenditure Account for the relevant year. However, where borrowing was repurchased as part of a restructuring of the loan portfolio with largely the same overall effect when viewed as a whole, gains and losses are recognised on the balance sheet and written down to revenue on a straight-line basis over the term of the replacement loans.
13 Pension costs
We take part in two different pension schemes to meet our employees’ needs.
• Most staff (other than teachers) are members of the Local Government Pension Scheme. They pay contributions to the fund (5% or 6% of their pay). We, as their employer, also make a contribution to the Pension Fund. Under current regulations governing how the fund operates, we are increasing our contributions over a reasonable period, to a level which will be enough to meet the full cost of all future pensions payments. This includes inflation awards. In 2007/08 our contributions were at the rate of 14.1% of employees’ pay. In 2008/09 this rate will be 14.3% of employees’ pay.
The fund’s actuary decides our contribution rate every three years as part of his valuation of the fund.
• The Teachers’ Pensions Agency, on behalf of the Department for Education and Skills, manages the pension scheme for teachers which is notionally funded. The charge to the revenue account is at the rate of 14.1% of reckonable pay as set by the Department.
14 Government grants and contributions
Whether paid on account, by instalments or in arrears, government grants and third-party contributions and donations are recognised as income at the date that:
• we meet the conditions for the grant or contribution; • there is reasonable assurance that we will receive the money; and • the spending the grant will cover has already taken place.
Revenue grants are matched in service revenue accounts with the service spending they relate to. Grants to cover general spending are credited to the Income and Expenditure Account after ‘Net operating expenditure’.
15 Discretionary benefits
We also have restricted powers to award retirement benefits if an employee retires early. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are built up in the year the decision is made to award the benefits and accounted for using the same policies as applied to the Local Government Pension Scheme.
16 VAT
Income and expenditure does not include any amounts related to VAT, as all VAT we collect is paid to HM Revenue & Customs and all VAT we pay is recovered from them.
17 Overheads
We charge the cost of management and administration to corporate and democratic core and front-line services in line with the Best Value Accounting Code of Practice. The costs are charged directly where appropriate, with the rest of the costs being shared in various suitable ways.
22
Support service Method of recharging
Office accommodation All based on floor area Central phones All based on actual usage Central despatch All based on actual usage Repairs and maintenance Charged in line with actual spending on behalf of the service Property services All based on floor area Information and communication technology Various bases which reflect the amount used by services Financial services Part-charged in line with the agreed use of service, with the rest charged on a net budget basis Fleet management All based on the amount used by services Personnel department All based on staff numbers Committee services All based on actual usage Somerset Direct All based on actual usage or staff numbers (or both) Central lease charges Charged in line with actual spending on behalf of the service
18 Income from dividends
We account for income from dividends in the year that it is due to be paid rather than in the year in which the company made the profit from which they pay the dividend.
19 Recognising income
We recognise all income, other than dividends in the year that we are due to receive it rather than in the year we actually receive the cash. Where we have recognised income but not yet received the cash we record a debtor for the relevant amount in the balance sheet.
20 Interests in companies and other businesses
We have interests in companies and other businesses (subsidiaries, associates or joint ventures) and we need to prepare group accounts for these. In our own accounts, the interests in companies and other businesses are recorded as investments (that is, the cost, less any losses).
21 Risk
The main risks to our finances are as follows.
Credit risk – the possibility that one party will fail to meet the conditions of a contract, causing a loss for the other party. We have shown our exposure to credit risk in note 25, ‘Short-term investments’. As we invest carefully, our exposure to credit risk is very limited. Liquidity risk – the possibility that a party will be unable to raise funds to meet its commitments. Our Treasury Management Team make sure that we have enough funds to meet our commitments. We analyse this each day. Market risk – the possibility that the value of a financial instrument will rise or fall because of changes in interest rates, market prices, foreign currency exchange rates and so on. We do not hold marketable shares or other marketable instruments. This risk is more relevant to our Pension Fund and the ways we manage this risk is discussed in the Pension Fund Annual Report.
23
Income and expenditure account
This section summarises our expenditure (spending) on services. It also shows where we got the money from.
The following table shows the total cost of delivering services. It includes charges for support services, the use of assets and adjustments for the true cost of providing pensions.
2006/07 2007/08
Expenditure Total Total Expenditure less income Summary of revenue expenditure expenditure income less income £millions £millions £millions £millions Notes
Gross expenditure on services 1 59.015 Education 433.088 -377.336 55.752 137.448 Social services 219.340 -78.036 141.304 0.010 Housing services 19.318 -19.108 0.210 38.636 Highways, roads and transport 74.539 -33.689 40.850 12.992 Cultural services 20.617 -5.773 14.844 19.114 Environmental services 32.771 -9.853 22.918 4.811 Planning and development services 9.429 -5.285 4.144 0.673 Courts services 0.803 - 0.803 1.102 Central services to the public 1.881 -1.129 0.752 4.642 Corporate and democratic core 5.463 -0.004 5.459 -0.874 Non-distributed costs -1.672 - -1.672 277.569 Total continuing services 815.577 -530.213 285.364 2 to 12 Exceptional Items - Devon & Som Fire Authority 1.000 1.000 16 Services transferred to Devon and Somerset Fire Authority Cost of services for Devon and 19.918 Somerset Fire Authority area 1.214 -0.816 0.398 1 297.487 Sub-total: Net cost of services 817.791 -531.029 286.762
-18.739 Gain (-) / Loss on disposal of assets 24.041 0.623 Contributions and levies 0.637 14 -1.385 Surplus (-) or deficit from trading activities 0.622 13 16.722 Interest payable 14.863 -11.460 Interest and income from investments -10.040 15 6.549 Pensions interest costs 5.582 4 289.797 Net operating expenditure 322.467
-185.904 Council Tax income -183.676 17 -1.544 Surplus from previous year's collection funds -1.657 -13.844 Government grant -11.796 -71.715 Business Rates -70.289 16.790 Surplus (-) / deficit for the year 55.049
24
Table 2 shows a detailed breakdown of the net additional amount required by statute and non-statutory proper practices debited or credited to the General Fund balance for the year.
Table 2
2006/07 2007/08
£millions £millions
Amounts included within the income and expenditure account but required by statute to be excluded when determining the movement on the General Fund balance for the year
-27.613 Depreciation of fixed assets -35.174
4.335 Government grants deferred amortisation 6.719
-5.732 Write down of deferred charges to be financed from capital resources -9.419
18.739 Net gain or loss on sale of fixed assets -24.041
-40.629 Net charges made for retirement benefits in accordance with FRS 17 -33.277
-50.900 -95.192 Amounts not included in the income and expenditure account but required to be included by statute when determining the movement on the General Fund balance for the year
9.719 Minimum revenue provision for capital financing 10.200
2.858 Capital expenditure charged to the General Fund balance 4.608
Employer's contributions payable to the Pension Fund and retirement 24.332 benefits payable direct to pensioners 24.153
36.909 38.961 Transfers to or from the General Fund balance that are required to be taken into account when determining the movement on the General Fund balance for the year
0.473 Voluntary provision for repayment of debt 0.728 -0.210 Reserves set aside for capital purposes -4.800 -6.262 Revenue reserves 1.751 0.793 Landfill allowance trading scheme -1.775 -5.206 -4.096
-19.197 -60.327
25 Statement of Movement on the General Fund Balance
The income and expenditure account shows our actual financial performance for the year, measured in terms of the resources used and created during the last year. However, we have a duty to raise Council Tax on a different accounting basis, the main difference being:
• capital investment is accounted for as it is financed, rather than when the fixed assets are used; and • retirement benefits are charged as amounts become due to pension funds and pensioners, rather than as future benefits are earned.
The General Fund balance shows whether we have overspent or underspent against the Council Tax that we raised for the year, taking into account the use of reserves built up in the past and contributions to reserves set aside for future spending.
The reconciliation statement shown in table 1 below summarises the differences between the revenue on the Income and Expenditure Account and the General Fund balance.
Table 1
2006/07 2007/08
£millions £millions
16.790 Deficit for the year on the Income and Expenditure Account 55.049
Net additional amount required by statute and non-statutory proper -19.197 practices to be credited to the General Fund Balance for the year -60.327
-2.407 Increase in General Fund Balance for the year -5.278 -34.759 General Fund balance as at 1 April -37.166 -37.166 General Fund balance as at 31 March -42.444
Amount of General Fund Balance held by governors under -25.464 schemes to finance schools -29.164
Amount of General Fund Balance generally available for -11.702 new expenditure -13.280
-37.166 -42.444
26 Statement of Total Recognised Gains and Losses (STRGL)
This statement brings together all our gains and losses for the year and shows the increase in its net worth. As well as the surplus or deficit on the Income and Expenditure Account, it includes gains and losses on:
• the revaluation of fixed assets; and
• the remeasurement of the net liability to cover the cost of retirement benefits.
Table 3
2006/07 2007/08
£millions £millions
16.790 Surplus (-) / deficit on the Income and Expenditure Account 55.049
7.837 Surplus (-) / deficit arising on the revaluation of fixed assets -26.292
-60.910 Actuarial gains (-) / losses on pension assets and liabilities 11.189
-0.070 Any other gains recognised in the STRGL (note 1 below) -97.853
-36.353 Total recognised gains (-) / losses for the year -57.907
Note 1: Within other gains we have included the movement of the Firefighters’ Pension Fund deficit to the Devon and Somerset Fire and Rescue Authority, this was £97.678 million. The remaining sum is mainly resulting from proceeds received for removing covenants on land we had previously sold.
27
Balance sheet on 31 March 2008
This section shows our financial position at the start and end of the 2007/08 financial year.
On On 31 March 31 March 2007 Balance sheet 2008
£millions £millions £millions £millions Notes - Intangible assets - Software licences 1.780 922.187 Operational assets 916.071 18-20 14.371 Non-operational assets 22.837 18 57.299 Long-term investments 61.248 22/25 1.311 Long-term debtors 1.137 23
995.168 Total long-term assets 1,003.073 Current assets 0.737 Stock and work in progress 0.391 33.160 Debtors and payments in advance 35.373 24 229.547 Short-term investments 176.508 25 12.637 Cash-in-hand 13.486 3.682 Landfill allowance 0.000 35
279.763 225.758 Less: Current liabilities -59.994 Borrowing repayable on demand or within 12 months -70.942 26 -64.066 Creditors and receipts in advance -74.421 27 -53.053 Bank overdraft -1.910 30 -1.907 Landfill used 0.000 35 -147.273 100.743 Current assets less current liabilities 78.485
Less: Long-term liabilities -100.494 Government grants deferred -118.380 -6.130 Unapplied government grants and contributions -9.838 29 -329.936 Loans due after more than one year -316.996 28 -4.419 Provisions -3.111 31 -2.241 Finance lease liability 0.000 -274.457 Pensions liability -197.092 4 -645.417 378.234 Total assets 436.141 Funded by the following reserves - Revaluation Reserve 14.708 37 582.133 Capital Adjustment Account 542.627 37 -274.457 Pensions reserve -197.092 4 1.775 Landfill allowance trading scheme reserve - 35 Reserves set aside for: 8.450 - capital purposes 13.335 38 23.167 - revenue purposes 20.119 37 25.464 General reserves - schools 29.164 37 11.702 General reserves - other 13.280 37 378.234 Total reserves 436.141
If we refer to a note number in the right-hand column, there is a further explanation in the section ‘Notes to the Core Financial Statements’
Kevin Nacey CPFA, Head of Finance & Property 26 September 2008 28
Cash-flow Statement
This statement shows the overall movement of cash during the year for revenue and capital.
If we refer to a note number in the right-hand column, there is a further explanation in the section ‘Notes to the Core Financial Statements’
2006/07 2007/08
£millions £millions £millions Notes
Revenue activities -8.793 Net cash inflow from revenue activities -32.890 42
Dividends from associates -2.156 Dividends we have received -
Servicing finance 16.682 Interest paid 14.960 0.149 Interest element of finance lease rental payments - -11.569 Interest received -10.137 5.262 Net cash outflow from servicing finance 4.823
Capital activities 49.601 Purchase of fixed assets 62.814 0.216 Other payments 0.098 -4.457 Sale of fixed assets -9.340 -8.424 Capital grants received -20.260 -4.282 Other income -8.586 32.654 Net cash outflow from capital activities 24.726
Acquisitions and Disposals -22.666 Sale of investments in subsidiary undertakings - - Managing our liquid resources Increase or decrease (-) in 23.773 temporary investments -51.201 28.074 Net cash inflow before financing -54.542
Financing 157.825 Repayments of amounts borrowed 62.160 0.175 Capital element of finance lease rental payments 0.000 New loans we have taken out over time: -20.000 - long-term -15.000 -106.575 - short-term -10.225 -34.635 Other money paid to us to invest in the Comfund -34.385 -3.210 Net cash outflow from financing 2.550
24.864 Increase (-) or decrease in cash -51.992 44
29
Notes to Core Financial Statements
Note 1: Analysis of our spending on services
The Statement of Recommended Practice says we must provide a detailed list, in a specific format, of our total spending on services. This means that you can easily see how we compare to other county councils’ spending patterns.
2006/07 2007/08
Spending Total Total Spending less income Summary of revenue spending spending income less income £millions £millions £millions £millions
Education Delegated school funds 0.196 Nursery schools 0.224 -0.025 0.199 14.778 Primary schools 156.985 -159.227 -2.242 6.706 Secondary schools 172.945 -159.801 13.144 9.492 Special schools 21.252 -3.203 18.049 31.172 351.406 -322.256 29.150
Non-school funding: 4.817 Strategic management of non-school service 17.552 -11.121 6.431 10.102 Pre-school education 25.144 -24.801 0.343 4.477 Youth service 5.299 -0.847 4.452 0.601 Adult and community learning 8.977 -8.424 0.553 0.353 Support for students 0.346 - 0.346 7.493 Other non-school funding 24.364 -9.887 14.477 27.843 81.682 -55.080 26.602
59.015 433.088 -377.336 55.752
30 Note 1 (continued)
2006/07 2007/08
Spending Total Total Spending less income Summary of revenue spending spending income less income £millions £millions £millions £millions
Social services Children's services 0.079 - Service Strategy 0.021 - 0.021 10.866 - Commissioning and social work 11.560 -0.473 11.087 13.156 - Children looked after 13.571 -0.028 13.543 2.808 - Family support services 2.120 -0.203 1.917 1.063 - Youth justice 2.703 -1.646 1.057 3.075 - Other children and family services 4.567 -1.549 3.018 Adult services - - 0.108 - Service Strategy 0.114 - 0.114 56.889 - Older people 98.383 -41.110 57.273 10.538 - Adults with physical disabilities 12.670 -1.227 11.443 29.437 - Adults with learning disabilities 53.756 -21.326 32.430 7.270 - Adults with mental-health needs 9.275 -1.698 7.577 1.517 - Other adult services 10.109 -8.775 1.334 0.642 Sheltered employment 0.491 -0.001 0.490
137.448 219.340 -78.036 141.304 Housing services - Supporting People 18.967 -19.108 -0.141 0.010 Private Sector Housing Renewal 0.351 - 0.351 0.010 19.318 -19.108 0.210 Highways, roads and transport 7.480 Transport, planning, policy and strategy 10.179 -2.071 8.108 0.546 Highways structural maintenance 18.283 -17.053 1.230 22.662 Highways routine maintenance 23.632 -0.899 22.733 3.485 Street lighting 3.505 -0.014 3.491 -0.014 Managing traffic and road safety 6.240 -5.950 0.290 3.551 Public transport 11.536 -7.702 3.834 0.926 Winter maintenance 1.164 - 1.164 38.636 74.539 -33.689 40.850
Cultural services 2.643 Culture and heritage 3.650 -0.540 3.110 0.857 Recreation and sport 4.385 -3.263 1.122 3.076 Open spaces 3.757 -0.651 3.106 0.122 Tourism 0.367 -0.224 0.143 6.294 Library service 8.458 -1.095 7.363 12.992 20.617 -5.773 14.844
31 Note 1 (continued)
2006/07 2007/08
Spending Total Total Spending less income Summary of revenue spending spending income less income £millions £millions £millions £millions
Environmental services 0.520 Environmental health 1.088 -0.616 0.472 - Coast 0.054 - 0.054 0.294 Community safety 1.207 -0.900 0.307 - Agricultural services 0.512 -0.635 -0.123 2.202 Consumer protection 2.532 -0.590 1.942 0.066 Flood defence 0.151 -0.151 - 16.032 Waste disposal 27.227 -6.961 20.266 19.114 32.771 -9.853 22.918
Planning and development services 1.563 Planning policy 2.214 -0.563 1.651 0.219 Environmental initiatives 1.996 -1.469 0.527 2.071 Economic development 3.597 -2.890 0.707 0.958 Community development 1.622 -0.363 1.259 4.811 9.429 -5.285 4.144
Courts services 0.673 Coroner's service 0.803 - 0.803 0.673 0.803 - 0.803
Central services to the public 0.464 Registration of births, deaths and marriages 1.050 -0.682 0.368 0.088 Cost of elections 0.078 -0.268 -0.190 0.288 Emergency planning 0.476 -0.179 0.297 0.262 Grants (including Citizens Advice Bureaus) 0.277 - 0.277 1.102 1.881 -1.129 0.752
Corporate and democratic core 2.244 Democratic representation and management 3.159 -0.004 3.155 2.398 Corporate management 2.304 - 2.304 4.642 5.463 -0.004 5.459
-0.874 Non-distributed costs -1.672 - -1.672 (we cannot share out between services) 277.569 Total continuing services 815.577 -530.213 285.364
Fire service transferred to Devon & Somerset Fire & Rescue Authority 1.282 Community fire safety 0.002 -0.001 0.001 18.636 Firefighting and rescue operations 1.212 -0.815 0.397 19.918 Total discontinued services 1.214 -0.816 0.398
297.487 Total spending on services 816.791 -531.029 285.762
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Note 2: Dedicated Schools Grant
Our spending on schools is funded by the Dedicated Schools Grant (DSG), provided by the Department for Education and Skills. DSG is ring-fenced, which means it can only be applied to meet spending properly included in the Schools Budget. The Schools Budget included elements for a restricted range of services provided on an authority-wide basis and for the Individual Schools Budget (ISB), which is divided into a budget for each school. Overspending and underspending on the two elements must be accounted for separately.
Details of the DSG we received for 2007/08 are as follows.
Schools budget funded by Dedicated Schools Grant
Individual Central Schools expenditure Budget Total
£millions £millions £millions
Original grant allocation to Schools Budget for -34.311 -219.255 -253.566 the current year in the authority's budget
Adjustment to finalised grant allocation 0.077 0.000 0.077
DSG receivable for the year -34.234 -219.255 -253.489
Actual expenditure for the year 33.394 216.444 249.838
Over / under (-) spend for the year -0.840 -2.811 -3.651
Planned top-up funding of ISB from Council resources - - - - Use of schools balances brought forward - -26.510 -26.510
Over / under (-) spend from prior year 2.340 - 2.340
Over / under (-) spend carried forward to 1.500 -29.321 -27.821 2008/09
33 Note 3: Costs for external audit services
The 2007/08 costs shown below for grant claims are based on payments we have made so far, plus an estimate of the amounts we have not yet paid. The 2007/08 costs for grant claims are an estimate based on the information that both Grant Thornton LLP and the Audit Commission have provided. The audit work carried out by Grant Thornton LLP relates to left over 2006/07 audits, whilst the Audit Commission is responsible for all current year audits.
2006/07 2007/08
£millions £millions
Audit fees 0.190 - main audit (inc.pension fund) 0.261 0.084 - inspections 0.015 0.037 - grant claims 0.026 0.311 0.302
Note 4: Pension costs
Our staff can contribute to one of two statutory pension schemes depending on the ir job. We, as their employer, have to make contributions towards these pensions in line with the rules governing ea ch scheme. This note explains the contributions we make to these schem es.
We apply the ‘projected unit method’ for valuing the costs to the fund of the benefit s to members. W ith this method, the current service cost of the Local Government will increase as me mbers of the scheme approach retirement.
We also have to show specific information about assets, liabilities, income and spending relating to the pension schemes we r un. These requirements are set out in Financial Reporting Standard 17 – Retirement Benefits (FRS 17).
Table 1: Total pension deficit
2006/07 2007/08
£millions £millions
-176.779 Local Government Pension Scheme -197.092 -97.678 Firefighters' Pension Scheme -
-274.457 Net deficit on 31 March -197.092
34 Local Government Pension Scheme This is the scheme for most local government employees. However, there are separate schemes for firefighters and teachers. This is a funded, defined-benefit pension scheme that we manage. The most recent full actuarial valuation of this scheme was done on 31 March 2007. The table below shows the costs in millions of pounds, and as a percentage of total pensionable pay.
Table 2
2006/07 2007/08
£millions % £millions %
19.178 10.75 or Contributions we have paid to the Pension 21.963 11.75 12.9 Fund towards our employees' pensions 14.1
Pension costs that we should charge to the 31.066 20.2 accounts in line with proper accounting rules 27.694 17.8
1.539 1.0 Discretionary pension payments made in the year 1.494 1.0
Capital costs of discretionary pensions 0.659 - that we agreed during the year 0.200 -
Capital costs of discretionary pensions 24.127 - that we agreed in previous years 25.175 -
Table 3: In applying FRS 17, we have made the following assumptions:
2006/07 2007/08
% % Assumptions used for: 3.3 inflation 3.7 4.8 rate of increase in salaries 5.2 3.3 rate of increase for pension payments 3.7 3.3 rate of increase in deferred pensions 3.7 5.4 rate used to discount liabilities 6.6
Table 4: The fair market value of the assets we hold and the percentage rate of return that we have earned on these assets are as follows.
2006/07 2007/08
£millions % £millions % 399.168 7.2 Equities 352.373 6.9 86.023 4.6 Bonds 93.813 4.3 50.937 6.2 Property 41.863 5.9 19.420 5.0 Other 23.511 5.0 555.548 511.560
35
Table 5: The estimated deficit on the scheme is as follows.
2006/07 2007/08
£millions £millions 555.548 Our share of the assets in the scheme 511.560 -732.327 Less: estimated liabilities -708.652 -176.779 Deficit on the scheme -197.092
Table 6: The movement in the deficit during the year is as follows.
2006/07 2007/08
£millions £millions -223.950 Net deficit on 1 April -176.779
-29.286 Current service cost -27.526 -1.780 Past service cost -0.169 21.952 Contributions received 24.153 -35.092 Interest costs -42.116 33.214 Expected return on assets 36.534 58.163 Actuarial gain or loss (-) -11.189 -176.779 Net deficit on 31 March -197.092
Table 7: The actuarial gain or loss (-) can be broken down as follows.
2006/07 2007/08
£millions % £millions % 29.530 5.3 Actual return less expected return on assets -77.846 -15.2 0.000 0.0 Experience gains arising on the scheme liabilities -54.638 -8.0 28.633 7.9 Effects of changes in assumptions relating to the 121.295 -1.6 present value of the scheme liabilities 58.163 -11.189
36 Teachers’ Pension Scheme This is a notionally-funded, defined-contribution scheme that is managed by the Teachers Pension Agency. This means we pay contributions as if it was a funded scheme, when, in fact, it is not. Because this scheme is not funded, there is no need for a full actuarial valuation. The table below shows the costs in millions, and as a percentage of total pensionable pay.
Table 8
2006/07 2007/08
£millions % £millions %
17.797 13.50 Pension costs charged to the accounts 19.346 14.10 or 14.10
0.195 0.16 Discretionary payments made 0.176 0.13
Note 5: Agency work
We do not include agency work in our spending summaries. Agency work used to be quite significant but it is now declining. We do have a payroll bureau service that had a turnover of £7.7 million (£7.4 million in 2006/07).
Note 6: Publicity costs
Under section 5 of the Local Government Act 1986, we must keep a separate account of our spending on publicity, which includes advertising.
2006/07 2007/08 Publicity £millions £millions
1.527 Recruitment advertising 1.600 2.007 Other advertising and publicity 1.732 0.677 Communications and marketing team 0.625 4.211 3.957
Note 7: Rental payments for the assets we lease
2006/07 2007/08 Finance Operating Finance Operating leases leases Rent we have to pay for the assets we lease leases leases
£millions £millions £millions £millions
0.090 0.131 Land and buildings 0.000 0.169 0.234 2.117 Vehicles and equipment 0.000 1.110
0.324 2.248 0.000 1.279
37
Note 8: Supplying goods and services to other local authorities and organisations
Under the Local Authority (Goods and Services) Act 1970 we provide goods and services to other local authorities and other public organisations, including Avon and Somerset Police Authority.
2006/07 2007/08 (Re-stated) £millions £millions
0.565 Financial services 0.562 2.027 Personnel services 2.140 0.043 Property services 0.047 8.024 Other services (including information and communications technology (ICT), 9.681 rights of way and planning control) 0.252 Community protection 0.282 10.911 12.712
Note 9: Employees’ pay
Under regulations, we must show the number of our staff who are paid more than £50,000 a year. This is shown in the table below. Pay includes:
- salary less employees’ pension contributions; - taxable travel and other expenses; and - non-taxable payments when employment ends.
2006/07 2007/08
Number Employee pay Number of of employees employees Employee pay bands
53 £50,000 to £59,999 53 39 £60,000 to £69,999 34 10 £70,000 to £79,999 22 5 £80,000 to £89,999 13 - £90,000 to £99,999 2 3 £100,000 to £109,999 - - £110,000 to £119,999 4 - £120,000 to £129,999 - 1 £130,000 to £139,999 - - £140,000 to £149,999 1
38 Note 10: Members’ allowances
The amount of allowances paid to our members during the year is shown below.
2006/07 2007/08
£millions £millions
0.577 Basic allowance 0.533 0.280 Special responsibility allowance 0.254 0.857 0.787
Note 11: Pooled budgets
We work closely with Somerset Primary Care Trust in many areas. In three areas, where we both provide the same service, we go as far as sharing our resources to get better value for money and provide a better service. This is known as a pooled budget. Because we host these pooled budgets, all of the activity is shown in our accounts.
Within our figures there are amounts relating to the Somerset Waste Partnership. These are shown in more detail in their own accounts.
The joint equipment service’s pooled budget operates under the Health Act 1999. We use the budget to provide community equipment to social services’ clients and the clients of the four primary care trusts within the Somerset Health Authority area. Income and spending for the year are as follows.
2006/07 Integrated Community Equipment Service 2007/08 (previously known as Joint Equipment Service) £millions £millions
Income from: -1.180 Social services -1.204 -0.088 Education -0.091 -1.007 Somerset Primary Care Trust -1.066 - Other income -0.010 -0.036 Previous year's funding brought forward -0.122 -2.311 Total income -2.493
Less expenditure: 2.114 Equipment, delivery, minor works 2.314 0.075 Management and Administration 0.079 2.189 Total expenditure 2.393 -0.122 Overspend / Underspend (-) -0.100
39 The adult drug treatment service’s pooled budget allows us to provide effective services for adults with substance misuse problems. Income and spending for the year are as follows.
2006/07 Substance Misuse 2007/08 (Previously known as Drug Treatment Budget) £millions £millions Income from: -0.491 Social services -0.501 Mendip, Taunton, Somerset Coast, -2.760 South Somerset, and Somerset Primary Care Trusts -3.430 -0.035 Avon & Somerset Probation Service -0.036 -0.055 Avon and Somerset Constabulary -0.057 -0.122 Crime and Disorder Reduction Partnerships -0.088 -0.364 Home Office grant -0.317 0.000 MH DOH Grant -0.086 0.000 NTA Capital Funding -0.149 -0.030 Previous year's funding brought forward -0.125 -3.857 Total income -4.789
Less expenditure: 0.765 Turning Point 0.930 2.222 Somerset Drugs Service 2.355 0.203 Pharmacy Related Spend 0.226 0.227 Probation 0.204 0.315 Other Expenditure 0.672 3.732 Total expenditure 4.387 -0.125 Overspend / Underspend (-) -0.402
The learning disabilities service’s pooled budget supports people with a learning disability to improve their quality of life.
2006/07 Learning disabilities services 2007/08
£millions £millions
Income from: -23.238 Social services -27.322 -0.480 Pensions Equalisation Reserve -0.465 Mendip, Taunton, Somerset Coast, -12.084 South Somerset, and Somerset Primary Care -13.389 Trusts -1.652 Somerset Partnership -1.655 -6.700 Income from charges -7.263 -44.154 Total income -50.094
Less expenditure: 11.783 Purchasing (Independent Sector) 14.942 8.879 Residential Services 9.584 14.273 Supported Housing 14.749 5.440 Day Services 6.054 3.267 Community Teams 3.082 1.537 Somerset Partnership Specialist Staff 1.537 45.179 Total expenditure 49.948 1.025 Overspend / Underspend (-) -0.146
40 Note 12: Transactions with related organisations and people for 2007/08
There are also more related party transactions reported elsewhere in these accounts. Please see Core Financial Statements notes 4, 5, 8, 9, 10, 14, 21, 22, 23, 24 and 27 for more information.
2006/07 2007/08
£millions £millions
Paid to or for: 8.074 other local authorities 10.022 1.669 police authorities 1.720 interests of members and chief officers 0.011 - professional work 0.014 0.002 - various grants 0.007 9.756 11.763
Received from: 3.385 central government 2.177 28.793 other local authorities 20.923 17.046 primary care trusts and NHS trusts 17.614 49.224 40.714
Note 13: Trading accounts
This represents income and spending of each trading unit of the council.
2006/07 2007/08 Surplus (-) Total Total Surplus (-) or deficit income spending or deficit £millions Trading unit £millions £millions £millions
Trading accounts -0.003 Charterhouse -0.184 0.200 0.016 -0.033 Dillington Advertising -2.090 2.049 -0.041 0.056 Dillington House -1.647 1.851 0.204 -0.048 Kilve -1.129 1.135 0.006 0.006 Resources 4 Learning -0.530 0.523 -0.007 0.513 SCS Catering -3.705 4.237 0.532 0.135 SCS Cleaning -2.451 2.471 0.020 0.160 SCS Design & Print -1.028 1.171 0.143 0.078 Somerset County Training -2.572 2.524 -0.048 -0.030 Somerset Music -1.970 1.893 -0.077 -0.034 Somerset Staffing -2.033 1.967 -0.066 -0.029 Wyvern Nursery Group -0.724 0.724 - - Legal Services -2.323 2.263 -0.060 0.771 Total trading units -22.386 23.008 0.622 Dividends -2.156 Wyvern Waste dividend - - -
-1.385 Surplus (-) or deficit on trading activities -22.386 23.008 0.622
41 The following provides a brief description of the nature of each of our trading services.
Charterhouse provides outdoor activities and environmental studies for schools, groups and the general public.
Dillington Advertising Services is our in-house advertising agency, providing a range of advertising services to Council departments, schools and other public-sector clients.
Dillington House is Somerset’s residential centre for adult education. It provides day and residential courses, talks and concerts, together with a wide range of conference facilities.
Kilve Court Residential Centres is made up of three centres – Kilve Court, The Outdoor Centre and Great Wood. The centres offer outdoor and adventurous activities to support the personal and social development of service users. Kilve Court also offers a large number of courses for able, gifted and talented students. Most service users are primary and secondary schools. Other users include youth, community and adult groups.
Resources 4 Learning delivers a loans service for books and materials, mainly to Somerset schools, as well as providing specialist advice, installing library furniture, discounted purchases, off-air TV programme recording and reprographics (copying and reproducing materials).
SCS Catering provides hot and cold meals and refreshments to our customers as well as other local public sector organisations. It also provides free school meals for pupils who are entitled to them.
SCS Cleaning provides caretaking and cleaning services for our services’ buildings as well as other local public- sector organisations.
SCS Design & Print is our in-house design and print service, which provides printing and design services to internal departments and other public-sector and private organisations.
Somerset County Training provides government-funded vocational training in Somerset. Its mission is to make a difference to people’s lives by providing learning experiences which meet individual needs and business needs and benefit the local community.
Somerset Music Services offers free musical and vocational tuition to parents, families and carers of pupils in Year 3 at primary school. It also offers tuition in Somerset schools and direct to Somerset parents, families and carers. The service:
• delivers the national curriculum for music in schools that ask for this service; • provides musical performances and opportunities, locally, nationally and internationally; • provides extended opportunities for music education and performance through music centres; • runs the County Youth Orchestra, Concert Band and Choir; • gives us advice and support on music; and • hires instruments, at a low cost, to parents, families and carers of pupils in Somerset.
Somerset Staffing is our in-house agency, providing casual and temporary staff to our departments and to other public-sector organisations.
Wyvern Nursery Group provides childcare places for children of our employees, other local public-sector employees and members of the local community.
Legal Services began trading on 1 April 2007. The previous budget for Legal Services was shared among existing internal clients, and charges to these clients have been based on chargeable hours, as set out in the Legal Services Service Level Agreement.
42
Note 14: Contributions and levies
2006/07 2007/08
£m illions £millions
0.085 Avon and Somerset Magistrates' Courts 0.082 0.538 Environment Agency 0.555 0.623 0.637
The magistrates’ courts became a nationally funded service on 1 April 2005. However, we continue to make debt repayments on loans raised on behalf of the Somerset Magistrates’ Courts Service where those payments are not supported by a government grant. The Environment Agency charges us directly for flood defence.
Note 15: Interest and income from investments
This is largely interest from temporarily investing our revenue balances. However, this also included the dividends we received from our shareholdings in Wyvern Waste Services Ltd. These were sold during 2006/07.
Note 16: Exceptional items
As part of the merger of Somerset and Devon Fire and Rescue Services, we have made two payments to the Devon & Somerset Fire and Rescue Authority. One was for £500,000 and related to compensation for the use of Hestercombe House and the other £500,000 relates to their share of our reserves, which was agreed as part of the merger.
Note 17: Income from Council Tax
The district councils in Somerset collect Council Tax. We received our share of this income by sending precepts to each of the following councils.
2006/07 2007/08
£millions £millions
-37.909 Mendip District Council -37.469 -37.901 Sedgemoor District Council -37.328 -57.109 South Somerset District Council -56.596 -38.808 Taunton Deane Borough Council -38.330 -14.177 West Somerset District Council -13.953 -185.904 -183.676
Our band-D Council Tax was £963.39 (£927.23 in 2006/07).
43
Note 18: Assets
Analysis by type of assets
Land and Vehicles Roads and Country Assets Total buildings and bridges parks and currently equipment open being spaces built £millions £millions £millions £millions £millions £millions Gross book value 766.188 26.004 288.233 2.271 3.395 1,086.091 - Total depreciation as at 31 March 2007 -71.228 -9.696 -67.342 -1.267 - -149.533 Net book value at the start of the year 694.960 16.308 220.891 1.004 3.395 936.558 - spending on our assets 6.228 8.812 26.492 0.189 11.050 52.771 - value of assets we have sold -30.037 -5.398 - - - -35.435 - reclassifications 2.174 - - - -2.174 - - changes in the value of assets 11.999 1.895 - - - 13.894 - depreciation for the year -12.615 -3.395 -12.690 -0.180 - -28.880 Net book value at the end of the year 672.709 18.222 234.693 1.013 12.271 938.908
Analysis of land and buildings
Operational Non-operational Total
£millions £millions £millions Gross book value 755.212 10.976 766.188 - Total depreciation as at 31 March 2007 -71.228 - -71.228 Net book value at the start of the year 683.984 10.976 694.960 - spending on our assets 6.121 0.107 6.228 - value of assets we have sold -28.326 -1.711 -30.037 - reclassifications 2.199 -0.025 2.174 - changes in the value of assets 10.779 1.220 11.999 - depreciation for the year -12.615 - -12.615 Net book value at the end of the year 662.142 10.567 672.709
44
Analysis of assets by service
Gross Depreciation Value of Other Depreciation Net book book to 1 April assets we movements value on 31 value 2007 have bought (including March 2008 or built revaluations) 2007/08 2007/08 2007/08 £millions £millions £millions £millions £millions £millions Children's Services 672.687 -113.578 20.971 -3.345 -17.949 558.786 Adult Social Care 65.503 -6.993 1.798 -2.532 -1.695 56.081 Highways 320.534 -95.065 26.710 0.620 -12.985 239.814 Waste 4.843 -0.842 4.879 3.516 -0.587 11.809 Fire Service 28.676 -3.933 - -24.743 - - Libraries 10.725 -0.888 0.566 -0.075 -0.395 9.933 Museums 6.635 -1.724 0.040 -0.025 -0.253 4.673 County farms 21.113 - 0.005 -1.786 - 19.332 Planning 6.456 -1.227 0.219 1.162 -0.222 6.388 Records 0.721 -0.244 - - -0.008 0.469 Magistrates 1.563 -1.563 - - - - Resources 23.507 -6.320 4.461 5.417 -2.407 24.658 Other services 8.493 -2.521 2.539 0.250 -1.796 6.965 Total 1,171.456 -234.898 62.188 -21.541 -38.297 938.908
This table includes assets we own and spending on assets that we do not own.
Notes about the movement of fixed assets
- The brought-forward balances have been adjusted in the table, to allow for the assets transferred between directorates during 2007/08.
- A large percentage of our capital spending relates to minor work (including structural, and health and safety work) and refurbishments, which we do not believe have a significant effect on the value of assets.
Finance leases Included within land and buildings is a workshop used by the Fire Service at Chelston. A 25 year finance lease has funded this new building. The table below shows the movements during the year.
Land and Vehicles Total buildings and equipment £millions £millions £millions
Gross book value 1.144 1.944 3.088
- Total depreciation as at 31 March 2007 -0.138 -0.893 -1.031
Net book value at the start of the year 1.006 1.051 2.057 - Transfer of Service to Devon & Somerset Fire Authority -1.006 -1.051 -2.057
Net book value at the end of the year - - -
45
Commitments under finance leases
At 1 April 2007, all of our commitments under finance leases were transferred to Devon & Somerset Fire & Rescue Authority. As these were our only finance leases, there were no remaining commitments from that date.
Commitments under operating leases
At 31 March 2008, we were committed to making payments of £0.513 million under operating leases in 2008/09, made up of the following parts.
Land and Vehicles Total Operating leases buildings and equipment £millions £millions £millions
Leases ending in 2008/09 0.176 0.174 0.350 Leases ending between 2009/10 and 2012/13 0.040 0.096 0.136 Leases ending after 2013/14 0.000 0.027 0.027
0.216 0.297 0.513
The above figures do not include the operating leases for vehicles and equipment that were transferred to Devon & Somerset Fire & Rescue Authority from 1 April 2007.
46 Where the money for our capital spending comes from
2006/07 2007/08
Assets Deferred Assets Deferred We Own Charges We Own Charges
£millions £millions £millions £millions
29.762 1.393 Loans 29.719 0.750 4.750 2.894 Government grants 12.864 7.453 0.027 0.143 Contributions from the revenue budget 0.133 0.478 5.216 -0.217 Capital receipts 4.731 - 2.133 1.285 Capital contributions 4.002 0.496 2.506 0.107 Capital fund 3.192 0.149 0.281 0.127 Other reserves 0.544 0.093 44.675 5.732 55.185 9.419 -0.618 - Variations in accruals for unpaid work on 31 March -0.635 - 44.057 5.732 54.550 9.419
47 Our assets We use a number of assets to help us provide all the services we deliver. We own most of these assets, but some schools (foundation, voluntary-aided (VA) and voluntary-controlled (VC) schools) belong to the governing bodies. We also lease and rent other buildings and vehicles where it makes sense to. These assets are listed below.
31 March 2007 31 March 2008 (Restated) Owned Other Owned Other Land (hectares) 3,246 - Smallholdings (county farms) 3,082 404 - Parks and open spaces 404 6,453 - Other land 6,258 10,103 9,744 Roads (kilometres) 6,846 - Roads 6,777 6,846 6,777 Buildings £1,062 million - Value of buildings and contents insured £1,208 million
138 132 - Schools 135 135 8 23 - Youth centres 8 25 13 - Other education properties 19 3 17 17 - Libraries 17 17 0 1 - Tourist information facilities and visitor centres 0 1 3 - Museums 3 14 - Household waste-recycling centres 14 0 3 - Waste-disposal sites in use 0 3 7 - Residential caravan and gypsy transit sites 7 5 - Transport workshops and depots 5 21 - Industrial units 16 70 - County farm tenancies 65 24 - Fire stations 0 62 - Care homes 60 18 - Day centres 17 15 1 - Administrative buildings and training facilities 15 4 17 1 - Other buildings we use 13 1 12 - Buildings we do not use any more 15 444 178 409 189 Vehicles 404 126 Total vehicles 462 27 404 126 462 27
Note 19: Revaluations
The following statement sets out our policy of revaluing our assets in a rolling five-year programme. The Valuation Group, Property Services Department carry out valuations of land and buildings. The basis for the valuation is set out in the statement of accounting policies. We have adjusted the valuation figures shown in this table as a result of:
- selling our assets; - total depreciation built up over time; and - buying new assets within the year.
48
As a result, this table shows the position on 31 March for the last five years.
Land and Vehicles, buildings plant and Total equipment
£millions £millions £millions
Assets valued at historic costs (as an estimate of current value) - 18.222 18.222
Assets valued at current value in: 2007/08 672.709 - 672.709 2006/07 694.960 - 694.960 2005/06 706.947 - 706.947 2004/05 703.240 - 703.240 2003/04 660.505 - 660.505
Note 20: Capital commitments
During 2007/08 we began a number of capital projects and made payments on earlier unfinished schemes. We have made accruals for unpaid capital work at the end of the year. However, at the end of the year we had approved spending of £50.9 million that had not been used. Some of this will be for schemes that have not yet started. Within this figure, however, we have major contractual commitments for a number of schemes that are already in progress. These include:
• £2.4 million for a new accommodation block and facilities at Dillington House, a residential centre for professional development, adult education and the arts at Ilminster; • £0.45 million for work at the Dulverton Workspace Project, designed to encourage new business into the rural community; • £1.56 million for the Minehead Mart Road Workspace Project, designed to create employment in Minehead; • £1.47 million for the Minehead Turntable Project, which provides a new turntable for the West Somerset Railway and improvements to the surrounding area to encourage tourism in Minehead; • £0.68 million for the Yeovil Innovation Centre Project, designed to provide space and business support for the local economy; • £0.95 million for a contract to provide a new sports hall at Court Fields Community School in Wellington; • £0.66 million for replacement accommodation and teaching facilities at Brymore School of Rural Technology; • £3.40 million for the development of a new training centre for 14- to 19-year-old students at West Somerset Community College; • £0.97 million for contracts at various schools for improving buildings and replacing temporary classrooms; • £0.62 million for contracts at various locations to set up local children's centres across the county; and • £0.79 million for new gritting vehicles.
We have also two further contracts for capital projects. The first is for highways that will result in estimated capital spending of between £19 million and £24 million in 2008/09. These payments will relate to new projects in 2008/09. The second is a contract with South West One, signed during 2007/08, that includes new capital investment of £29.8 million during 2008/09.
49
Note 21: Assets that we do not own
Total Total 2006/07 2007/08
£millions £millions
47.077 Gross book value 52.809
-47.077 - Total depreciation as at 31 March 2007 -52.809
- Net book value at the start of the year - 5.732 - spending on assets we do not own 9.419 -5.732 - depreciation -9.419
- Net book value at the end of the year -
Note 22: Long-term investments
Total Total 2006/07 Wyvern Waste Services Ltd 2007/08
£millions £millions
3.850 Turnover - -3.176 Less: operating expenses - 0.674 Profit before tax - -0.209 Less: tax - 0.465 Profit after tax -
2.156 Dividend paid - Note 1below -
- Assets less liabilities held at the end of the year -
Note 1: Wyvern Waste paid a dividend of £2.156 million before we sold the company.
As Wyvern Waste was only trading for six weeks of the 2006/07 year, the results only cover this period. By the end of 2006/07, we had sold Wyvern Waste so none of their assets or liabilities appeared in our Balance Sheet.
We now have shares in our partner company South West One. We hold 1,175 shares at £1 a share. These are not marketable shares and so are recorded at face value.
We also have long-term investments of £60 million in the Comfund and interest due on these investments of £1.247 million. See Note 25 on page 51 for details
50 Note 23: Long-term debtors
In the past we have lent money to other authorities, Wyvern Waste Services Ltd and other organisations. We also operate a car loan and lease scheme for our officers.
2006/07 2007/08
£millions £millions
Loans to: 0.741 other authorities (mostly for housing) 0.644 0.150 Other Bodies 0.132 0.277 Capital spending for probation to be funded in future years 0.243 0.143 Officers' car loans and leasing arrangements 0.118 1.311 1.137
Note 24: Debtors and payments made in advance
These are people and organisations that owe us money at the end of the year, or where we have bought goods or services that we will not receive until after the end of March.
2006/07 2007/08
£millions £millions
Money owed to us by: 5.886 government departments 3.838 0.247 officers for car loans and leasing arrangements 0.123 0.080 other organisations for loans which they must repay within one year 0.080 18.423 other organisations 22.721 8.524 Payments made in advance 8.611 33.160 35.373
51 Note 25: Long-term and Short-term investments These investments include money invested in an account known as the ‘Comfund’, for other organisations, together with our own money. The aim is to gain the best income from the money jointly invested. We also show the money we receive to invest for other organisations as temporary loans.
2006/07 2007/08
£millions £millions
Investments through the Comfund for: 32.500 - Avon and Somerset Police Authority 35.400 19.485 - the Pension Fund 26.000 2.640 - South West Regional Assembly 2.960 1.500 - Exmoor National Park 2.200 0.260 - Police Community Trust 0.365 0.250 - Society of County Treasurers 0.300 0.325 - Falcon Housing Trust 0.025 0.450 - Richard Huish College 0.500 0.100 - Learning South West 0.400 0.040 - Wyvern Club 0.040 57.550 68.190 105.450 Our own short-term investment in the Comfund 71.060 163.000 Total temporary Comfund investment 139.250 61.386 Other temporary investments 30.685 5.161 Interest due on temporary investments 6.573 229.547 Total short-term investments 176.508 56.750 Our own long-term investment in the Comfund 60.000 0.000 Investment in South West One 0.001 0.549 Interest due on long-term Comfund investments 1.247 57.299 Total long-term investments 61.248
Under FRS 29 Financial Instruments Disclosures, we must show our exposure to risk. We have analysed our investments of £229.935 million plus interest and have worked out that our risk exposure is £65,250. This is very small in relation to the size of our investments and we invest carefully with highly-rated institutions to limit the risk we are exposed to.
Note 26: Temporary borrowing
2006/07 2007/08
£millions £millions
-57.550 Other organisations investing in the Comfund -68.190 -0.790 PWLB loans we must repay within one year -0.245 -1.654 Interest payable on temporary borrowing -2.507 -59.994 -70.942
We invest temporary revenue loans and short-term borrowing from trust funds (such as the Pension Fund). We also have to show the temporary investments of other organisations in the Comfund as a further temporary borrowing by us (see also note 25 above).
52 Note 27: Creditors and receipts in advance
These are people or organisations that we owe money to at the end of the year for goods or services we have already received, or who have already paid us money for goods and services that they will not receive until after the end of March.
2006/07 2007/08
£millions £millions Money we owe to: -8.294 government departments -13.814 -36.229 other organisations -39.064 -19.543 Income we have received in advance -21.543 -64.066 -74.421
Within ‘money we owe to other organisations’, we include £2.0 million (£0.8 million in 2007) for capital work we have not yet paid for.
Note 28: Long-term borrowing
Our long-term loans on 31 March are shown below.
2006/07 2007/08
£millions £millions Loans due to be repaid within: -0.245 one to two years - - two to five years -15.000 -19.200 five to 10 years -9.200 -306.950 after more than 10 years -289.550 -3.541 Interest due on long-term borrowing -3.246 -329.936 -316.996
The average interest rate we pay on these loans is 4.42%.
Within our long-term borrowing we have £185.5 million of market loans. To keep to FRS 29 Financial Instruments Disclosures regulations, we must show the cost of these if we had had to redeem them at 31 March 2008. The cost of redeeming them would have been £191.546 million. This note is for information only and does not change the value of the loans in our accounts.
53 Note 29: Unapplied government grants and contributions
Unapplied Unapplied 2006/07 government government 2007/08 contributions grants Total
£millions £millions £millions £millions
5.147 Balance on 1 April 4.640 1.490 6.130
Receipts: 12.011 Contributions and 8.293 20.260 28.553 grant income 0.171 Interest and 0.255 - 0.255 other income
Payments: -11.199 Capital spending -5.018 -20.060 -25.078
- Other - -0.022 -0.022
6.130 Balance on 31 March 8.170 1.668 9.838
Note 30: Banking arrangements
We have several bank accounts for various purposes and our main banking arrangement is with National Westminster Bank PLC.
We hold amounts within our bank accounts on behalf of some other organisations, for example Avon & Somerset Police Authority and Exmoor National Park Authority. We invest these amounts each day so that we can earn the maximum amount of interest possible. However, accounting rules say that we have to deduct the amounts we hold on behalf of these other organisations when setting out our bank account balance on our balance sheet. This means that we have had to show a notional overdrawn balance of £1.910 million, when, without this treatment, our bank account balance would have been £9.09 million overdrawn.
54 Note 31: Provisions (amounts set aside for the future)
We need to provide for certain future insurance events which we have not agreed exact amounts for on 31 March 2008, as well as for other liabilities.
2006/07 2007/08
£millions £millions -3.166 Total insurance provision set aside on 1 April -4.326 Add: -2.597 premiums received from services -2.453 -0.171 interest received -0.248 Less: 0.525 insurance premiums paid 0.540 0.414 net claims paid 0.238 0.669 professional and administrative costs 0.828 - Transfer to earmarked reserve 2.544 -4.326 Total insurance provision set aside on 31 March -2.877
Resources - Property - Repairs & Maintenance contracts not yet complete -0.159
Somerset County Training Amount provided for e2e quality improvements -0.080 and contract support -0.068
-0.013 Other minor provisions -0.007
-4.419 Total amounts set aside on 31 March -3.111
Insurance provision
The Insurance Fund directly covers a wide range of our insurance risks. However, there are a very limited range of risks which are not covered by insurance and we charge any loss which arises directly to the service concerned. At the end of the year we have £2.3 million of claims not yet finally agreed (£2.8 million in 2007) which we have not yet charged to the Fund, but we have set aside £2.9 million as a provision. We also have an earmarked reserve for the Insurance Fund, which currently contains £2.5 million. Because we insure ourselves, we must put aside funds for any future claims as well as the claims we currently have ongoing.
Somerset County Training provision
We set aside £204,000 for an ‘e2e training scheme’ in 2005/06, which provides training for young people who are not ready or able to enter into mainstream training or long-term employment. We have used this money to support training costs which will not be met from our income and to help us provide better courses. We paid out £124,000 in 2006/07and £12,000 in 2007/08, leaving £68,000 to be paid in the future.
Note 32: Contingent liabilities
In future we may have to refund charges we have made to people in previous years under section 117 of the Mental Health Act. We have set aside £0.3 million within the 2008/09 budget to meet possible claims.
55 Note 33: Trust funds
We have not included these funds, which we manage on behalf of the trusts, on our consolidated balance sheet because the money does not belong to us. Most of the money can only be used for residential homes and educational purposes. On 31 March these stood at the levels shown below. The Pension Fund is also a trust (you will find the details on pages 69 to 77).
2006/07 2007/08
£millions £millions 0.956 Field House 1.004 0.488 Eagle House 0.478 2.860 Bishop Fox's foundation 2.890 0.044 Other trusts 0.045 4.348 4.417
We are the only trustee of the Field House Trust. We can only use this money for helping the elderly people of Somerset, with preference for the elderly of Shepton Mallet. There is an extract from the Field House Trust accounts below.
2006/07 2007/08
£millions £millions -0.052 Total income -0.060 0.014 Total spending 0.012 -0.038 Surplus -0.048
0.956 Value of assets 1.004 - Less: long-term liabilities - 0.956 Total value of fund 1.004
Note 34: Effects of the single currency
If the United Kingdom joins the euro, our financial information system and software will be ready to cope. There will need to be a conversion exercise during any period when we can use both pounds and euros because we will need to record every transaction in both currencies. Our computer system is compatible with the euro, although there will be costs involved if we need to convert. We don’t yet know how much this would cost.
56 Note 35: Landfill allowance trading scheme (LATS)
We have to account for the amount of waste that we dispose of using landfill sites. The table below shows the weight in tonnes and the cash value of our allowance for landfill that we have been awarded by DEFRA (Department for Environment, Food and Rural Affairs). The table also shows how much we have used during the year and the amount that we have left at the end of the year. This year, the allowances have no marketable value. This may change next year.
Total Total 2006/07 2007/08
£millions £millions
0.982 Net surplus on 1st April 1.775 -0.123 Adjustment to net realisable value -1.775 Landfill allowance Awarded by DEFRA for the year 2.823 149,750 tonnes at nil value - Landfill used Used by us during the year -1.907 98,964 tonnes at nil value -
1.775 Net surplus on 31 March -
Note 36: Local area agreement grant
The local area agreement (LAA) is a three-year agreement that sets out the priorities of the Somerset Strategic Partnership (SSP) and Local Strategic Partnerships (LSPs) and respond to the very particular characteristics of Somerset itself. LAAs are delivered through blocks – Children and Young People, Healthier Communities and Older People, Safer and Stronger Communities, and Economic Development and Enterprise.
The LAA partners are the Government (represented by the Government Office for the South West), the local area (the geographical area of the current area of Somerset) and the Somerset Strategic Partnership (Somerset’s Local Strategic Partnership with representation from each district LSPs and other stakeholders, including district councils).
Under the LAA, many of the central government grants local authorities receive are ‘pooled’ to give us greater flexibility in how we use funding. Under current laws, we act as the accountable body for the LAA. In 2007/08, the total grant amount received under the LAA was £9.520 million, £9.079 million of which we received.
57
Note 37: Total movement in reserves
The total movements in capital reserves during the year were as follows.
Capital reserves Revaluation Capital Other Total reserve adjustment capital account reserves £millions £millions £millions £millions
Balance on 1 April 2007 - - 8.450 8.450
Effects of selling our fixed assets
- Value of assets we have sold - -35.434 - -35.434
- Realised gains from the selling of - 5.531 - 5.531 previously revalued fixed assets
- Value of investments we have sold - - - -
- Deferred capital grants we have written off - 0.473 - 0.473
Deferred liablilty written down - 2.143 - 2.143
- Income from selling our assets - - 9.340 9.340
Surplus or deficit (-) on selling our fixed assets - -27.287 9.340 -17.947
Deficit for the year - -16.831 - -16.831
Unrealised gains after revaluing fixed assets 14.708 - - 14.708
Paying for fixed assets from:
- usable capital receipts - 4.476 -4.476 -
- other sources - - -0.064 -0.064
Transfer from FARA/CFA - 582.133 - 582.133
Other movements - 0.136 0.085 0.221
Balance on 31 March 2008 14.708 542.627 13.335 570.670 (See note 38)
58 The total movements in revenue reserves during the year were as follows.
Revenue reserves General General Total Reserves Total reserves - reserves - general set aside revenue school other reserves reserves £millions £millions £millions £millions £millions
Balance on 1 April 2007 25.464 11.702 37.166 23.167 60.333
Surplus or deficit (-) for the year 3.700 1.578 5.278 -3.048 2.230
Transfers between reserves ---- -
Balance on 31 March 2008 29.164 13.280 42.444 20.119 62.563
The summary of the total movements in all reserves during the year is as follows.
Landfill Total movement allowance Pensions Capital Revenue Total trading reserves reserves reserves scheme reserve £millions £millions £millions £millions £millions
Balance on 1 April 2007 1.775 -274.457 590.583 60.333 378.234
Movement in the year -1.775 77.365 -19.913 2.230 57.907
Balance on 31 March 2008 - -197.092 570.670 62.563 436.141 (see note 35) (see note 4)
59
Note 38: Capital reserves
We receive money from selling our assets, contributions from various organisations and government grants towards the cost of buying, building or upgrading our assets. We keep this money in the reserves we set aside. The movement on these capital reserves in the year is as follows.
2006/07 Usable Other 2007/08 capital capital Total receipts reserves £millions £millions £millions £millions
0.902 Balance on 1 April 7.205 1.245 8.450
Receipts: 27.123 Income from 9.340 - 9.340 selling our assets
0.058 Interest and - 0.085 0.085 other income
- Transfers -0.275 0.275 -
Payments: -19.633 Capital spending -4.476 -0.064 -4.540
8.450 Balance on 31 March 11.794 1.541 13.335
60 Note 39: Revenue reserves
We have set aside money for certain purposes. The following table shows how we have used this money in the year.
Balance on Movement Balance on 1 April in the 31 March 2007 year 2008
£millions £millions £millions
Revenue reserves set aside for capital purposes
Capital fund 15.964 -4.876 11.088
Self-financing fund 0.376 0.013 0.389
Economic development fund 2.260 0.062 2.322 18.600 -4.801 13.799
Revenue reserves set aside for other purposes
Money carried forward when services have not fully spent their budget 1.160 -2.016 -0.856
Repairs and maintenance fund 1.325 0.027 1.352
Social services' pensions reserve 1.349 -0.117 1.232
Financial systems projects 0.154 -0.154 -
Fire merger reserve 0.500 -0.500 -
Insurance Reserve - 2.544 2.544
Other minor reserves 0.079 1.969 2.048 4.567 1.753 6.320
Total - 2007/08 23.167 -3.048 20.119
Total - 2006/07 29.637 -6.470 23.167
Note 40: Commitments against reserves
We have decided to use the following amount from our reserves in 2008/09.
Capital Fund - £5.693 million to support the revenue budget General reserve s - £0.395 million to support the revenue budget
61 Note 41: Revenue activities cash flow
2006/07 2007/08
£millions £millions
Spending 406.169 Cash paid to staff 394.007 359.074 Other costs 378.608 765.243 772.615 Income -187.448 Income from Council Tax -185.333 -71.715 Income from Business Rates -70.289 -13.844 Government revenue support grant -11.796 -362.117 Government - specific grant (see note 42) -384.627 -138.912 Cash received for goods and services -153.460 -774.036 -805.505
-8.793 Net cash inflow from revenue activities -32.890
Note 42: Reconciliation of revenue cash flow This note explains how the surplus of income overspending, when adjusted by changes in other areas, results in more money being received than spent.
2006/07 2007/08
£millions £millions
Surplus (-) or loss for the year met from or added -0.744 to (-) the general balances -1.578
Less / add (-) contributions to or from (-) reserves which are set aside for: 0.210 - capital purposes 4.801 4.598 - revenue purposes -6.728 4.808 -1.927 Less: -16.831 - interest paid -14.960 -10.192 - principal repaid on internal loans -15.562 -2.858 - contributions to capital spending -4.608 -29.881 -35.130 Add: 13.725 - interest received 10.137
0.439 Add decrease/ less (-) increase in creditors -9.758 3.695 Less (-) decrease/ add increase in debtors 4.404 -0.120 Less (-) decrease/ add increase in stocks -0.346 and work-in-progress 4.014 -5.700 -0.715 Net movement in provisions 1.308
-8.793 Net cash inflow from revenue activities -32.890
62 Note 43: Government grant income The table below shows what specific grants the Government gives us to help us pay for our services.
2006/07 2007/08 2007/08
£millions £millions £millions
Revenue Children & Young People -241.427 DfES - Dedicated Schools Grant -253.490 0.000 Local Area Agreement (Childrens Services) -8.048 -0.977 Children's Services 0.000 -37.532 Standards fund -34.781 -12.252 Standards grant -15.103 -9.548 Learning and Skills Council -9.400 0.000 Children's Mental Health -0.525 -0.374 Parent Support Advisers -1.189 -2.413 Other -3.690 Community -1.013 Mental illness -1.144 -5.340 Access and systems capacity grant -5.775 -5.378 Learning and Skills Council -5.195 -1.755 Carers' grant -1.586 -1.047 Delayed discharges (from hospitals) -1.072 0.000 Adult Social Care Workforce -1.398 -2.075 Preserved rights (support for care residents) -1.879 -8.433 Sure Start -8.531 -0.804 Crime and disorder -0.740 -0.782 Youth justice -0.852 -4.284 Other -5.194 -18.906 Supporting People -18.967 -1.713 Rural bus grant -1.748 -1.312 Waste and recycling -0.940 0.000 Road Safety -1.311 -4.752 Other services -2.069 -362.117 -384.627 2.167 Increase (-) or decrease in income accrual 1.800 -359.950 -382.827 Capital - Highways - transport supplementary grant -3.836 -1.010 Performance Reward Grant - -6.432 Education - new deals for schools -12.981 -0.321 Fire brigade - -0.489 South West Regional Development Agency and European -2.503 Regional Development Fund - -0.030 Learning Skills Council - -0.142 Planning - Gypsy site improvements - - Department of Health -0.780 - West Somerset District Council - Rural Development -0.160 -8.424 -20.260 -368.374 Total income we receive from government grants -403.087
63 Note 44: Movement in net debt
Reconciliation of net cash flow to the movement in net debt This takes the increase or decrease in cash from the cash-flow statement. We then add back the items that we consider to be part of our debt. We then match this against the movement in net debt in the following note.
2006/07 2007/08
£millions £millions
-138.450 Net debt on 1 April -142.704
-24.864 Increase/decrease (-) in cash in the year (see cash-flow statement) 51.992
23.773 Increase/decrease (-) in temporary investments -51.201 Add: 158.000 repayments of amounts we have borrowed 62.160 0.216 new loans we have given 0.097 Less: -161.210 new loans we have taken out -59.610 -0.169 loans repaid -0.271
-4.254 Change in net debt 3.167
-142.704 Net debt on 31 March -139.537
Analysis of the change in net debt
Movement On On Movement 2006/07 31 March 31 March 2007/08 2007 2008 £millions £millions £millions £millions
Movement in cash 1.535 - Cash in hand 12.637 13.486 0.849 -26.399 - Bank overdraft -53.053 -1.910 51.143 -24.864 -40.416 11.576 51.992 Managing our liquid resources 23.773 - Short-term investments 281.136 229.935 -51.201
0.047 Movement in long-term debtors 1.311 1.137 -0.174
Movement in borrowing 7.790 - Long-term loans -326.395 -313.750 12.645 0.300 - PWLB loans we must repay within one year -0.790 -0.245 0.545 -11.300 - Temporary loans -57.550 -68.190 -10.640 -3.210 -384.735 -382.185 2.550 -4.254 -142.704 -139.537 3.167
64 Group accounts
The group accounts bring together the accounts of Somerset County Council and PLUSS Ltd, which provides employment and work-related services to people with disabilities.
These accounts are based on our income and expenditure account, balance sheet, cash-flow statement, statement of total movement on reserves and the accounts of PLUSS Ltd.
Group income and expenditure account
2006/07 2007/08
Expenditure Total Total Expenditure less income Summary of revenue spending expenditure income less income £millions £millions £millions £millions Notes Gross expenditure on services 59.015 Education 433.080 -377.334 55.746 137.448 Social services 219.346 -78.039 141.307 0.010 Housing services 19.318 -19.108 0.210 38.636 Highways, roads and transport 74.539 -33.689 40.850 12.992 Cultural services 20.619 -5.772 14.847 18.447 Environmental services 32.771 -9.853 22.918 4.811 Planning and development services 9.429 -5.285 4.144 0.673 Courts services 0.803 - 0.803 1.102 Central services to the public 1.881 -1.129 0.752 4.642 Corporate and democratic core 5.463 -0.004 5.459 -0.874 Non-distributed costs -1.672 - -1.672 0.049 Share of profit or loss (-) of associate 0.033 - 0.033 276.951 Total continuing services 815.610 -530.213 285.397
Exceptional items Payments to Devon & Som Fire Authority 1.000 1.000
Services transferred to Devon and Somerset Fire Authority 19.918 Cost of services D&S area 1.214 -0.816 0.398 296.869 Sub-total: Net cost of services 817.824 -531.029 286.795 -12.487 Gain (-) / Loss on disposal of assets 24.008 0.623 Contributions and levies 0.637 0.771 Surplus (-) or deficit from trading activities 0.622 16.723 Interest payable 14.863 -11.467 Interest and income from investments -10.040 -0.017 Share of interest and investment income of associates -0.032 6.549 Pensions financing costs 5.582 -0.076 Share of pensions financing costs of associates -0.127
297.488 Net operating expenditure 322.308 0.209 Tax on the operating activities of Wyvern Waste - 0.006 Share of tax of associate 0.054 297.703 Net operating expenditure after tax 322.362 -185.904 Council Tax income -183.676 -1.544 Surplus from previous year's collection funds -1.657 -13.844 Government grant -11.796 -71.715 Business Rates -70.289 24.696 Surplus (-) / deficit for the year 54.944
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Reconciliation of the single entity deficit to the group deficit
2006/07 2007/08
£millions £millions
16.790 Deficit on the authority's single entity Income and Expenditure Account 55.049
2.156 Less: subsidiary dividend income -
Add: surplus arising from other entities in the group accounts analysed into the amounts attributable to: 5.791 - Subsidiaries - -0.041 - Associates -0.105
24.696 Group Account surplus or deficit for the year 54.944
Group Statement of Total Recognised Gains and Losses (STRGL)
This statement brings together all our gains and losses for the year and shows the increase in the net value. As well as the surplus or deficit on the income and expenditure account, it includes gains and losses on:
• the revaluation of fixed assets;
• the remeasurement of deferred grants matched to fixed assets; and
• the remeasurement of the net liability to cover the cost of retirement benefits.
2006/07 2007/08
£millions £millions
24.696 Surplus (-) / deficit for the year 54.944
7.837 Surplus/deficit arising on the revaluation of fixed assets -26.292
-60.910 Actuarial gains (-) / losses on pension assets and liabilities 10.536
-0.091 Any other gains recognised in the STRGL -97.670
-28.468 Total recognised gains (-) / losses for the year -58.482
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Group balance sheet
On On 31 March 31 March 2007 2008 £millions £millions £millions £millions
- Intangible assets - Software licences 1.780 922.187 Operational assets 916.071 14.371 Non-operational assets 22.837 57.299 Long-term investments 61.248 1.311 Long-term debtors for loans we are still owed 1.137 995.168 Total long-term assets 1,003.073 0.059 Investment in associate 0.634 Current assets 0.737 Stock and work-in-progress 0.391 33.160 Debtors and payments in advance 35.373 229.547 Short-term investments 176.508 12.637 Cash-in-hand 13.486 3.682 Landfill usage allowance - 279.763 225.758 Less: current liabilities -59.994 Borrowing repayable on demand or within 12 months -70.942 -64.066 Creditors and receipts in advance -74.421 -53.053 Bank overdraft -1.910 -1.907 Landfill used - -147.273 100.743 Current assets less current liabilities 78.485 Less: long-term liabilities -100.494 Government grants deferred -118.380 -6.130 Unapplied Government grants and contributions -9.838 -329.936 Loans due after more than one year -316.996 -4.419 Provisions -3.111 -2.241 Finance lease liability - -274.457 Pensions liability -197.092 -645.417 378.293 Total assets 436.775 Funded by the following reserves - Revaluation reserve 14.708 582.133 Capital adjustment acount 542.627 -274.457 Pensions reserve -197.092 1.775 Landfill allowance trading reserve - Reserves set aside for: 8.450 - capital purposes 13.335 23.167 - revenue purposes 20.119 0.059 Share of associate's reserves 0.634 25.464 General reserves - schools 29.164 11.702 General reserves - other 13.280 378.293 Total reserves 436.775
Kevin Nacey CPFA Head Of Finance and Property 26 September 2008
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Group Cash-Flow Statement
2006/07 2007/08
£millions £millions £millions
Revenue activities -10.161 Net cash inflow from revenue activities -32.890
Dividends from associates - Dividends we have received -
Servicing finance 16.683 Interest paid 14.960 0.149 Interest element of finance lease payments - -11.576 Interest earned on cash balances -10.137 5.256 Net cash outflow from servicing finance 4.823
0.219 Taxation -
Capital activities 49.601 Payments to buy fixed assets 62.814 0.216 Other payments 0.098 -4.457 Receipts from selling our fixed assets -9.340 -8.424 Capital grants we have received -20.260 -4.282 Other income -8.586 32.654 Net cash outflow from capital activities 24.726
Acquisitions and Disposals -22.666 Sale of investments in subsidiary undertakings - - Managing our liquid resources Increase or decrease (-) in 23.773 temporary investments -51.201 29.075 Net cash outflow before financing -54.542
Financing 163.152 Repaying money we have borrowed 62.160 0.175 Capital element of finance lease - New loans we have taken out over time: -20.000 - long-term -15.000 -106.575 - short-term -10.225 -34.635 Other money paid to us to invest in the Comfund -34.385 2.117 Net cash inflow from financing 2.550
31.192 Increase (-) or decrease in cash -51.992
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Reconciliation of revenue cash flow
2006/07 2007/08
£millions £millions
Surplus (-) or loss for the year met from or added -1.227 to (-) the general balances -1.578
Less / add (-) contributions to or from (-) reserves which are set aside for: 0.210 - capital purposes 4.801 4.598 - revenue purposes -5.453 4.808 -0.652 Less: -16.832 - interest paid -14.960 -10.192 - principal repaid on internal loans -15.562 -2.858 - contributions to capital spending -4.608 -29.882 -35.130 Add: 13.732 - interest received 10.137
-0.371 Add decrease/ less (-) increase in creditors -9.758 3.614 Less (-) decrease/ add increase in debtors 4.404 -0.120 Less (-) decrease/ add increase in stocks -0.346 and work-in-progress 3.123 -5.700 -0.715 Net movement in provisions 1.308
-10.161 Net cash inflow from revenue activities -31.615
Notes to the group accounts
Note 1: The PLUSS Organisation
The PLUSS Organisation is a company limited by guarantee, with no share capital. The company’s main activity is providing employment and work-related services for people with disabilities. Four local authorities – Devon County Council, Plymouth City Council, Torbay Council and Somerset County Council – each have voting rights and have limited liability if the company is dissolved. All losses or profits are kept within the company while operating as a going concern. The company began trading on 1 August 2005.
The company’s accounts are available from:
The PLUSS Organisation 22 Marsh Green Road Exeter Devon EX2 8PQ.
We account for our interest in The PLUSS Organisation as an associate, so we show our share of the profits and reserves. We do this through the equity method.
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The Pension Fund
This section summarises the accounts of our Local Government Pension Fund. We use the local Government Pension fund to pay former employees their pensions and other benefits when they retire.
Local Government Pension Fund (LGP Fund)
By law, we have to run a pension fund for local government staff in Somerset. We have split the total fund into nine sub-funds. Four of these funds are managed by Jupiter Asset Management, JP Morgan Investment Management, Morley Asset Management and UBS. Two are managed by Standard Life and two are managed by Record Currency Management. The ninth is managed here by the County Treasurer. A more detailed description of the fund's year is available as a supplementary booklet from the Treasurer.
Who the pension fund covers
The pension fund covers our employees and the employees of the five district and borough councils in Somerset, as well as the civilians within the Avon and Somerset Police Authority. 53 other public-service organisations also take part in the fund. Scheduled organisations are local government organisations that have the automatic right to take part in the pension scheme. Admitted organisations are those which do good for the community who we have allowed to join the scheme because they are too small to make their own pension arrangements.
The fund does not cover teachers, police officers or firefighters, as they have different pension arrangements. 19,886 employees pay contributions to the fund. We pay 9,706 pensioners using the fund, and we have frozen 10,897 former employees’ pension rights. This means they will be entitled to a pension when they retire.
Administrative, professional, technical and clerical staff contributed 6% of their earnings, and manual workers 5% of their earnings. From April 1998, all new employees paid a contribution rate of 6%.
During 2007/08, we paid an employer’s contribution of 14.1% to the fund. The district and borough councils paid different rates, ranging between 14.1% and 15.9%, and Avon and Somerset Police Authority paid 13.5%. The rates are based on the actuarial valuation of the fund (see note 13 on the balance sheet).
The pension and lump-sum payments that employees receive when they retire are related to their final year’s salary and how long they have worked for a local authority. Payments due to increases in the cost of living come out of the fund.
You will see an analysis of the contributions received and the pensions paid for each of the different type of employer in note 1 to the revenue account. You can get a full list of other public-service organisations from the Finance Department, County Hall, Taunton, TA1 4DY.
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Summary of the scheme member bodies
Police Authority - Avon and Somerset (civilian staff)
District Councils - Other bodies - Mendip Avon and Somerset Local Probation Board Sedgemoor Exmoor National Park South Somerset Taunton Deane West Somerset
Other scheduled bodies with contributors Admitted bodies with contributors - Parish and town councils, and so on - Axbridge Town Council Connexions Somerset Ltd (Careers) Burnham Burial Board ECT Recycling Ltd Burnham and Highbridge Town Council Homes in Sedgemoor Chard Town Council Learning and Skills Network Crewkerne Town Council Learning South West (formerly SWAFET) Frome Town Council Magna West Somerset Housing Association Glastonbury Town Council Mendip Housing Ltd Ilminster Town Council National Autistic Society Langport Town Council SHAL Housing Lower Brue Drainage Board Society of Local Council Clerks Minehead Town Council Somerset Care Ltd Shepton Mallet Town Council Somerset Redstone Trust Somerton Town Council Somerset Rural Youth Project Street Parish Council South Somerset Homes Ltd Wells Burial Board and Parish Council South West Regional Assembly Board Wincanton Town Council Tone Leisure Ltd Yeovil Town Council Wessex Group Valuation Tribunal
Further-education colleges - Other scheduled bodies without contributors Bridgwater College (pensioners only) Richard Huish Sixth Form College Long Ashton Parish Council Somerset College of Arts and Technology North Somerset Drainage Board Strode College Martock Parish Council Yeovil College
Foundation and voluntary-aided schools - Admitted bodies without contributors Bruton Primary School (pensioners only) Bruton Sexeys School Ammerdown College Brymore School Signpost Housing Association Charlton Horethorne Primary School Vaughan Lee House Enmore Primary School Wellington St John’s Primary School
71
LGP Fund account
2006/07 2007/08
£millions £millions Notes
Contributions receivable -17.768 From employees -18.905 1 -37.895 From employers -44.261 1 -31.355 Income earned on investments -38.842 2 Transfers in -10.578 From employees transferring from other pension funds -8.663 Other income -4.132 Income recovered from member organisations for pensions we pay -3.416 -0.004 Other income (commission and so on) -0.006
Benefits payable 35.483 Pension payments 38.079 6.550 Lump-sum payments due when people retire 8.103 0.716 Lump-sum payments due when people die 0.811 Payments to and on account of people who leave the scheme 0.016 Refunds to employees who leave the scheme 0.007 3 7.320 Payments where employees transfer to other funds 8.776 Administration expenses borne by the scheme 0.912 Administration expenses 0.897 3.108 Investment expenses 3.940 4 Taxation 1.578 Irrecoverable withholding tax 1.660 46.049 Net increase in the fund during the year 51.820 982.601 Add: Opening assets of the scheme 1,104.061 75.411 Add/Less (-) : Change in market value of investments still held -120.631 1,104.061 Closing net assets of the scheme 1,035.250 6
72
Net Assets Statement
On On 31 March 31 March 2007 2008 £millions £millions Notes
Assets
Investment assets at market value Fixed interest 75.224 - public sector 54.431 72.250 - other 99.986 25.833 Index-linked 50.623 304.834 UK shares - quoted on the stock exchange 262.894 25.173 - unit trusts 20.818 438.722 Foreign holdings 439.501 -0.552 Currency hedging -12.854 0.200 Venture capital 0.800 100.462 Property unit trusts 91.900 1,042.146 1,008.099
9.622 Debtors 8.492 -3.235 Less: Creditors -1.706 6.387 6.786
55.528 Cash 20.365
1,104.061 1,035.250
408.940 Revenue surplus 460.760 491.209 Profits on selling our investments 498.356 203.912 Unrealised profits on investments still held 76.134 1,104.061 1,035.250 6
Accounting policies
The Fund account is prepared on a full accruals basis except for transfer values. As a result, the following apply.
- We account for contributions and benefits in the period in which they are due. - Interest on deposits is included in the accounts if it has not been paid by the end of the year. - We account for interest on investments on the dates that it is due to be paid. - We account for dividends on the ‘ex-dividend’ date. - All amounts for buying or selling investments are included in the Fund Account on the day of trading. - We account for transfer values when we receive or pay them. We agreed 23 significant transfers into the scheme - amounting to £1.3 million but which were not settled or were still under negotiation on 31 March 2008. None of these appear in these accounts. We did not have any transfer values out of the scheme that were outstanding at the end of the year. - The Pension Fund has significant investments overseas. The value of these investments in the Net Asset Statement is converted into sterling at the exchange rates on 31 March. Income receipts, and purchases and sales of overseas stocks, are normally converted into sterling at or about the date of each transaction and are accounted for using the actual exchange rate received. - The Pension Fund financial statements have been prepared in line with the conditions of Chapter 2 - Recommended Accounting Practice of the Pension SORP.
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Notes to accounts
Note 1: Income to the fund
In the table below we analyse the total contributions we were due to receive and benefits we paid for scheduled and admitted organisations.
Somerset Scheduled Admitted Total County organisations organisations Council
£millions £millions £millions £millions
Employees' contributions - Normal -9.664 -7.468 -1.355 -18.487 - Additional -0.229 -0.159 -0.030 -0.418 Total -9.893 -7.627 -1.385 -18.905
Employers' contributions - Normal -22.698 -17.485 -3.639 -43.822 - Special - - -0.439 -0.439 Total -22.698 -17.485 -4.078 -44.261
Pensions paid 21.468 22.161 3.364 46.993
Recoveries -0.176 -1.426 -0.019 -1.621
Recoveries for early retirement -0.464 -1.049 -0.282 -1.795
Total -11.763 -5.426 -2.400 -19.589
AVC’s (Additional Voluntary Contributions) are not included in the Pension fund accounts and are invested separately.
Note 2: Investment income
2006/07 Income earned on investments 2007/08
£millions £millions
-6.739 Fixed interest -9.265 -0.540 Index linked -0.625 -11.303 UK equities -13.493 -8.490 Foreign equities -9.758 -2.707 Property unit trusts -3.306 -1.463 Cash invested internally -2.204 -0.008 Refund on commission paid -0.006 -0.105 Stock lending -0.185 -31.355 -38.842
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Note 3: Refunds to employees who leave the scheme
2006/07 2007/08
£millions £millions
0.025 Contributions refunded to people who leave th 0.015 less than 3 months' service 0.002 Interest accumulated in historical cases 0.002 0.027 0.017 -0.004 less deductions from contributions equivalent premium -0.002 -0.007 Add/less (-) payments to DHSS contributions equivalent premium -0.008
0.016 0.007
Note 4: Investment expenses
2006/07 Investment expenses 2007/08
£millions £millions
Fund manager 0.514 Standard Life (UK equities) 0.496 - Standard Life (Fixed interest) 0.079 0.257 JP Morgan 0.237 0.239 Jupiter Asset Management 0.250 0.264 UBS Global Asset Management 0.264 0.292 F and C Management 0.300 0.139 Morley Asset Management 0.172 0.535 Record Currency Management 1.076 0.116 ABN AMRO Mellon 0.120 2.356 2.994 Other expenses 0.095 Professional services and subscriptions 0.135 0.072 Specialist IT systems 0.156 0.017 WM Company 0.017 0.568 Property unit trust managers' fee 0.638
3.108 Total investment expenses 3.940
Note 5: Pension committee members
During the year, none of the pension committee members have carried out any significant transactions with the Somerset County Council Pension Fund.
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Note 6: Movement in assets less liabilities These assets have changed during the year as follows.
2006/07 2007/08
£millions £millions
982.601 Assets held on 1 April 1,104.061 46.049 Net new money invested 51.820 1,028.650 1,155.881 75.411 Change in market value of investments still held -120.631 1,104.061 Assets held on 31 March 1,035.250
Note 7: Movement in investment assets
Investment assets have changed during the year as follows. This table is different from the table above as it does not include ‘Debtors less creditors’.
2006/07 2007/08
£millions £millions
983.242 Investment assets held on 1 April 1,097.674 32.581 Change in cash invested within our organisation -35.163 2,384.784 Purchases 5,946.658 75.411 Change in market value of investments still held -120.631 -2,378.344 Sales -5,860.074 1,097.674 Investment assets held on 31 March 1,028.464
Note 8: Investments
Quoted investments are shown at market value using normal market pricing methods. We translate foreign investments into pounds sterling using the latest traded rate from local currency on the balance sheet date.
The fund holds shares in a number of companies that Somerset County Council and the other member bodies have commercial dealings with. Decisions about the suitability of companies for the fund to invest in are taken by Standard Life, JP Morgan Fleming Asset Management, Jupiter Asset Management, UBS, and Morley Asset Management without referring to the county council, its officers or other member bodies. Decisions about suitable investments for the fund of Somerset County Council are made solely on the basis of the recommendations of a quantitative investment model, so officers do not have the power to include or exclude specific companies.
Note 9: Debtors less creditors
We have included within creditors £0.785 million (£1.874 million in 2006/07) for investments bought but for which payments have not been made at the end of the year. There were no payments outstanding for investments sold at the end of the year (£1.771 million in 2006/07).
Also included within debtors is £4.723 million (£4.496 million in 2006/07) of dividend income which we take into account on an ex-dividend basis. We have also included amounts due from member organisations. Also included within debtors is £1.504 million (£1.455 million in 2006/07) of contributions from scheme member bodies.
Note 10: Contingent liability
There were no contingent liabilities as at 31 March 2008.
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Note 11: Stock
Under a stock-lending arrangement we made on 31 March 2008, we lent stock valued at £148.230 million to other organisations. We held collateral of £159.912 million for these loans, and the form of collateral provided was as follows. • 28% UK Government debt • 45% debt that has been issued in US dollars • 27% UK equities
Note 12: Investment performance
The fund holds assets worth £1,028 million. This is a decrease of £69 million from last year. Figures for the fund’s average yearly performance are as follows.
Investment returns Somerset Top 25% Local County performers authority Council average % %%
Over the last year -7.5 -1.4 -2.8 Over the last 5 years 11.8 12.7 12.4 Over the last 10 years 4.7 5.5 5.1 Over the last 20 years 9.5 9.5 9.4
Investment performance We, Standard Life, JP Morgan Investment Management, Jupiter Asset Management, UBS and Morley Asset Management manage the fund’s assets. On 31 March 2008, Standard Life managed 43% of the fund, JP Morgan Investment Management managed 5%, Jupiter Asset Management managed 6%, UBS managed 4%, Morley Asset Management managed 9% and we managed the other 33%.
We invest the cash balances using our own treasury arrangements to get the best possible investment returns.
The value of the managed fund and the return achieved by each fund manager is as follows.
2006/07 2007/08 % % £millions Return £millions Return
Funds active for the whole year 0.2 - Yorkshire Fund Managers Ltd 0.8 - 377.7 1.8 Somerset County Council 350.8 2.6 284.3 ## Standard Life Investments 233.5 -21.0 53.5 0.7 JP Morgan Investment Management 49.2 -14.5 60.2 ## Jupiter Asset Management 64.8 7.7 47.2 0.4 UBS 43.9 -6.1 174.1 0.9 F and C (see below) 0.0 0.0 - - Standard Life Investments (see below) 206.3 -1.0 101.1 ## Morley Asset Management 91.9 -9.9 -0.7 0 Record Currency Management Active -4.8 -1.3 0.1 2 Record Currency Management Passive -8.0 -4.5
1,097.7 Total 1,028.4
The fixed-interest fund was managed by F and C until 1 February 2008 and taken over by Standard Life on 4 February 2008. 77
Note 13: Actuarial valuation
An actuarial valuation measures the fund’s ability to meet its long-term liabilities (future costs). By law, we have to have actuarial valuations every three years. Our actuary assesses the likely growth in the value of the fund, and the probable amounts we will have to pay in pensions for current and former employees. The difference between the value of the fund’s assets and its liabilities decides the amount we have to contribute to the fund. At the date of the last actuarial valuation (31 March 2007), the market value of the fund was £1,104.1 million, which was equal to 95% of the fund’s discounted liabilities. We are trying to increase the value of the fund to 100% of its liabilities. We are moving towards this by making contributions in 2008/09 of 14.3% of payroll (14.1% of payroll in 2007/08). Other organisations’ contributions will range from 12.9% to 19.6%. The deficit on the fund is proposed to be recovered from employers’ contributions over a period of no more than 25 years.
The actuary uses the projected unit method to estimate the cost of future benefits from the pension scheme.
The last valuation was done based on the figures from 31 March 2007 and we will introduce any changes to our contribution from 1 April 2008. The most significant assumptions used at this valuation in March 2007 for future service were as follows. These assumptions do not match Somerset County Council’s because this is as at 31 March 2007 and Somerset County Council’s is as at 31 March 2008.
Actuarial valuation - significant assumptions
% a year
Rate of return on investments 6.9
Salary and earnings increase 4.8
Rate of increase in pensions above the guaranteed minimum 3.3
More information about the pension fund
The accounts of the fund do not form part of our accounts as a whole. As a result, we do not include these in our net assets statement or fund account.
The accounts reflect the assets the Trustee can use, and the current liabilities. We do not include longer-term liabilities for future pension benefits in the accounts. We match future contributions to future liabilities using an actuarial valuation.
We have prepared a Statement of investment principles, which explains the strategies and policies that we use in the administration of the Pension Fund.
The full details of the statement are published in the Pension Fund Annual Report and Financial Statement.
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Glossary of terms
This section explains complicated terms that we have used throughout this document.
Over the years, local government has developed its own set of terms and phrases. This glossary helps to identify them.
Accruals An amount shown in our accounts to cover money we owe or money owed to us, in the financial year, but which we will not actually pay or receive until the following year. (See also ‘Creditors’ and ‘Debtors’.)
Accumulated funds Reserves that have built up over a period of time.
Actuarial gains or losses The actuarial gains or losses to the pension fund are made up of: • actual gains or losses to the value of the fund’s investments; • changes to the number, age and sex of staff that contribute to the pension fund; and • changes to the assumptions regarding the growth of investments and the liabilities of the scheme.
Admitted organisations Organisations that take part in the Local Government Pension Scheme with our agreement under an ‘admission agreement’. Examples would include housing associations, development agencies and certain companies providing services we previously carried out ourselves. (See also ‘Scheduled organisations’.)
Agency work When an organisation provides services on our behalf, which we pay for.
Apportionment A way of sharing the cost of management and administration to services using an appropriate method (for example, floor space for accommodation-related support services).
Associate An entity other than a subsidiary or joint venture in which the reporting authority has a participating interest and over whose operating and financial policies the reporting authority is able to exercise significant influence.
Best value Under the Local Government Act 1999, we must constantly aim to improve our services. We must review all our functions within a five-year period. The aim is to make a real and positive difference to services which local people receive.
Biodegradable municipal waste Household waste that naturally breaks down or rots over time.
Capital charges Charges we make to services for using fixed assets when providing the service.
Capital contributions and grants Money we receive towards paying for capital spending on a particular service or scheme.
Capital discharged The amount we have so far charged to the revenue account for capital spending. This includes items of capital spending charged in full to the revenue account in the year they were bought.
Capital financing charges The charge to our capital financing reserve for repaying loans. It does not include:
• interest on the loans; or
• the direct cost of buying assets in the year.
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Capital grants deferred The value of capital grants and contributions we have received towards the cost of capital spending but which we have not yet written off to services.
Capital receipts The proceeds from selling assets such as buildings.
Capital spending Our spending on buying or creating a fixed asset or spending that adds to and does not just maintain the value of an existing asset, for example, land, buildings, roads, new furniture, vehicles and equipment.
Carry-forwards Unspent revenue budgets which services can use in future years.
Cash-limited budgets Fixed amounts of money, including allowances for pay and price increases, given to departments to run their services. All spending should be met from these budgets. This also involves flexibility in carrying forward underspending and overspending.
Central government grants There are three types of grant.
• Revenue Support Grant - the main government grant to support local-authority services.
• Specific service grants - payments from the Government to cover local-authority spending on a particular service or project (for example, Standards Fund for schools). Specific grants are often a fixed percentage of the costs of a service or project.
• Supplementary grants - grants towards capital spending for highway schemes.
CIPFA The Chartered Institute of Public Finance and Accountancy. This is the professional institute governing how public money is used and how it has to be reported.
Collection funds Accounts which district councils keep to record the amounts of Council Tax collected.
Comfund We operate a joint scheme called the Comfund to earn the best possible interest on our investments. We invest our spare reserves into this scheme together with investments from other organisations who also take part.
Community assets Assets that we plan to hold for ever, have no set useful life, and may have restrictions on how we sell or otherwise dispose of them. Examples of community assets are parks, historic buildings and various conservation works.
Consolidated loans pool The pool into which we pay all money we borrow and from which we pay advances to capital schemes which are paid for from loans.
Contingent liability A possible liability which may arise when the outcome of unsettled claims made against us is known.
Corporate and democratic core Spending relating to our need to co-ordinate and account for the many services we provide to the public.
Creditors People we owe money to for work, goods or services we receive but which we have not paid for by the end of the financial year.
80 Current value This is the cost of an asset if bought in the current year.
Debtors People who owe us money that we are due to receive but which we have not been paid by the end of the financial year.
Deferred charges These charges are made up of our contributions over time towards paying for capital spending at voluntary-aided and voluntary-controlled schools (which we do not own). It also includes capital grants to outside organisations. We write them off over a period which reflects when we actually benefit from these assets.
Deficit There are two types of deficits. A fund is said to be in deficit when its liabilities are higher than its assets. An in-year deficit is achieved when spending is higher than income.
Depreciation The reduction in the value of assets, for example, through wear and tear.
Employment costs and other costs of employing The salaries, wages of staff including spending on training and the costs of redundancy.
Equity method A method of accounting that brings an investment into the reporting authority’s financial statement initially at cost, identifying any goodwill arising. The carrying amount of the investment is adjusted in each period by the reporting authority’s share of the results of the company less any write-off for goodwill, the reporting authority’s share of any relevant gains or losses, and other changes in the company’s net assets including distributions to its owners (for example, by dividend).
Ex-dividend A share is ‘ex-dividend’ (or ‘ex-div’) on a date set by a company when current shareholders are entitled to a dividend on their holding. Even if the holding is sold, the former owner will receive the income. On that date, the market price of a share will be adjusted to reflect the income due to the holder. (For example, a share which goes ‘ex-div’ with a dividend of 10p will see the market price reduce by that amount.) Stock may be sold ‘ex-div’ (without dividend entitlement) or ‘cum-div’ (with dividend entitlement).
Fair value The price at which we could buy or sell an asset or loan in a transaction with another organisation, less any grants we receive towards buying or using that asset.
Fees and charges Money we raise by charging for the use of facilities or services.
Finance leases Leases where we treat the organisation paying the lease as if they own the goods. The organisation gains the profits that would come with ownership but it also suffers the losses. (See Operating leases.)
Financial instrument Any item that gives rise to both a financial asset for one party and a financial liability for another party.
Financing transactions Also known as interest and investment income. They mainly relate to interest payments and receipts associated with managing our cash flow and reserves during the year.
Fixed assets Items such as land, buildings, vehicles and major items of equipment, which benefit us over more than one year.
FRS A financial reporting standard issued by the Accounting Standards Board. FRSs are gradually replacing SSAPs. Our accounts keep to these standards where they apply to local authorities.
81 General reserves The amounts we have built up this year, and over earlier years, that we have not set aside for specific purposes.
Gross book value This is the original or revalued cost of an asset before any depreciation is taken off it. See also Net Book Value.
Historical cost What a fixed asset cost us to buy originally.
Irrecoverable withholding tax Tax deducted from dividend income that cannot be recovered
Impairment Where an asset’s value has been reduced by physical deterioration or other factors beyond usual wear and tear. The asset’s value in the accounts also has to be reduced to reflect this impairment.
Income The amount which we receive, or expect to receive, from any source. Service revenue income includes grants, sales, rents, fees and charges.
Infrastructure A fixed asset that cannot be taken away or transferred, and which we can only continue to benefit from by actually using it. Examples of infrastructure are roads, bridges and footpaths.
Joint venture A reporting authority jointly controls a venture with one or more other entities if none of the entities can control the joint venture alone but all together can do so. Decisions on financial and operating policy essential to the activities, economic performance and financial position of that venture need to be agreed by each venturer.
Levy The money we pay to the Environment Agency (for flood defence and land drainage purposes) and the Exmoor National Park Authority.
Long-term investments Those investments which we plan to hold on a continuous basis (for example, shares in South West One).
Material mistake A mistake in the accounts that could be serious enough to influence the reader’s opinion of our financial performance or position.
Minimum debt repayment or minimum revenue provision The amount we have to set aside to repay loans. It is set at 4% of our total borrowing.
National Non-Domestic Rate (NNDR) income (also known as Uniform Business Rate, or UBR) District councils collect this from non-domestic properties, at a national rate set by the Government. The proceeds are pooled nationally and redistributed to areas according to the size of their population.
Net book value The value of an asset as recorded in the accounts. It is usually the net current replacement or original cost less any depreciation we have charged.
Net current replacement cost The cost of replacing an asset in its existing condition and use.
Net present value The net present value (NPV) of an asset is the current net value of the future receipts and payments associated with it.
82 Net realisable value The selling value of an asset less the costs of selling it.
Net service underspend The net service underspend is the amount that a service’s total spending is less than that service’s allocated budget plus use of carry-forward.
Netted off This is where the money we are due to pay is reduced by the money that is owed to us.
Non-distributed costs These are specific overheads relating to unused assets and certain pension costs for employees’ service in previous years. These are not allocated to service departments because they do not relate to the in-year cost of providing the service.
Non-funded pension schemes These are pension schemes that do not have an actual fund from which pensions are paid and contributions are made into. Instead payments are made to current pensioners directly from the year’s budget. The teachers’ pension scheme is an example of a non-funded scheme that we run.
Non-operational assets Those assets we hold but do not directly use when delivering services. Examples of non-operational assets are investment properties and assets that we do not actually need before they are sold or developed.
Notionally funded pension schemes These are a form of non-funded pension scheme that are treated similarly to funded schemes. There is no stock of investments, but employer contribution rates are set as if there were investments, based upon figures set by government actuaries. The Teachers’ Pension Scheme is notionally funded.
Operating leases Under this type of lease, the risks and rewards of ownership of the leased goods stay with the company leasing out the goods.
Operational assets Those assets (for example, land and buildings) that we use in delivering services.
Other operating costs Includes spending on buildings, fuel, light, rent, rates, buying furniture and equipment, administration and other costs.
Pensions equalisation reserve This is money we have set aside to maintain the level of pension charges to revenue for social services schemes jointly paid for by the health authority.
Post balance sheet event Events which happened after we produced the balance sheet.
Precept What we demand from the collection funds maintained by the district councils for the contribution to our services from Council Tax payers.
Principal The original amount borrowed. It does not include interest or other charges.
Procurement The process of gaining the use of supplies, services and construction work.
Projected unit method This is a common method by which actuaries estimate the cost of future benefits to a pension scheme. The method works out the costs of future benefits members are expected to earn over a period (usually a year) following the valuation date, allowing for future increases in pay until retirement or the date a member leaves service.
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Provisions This is money we keep to pay for known, future costs.
Provision for credit liabilities Money we set aside to repay debts or to cover spending which we have borrowed money for. We include these details in the Capital Adjustment Account.
Prudential Code The Prudential Code has been introduced by the regulations supporting the Local Government Act 2003. Local authorities can borrow money to pay for capital spending in a similar way as people can get a mortgage to buy a house. Until April 2004, the Government used to tell local authorities how much they could borrow. This code replaces central government control with self-regulation ⎯ each local authority is now responsible for deciding how much it can afford to borrow. Under the regulations, when we are making this decision we must keep within the Prudential Code, which sets out the principles that local authorities must follow. These include the following.
• Affordability – can we afford to make the repayments? • Prudence – are we planning to borrow sensibly? • Value for money – will the loan pay for something that is good value for money? • Service delivery – will the loan help us to deliver our service aims?
PWLB The Public Works Loan Board, a government agency which lends money to the public sector.
Related organisations and people Under accounting rules, we have to show transactions between us and other organisations which are also funded by the Government. We have to show transactions between us and the immediate families of county councillors or senior officers, and any companies or organisations that they have a controlling interest in.
Remuneration Includes taxable salary payments to employees less employees’ pension contributions, together with non-taxable payments when employment ends (including redundancy, pension enhancement payments, and pay in lieu of notice), taxable expense allowances and any other taxable benefits.
Revenue spending The day-to-day spending on employment costs, other operating costs and capital charges less any income from fees, and charges.
Ring-fenced grant This is money that can only be used for certain things.
Scheduled organisations Local government organisations that have automatic rights to take part in the Local Government Pension Scheme. Examples would include the county council, police authority, district and town councils, further education colleges, National Park Authority, and magistrates’ courts and probation service. (See also ‘Admitted organisations’.)
Segregation of duties Where individual tasks involved with important financial procedures (for example, buying goods, making payments or receiving income) are separated out among different employees. This makes sure that no one person is too involved in these procedures. This helps to prevent us suffering losses in areas of high risk.
Service level agreements (SLAs) Agreements drawn up mainly between our departments which provide management and administrative support (for example, financial, legal, personnel and property) and the client services the service is provided for. They give details of the nature, quality and timing of the service provided, but no longer the cost. (See ‘Apportionment’.)
Slippage The term we use to describe capital spending which happens later than we originally planned.
84 SORP A statement of recommended practice issued by the Accounting Standards Board or by one of the accountancy institutes (such as CIPFA). SORPs are developed in the public interest and set out current best accounting practice. They are produced for subjects for which it is not considered appropriate to issue a financial reporting standard. Our accounts keep to the relevant SORPs (unless we say otherwise), particularly to the Code of Practice on Local Authority Accounting in Great Britain, and the Best Value Accounting Code of Practice.
SSAP A statement of standard accounting practice issued by the Accounting Standards Committee and adopted by the organisation which replaced it, the Accounting Standards Board. Our accounts keep to SSAPs where they apply to local authorities.
Surplus There are two types of surplus. A fund is said to be in surplus when its assets are higher than its liabilities. We achieve an in-year surplus when our income is higher than our spending.
Tangible assets Operational assets, non-operational assets and assets currently being built.
Transfer values Payments made between pension schemes of accumulated pension funds for employees who change their employment.
Trunk roads These are roads that pass through the geographical area of Somerset. Because of their national importance, as defined within specific pieces of legislation, they are maintained by the Secretary of State.
Trust funds Money that we do not own but that we manage for the owners of the money. The most significant trust fund we manage is the Somerset Pension Fund.
Venture capital Finance for companies that are not listed on the Stock Exchange.
Work-in-progress The value of work on an uncompleted project at the end of the year which we have yet to recover from the client.
Write down To reduce the value of an asset in a set of accounts.
Write off To reduce the value of an asset to nothing in a set of accounts.
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More information
If you have any comments or feedback on these accounts, please contact us. This will help us to provide a more informative and useful document.
For more information on these accounts, or for extra copies, please write to:
Kevin Nacey CPFA Head of Finance & Property County Hall Taunton Somerset TA1 4DY.
Phone: 01823 355484 E-mail: [email protected]
These accounts are also available on the internet at www.somerset.gov.uk/accounts
These accounts are also available in Braille, in large print, on tape and on disc, and we can translate them into different languages.
Published by: Corporate, Accounting & Technical Section, Finance Department, Somerset County Council
Printed by: SCS Design & Print, Somerset County Council, County Hall, Taunton, Somerset TA1 4DY