Statement of Accounts 2015/2016 Audited Version September 2016 Chief Executive 2 Page Introduction to the Statement of Accounts 1) Narrative Report 3 A brief introduction to the Statement of Accounts highlighting significant financial events and background to the 2015/2016 financial year. 2) Statement of Responsibilities for the Statement of Accounts 13 The principal financial responsibilities for approval and certification of the Statement of Accounts. Core Financial Statements 3) Movement in Reserves Statement (MIRS) 14 The Movement in Reserves Statement illustrates the overall position of the Council in terms of reserves held and the movement during the 2015/2016 financial year. 4) Comprehensive Income and Expenditure Statement 15 A summarised statement of the accounting income and expenditure for the provision of services during the 2015/2016 financial year in accordance with International Financial Reporting Standards (IFRS), as opposed to the amount to be funded by Council Tax. 5) Balance Sheet 16 An abbreviated statement of the Council’s assets, liabilities and reserves at the beginning and the end of the 2015/2016 financial year. 6) Cash Flow Statement 17 An abbreviated statement of the inflows and outflows of cash and cash equivalents during the 2015/2016 financial year categorised into operating, financing and investing activities. 7) Accounting Policies 18 Bedford Borough Council’s accounting policies employed in the production of the 2015/2016 Statement of Accounts. 8) Disclosure Notes to the Core Financial Statements 33 A group of detailed notes produced to provide clarity and to support the summarised amounts included in the core financial statements. Supplementary Statements 9) Collection Fund Statement 84 An overall summary of the collection performance of Council Tax and National Non-Domestic Rates (NNDR), including supporting disclosure notes. 10) Bedfordshire Pension Fund Statements (administered by Bedford Borough Council) 87 The Pension Fund Statement of Accounts for 2015/2016, including supporting disclosure notes. 11) Annual Governance Statement 110 A statement of the governance responsibilities and controls in place within the Council Other Documents 12) Glossary of Terms 111 13) Independent Auditor’s Reports 133 These are audit reports produced by the appointed auditors for the Council and Pension Fund. Bedford Borough Council 2015/2016 Statement of Accounts 3 1) Narrative Report (a) Introduction 2015/2016 has been another challenging year for Bedford Borough Council with increasing demand for services at the same time as budgets being constrained. As in previous years the Council has carefully managed its financial affairs with robust financial controls ensuring that services were delivered within the resources allocated. This has, in turn, contributed towards the delivery of £9.101 million in budgeted savings within the last financial year. The Council is in good financial health in terms of its financial performance and has strengthened the level of reserves held in order to respond to continued reductions in funding and associated increase in funding risks in the medium term as austerity measures continue, and will need to make further efficiencies to meet the financial challenge ahead. Our service provision across a number of areas remains strong as demonstrated by the number of performance measures (53%) which have shown an improvement on previous outturn. (b) Revenue Outturn Position The revenue outturn for 2015/2016 for Bedford Borough Council shows an overall net underspend of £3.088 million. The outturn reflects all expenditure incurred and income due and relevant year end accounting entries, including transfers to and from reserves. The table below sets out the revenue outturn position for each Directorate, as reported to Executive on 15 June 2016. This compares to a net revenue underspend in 2014/2015 that equated to £2.589 million. Revenue 2015/2016 Outturn Net Net Net Budget Outturn Variance Directorate £million £million £million Children’s and Adult’s Services 76.978 77.494 0.517 Chief Executive’s 17.875 17.511 (0.364) Environment & Sustainable Communities 28.892 28.285 (0.607) Operational Net Cost 123.745 123.290 (0.455) Capital Financing 7.768 7.030 (0.738) Contingency 1.769 0.500 (1.269) Corporate Budgets 1.371 0.969 (0.402) Total Revenue Outturn 134.652 131.789 (2.863) Financing (134.652) (134.878) (0.225) Total Net Revenue Outturn 0 (3.088) (3.088) % of Total Net Budget 2.3% Operational budgets (£123.7 million) account for 92% of the Council’s Net Budget and at the year-end stood at an underspend of (£0.455 million) (this represents 0.4% of the operational budget). The most significant element of the provisional outturn underspend is in relation to non-operational budgets. Two main elements of the underspend are one off variances and a 2016/2017 approved revenue budget incorporates changes to these budget areas that, in effect, take into account the savings realised in 2015/2016, as set out below: . Contingency (£1.269 million); and . Capital Financing (£0.738 million). The final budget for 2015/2016 was funded through Council Tax (including Council Tax surplus) of , retained business rates of £33.389 million, Revenue Support Grant of £28.460 million and other grants of £0.788 million. In determining the 2015/2016 revenue budget, the Council ensured regard to its ongoing sustainability and the observance of a number of overarching principles. This involved: (i) An overall commitment to endeavour to increase annual income sources and reduce annual expenditure without materially reducing front line services provided by the Council; (ii) A preparedness to consult service users and providers to ensure that services can be remodelled and tailored within acceptable tolerances; (iii) A comprehensive review of the base budget to provide greater assurance for the future. The review has been based upon regular established monitoring processes, and has incorporated a review of the alignment between the original budget and service activity; Bedford Borough Council 2015/2016 Statement of Accounts 4 (iv) The identification, as a result of (c) above, of service pressures (such as Adult Social Care, Children’s Improvement Plan and parking income) and endeavours to make adequate provision in the 2015/2016 base budget; (v) The continued review and control of the capital programme given the impact of borrowing. When the Council considers each revenue service and function budget, endeavours are made to identify potential risks. Inevitably, during the year, some of these risks will occur and impact on the budget by either requiring further expenditure or by reducing the Council’s budgeted income. The budget process identified a number of service specific risks relating to the range of Borough Services and related budgets. The monitoring procedures are predominantly guided by the risk based approach that also incorporates performance and demand led analysis to complement and provide additional context to the financial monitoring position. The Executive has also been kept informed of the budgetary position for both Revenue and Capital budgets through the regular trends reports. The Council reports the budget monitoring to its Executive on a quarterly basis throughout the year. In order to deliver the necessary assurance and challenge of the 2015/2016 revenue budget monitoring position the Council undertook regular monthly monitoring meetings with Directors and Portfolio Holders. The objective being to ensure timely action has been taken to avoid potential overspends where possible, together with recommendations to the Executive to allocate the Revenue Contingency. (c) General Fund Position It is best practice to ascertain, on an annual basis, a risk assessed level of the General Fund. The Risk Assessment methodology has been reviewed to ensure that the recommended level of the General Fund Balance is appropriate and reflects the key issues facing the Council. The methodology adopted by the authority takes into account past experience of budget pressures, demographic pressures, legislative impacts and the extent to which some services are reliant on external funding and the potential impact that these areas could have on the budget. The Risk Assessment undertaken by the authority consequently determined that the optimum General Fund balance for Bedford Borough Council as being within the range of £9.733 million to £13.168 million. As at 31 March 2015, the General Fund balance stood at £10.416 million. The 2015/2016 Budget included a transfer to the General Fund Balance of £0.206 million to reflect the surplus on the NNDR Collection Fund. A summary of the movement on the General Fund Balance is shown below: £ million Balance as at 31 March 2015 10.416 Budgeted transfer to reserve 0.206 Contingency Approval 0.500 Funds released from other reserves 0.251 Additional transfer to reserve 0.249 Balance as at 31 March 2016 11.622 Business Rates appeals (1.000) Estimated Balance at 31 March 2017 10.622 The 2016/2017 Revenue Budget includes a drawing on the General Fund Balance of £1.0 million to offset the need to fund a provision for one off backdated Business Rates Appeals. A further review will be undertaken during 2016/2017 to consider whether a future balance of £10.622 million is sufficient to manage the financial risks going forward with the significant changes to local government funding and the introduction of 100% business rates, and the Council’s longer term transformation programme. (d) Earmarked Reserves There was a full review and challenge of current reserve requirements and known commitments against the Council’s policies as part of the 2016/2017 General Fund Budget setting process. This resulted in a number of reserves, totalling £1.397 million, being identified for release and reallocation as agreed by Full Council on 3 February 2016. A recommendation to Full Council was approved by the Executive on 15 June 2016 in respect of the transfer of the net revenue underspend of £3.088 million to the Transformation Reserve in order to allow the authority to provide resources to continue the transformation of its services.