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.
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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;
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(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. The final level of Earmarked Revenue Reserve balances, including School Reserves of £5.108 million, as at 31 March 2016 equated to £35.466 million at as set out in Note 9 to the accounts.
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(e) Capital Outturn The capital outturn position in relation to the 2015/2016 Capital Programme is set out in the table below. This identifies a net underspend for the year amounting to (£4.835 million) resulting from a gross underspend on expenditure of (£6.442 million) and an overspend on capital resources of £1.607 million.
Net Net Net Capital Capital 2015/2016 Outturn Budget Outturn Variance Carry-
forward Directorate £million £million £million £million Gross Expenditure Children’s and Adult’s Services 9,164 9,514 350 871 Chief Executive’s 11,318 5,893 (5,425) 5,389 Environment & Sustainable Communities 24,563 23,196 (1,367) 1,277 Total Gross Expenditure 45,045 38,603 (6,442) 7,537 Net Expenditure Children’s and Adult’s Services 735 362 (373) 373 Chief Executive’s 6,182 1,710 (4,472) 4,300 Environment & Sustainable Communities 3,924 3,924 10 (15) Net Expenditure Total 10,841 6,006 (4,835) 4,658
The net budget available to the authority, resulting from the capital projects slipped to later years, equates to £4.658 million. These have been determined in accordance with the authority’s protocol on the treatment of carry forward balances as set out in the Capital Investment Strategy, and supporting Code of Practice. These schemes will be reviewed again in September when the Capital Programme is next considered by the Executive. The underspend on net capital expenditure of (£0.177 million) is as a result a number of minor under and overspends on completed schemes, resulting in a net release of budgets that are no longer required. The net effect of schemes slipping into future years, and less receipts being received in year than planned has resulted in less borrowing of £3.035 million being undertaken than reported at Executive in January 2016. In year capital receipts of £4.362 million were planned however, the outturn was £2.864 million; this was as a result of a change in the profile of income receivable from a number of conditional property sales, being delayed to 2016/2017. Due to the nature of capital schemes it is not unusual to have projects delayed and, therefore, the re-profiling of schemes into future years does occur as the programme is subject to regular review. Scheme budgets are subject to challenge during the year, with Directorates and Portfolio Holders to assess the current need for funding and to ensure that critical schemes are re-profiled accordingly. The outcome of these reviews is reported to the Executive for consideration as an integral part of the capital programme review process. Capital can be funded from a number of sources, including capital grants, contributions from external parties and revenue budgets, capital receipts and borrowing. A breakdown of the Council’s financing of the capital programme is shown in Note 36 which shows expenditure on a gross expenditure basis.
Capital Programme – Performance 2015/2016 The Council’s approved Capital Investment Strategy requires that the Executive/Portfolio Holder will receive a report annually covering: . the details of schemes commenced on time; . the details of schemes completed on time; . details of schemes where contracts commenced on time; . how many schemes were completed within budget. During 2015/2016 a number of individual schemes achieved completed status. These schemes included Bedford Western Bypass, Footways Replacement, The Higgins and the Bus Station regeneration projects. The revised Capital Programme, which includes the slippage of £7.537 million, is included in the authority’s revised Capital Programme and provides total planned capital investment of £107.781 million for the period 2016/2017 to 2018/2019.
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(f) International Financial Reporting Standards (IFRS) The Council is required to report its Statement of Accounts using International Financial Reporting Standards (IFRS) that follow a prescribed layout which is different from that reported during the year, and discussed in Section B shown above. Note 28 sets out these differences. Due to various statutory instruments the Council is required to charge amounts to council tax payers (via the General Fund), and exclude others. For example, the Comprehensive Income and Expenditure Statement (CIES) on page 9 follows a prescribed format on where and how spend should be reported. This statement also includes a number of technical accounting entries (such as depreciation, pension fund adjustments, overhead apportionments) that are subsequently reversed out in the Movement in Reserves Statement on page 8.
(g) Disclosure of a Change of Accounting Policy for the Highways Network Asset The reporting requirements for the 2015/2016 financial statements to disclose information relating to new standards issued but not yet adopted by the Code are stipulated in Appendix C as amended by the Update to the 2015/2016 Code of Practice on Local Authority Accounting in the United Kingdom. The requirement to restate opening balances at 1 April 2015 and preceding year information in the 2016/2017 financial statements for the Highways Network Asset have now been removed under an exceptional adaptation to IAS 1 Presentation of Financial Statements. As there are no reporting requirements in the 2015/2016 year for 2016/2017, then the reporting requirements for the 2015/2016 financial statements have been removed from Appendix C. The Council will adopt these changes in 2016/2017 that will require the authority to comply with the definitions contained within the Code of Practice on the Highways Network Asset (the HNA Code). This will require the authority to identify its interconnected network and manage and maintain adequate records. The implications of any amendments to the measurement of these assets from the existing historic valuation methodology applied to infrastructure assets will be incorporated into the Council’s Statement of Accounting Policies.
(h) Highlight Commentary on Core Statements
Movement in Reserves Statement (MIRS) [Page 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. During 2015/2016 Usable Reserves, which are cash backed and are readily available to support services, increased by £4.360 million. This increase has been generated by a revenue outturn underspend of £3.089 million, creating a positive movement in General Fund and Earmarked Reserves of £0.833 million, and an increase in Unapplied Grants unallocated of £3.527 million for the 2015/2016 financial year. In addition to this increase, Unusable Reserves also increased by £87.585 million during the financial year. This increase was a result of a significant reduction of £48.910 million in the valuation of the Council’s Net Pension Liability and upward property valuations totalling £36.984 million (reflected in the Capital Adjustment Account and Revaluation Reserve). Movements in Unusable Reserves have no immediate impact on the current resources available to the Council, but do illustrate potential long term financial resourcing implications. Comprehensive Income and Expenditure Statement (CIES) [Page 15] A summarised statement of the accounting income and expenditure for the provision of service 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. The Comprehensive Income and Expenditure Statement demonstrates how the Council’s reserves have grown by £91.945 million during the 2015/2016 financial year. The majority of the growth in Unusable Reserves is reflected within the Other Comprehensive Income and Expenditure section of the statement. A £57.291 million Remeasurement of the net defined benefit liability, which is due to changes in financial assumptions used by our external Actuary, and £20.792 million upward operational property valuations. Further details are enclosed within Note 42 on the movement of the net liability and Note 13 on the upward operational property revaluations. The positive movement posted to Unusable Reserves is enhanced further by a surplus of £13.776 million in the provision of services for the 2015/2016 financial year. The surplus generated is the equivalent figure to the outturn a private sector organisation would show in their published Statement of Accounts. This position is then amended by statutory adjustments to create the net balance funded by Council Tax for 2015/2016. The statutory adjustments are detailed within Note 8.
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Balance Sheet [Page 16] An abbreviated statement of the Council’s assets, liabilities and reserves at the beginning and the end of the 2015/2016 financial year. The Balance Sheet reiterates the upward movement in Total Reserves of £91.945 million to a closing position as at 31 March 2016 of £338.087 million. This increase creates a corresponding increase in the Net Assets held by the Council at 31 March 2016. A corresponding reduction in the Pensions Net Liability of £48.910 million is the most significant change in the Council’s Net Assets. Apart from the Pensions liability remeasurement there are three key themes evident in the movement of the Balance Sheet. (1) A continued high level of capital investment and inflation in property values during 2015/2016 has realised a growth of £37.069 million in property assets over the period. Continued high spend on assets through the Capital Programme, in highways and schools in particular, has seen additions remain higher than disposals and asset devaluation during the year (shown in Note 38). In conjunction with high spend, operational property upward revaluations of £20.792 million, as detailed in Note 13, and Investment Property growth of £16.192 million, as detailed in Note 14, over the 12 month period. (2) This additional capital investment has been predominately financed by external resources with the remainder financed by internal borrowing. This position is reflected in the Balance Sheet by a reduction of £6.411 million in Capital Grants and Contributions held (Note 36) and a reduction in external borrowing of £3.625 million. Capital Investment is expected to continue at these higher levels funded by the sale of development land to housing developers. This is reflected in Note 14 by £46.138 million of Investment Property being classified as held for sale within the Current Assets section of the Balance Sheet. (3) The Council has continued to invest in longer term investment vehicles during the financial year to maximise return. These investments have had the effect of increasing Long Term Investments by £16.296 million between Balance Sheet dates. This change in Treasury Strategy has created enhanced investment return from reduced levels of available cash balances. Total available cash has reduced by £10.245 million over the year, but perversely investment returns, detailed in Note 11, have grown by £0.806 million (119%) to £1.484 million.
Cash Flow Statement [Page 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. This statement essentially restates the Comprehensive Income & Expenditure Statement for cash items only, stripping out accruals and other items such as depreciation and pension fund charges. The 2015/2016 cash flow statement reiterates the reduction in the balance of cash and cash equivalents shown in the Balance Sheet. The movement is broken down into operating, investing and financing cash flows within Notes 25, 26 and 27. The detailed notes highlight operational cash flows are positive and support the increase in Usable Reserves. It also highlights the significant financing of capital expenditure by Council Tax through Direct Revenue Financing and Minimum Revenue Provision. Financing and investing net cash outflows more than offset the positive operating cash flows to create a reduced overall cash and cash equivalents balance. There are three key elements to the reduced balances; . £18.844 million capital investment funded by revenue and reduced capital grants and contributions held, . £1.167 million net increase in investments as part of the ongoing Treasury Strategy, and . £4.304 million opting not to replace borrowing agreements or lease arrangements that have ended.
Collection Fund Statement [Page 84] An overall summary of the collection performance of Council Tax and National Non-Domestic Rates (NNDR), including supporting disclosure notes. This statement represents the transactions of the Collection Fund, which is a statutory fund under the provisions of the Local Government Finance Acts 1988, 1992 and 2012. The fund covers all Council Tax and National Non- Domestic Rates collection in the Borough. The fund is accounted for as an agency arrangement with the balances belonging to the billing authority and the major preceptors. Council Tax collection currently holds a surplus position of £2.629 million as at 31 March 2016. The surplus balance has reduced during the year as the £2.859 million surplus, reported in 2014/2015, was paid out to the major precepting bodies. However, due to strong collection rates and an increasing Taxbase a healthy surplus has been maintained, which will be allocated out to the precepting bodies during 2016/2017. National Non-Domestic Rates (NNDR) collection is in a deficit position of £3.954 million as at 31 March 2016. The deficit position has been further increased during the year by the requirement to hold greater levels of provisions for appeals and uncollectable debts.
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Bedfordshire Pension Fund Statement [Page 87] The Pension Fund Statement of Accounts for 2015/2016, including supporting disclosure notes. Bedford Borough Council administers the Local Government Pension Fund, which looks after the current and future pension entitlements on behalf of 145 employers. As the Council is the administering authority for the Pension Fund the accounts are included here. These accounts look at the investment balance sheet and the income and expenditure of the Pension Fund. They do not include the Fund’s long term liabilities. The Pension Fund’s assets increased by £22.858 million (1.3%) compared to 31 March 2015. The new Pension Regulations which came into force in April 2014 impact on the Local Government Pension Scheme, and this may impact on the future net liabilities.
Annual Governance Statement [Page 110] A statement of the governance responsibilities and controls in place within the Council. The Framework for Delivering Good Governance in Local Government (the Framework), published by CIPFA in association with the Society of Local Authority Chief Executives (SOLACE) in 2007 (and updated in 2012), provides best practice in relation to governance and internal control arrangements. The current Framework consists of six core principles: . Core Principle 1: Focussing on the purpose of the authority and on outcomes for the community and creating and . implementing a vision for the local area. . Core Principle 2: Members and officers working together to achieve a common purpose with clearly defined functions and . roles. . Core Principle 3: Promoting values for the authority and demonstrating the values of good governance through upholding . high standards of conduct and behaviour. . Core Principle 4: Taking informed and transparent decisions which are subject to effective scrutiny and managing risk. . Core Principle 5: Developing the capacity and capability of members and officers to be effective. . Core Principle 6: Engaging with local people and other stakeholders to ensure robust public accountability
(i) Non-Financial Performance AII services use service user data and performance metrics to support the provision and development of services, this includes customer feedback provided through the Council's consultation, complaints and community engagement processes. The data and information sources referenced above have shaped the Council's new Corporate Plan which was adopted in February 2016 and covers the period 2016-2020. The Council’s Corporate Plan identifies three priority areas which will help ensure that Bedford Borough continues to be a place where people want to live, work and spend their leisure time, the priorities are: . A Thriving Local Economy – providing the environment to ensure that Bedford Borough’s economy can continue to grow, despite shrinking public spending - without economic growth the Borough will not be able to respond to the challenges of providing the homes and jobs our growing and ageing population need and the places for them to enjoy and learn as individuals and a community; . Empowering Communities – supporting our communities and neighbourhoods. The Borough is rightly proud of its strong traditions of inclusion for all its communities. We need to build on this approach and enable our communities to make and influence choices about services and our Borough as well as taking on greater responsibility; . Supporting People – safeguarding our vulnerable residents. The Council also utilises national and local data sets to understand the Borough and the specific needs of the population. For example health and other data are used to inform the Joint Strategic Needs Assessment which in turn sets the priority areas outlined in the Health & Wellbeing Strategy. Bedford Borough Council’s approach to performance management is designed to be rigorous and consistent and, its objective to actively support the delivery and improvement of services and efficiency. The success of this approach to performance management is demonstrated through the improvements in services and outcomes for the people of Bedford Borough within the confines of the reducing resources and service pressures we continue to face. Performance is monitored against a number of key corporate indicators of which 84% (174) were rated as either ‘Green’ or ‘Amber’ by our RAG rating. Of these 92 showed an improvement compared to the previous year’s outturn. These performance improvements are shown across the council and include the following:
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. Homelessness was prevented for 510 households . Adult Social Care clients receiving self-directed support rose to 78.2% (1,468 clients) . Emissionns from council buildings and transport vehicles has decresed by 30% . Nearly all fly tips (99.6% - 2,726 from 2,737) were removed within 24 hours . The number of Children in Need reduced from 980 to 753 . Council Tax and Business Rates collection remained above 95% In recent years the Local Government Association’s sector led approach to effective performance management has been implemented in Bedford Borough as a result of the abolition of the national accountability framework. As a consequence, Bedford Borough’s emphasis is primarily focused on locally driven frameworks and outcomes as opposed to compliance with centrally driven targets, as required within the previous reporting regime. In addition to service performance we also collect and report on, a number of ‘perception’ based measures. During 2015/16 these included: . 98% of people contacting our Customer Contach Centre were satisfied with the service they received, this is up from 95% in the previous year; . The number of followers of ‘Bedford Tweets’ has increased by over 27% to 7,894; . Despite a 20% increase in the number of complaints (301 to 358) we have still responded to 95.2% within published complaint timescales . The number of Freedom of Information requests has increased year-on-year and by over 100% since 2009/10; however 99.8% were responded to within 20 days in 2015/16 Bedford Borough’s established Performance Management Framework is intended to support the strategic direction given by the Mayor and the administration as articulated in our agreed Corporate Plan. This Plan in turn is informed by a strong evidence base of demographic and service-level information. The Council (members and officers) monitor key indicators on a regular basis. Bedford Borough uses performance management to improve services for local communities, members and officers use this process to drive continuous improvement to help increase efficiency. Performance management is also used to ensure policy decisions are being implemented and that customers are receiving the standard of service they expect at a cost that represents good value for money. The Council places a high emphasis on ensuring that we have systems for collecting performance information and to ensure that these systems meet data quality standards; these standards are important for the quality of Council decision-making and for sharing information with citizens, service users, local partners, and other local authorities. We are aware that poor data quality compromises the information available to decision makers, and compromises the quality of the decisions they make. The 2015/16 performance report for our headline is attached. Overall, taking into consideration the challenging but realistic (SMART) targets that have been set we are pleased that in the current financial climate we have managed to deliver and maintain strong performance against our strategic objectives; the indicators within the report are monitored on a quarterly basis by the Mayor and Chief Executive who hold officers and portfolio holders to account and undertake intervention as necessary to make performance better than it would otherwise be. The report is service based and where possible previous and comparative (benchmarking) information has been included as far as possible; the report also contains narrative where corrective action in relation to exceptions is required or a balanced explanation of the reasons behind the performance (both good and challenging). A summary of the key Indicators for 2014/15 & 2015/16 is set out below:
Key Indicators Key Indicators RAG for 2014/15 for 2015/16 Green 60% 63% Amber 25% 20% Red 15% 17% Green & Amber 85% 83%
During 2015/16 our successes included the following: . The proportion of social care clients (service users) receiving Self-directed Support (i.e. being in control of the support they need to live their lives the way they choose) improved noticeably during the year from 71.3% (1,194 clients) in 2014/15 to 78.2% in 2015/16 relating to 1,468 clients). . In 2015/16, the Adult Social Care User Survey generated an improved response rate and the overall perception was that ‘quality of life’, ‘control over their daily Life’, ‘finding it easy to find information about services’, ‘feeling safe and secure’, ‘receiving as much social care as they would like’, had either been maintained or improved compared to the previous year.
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. The Council continues to do more to prevent people becoming homeless. Although we aim is to decrease the number of nights spent in emergency accommodation (bed & breakfast); in 2015/16 there was a significant increase from 1,018 to 2,327 nights; this is an indication of our positive approach in homelessness prevention and should be contextualised against the challenges of an influx of households from other areas; in 2015/16 homelessness was prevented in Bedford Borough for 510 households compared to 464 in 2014/15 (an increase of almost 10%). . Public Health is about helping people to stay healthy, and protecting them from threats to their health. Bedford Borough Council wants its citizens to be able to make healthier choices, regardless of their circumstances, and to minimise the risk and impact of illness. . Children deemed to have excess weight have increased risk of asthma, type 2 diabetes, heart disease, certain types of cancer, and are more likely to become obese adults and not achieve their full potential at school. The reduction in excess weight (as part of the National Child Measurement Programme) for both 4- 5 year olds and 10-11 years olds shows performance to be in line with last year. For adults healthy weight is about achieving your ideal body weight and encouraging good health through a balanced diet and regular physical activity. Performance has improved significantly compared to last year with more than two- thirds of adults successfully completing these programmes. . Emissions from Council buildings and transport emissions have reduced by almost a third (30% or 5002tCO2) as at March 2015 since the baseline was established in 2009/10. This has been achieved through ongoing energy efficiency projects, rationalisation of buildings and staff being more aware, conscientious and proactive in their habits and practice to help deliver carbon savings. For 2016/17 we are retaining the aspirational target of 6600tCO2 figures will be updated at the end of July . Bedford Borough Council removed almost all flytips (99.6%) in 2015/6 within 24 hours of being reported, this relates to 2726 out of 2737 jobs and maintains year on year performance and prevention in helping to keep the Borough tidy. . Nearly all (99.98%) of residual waste, recycling and green waste was collected on time in 2015/16 – this represents only 1,518 missed collections out of over 7.1million and an improvement on 2014/15. In addition, we undertake assisted collections for customers identified as infirm, having a medical condition or disability that restricts their ability to wheel a bin out for delivery (there was a significant improvement of almost one-third in reducing the number of missed assisted collections). . Having punctual and reliable transport is essential for keeping the Borough moving at the mid-year point we were in a strong position of achieving the target. However, the latest data is not available due to the installation of a new software system by Stagecoach. . For Bedford Borough Council ensuring good local food hygiene standards is important to maintain the public’s health. In 2015/16 we ensured that 95.3% (1347 / 1413) of our food premises assessed were rated broadly compliant against the Food Hygiene Rating Scheme, the improved performance compared to 94.3% in 2014/15 and improvement in the demonstration of satisfactory or better hygiene structure and food safety management. This compares favourably when compared to both the national average of 91.7% and against neighbouring authorities. . The structural condition of roads data is taken from the Surface Condition Assessment of the National Network of Roads (SCANNER) for classified Principal and Non-Principal roads; latest information is at 2015/16 indicates that of the actual length of the network that was surveyed (lane length) more than 78% is deemed to be in good condition, just over 19% requires further investigation and just over 2% is where ‘plan maintenance’ is required soon. Latest comparator figures suggest that Bedford’s condition of roads compare favourably against the national average. . Major Planning applications (within 13 weeks); new government guidance enables all authorities to agree more appropriate timescales with applicants. In 2015/16 performance remained above target at 78% and this also included a 40% increase in the number of applications received compared to the previous year. . We consider the health of the children we look after is important. In 2015/16 we helped more children than previously to have an annual health assessment, 91.3% (all ages) and performed better than the national figures and comparator authorities. . The number of Children in Need reduced from 980 at the end of March 2015 to 753 (23% reduction) at the end of March 2016. This indicates that we are better at working towards delivering effective outcomes necessary to bring about the required changes outlined in the child in need plans. . For Key Stage 2, out of a cohort of 1892 pupils, 74% (1397) pupils achieved Level 4 and above in Reading, Writing and Mathematics (57 more pupils than last year). The overall percentage is in line with the previous academic year and we are mindful that more needs to be done to mirror the performance of comparator authorities.
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. For GCSE (i.e. at the end of Key Stage 4) 2014/15 academic year 52.4% of pupils achieved 5 or more A* - C grades or equivalent including English and Mathematics compared to 53.8% for all England. This was a slight improvement on 2013/14 (52%). . Council Tax collection is critical for ensuring the retention of low rates as far as possible. In 2015/16, 97.5% of council tax was collected by the Council (in line with the previous year’s performance); this is better than the average for unitary authorities of 96.8%. The collection of non-domestic rates was 98.3%. . 98% of people contacting the Customer Service Centre/Customer Contact Centre were satisfied with the service they received, we exceeded our aspirational target of 95% and improved on last year’s performance. . We are seeing more customers within 15 minutes of them arriving at the Customer Service Centre, this improved from 85.6% in 2014/15 to an impressive 89.3% in 2015/16. . The Council prides itself on recruiting and supporting a workforce which reflects the Borough’s diverse communities. Previously, 6.6% of employees were recorded as having a disability; in 2015/16, this improved to 7.3%. In terms of Bedford Borough Council employees recorded as being from minority ethnic communities; the revised figure in line with the Equalities Duty Classifications indicates a year on year improvement to 22.5% of employees from ethnic minority communities (BME) and this is now above the Office of National Statistics national BME figure. . Social media is an important shift in the way in which we relay messages and communicate with the public. Our followers on ‘Bedford Tweets’ increased by over 27% (7,894) compared to the previous year and this is despite the creation other social media channels. . Developing and promoting economic growth is one of our key priorities. The Borough continues to encourage new businesses to the area and it is reassuring to note that the target was exceeded for companies attending business events (479) that were organised or sponsored by Bedford Borough Council (this includes a Creative Beds Conference which alone was attended by over 60 companies). . Encouraging the participation by 16-18 year olds who are not in education, employment and training (NEET) is important to the life chances and choices of our youngsters. In 2015/16 this performance was in line at 5.4% or 300 young people (compared to 5.5% or 303 in 2014/15) and this is against Bedford having a very low number of ‘unknowns’ compared to other areas and therefore indicating a much more realistic overview of the NEET situation. . The percentage of long-term unemployed both for up to 6 months and 12 months improved by almost 9% (or 150 people) over the year. Moreover the number of JSA Claimants (aged 18 to 64) improved (reduced) by almost 22% (510 people) over the year. . Buying a property, be it a house, flat, shop, factory or a plot of land, is a major undertaking. In 2015/16 almost all requests (99.96%) for Land Charge searches (normally received from a solicitor or licenced conveyancer) were processed within the target 10 days and therefore helping to support the efficient processing of mortgages and loans. . The Borough prides itself on being transparent and has committed itself to answering 100% of freedom of information requests within the statutory timescales of 20 days; In 2015/16 we answered 99.8% (1593) on time and did this against more than a 6% increase in the number of requests received compared to 2014/15. We received an average of 6.3 requests every day. . The number of days lost to the authority due to sickness absence. In 2015/16 the challenging target of 9.5 days was met and represents a reduction of approximately 2140 sick days compared to the previous year. Although sickness fluctuates year-on-year in 2010/11 sickness was at an average of 11.72 days per employee, when compared against current FTE this represents a reduction of over 2.2 days per employee (or over 3,800 days) since 2010/11. This positive performance is most likely due to the implementation of new health and wellbeing initiatives which act as positive interventions and encourage preventative approaches to sickness absence. . In 2015/16, 97.78% of undisputed invoices in Bedford Borough were paid within 30 days, thus exceeding our challenging target of 95%. This is recognised as having a positive impact on local businesses and is a noticeable improved on 2014/15 outturn of 96.8%
(j) Future Prospects The Corporate Plan has been developed in full regards to the significant financial and demographic pressures the Council is facing. It is recognised that in order to meet these pressures the authority is required to implement fundamental changes to transform how the Council operates. This will include wide-ranging reviews of all service areas and consideration of all options for how services are provided including whether any could be stopped entirely.
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The Council is proactively seeking to address future demand and financial pressures. The Council’s March 2016 Medium Term Financial Strategy (MTFS) sets out the forecast funding gap for the period up to 2019/2020 which amounted to a range of between £17 million to £23 million. It is clear that the Council will need to continue the transformation of its services. There will inevitably be one off investment costs to continue the digital transformation journey including channel shift (web portal, supporting self-service) and putting in place the necessary infrastructure for agile and mobile working leading to reduced operating costs. These initiatives, in addition to automating business processes required to deliver a new Operating Model, will require significant one off investment. The Council will also need to consider new models of delivery and how these can be best developed. Clearly, in the context of the current financial climate the Council needs to ensure through this investment that it has an operating model that can meet the needs of the community in a sustainable manner. In order to respond to this specific initiative and allow the authority to respond to wider improvement opportunities the authority has strengthened its Transformation Reserve. The purpose of the reserve is to provide investment in enabling the required level of resource capacity, project management skills, IT solutions and training to enable transformation proposals to be further evaluated. The reserve stood at £5.621 million as at 31 March 2016, this compares to £4.098 million as at 31 March 2015. The Council’s Capital Programme has included gross expenditure of £96.1 million over the period 2016/2017 to 2018/2019. This will be funded through Grants and Contributions of £44.7 million, Capital Receipts of £23.0 million, Direct Revenue Financing of £15.1 million and Borrowing of £13.3 million. The authority will manage these commitments through its Treasury Management Strategy. Although local authorities' relationship with schools has fundamentally changed in recent years the Council recognises the role it has in shaping the environment within which education is provided. This includes school improvement and other support services and more importantly major capital investment and leadership to support the move to two-tier schooling across most of the Borough. A change of policy was agreed in January 2016 following extensive consultation and engagement with local schools and their communities. In order to deliver the longer term growth requirements, as set out in the Corporate Plan, the Council is in the process of preparing a new Local Plan (to cover the period to 2035). This is informed by Census data and population modelling to address the Borough's future housing, employment and infrastructure needs. Involvement in the government's One Public Estate scheme will support further regeneration of the Borough by bringing together public sector land and assets, releasing surplus public land and creating redevelopment opportunities. The authority continues to collaborate in regional development through the South East Midlands Local Economic Partnership – SEMLEP) and pursue bids to the national Local Growth Fund programme and (Including the securing of £2.5 million investment in small business incubator units at the Marston Vale Business Park).
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2) Statement of Responsibilities for the Statement of Accounts
The Council’s Responsibilities The Council is required to: . Make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. At Bedford Borough Council that officer is the Assistant Chief Executive & Chief Finance Officer. . Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets. . Approve the Statement of Accounts.
The Assistant Chief Executive & Chief Finance Officer’s Responsibilities The Assistant Chief Executive & Chief Finance Officer is responsible for the preparation of the Council’s Statement of Accounts in accordance with proper accounting practices, as set out in the CIPFA/ LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Code). In preparing this Statement of Accounts, the Assistant Chief Executive & Chief Finance Officer has: . selected suitable accounting policies and then applied them consistently; . made judgements and estimates that were reasonable and prudent; . complied with the Code of Practice on Local Authority Accounting in the United Kingdom (the Code). The Assistant Chief Executive & Chief Finance Officer has also: . to ensured proper accounting records were kept which were up to date; and . taken reasonable steps for the prevention and detection of fraud and other irregularities.
Certification This statement of accounts presents a true and fair view of the financial position of Bedford Borough Council at 31 March 2016 and income and expenditure for the year ended 31 March 2016.
Signed: Date: Andy Watkins, Assistant Chief Executive & Chief Finance Officer
Approval I confirm that the Statement of Accounts was approved by the Audit Committee at its meeting on 20 September 2016.
Signed Date: Councillor Nawaz, Chair of Audit Committee
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3) Movement in Reserves Statement (MIRS) This statement shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The (Surplus) or Deficit on the Provision of Services line shows the true economic cost of providing the Council’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance for council tax setting purposes. General Earmarked Capital Capital Total Unusable Total Fund General Receipts Grants Usable Reserves Authority Balance Fund Reserve Unapplied Reserves Reserves Reserves £000 £000 £000 £000 £000 £000 £000 Balance at 31 March 2014 -8,205 -34,763 0 -4,978 -47,946 -223,647 -271,593 Movement in Reserves in 2014/2015 (Surplus) or deficit on provision of services -11,317 -11,317 -11,317 Other Comprehensive Expenditure and Income 0 36,768 36,768 Total Expenditure and Income -11,317 0 0 0 -11,317 36,768 25,451 Adjustments between accounting & funding basis (Note 8) 8,030 661 8,691 -8,691 0 Net Increase/Decrease b/f Transfers to Reserves -3,287 0 0 661 -2,626 28,077 25,451 Transfers to/from Earmarked Reserves (Note 9) 1,076 -1,076 0 0 Increase/Decrease in Year -2,211 -1,076 0 661 -2,626 28,077 25,451 Balance at 31 March 2015 -10,416 -35,839 0 -4,317 -50,572 -195,570 -246,142 Movement in Reserves in 2015/2016 (Surplus) or deficit on provision of services -13,776 -13,776 -13,776 Other Comprehensive Expenditure and Income 0 -78,169 -78,169 Total Expenditure and Income -13,776 0 0 0 -13,776 -78,169 -91,945 Adjustments between accounting & funding basis (Note 8) 12,943 -3,527 9,416 -9,416 0 Net Increase/Decrease b/f Transfers to Reserves -833 0 0 -3,527 -4,360 -87,585 -91,945 Transfers to/from Earmarked Reserves (Note 9) -373 373 0 0 Increase/Decrease in Year -1,206 373 0 -3,527 -4,360 -87,585 -91,945 Balance at 31 March 2016 -11,622 -35,466 0 -7,844 -54,932 -283,155 -338,087
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4) Comprehensive Income and Expenditure Statement (CIES) This statement shows the accounting cost in the year of providing services in accordance with International Financing Reporting Standards (IFRS) rather than the amount to be funded from taxation. The Council raises taxation to cover expenditure in accordance with regulations; which is different from the accounting cost for some areas of income & expenditure. The taxation position is shown in the Movement in Reserves Statement. 2014/2015 2015/2016 Gross Gross Net Gross Gross Net Spend Income Spend Spend Income Spend £000 £000 £000 Service Description £000 £000 £000 3,619 -2,161 1,458 Central services to the public 4,264 -2,067 2,197 14,537 -4,070 10,467 Cultural & related services 13,817 -3,569 10,248 20,049 -7,875 12,174 Environmental & regulatory services 20,892 -6,600 14,292 10,523 -2,458 8,065 Planning services 7,488 -3,872 3,616 130,099 -90,789 39,310 Education and children’s services 128,355 -91,977 36,378 25,794 -8,048 17,746 Highways and transport services 25,259 -8,496 16,763 64,383 -59,338 5,045 Other housing services 63,167 -59,370 3,797 62,266 -15,798 46,468 Adult social care 68,838 -18,950 49,888 7,477 -7,093 384 Public Health 8,653 -7,448 1,205 4,958 -1,741 3,217 Corporate and democratic core 5,833 -1,103 4,730 7,705 -2,564 5,141 Non distributed costs 3,034 -2,587 447 351,410 -201,935 149,475 Cost Of Services 349,600 -206,039 143,561 4,684 4,684 Other Operating Expenditure (Note 10) 24,227 0 24,227 13,401 -4,690 8,711 Financing and Investment Income and Expenditure (Note 11) -3,480 -5,707 -9,187 -174,187 -174,187 Taxation and Non-Specific Grant Income (Note 12) -172,377 -172,377 369,495 -380,812 -11,317 (Surplus) or Deficit on Provision of Services 370,347 -384,123 -13,776 -12,952 Revaluation (gain) / loss of Property, Plant and Equipment (Note 24a) -20,792 379 Revaluation (gain) / loss of available for sale financial assets (Note 24b) -86 49,341 Remeasurement of the net defined benefit liability / (asset) (Note 42) -57,291 36,768 (Surplus) or Deficit on Other Comprehensive Income & Expenditure -78,169
25,451 (Surplus) or Deficit on Total Comprehensive Income & Expenditure -91,945 The Net Cost of Services has reduced by £5.914 million between years. This variance has been created by the £6.783 million reduction in capital charges (revaluations and Revenue Expenditure Funded Capital Under Statute) to the cost of services. The reduced Net Cost of Planning Services of £3.616 million is comparatively low equated to 2014/2015 due to a one-off REFCUS charge for the Town Centre Development project in the previous year. The movements within the non-cost of services are explained in more detail in Notes 10, 11 & 12.
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5) Balance Sheet The Balance Sheet shows the value of the assets and liabilities recognised by the Council at the financial year end. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves is those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’. These financial statements replace the unaudited financial statements certified by the Assistant Chief Executive and Chief Finance Officer on 17 June 2016. 31 March 2015 Balance Sheet Category Notes 31 March 2016 £000 £000 513,299 Property, Plant & Equipment 13 531,353 6,522 Heritage Assets 46 6,522 46,891 Investment Property 14 50,051 2,618 Intangible Assets 15 3,568 21,948 Long Term Investments 16 38,244 1,906 Long Term Debtors 16 1,910 593,184 Long Term Assets 631,648 25,571 Short Term Investments 16 10,508 32,429 Investment Property for Sale 14 46,138 225 PPE Held for Sale 20 2,371 208 Inventories 17 200 21,827 Short Term Debtors 16 & 18 23,680 20,345 Cash and Cash Equivalents 16 & 19 8,867 100,605 Current Assets 91,764 -4,024 Short Term Borrowing 16 -4,006 -48,385 Short Term Creditors 16 & 21 -45,638 -4,519 Provisions 22 -4,508 -449 Other Short Term Liabilities 16 & 39 -372 -57,377 Current Liabilities -54,524 -5,912 Provisions 22 -5,476 -80,038 Long Term Borrowing 16 -76,803 -1,206 Other Long Term Liabilities 16 & 39 -834 -287,563 Pension Liability 42 -238,653 -1,296 Donated Assets Account 36 -1,191 -14,255 Capital Grants Receipts in Advance 36 -7,844 -390,270 Long Term Liabilities -330,801 246,142 Net Assets 338,087 -50,572 Usable reserves 23 -54,932 -195,570 Unusable Reserves 24 -283,155 -246,142 Total Reserves -338,087 Please refer to the commentary included in the Narrative Report for an explanation of the changes in assets and liabilities between years.
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6) Cash Flow Statement The Cash Flow Statement shows the changes in cash and cash equivalents of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (e.g. borrowing) to the Council. 2014/2015 2015/2016 £000 £000 11,317 Net surplus or (deficit) on the provision of services 13,776 Adjustments to net surplus/(deficit) on the provision of services for non-cash 4,311 -4,451 movements Adjustments for items included in the net surplus or (deficit) on the provision of 5,427 3,512 services that are investing and financing activities 21,055 Net surplus or (deficit) from Operating Activities (Note 25) 12,837 -35,613 Net surplus or (deficit) from Investing Activities (Note 26) -20,011 -2,854 Net surplus or (deficit) from Financing Activities (Note 27) -4,304 -17,412 Net increase or (decrease) in cash and cash equivalents -11,478 37,757 Cash and cash equivalents at the beginning of the reporting period 20,345 20,345 Cash and cash equivalents as at 31 March (Note 19) 8,867 The cash flow movements above are broken down into detail disclosure notes identifying operating, investing and financing activities within Notes 25, 26 and 27.
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7) Accounting Polices
A GENERAL The Accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2015/2016 (“the Code”), which is recognised by statute (Accounts and Audit Regulations 2003) as representing proper accounting practice; taking into account any subsequent accounting guidance such as Local Authority Accounting Panel (LAAP) bulletins and any statutory requirements. Any variations from the Code or changes in accounting policy are highlighted where appropriate. The accounting policies and estimation techniques applied have been selected and exercised having regard to proper accounting principles and policies. Estimation techniques are the methods adopted by the Council to arrive at monetary amounts corresponding to the measurement basis selected for assets, liabilities, gains, losses and changes in reserves. Details of where these have been used are contained in the relevant notes to the statements. The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets (current assets in terms of assets held for sale) and financial instruments.
B ACCOUNTING CONCEPTS In general the accounts are prepared on the basis of historical cost modified by the revaluation of land, buildings, vehicles and plant subject to and in accordance with the fundamental accounting concepts set out below:
Relevance The accounts are prepared so as to provide readers with information about the Council’s financial performance and position that is useful for assessing the stewardship of public funds.
Reliability The accounts are prepared on the basis that the financial information contained in them is reliable, i.e. they are free from material error, systematic bias, complete within the bounds of materiality and represent faithfully what they intend to represent. Where there is uncertainty in measuring or recognising the existence of assets, liabilities, income and expenditure then caution and prudence has been used as a basis to inform the selection and application of accounting policies and estimation techniques.
Comparability The accounts are prepared so as to enable comparison between financial periods as far as possible. To aid comparability the Council has applied its accounting policies consistently both during the year and between years.
Understandability Every effort has been made to make the accounts as easy to understand as possible. Nevertheless, an assumption has been made that the reader will have a reasonable knowledge of accounting and local government. Where the use of technical terms has been unavoidable an explanation has been provided in the glossary of terms.
Materiality Certain information may be excluded from the accounts on the basis that the amounts involved are not material either to the fair presentation of the financial position and transactions of the Council or to the understanding of the accounts.
Accruals With the exception of the Cash Flow Statement, the accounts are prepared on an accruals basis. The accruals basis of accounting requires the non-cash effect of transactions to be reflected in the accounts for the year in which those effects are experienced and not in the year in which the cash is actually received or paid.
Going Concern The accounts are prepared on the basis that the Council will continue to operate in the foreseeable the future.
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C ACCRUALS AND RECOGNITION OF INCOME AND EXPENDITURE All accounts of the Council are maintained on an accruals basis in accordance with the Code, subject to materiality considerations. That is, sums due to or from the Council during the year are included whether or not cash has actually been received or paid in the year. Further details of accruals and exceptions are given below.
Customer and Client Receipts from the Sale of Goods Customer and client receipts in the form of sales, fees, charges and rents (when the Council transfers the significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Council) are accrued and accounted for in the period to which they relate.
Customer and Client Receipts from the Provision of Services Customer and client receipts in the form of charges (when the Council can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Council) are accrued and accounted for in the period to which they relate.
Employee Costs The full cost of employees is charged to the accounts of the period within which the employee worked. Accruals are made for salaries and other employee benefits (e.g. annual leave – see separate accounting policy ‘Employee Benefits’) earned but unpaid at the year end. No accrual will be made for flexi leave, maternity leave or sickness, if the amounts are deemed immaterial.
Financial Instruments - Assets These are recognised on the Balance Sheet on the Contract Date (Trade Date), with the exception of Trade Receivables, which are recognised when the Goods/Services have been received.
Financial Instruments - Liabilities These are recognised on the Balance Sheet when the loan is received (not when agreed).
Grants and Contributions Grants or contributions are accounted for on an accruals basis and recognised in the accounting statements when there is reasonable assurance that: . the conditions for their receipt have been complied with; and . the grant or contribution will be received.
Interest Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract.
Supplies and Services The cost of supplies and services is accrued and accounted for in the period during which they were consumed or received, respectively. Accruals are made for all material sums unpaid at the year end for goods or services received or works completed. Where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet.
Debtors and Creditors Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to the Comprehensive Income and Expenditure Statements for the income that might not be collected.
D ACQUIRED AND DISCONTINUED OPERATIONS Income and expenditure directly related to acquired and discontinued operations, when material, are shown separately on the face of the Comprehensive Income and Expenditure Statements (CIES).
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E AGENCY AND PRINCIPAL In presenting income and expenditure, the Council takes a view as to whether the income and expenditure it incurs is on an Agency basis or a Principal basis. Agency basis is where the Council incurs income and expenditure on behalf of a third party, usually due to statutory rules and regulations. An example is the collection of Council Tax on behalf of the Police & Crime Commissioner for Bedfordshire and the Bedfordshire Fire & Rescue Authority. Principal basis is where the Council incurs income and expenditure on behalf of a third party, but under contract and where risks and rewards are taken. An example is the provision of social care on behalf of other authorities under a Service Level Agreement.
F CASH AND CASH EQUIVALENTS Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature in 28 days or less from the Balance Sheet date and that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management.
G CONTINGENT ASSETS AND LIABILITIES A contingent asset arises where an event has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential. A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably. Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.
H EVENTS AFTER THE BALANCE SHEET DATE Events after the balance sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified: . those that provide evidence of conditions that existed at the end of the reporting period. For these, the Statement of Accounts is adjusted to reflect such events; . those that are indicative of conditions that arose after the reporting period. For these, the Statement of Accounts is not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect. Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts.
I EXCEPTIONAL ITEMS When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement (CIES) or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance.
J FAIR VALUE MEASUREMENT The authority measures some of its non-financial assets such as surplus assets and investment properties and majority of its financial instruments at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either:
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. in the principal market for the asset or liability, or . in the absence of a principal market, in the most advantageous market for the asset or liability. The authority measures the fair value of an asset or liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. When measuring the fair value of a non-financial asset, the authority takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The authority uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Inputs to the valuation techniques in respect of assets and liabilities for which fair value is measured or disclosed in the authority’s financial statements are categorised within the fair value hierarchy, as follows: . Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the authority can access at the measurement date . Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly . Level 3 – unobservable inputs for the asset or liability.
K FINANCIAL ASSETS Financial assets are classified into two types: . Loans and Receivables – assets that have fixed or determinable payments but are not quoted in an active market; . Available-for-sale assets – assets that have a quoted market price and/or do not have fixed or determinable payments.
Loans and Receivables Loans and receivables are initially measured at fair value and subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the CIES for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the CIES is the amount receivable for the year in the loan agreement. Where a receivable (i.e. debtor) has a maturity of less than 12 months or is a trade or other receivable, the fair value is taken to be the principal outstanding or the billed/invoiced amount. When soft loans (e.g. interest-free or low interest rate loans to voluntary organisations) are made, a loss is recorded in the CIES (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. Interest is credited to the Financing and Investment Income and Expenditure line in the CIES at a marginally higher effective rate of interest than the rate receivable from the voluntary organisations, with the difference serving to increase the amortised cost of the loan in the Balance Sheet. Statutory provisions require that the impact of soft loans on the General Fund Balance is the interest receivable for the financial year – the reconciliation of amounts debited and credited to the CIES to the net gain required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement. Where the value of soft loans is considered immaterial, this guidance is not followed and the amounts recorded in the balance sheet reflect the cash amounts. Any gains and losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the CIES. Normally a financial asset is derecognised when the contractual rights to the cash flows from the financial asset have expired or have been transferred.
Available-for-Sale Assets Available-for-sale assets are initially measured and carried at fair value. When the asset has fixed or determinable payments, annual credits to the Financing and Investments Income and Expenditure line in the CIES for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the CIES when it becomes receivable by the Council. Assets are maintained in the Balance Sheet at fair value. Values are based on the following principles: . Instruments with quoted market prices – the market price; . Other instruments with fixed and determinable payments – discounted cash flow analysis; . Equity shares with no quoted market prices – independent appraisal of company valuations.
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Changes in fair value are balanced by an entry in the Available-for-sale Reserve and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available-for-Sale Financial Assets line in the CIES. The exception is where impairment losses have been incurred – these are debited to the Financing and Investment Income and Expenditure line in the CIES, along with any net gain or loss for the asset accumulated in the Available-for-Sale Reserve. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to the service) or the Financing and Investment Income and Expenditure in the CIES. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Any gains and losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the CIES, along with any accumulated gains or losses previously recognised in the Surplus or Deficit on Revaluation of Available-for-Sale Financial Assets line in the CIES. Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses).
Impairment of Financial Assets The Council maintains reviews of its financial assets (debtors) to ensure that it can finance any sums due to the Council that are subsequently deemed to be irrecoverable after recovery measures have been exhausted. Colloquially known as the Bad Debt provision, as part of the Council’s financial reporting the Executive considers the level required on at least an annual basis. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to the service) or the Financing and Investment Income and Expenditure in the CIES. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. The amount needed to provide for potential unpaid sundry debts (including commercial rents and Benefit overpayments) is reduced annually by sums written off and increased by an annual charge to the services in the CIES. The impairment is netted off the Debtors figure in the Balance Sheet and not included in the Provisions total.
L FINANCIAL GUARANTEES The Council may give financial guarantees requiring payments to be made to reimburse the holder of a debt if a debtor fails to make a payment when due in accordance with the terms of a contract. Where these guarantees are given they are to be included in the accounts at fair value. Where guarantees are given to unrelated parties, the fair value is the premium received unless that sum does not represent a reliable estimate of the fair value. Where no premium is received the fair value of the guarantee is estimated by assessing the likelihood of the guarantee being called against the likely amount payable. At 31 March 2016 the Council had given no financial guarantees but may do so in the future.
M FINANCIAL LIABILITIES Financial liabilities are initially measured at fair value and subsequently measured at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the CIES for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus interest payable) and interest charged to the CIES is the amount payable for the year in the loan agreement. Where a payable (i.e. creditor) has a maturity of less than 12 months or is a trade or other payable, the fair value is taken to be the principal outstanding or the billed/invoiced amount. Gains and losses on the repurchase or early settlement of borrowing are credited and debited to Financing and Investment Income and Expenditure line in the CIES in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the CIES is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the CIES, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid (subject to a maximum of ten years in the case of discounts received). The reconciliation of amounts charged to the CIES to the net charge required against the General Fund Balance is managed by a transfer to or from the
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Financial Instruments Adjustment Account in the Movement in Reserves Statement.
N GRANTS AND CONTRIBUTIONS Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Council when there is reasonable assurance that: . the Council will comply with the conditions attached to the payments; and . the grants or contributions will be received. Amounts recognised as due to the Council are not credited to the CIES until all terms and conditions attached to the grant or contributions have been satisfied. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors for revenue grants and contributions or capital grants receipts in advance for capital grants and contributions. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants and contributions) or Taxation and Non-Specific Grant Income (non-ring-fenced revenue grants and all capital grants) in the CIES. Where capital grants are credited to the CIES, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Reserve. Where the grant has been used to finance capital expenditure, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Reserve are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure in the Movement in Reserves Statement.
O INTANGIBLE ASSETS Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) are capitalised (above a de minimis limit of £4,000 for schools and £10,000 for non-schools) when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council. Intangible Assets are amortised to the relevant service line(s) in the CIES over the economic life of the asset (between 5 and 15 years). Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase (research expenditure cannot be capitalised). Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services. Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. In practice, no intangible asset held by the Council meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the CIES. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the CIES. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the CIES. Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve. When Intangible assets are amortised to zero, it will be assumed there is no existing operational use for the asset, unless there is evidence to the contrary. The Gross Book Value and Accumulated Amortisation will be treated as a disposal and removed from the Fixed Asset Register.
P INTERESTS IN COMPANIES AND OTHER ENTITIES The Council has interests in entities that have the nature of subsidiaries. The main funds for which the Council acts as sole trustee are listed in Note 47. Group Accounts have not been prepared as these interests are not considered material.
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Q INVENTORIES AND LONG TERM CONTRACTS Inventories are to be included in the Balance Sheet at the lower of cost and net realisable value. Due to materiality, the cost of inventories is valued at cost price. Long term contracts are accounted for on the basis of charging the Surplus or Deficit on the Provision of Services with the value of works and services received under the contract during the financial year.
R HERITAGE ASSETS Heritage assets are assets that are held by the authority principally for their contribution to knowledge or culture. Heritage assets are measured at valuation in the balance sheet where practical and material, but are otherwise disclosed by means of narrative. There is no depreciation charged on the heritage assets because it has been estimated that the assets have a useful life of such length that any depreciation charge on the asset will be negligible and can be ignored on the basis of materiality. Civic Regalia and Art Museum artefacts have been valued on the basis of the last insurance valuation. Statues and Memorials, Heritage Properties (e.g. Bromham Mills, Stevington Windmill) and the Crystal Archive Collection have been valued on the basis of Historic Cost (when previously held as Community Assets). The Council has not recognised any other Archived assets as it is of the view that obtaining valuations for the vast majority of these collections would involve a disproportionate cost of obtaining the information in comparison to the benefits to the users of the Council’s financial statements – this exemption is permitted by the Code.
S INVESTMENT PROPERTY Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale.
Recognition Expenditure on the acquisition, creation or enhancement of Investment Property is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Authority and the cost or fair value of the item can be measured reliably. Expenditure that maintains but does not add to an assets potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred. Where part of an investment property is replaced (above a de minimis level of £100,000), the cost of the replacement is recognised in the carrying value of the investment property and the carrying amount of those parts that are replaced is derecognised.
Measurement Investment properties are measured initially at cost and subsequently at fair value, based on the amount at which the asset could be exchanged between knowledgeable parties at arms-length (i.e. market value). Where an Investment Property is held under a lease (i.e. the Council is the lessee), the measurement is based on the lease interest. Properties are not depreciated but are revalued annually according to market conditions at the year-end. This means that a periodic revaluation approach (see accounting policy for Property, Plant and Equipment) is only used where the carrying amount does not differ materially from that which would be determined using fair value at the Balance Sheet date. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the CIES. The same treatment is applied to gains and losses on disposal. Investment Properties are not permitted to be reclassified as Assets Held for Sale. An investment property under construction is measured at fair value if the Council is able to measure reliably the fair value of the investment property; otherwise these assets are measured at cost. Rental Income and Disposals Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.
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T JOINTLY CONTROLLED OPERATIONS AND JOINTLY CONTROLLED ASSETS Jointly controlled operations are activities undertaken by the Council in conjunction with other organisations that involve the use of the assets and resources of the organisations rather than the establishment of a separate entity. The Council recognises on its Balance Sheet the assets that it controls and the liabilities that it incurs and debits and credits the CIES with a share of the expenditure it incurs and income it earns from the activity of the operation. Jointly controlled assets are items of property, plant or equipment that are jointly controlled by the Council and other organisations, with the assets being used to obtain benefits for the organisations. The joint venture does not involve the establishment of a separate entity. The Council accounts for only its share of the jointly controlled assets, the liabilities and expenses that it incurs on its own behalf or jointly with others in respect of its interest in the joint venture and income that it earns from the venture.
U LEASES Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets. The Council as Lessee Finance Leases Property, Plant and Equipment or Investment Property held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred. Lease payments are apportioned between: . a charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability; and . a finance charge (debited to the Financing and Investment Income and Expenditure line in the CIES). Property, Plant and Equipment and Investment Property recognised under finance leases is accounted for using the policies applied generally to such assets, for Property, Plant and Equipment subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Council at the end of the lease period). The Council is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund Balance, known as the Minimum Revenue Provision (MRP), by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. Operating Leases Rentals paid under operating leases are charged to the CIES as an expense of the services benefitting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease; even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease). An Investment Property held under an operating lease is accounted for as if it was a finance lease. The Council as Lessor Finance Leases Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Investment Property) is written off to the Other Operating Expenditure line in the CIES as part of the gain or loss on disposal. A gain, representing the Council’s net investment in the lease, is credited to the same line in the CIES as part of the gain or loss on disposal
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(i.e. netted off against the carrying value of the asset at the time of disposal), matched by a lease (long-term debtor) asset in the Balance Sheet. Lease rentals receivable are apportioned between: . a charge for the acquisition of the interest in the property – applied to write down the lease debtor (together with any premiums received); and . finance income (credited to the Financing and Investment Income and Expenditure line in the CIES). The gain credited to the CIES on disposal is not permitted by statute to increase the General Fund Balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the General Fund Balance to the Capital Receipts Reserve, in the Movement in Reserves Statement. Where the amount due in relation to the lease asset is to be settled by the payment of rentals in future financial years, this is posted out of the General Fund Balance to the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. When the future rentals are received, the element for the capital receipt for the disposal of the asset is used to write down the lease debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts Reserve in the Movement in Reserves Statement. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. Under transition to IFRS, the Council reclassified a number of operating leases to finance leases. In order to mitigate the impact of this reclassification on council tax, regulations (SI 2010 No. 454) required the Council not to classify the repayment of the principal element as a capital receipt for leases entered into on or before 31 March 2010, but to retain it in the General Fund as income Operating Leases Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the CIES. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income. Lease Type Arrangements Where the Council enters into an arrangement, comprising a transaction or a series of related transactions, that does not take the legal form of a lease but conveys a right to use an asset (e.g. an item of property, plant or equipment) in return for a payment or series of payments, the arrangement is accounted for as a lease as detailed above.
V OVERHEADS AND SUPPORT SERVICES The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2015/2016 (SeRCOP). The total absorption costing principle is used – the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of: . Corporate and Democratic Core – costs relating to the Council’s status as a multi-functional, democratic organisation; and . Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring early and impairment losses chargeable on Assets Held for Sale. These two cost categories are defined in SeRCOP and accounted for as separate headings in the CIES.
W PROPERTY, PLANT AND EQUIPMENT Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment. Recognition Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised (above a de minimis limit of £4,000 for schools and £10,000 for non-schools) on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential
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27 to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred. The de minimis level for capitalisation, referred to above, is not applicable to a project if it is part of a larger scheme of works which has a combined value exceeding the de minimis. Measurement Assets are initially measured at cost, comprising: . the purchase price; . any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The Council does not capitalise borrowing costs incurred whilst assets are under construction. The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council. Assets are then carried in the Balance Sheet using the following measurement bases: . Infrastructure, Community Assets and Assets Under Construction – depreciated historical cost; . All other assets – fair value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV). Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value. Where non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value. The valuation of land and buildings is undertaken by professionally qualified valuers. New capital projects are treated as assets under construction until they are formally handed over to the service as completed and ready for use. Capital expenditure in year is added to the carrying value of the asset until it is next revalued with the exception of material works on assets (£100,000 or over), which will be revalued at the end of the financial year. Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year-end, but as a minimum every five years. Revaluations are completed as at 1 April in the year of valuation. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Gains are credited to the appropriate line(s) in the Surplus or Deficit on Provision of Services (up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised) where they arise from the reversal of a revaluation loss previously charged to the Surplus or Deficit on Provision of Services, for the same asset. Where decreases in value are identified (revaluation loss), they are accounted for as follows: . where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains); . where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Surplus or Deficit on Provision of Services. The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. When an asset is re-valued (revaluation gain and revaluation loss), any accumulated depreciation and impairment at the date of valuation is eliminated against the gross carrying amount of the asset and the net amount restated to the re-valued amount of the asset. Revaluation gains and revaluation losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement (MIRS) and posted to the Capital Adjustment Account. Closed Landfill Site The Council owns one closed landfill site. The future statutory costs of maintaining this site have been set aside in a provision and capitalised. These costs have then been revalued downwards and charged to the CIES. The revaluation losses are then credited in the MIRS and debited in the Capital Adjustment Account. The provision will be held at the discounted cash value determined by a relevant PWLB borrowing rate. The unwinding of the discounted provision will create an interest charge being made to the CIES. Any expenditure
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28 incurred in the statutory obligations of the site, whether capital or revenue, will be charged to the outstanding provision. Impairment Assets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for as follows: . where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains); . where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Surplus or Deficit on Provision of Services. In exceptional cases where an impairment loss is reversed subsequently on the same asset, the reversal is credited to the relevant service line(s) in the Surplus or Deficit on Provision of Services, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. Revaluation gains and impairment losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. Depreciation Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. Freehold land and Community Assets) and assets that are not yet available (i.e. assets under construction). Assets are depreciated based on the value and life at the start of the financial year (following any revaluations) on a straight-line basis using the following life periods:
Asset Type Depreciation Range Building Between 0 and 100 years Land No Depreciation Plant, Vehicles and Equipment Between 5 and 15 years Highways Infrastructure 30 years Other Infrastructure Between 10 and 20 years
Depreciation is recognised in the appropriate lines in the Surplus or Deficit on Provision of Services. Depreciation is not permitted to have an impact on the General Fund Balance. The depreciation is, therefore, reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account in the Balance Sheet. Residual Value Residual values are not used as asset values are assumed to be fully consumed over their useful life. Componentisation Where an item of Property, Plant and Equipment is of significant value in relation to the overall asset portfolio and has major components whose cost is significant in relation to the total cost of the asset, the components are depreciated separately. The Council applies a de minimis limit (£5 million) below which assets will not be componentised because the asset is not considered significant in relation to the overall value of the Council’s asset portfolio. For those assets above this de minimis limit, there will be a separate de minimis to only consider those components that are significant in relation to the total cost of the asset (20% or above of the total cost). These de minimis limits will be assessed on a regular basis so ensure that the levels are appropriate and do not materially affect the depreciation calculation. Componentisation for depreciation purposes is applicable to enhancement and acquisition expenditure incurred, and revaluations carried out.
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Where part of a Property, Plant and Equipment asset is replaced (above a de minimis level of £100,000), the cost of the replacement is recognised in the carrying value of the asset and the carrying amount of those parts that are replaced is derecognised. This recognition and derecognition takes place regardless of whether the replaced part had been depreciated separately. Disposals and Non-Current Assets Held for Sale When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction, rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the CIES. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Services on the same asset (up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised). Depreciation is not charged on Assets Held for Sale. Where assets are expected to be sold within 12 months of the end of the financial year they are classified as Current Assets Held for Sale. Revaluation gains and revaluation losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. If assets no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to non- current assets (Property, Plant and Equipment or Investment Property) and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as Held for Sale, and their recoverable amount at the date of the decision not to sell. Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale. When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the CIES as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the CIES also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account. Amounts received for a disposal in excess of £10,000 are categorised as capital receipts and credited to the Capital Receipts Reserve (disposals of £10,000 or below are treated as revenue). Capital receipts can then only be used for new capital investment (or set aside to reduce the Council’s underlying need to borrow). Receipts are appropriated to the Reserve from the General Fund Balance in the Movement in Reserves Statement. The written-off value of disposals is not a charge against Council Tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. Reclassifications to Investment Property Where Property, Plant and Equipment meet the criteria for Investment Property, the asset is reclassified to Investment Property. The asset is revalued immediately before reclassification to Investment Property with any remaining balance on the Revaluation Reserve is ‘frozen’ until such time it is reclassified. Schools The capital assets of certain schools in the Borough are not owned by the Council and hence it is not probable that the future economic benefits or service potential associated with the asset will flow to the Council. Neither does the Council control the assets and hence there is no service concession or lease type arrangement. As a result, the value of the assets is not included in the Council’s Balance Sheet. Those schools not included are: Voluntary Aided (VA) and Voluntary Controlled (VC) schools (though the playing fields of VA / VC schools are included).
X EMPLOYEE BENEFITS Benefits Payable During Employment Short-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits for current employees and are recognised as an expense for services in the year in which employees render service to the Council. An accrual is made for the cost of holiday entitlements earned by employees but not taken before the year-end which employees can carry forward into the next financial year. For the accounts, flexi-time and leave accrued during maternity leave and long term sickness are excluded if deemed immaterial.
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The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out to the Accumulated Absences Account through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs. Termination Benefits Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy. The cost is charged on an accruals basis to the Non Distributed Costs line in the CIES when the Council is demonstrably committed to the termination of the employment of an officer or group of officers. Post-Employment Benefits (Pension Costs) Employees of the Council are members of three separate pension schemes: . The Teachers’ Pension Scheme, administered nationally by the Teachers’ Pensions Agency; . The NHS Pension Scheme, administered nationally by the NHS Pensions; . The Local Government Pensions Scheme, administered by Bedford Borough Council. All three schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees work for the Council. However, the arrangements for the Teachers’ and NHS pension schemes mean that liabilities for these benefits cannot be identified to the Council. These schemes are, therefore, accounted for as if they were defined contributions schemes – no liability for future payments of benefits is recognised in the Balance Sheet and the Children’s and Education Services and Public Health lines in the CIES are charged with the employer’s contributions payable to their respective pension funds in the year. The Local Government Scheme is accounted for as a defined benefits scheme as follows: The liabilities of the Bedfordshire Pension Scheme attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc., and projections of estimated earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate of 3.2% (based on the indicative rate of return on high quality corporate bonds). The assets of the Bedfordshire pension fund attributable to the Council are included in the Balance Sheet at their market value: . quoted securities – market bid price . unquoted securities – professional valuations . unitised securities – current bid price quoted by fund manager . property – current bid price quoted by fund manager The change in the net pension’s liability is analysed into seven components: (1) current service cost – the increase in liabilities as result of years of service earned this year – allocated in the CIES to the revenue accounts of services for which the employees worked (2) past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the CIES as part of Non Distributed Costs (3) net interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to the Financing and Investment Income and Expenditure line in the CIES (4) expected return on plan assets – the annual investment return on the fund assets attributable to the Council, based on an average of the expected long-term return, net of administration costs related to the management of plan assets – credited to the Financing and Investment Income and Expenditure line in the CIES (5) gains/losses on settlements and curtailments – the result of actions to relieve the Council of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited to the Surplus or Deficit on Provision of Services in the CIES as part of Non Distributed Costs (6) actuarial gains and losses – changes in the Net Pensions Liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Pension Reserve (7) contributions paid to the Bedfordshire Pension Fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense. In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund in the year, not the amount calculated according to the relevant
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31 accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year- end. The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.
Y PRIOR PERIOD ADJUSTMENTS, CHANGES IN ACCOUNTING POLICIES, ESTIMATES AND ERRORS Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment. Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period.
Z CHARGES TO REVENUE FOR NON-CURRENT ASSETS Services, support services and trading accounts are debited with the following amounts to record the cost of holding fixed assets during the year: . depreciation attributable to the assets used by the relevant service. . revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off . . amortisation of intangible fixed assets attributable to the service. The Council is not required to raise Council Tax to fund depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the Council in accordance with statutory guidance (MRP). Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance (MRP), by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.
AA PROVISIONS Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. For instance, the Council may be involved in a court case that could eventually result in the payment of a negotiated settlement or the payment of compensation. Existing provisions are reviewed annually alongside consideration for new provisions. They reflect the best estimate when the accounts are prepared. Provisions are charged as an expense to the appropriate service line in the CIES in the year that the Council becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some, or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Council settles the obligation. Provisions are classified on the Balance Sheet as short term (due to be settled within 12 months of the financial year end) or long term (due to be settled over 12 months of the financial year end). For long term provisions where
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32 the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. The unwinding of the discount due to the passage of time is recognised as interest within Surplus or Deficit on the Provision of services.
BB RESERVES The Council maintains earmarked reserves to fund future expenditure on specific policy priorities as well as to provide funds to meet various contingency requirements the Council may have to face. The Executive has undertaken a review to ensure they are still required for the purpose set out and that the balance is still appropriate. Amounts set aside for purposes falling outside of the definition of provisions or contingent liabilities are treated as reserves and transfers to and from them are distinguished from service expenditure. Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year and therefore included in the Surplus or Deficit on the Provision of Services in the CIES. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against council tax for the expenditure. Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments, retirement and employee benefits and do not represent usable resources for the Council – these reserves are explained in the relevant accounting policies.
CC REVENUE EXPENDITURE FUNDED FROM CAPITAL UNDER STATUTE (REFCUS) Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of non-current assets (e.g. grants to third parties for capital purposes) has been charged as expenditure to the relevant service in the CIES in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund to the Capital Adjustment Account then reverses out the amounts charged, so that there is no impact on the level of council tax.
DD VALUE ADDED TAX (VAT) VAT payable is included as an expense in the CIES whether of a capital or revenue nature only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is not included as income in the CIES.
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8) Disclosure Notes to the Core Financial Statements No. Disclosure Note Description Page 1) New Accounting Standards 34 2) Acquired Operations 34 3) Accounting Standards That Have Been Issued But Have Not Yet Been Adopted 34 4) Critical Judgements in Applying Accounting Policies 35 5) Assumptions Made About the Future / Major Sources of Estimation Uncertainty 35 6) Material Items of Income and Expenses 36 7) Events after the Balance Sheet Date 36 8) Adjustments between Basis & Funding Basis Under Regulations 37 9) Transfers to / from Earmarked Reserves 38 10) Other Operating Expenditure 40 11) Financing & Investment Income and Expenditure 40 12) Taxation & Non-specific Grant Income 40 13) Property, Plant & Equipment 41 14) Investment Property 44 15) Intangible Assets 47 16) Financial Instruments 48 17) Inventories 52 18) Short-Term Debtors 52 19) Cash & Cash Equivalents 53 20) Assets Held for Sale 53 21) Short-term Creditors 53 22) Provisions 54 23) Usable Reserves 54 24) Unusable Reserves 55 25) Cash Flow Statement - Operating Activities 59 26) Cash Flow Statement - Investing Activities 59 27) Cash Flow Statement - Financing Activities 59 28) Amounts Reported for Resource Allocation 60 29) Trading Operations 63 30) Agency Services 63 31) Pooled Budgets 63 32) Members’ Allowances 64 33) Officer Remunerations 64 34) External Audit Costs 66 35) Dedicated Schools Grant 66 36) Grant, Contributions & Taxation 67 37) Related Parties 68 38) Capital Expenditure & Capital Financing 69 39) Leases 70 40) Impairments 72 41) Pensions Schemes Accounted for as Defined Contribution Schemes 72 42) Defined Benefit Pension Schemes 73 43) Contingent Liabilities 77 44) Contingent Assets 77 45) Nature & Extent of Risks Arising from Financial Instruments 77 46) Heritage Assets – In year notes 80 47) Trust Funds 82
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1) New Accounting Standards
For any new accounting standards or policy introduced, the Council is required to provide information explaining how these changes have affected the accounts. IFRS 13 Fair Value Measurement (May 2011) Local authorities are required to apply the fair value measurement and disclosure requirements of Section 2.10 of the Code prospectively from 1 April 2015. Restatement of prior year transactions is not required. The 2015/2016 Code has introduced the concept and definition of current value for the measurement of property, plant and equipment. This concept requires that local authorities measure the service potential and thus operating capacity used to deliver local authority goods and services inherent in the assets. This means that the measurement requirements for operational property, plant and equipment have not changed from those in the 2014/2015 Code. However, the Code requires that non-operational property, plant and equipment classified as surplus assets are measured at fair value in accordance with section 2.10 of the Code. In addition to the new valuation method applied to surplus assets, there are additional disclosure requirements required to support any assets or liabilities valued using a fair value as at the Balance Sheet date. The new fair value disclosures can be seen in notes 14) Investment Properties and 16) Financial Instruments. Accounts and Audit Regulations 2015 The Updated 2015/16 Code specifies the principles for narrative reporting which CIPFA/LASAAC considers should be used to meet the requirements of the Accounts and Audit Regulations in England (see Regulation 8 (2)). This change is reflected in the change of title of the Explanatory Foreword to the Narrative Report, included as section 1) Narrative Report of this document. The Narrative Report is a stand-alone document which is not formally part of the Statement of Accounts and is not then covered directly by the statutory requirements for an audit opinion or certification by the responsible financial officer.
2) Acquired Operations
From 30 September 2015 responsibility for Public Health for Children 0 – 5 transferred to the Council. A grant of £1.285 million was received from the Department of Health to fund the transferred services. There were be no assets or liabilities associated with the transfer of this service. This transfer was deemed not material and therefore not disclosed separately on the face of the Comprehensive Income and Expenditure Statement (CIES).
3) Accounting Standards That Have Been Issued But Have Not Yet Been Adopted
Paragraph 3.3.2.13 of the 2015/2016 Code requires changes in accounting policy to be applied retrospectively unless alternative transitional arrangements are specified in the Code. Paragraph 3.3.4.3 requires an authority to disclose information relating to the impact of an accounting change that will be required by a new standard that has been issued but not yet adopted by the Code for the relevant financial year. The standards introduced in the 2016/2017 Code that are relevant to the requirements of paragraph 3.3.4.3 are: . Amendments to IAS 19 Employee Benefits (Defined Benefit Plans: Employee Contributions) . Annual Improvements to IFRSs 2010 – 2012 Cycle . Amendment to IFRS 11 Joint Arrangements (Accounting for Acquisitions of Interests in Joint Operations) . Amendment to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (Clarification of Acceptable Methods of Depreciation and Amortisation) . Annual Improvements to IFRSs 2012 – 2014 Cycle . Amendment to IAS 1 Presentation of Financial Statements (Disclosure Initiative) . The changes to the format of the Comprehensive Income and Expenditure Statement, the Movement in Reserves Statement and the introduction of the new Expenditure and Funding Analysis . The changes to the format of the Pension Fund Account and the Net Assets Statement. These policy changes are not expected to have a significant impact on the Council’s accounts. There are changes to the appearance of the statements expected and the potential for additional disclosures.
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4) Critical Judgements in Applying Accounting Policies
In applying the accounting policies set out in Section 7, the Council has had to make certain judgements about complex transactions, or those involving uncertainty about future events. The critical judgements made in the Statement of Accounts are: . There continues to be a high degree of uncertainty regarding future levels of funding for local government. The Governments four year deal, provides some mitigation of this risk in relation to Revenue Support Grant, however other changes such as the proposed localisation of business rates from 50% to 100% and the accompanying transfer of responsibilities from Central to Local Government brings further risk and greater volatility. . The Council is embarking on a review of its operating model in partnership with PwC, this review will focus on its digital offering, and streamlining middle and back office functions to maximise technology. The Council continues to protect where possible services to residents and therefore is of the view that there is no requirement to impair any assets as a result of the rationalisation of services. . The Council maintains a prudent level of reserves to mitigate financial risk and ensure financial stability in the medium term. The General Fund Balance and Transformation Reserves in particular are reviewed at both budget setting and as part of the closure of accounts to ensure there is financial resilience and sufficient funding to support the Council’s Transformation Programme. . Where there are amounts in dispute with other parties, the Council has accounted for the amount it believes is correct. Where appropriate, a provision is set up to account for doubtful amounts. . Valuation of property is subject to a number of professional judgements. Valuations are carried out by a qualified valuer, and their assumptions are set out in Note 13.
5) Assumptions Made About Future and Other Major Sources of Estimation Uncertainty
The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The items in the Council’s Balance Sheet at 31 March 2016 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:
Item Uncertainties Effect if Actual Results Differ from Assumptions
Pensions Estimation of the net liability to pay pensions The effects on the Net Pensions Liability of Liability depends on a number of complex judgements changes in individual assumptions have been relating to the discount rate used, the rate at calculated as being: which salaries are projected to increase, . A decrease in the Discount Rate of 0.5% changes in retirement ages, mortality rates and would increase the employer liability by expected returns on pension fund assets. The approximately 10% (£58.3 million) Council’s Actuaries provide expert advice about . An increase in the life expectancy of the assumptions to be applied. members by 1 year would increase the employer liability by approximately 3% (£17.3 million) . An increase in the salary increase rate of 0.5% would increase the employer liability by approximately 2% (£14.1 million) . An increase in the pension increase rate of 0.5% would increase the employer liability by approximately 8% (£43.7 million)
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Item Uncertainties Effect if Actual Results Differ from Assumptions
Reserves The Council’s outturn includes a number of Corporate Reserves total £15.6 million. An estimates in terms of payments to suppliers increase of 10% above these estimated and income due from its customers. Those requirements would have the effect of adding estimates are made on the best available £1.56 million to the funding required. information at the time of closing the accounts. Any material difference between the actual expenditure and income and accruals may impact on the Council’s budget which would need to be met from reserves.
Fair Value When the fair values of financial assets and The authority uses the discounted cash flow Measurements financial liabilities cannot be measured based (DCF) model to measure the fair value of on quoted prices in active markets (i.e. Level 1 some of its investment properties and inputs), their fair value is measured using financial assets. The significant unobservable valuation techniques (e.g. quoted prices for inputs used in the fair value measurement similar assets or liabilities in active markets or include management assumptions regarding the discounted cash flow (DCF) model). Where rent growth, vacancy levels (for investment possible, the inputs to these valuation properties) and discount rates – adjusted for techniques are based on observable data, but regional factors (for both investment where this is not possible judgement is required properties and some financial assets). in establishing fair values. These judgements Significant changes in any of the typically include considerations such as unobservable inputs would result in a uncertainty and risk. However, changes in the significantly lower or higher fair value assumptions used could affect the fair value of measurement for the investment properties the authority’s assets and liabilities. Where and financial assets. Level 1 inputs are not available, the authority employs relevant experts to identify the most appropriate valuation techniques to determine fair value. Information about the valuation techniques and inputs used in determining the fair value of the authority’s assets and liabilities is disclosed in notes 14 and 16 below.
6) Material Items of Income and Expense
The following material item of income and expense recognised in Net Cost of Services with the surplus or deficit on the provision of services is detailed below. During 2015/2016, the CIES incurred depreciation impairment charges of £16.105 million (£17.825 million in 2014/2015) and net revaluation gains of £0.694 million (£3.042 million net losses in 2014/2015). However, these have no impact on the General Fund as these are reversed out as required under statutory regulations (see Note 8). Other material items of income and expense are disclosed in Notes 10, 11 and 12.
7) Events after the Balance Sheet Date
The Statement of Accounts was authorised for issue by the Assistant Chief Executive & Chief Finance Officer on 20 September 2016. Events taking place after this date are not reflected in the financial statements or notes. On 23 June 2016 the United Kingdom voted to leave the European Union. The result has caused uncertainty in the financial markets, with the pound falling against the dollar and the euro and the stock market experiencing higher than normal volatility. The investments held by the Authority are currently valued at levels equal to, or above, before the Brexit decision. To date there are no facts about any medium/long term changes that are likely to occur and it is too early to understand any direct impacts. The Council will continue to monitor the position and impact of the exit negotiations.
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8) Adjustments between Accounting Basis and Funding Basis under Regulations
This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure. Usable Reserves 2014/2015 Movement Usable Reserves 2015/2016 Movement General Capital Capital in General Capital Capital in Fund Receipts Grants Unusable Fund Receipts Grants Unusable Balance Reserve Unapplied Reserves Balance Reserve Unapplied Reserves £000 £000 £000 £000 £000 £000 £000 £000 Reversal of items debited or credited to the CIES -283 283 Amortisation of intangible assets -382 382 -17,825 17,825 Depreciation and Impairment of non-current assets -16,105 16,105 -5,961 5,961 Revaluation losses on Property, Plant and Equipment -4,435 4,435 2,919 -2,919 Revaluation gains reversing previous losses 5,129 -5,129 2,223 -2,223 Movement in market value of investment property 16,192 -16,192 -1,257 -330 1,587 Net gain or (loss) on sale of investment property 949 -2,094 1,145 23,809 -23,809 Capital Grants and Contributions credited to the CIES 23,249 -23,249 -5,405 5,405 Revenue expenditure funded from capital under statute (net of grants) -2,358 2,358 -2,675 -480 3,155 Net gain or loss on sale of non-current/current assets (excl. investment property) -22,169 -717 22,886 38 -38 Finance costs adjustment between the Code and statutory requirements 36 -36 Insertion of items not debited or credited to the CIES 10,189 -10,189 Capital expenditure charged to the General Fund balance 9,923 -9,923 4,360 -4,360 Statutory Provision for Repayment of Debt (MRP) 4,602 -4,602 544 -544 Statutory Repayment of Debt (Finance Lease Liabilities) 549 -549 Adjustments involving the capital grants unapplied account 5,063 -5,063 0 Capital grants and contributions unapplied credited to the CIES 7,671 -7,671 5,724 -5,724 Application of grants to capital financing (to capital adjustment account) 4,144 -4,144 Adjustments involving the capital receipts reserve 839 -839 Capital Receipts applied to fund Capital Expenditure 2,821 -2,821 -3 3 0 Capital Receipts payable to the Housing Capital Receipts Pool -32 32 Transfer from Capital Receipts Deferred to Capital Receipts Reserve -10 10 Adjustments involving the collection fund adjustment account 525 -525 Collection Fund statutory income adjustments -1,426 1,426 Adjustment involving the pension reserve -22,507 22,507 Reversal of retirement benefits posted to the CIES -22,610 22,610 13,823 -13,823 Employer's pension contributions and direct payments to pensioners 14,229 -14,229 Adjustment involving the accumulated absences account 453 -453 Remuneration adjustment between the Code and statutory requirements -101 101 8,030 0 661 -8,691 Total Adjustments 12,943 0 -3,527 -9,416
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9) Transfers to / from Earmarked Reserves
This note sets out the amounts set aside from the General Fund in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund expenditure.
Balance Transfers Balance Reserve Description Balance Transfers Balance 31 to/from 31 31 to/from Other 31 March CIES March March CIES March 2014 2015 2015 2016 £000 £000 £000 £000 £000 £000 £000 Adult Social Care Development 0 0 0 0 -350 0 -350 Plan 0 -448 -448 Apprenticeship Scheme -448 127 0 -321 -188 12 -176 Bedford Western Bypass -176 29 0 -147 -350 0 -350 Benefit Subsidy -350 50 0 -300 0 0 0 Better Care Fund 0 -345 0 -345 0 -581 -581 Childrens Improvement Plan -581 394 0 -187 -269 -300 -569 Elections -569 369 0 -200 0 -150 -150 Finance Departmental Training -150 50 0 -100 -10 -164 -174 Financial Investigation Unit -174 -70 0 -244 0 -150 -150 Fire Authority Pension Costs -150 150 0 0 -1,981 -392 -2,372 Insurance & Risk Management -2,372 -504 0 -2,876 -3,925 756 -3,169 IT Infrastructure & Software -3,169 405 0 -2,764 -1,236 198 -1,038 Local Strategic Partnership -1,038 340 0 -698 -325 -319 -644 Local Welfare Provision -644 86 0 -558 0 -1,614 -1,713 Members Ward Fund -1,713 396 0 -1,317 -870 -827 -1,697 OP Accommodation Reserve -1,697 1,000 0 -697 0 -155 -155 Parking Equipment -155 0 0 -155 -59 -152 -211 Plans & Strategies -211 100 0 -111 -100 -217 -317 Property Development and Disposal -317 0 0 -317 -1,363 -798 -2,161 Property Repairs & Renewals -2,161 254 0 -1,907 -749 -511 -1,260 Public Health -1,260 131 0 -1,129 -150 -50 -200 Railway Station Quarter -200 0 0 -200 0 0 0 Rural Grants 0 -400 0 -400 -300 0 -300 School Land Purchases -300 300 0 0 0 0 0 Schools 2 Tier Project 0 -500 0 -500 0 -500 -500 Social Work Academy -500 162 0 -338 0 -189 -189 Staff Benefits -189 189 0 0 -813 203 -610 Supporting People -610 239 0 -371 -500 266 -234 Town Centre Decongestion -234 91 0 -143 -1,603 -269 -1,872 Transformation Reserve -1,872 -1,523 -2,226 -5,621 -2,750 524 -2,226 Transitional Costs -2,226 0 2,226 0 -342 23 -319 Troubled Families -319 141 0 -178 -2,440 407 -2,033 Reserves Supporting Capital -2,033 -302 0 -2,335 -2,547 187 -2,360 Vehicles & Plant -2,360 -1,278 0 -3,638 -1,168 -623 -1,791 Waste & Recycling -1,791 1,452 0 -339 -927 575 -501 Other Service Carry-forward -501 -27 0 -528 -4,811 3,512 -1,052 Other Service Reserves -1,052 8 0 -1,044 -29,776 -1,746 -31,522 Earmarked Reserves -31,522 1,164 0 -30,358 -4,987 670 -4,317 School Reserves -4,317 -791 -5,108 Earmarked Reserves (incl. -34,763 -1,076 -35,839 -35,839 373 0 -35,466 Schools) -8,205 -2,211 -10,416 General Fund -10,416 -1,206 -11,622 -42,968 -3,287 -46,255 Total Reserves -46,255 -833 0 -47,088 A brief description of reserves with a closing balance of over £100,000 is included over the page.
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. Adult Social Care Development Plan – to address the increasing demand in adult social care and mitigate further pressures, including developing the workforce to reduce agency staff, promoting independence, managing the supply chain, integration with health and replacing the care management system. . Apprenticeship Scheme – Funding allocated for the Council's Apprenticeship scheme. . Bedford Western Bypass – To manage future remaining costs relating to the capital project (Phase 1). . Benefits Subsidy – To provide for amendments to the subsidy claim following external scrutiny. . Better Care Fund – Funding allocated to the Council as part of the Better Care Fund agreement not utilised and carried forward to be spent in the next financial year. . Children’s Improvement Plan – resource to support implementation of the Children’s Improvement Plan. . Elections – Funding for elections and removes the need for an annual revenue base budget. . Finance Departmental Training – This reserve has been established for financial training for all services of the Council. . Financial Investigation Unit – This reserve continues to fund financial investigation cases, and will be maintained from proceeds of successful prosecutions. . Insurance & Risk Management – This reserve is available to cover unexpected claims, including a top-up of the provision should that prove necessary. . IT Infrastructure & Software – This reserve covers the replacement cost of Council equipment where lease finance is either unavailable or inappropriate. . Local Strategic Partnership – Monies held by the Council as accountable body for the partnership. . Local Welfare Provision – carry forward of grant funding to provide for welfare payments. . Member’s Ward Fund – This protects the unspent balance in order to continue to fund committed projects into future years and continues the service for a further three years. . Older People’s (OP) Accommodation – To provide funding for costs associated with the development of the homes within the Older Peoples’ Accommodation Review. . Parking Equipment – Parking income held to finance the replacement of parking equipment. . Plans & Strategies – Periodic refresh of plans and strategies (such as the Local Development Framework, Local Economic Assessment, etc.). . Property Development / Disposal – A new reserve to fund the costs of preparing development sites and surplus property for sale to support the Capital Programme. . Property Repairs & Renewals - This reserve covers funding for all committed and outstanding work on the Council's property portfolio (which has been identified through annual planned maintenance programmes) and any emergency or reactive expenditure that has not been pre-planned. . Public Health – contains the funding of the strategic reserve which is ring-fenced for public health activity and an operational reserve which is shared with Central Bedfordshire Council. . Railway Station Quarter – Reserve to fund future capital investment in the redevelopment of the Railway Station Quarter and software. . Rural Grants – assisting rural organisations to provide a wide-range of new and improved facilities to rural communities. . Schools Two Tier Project – Revenue costs to support the schools structure conversion to a two tier educational system. . Social Work Academy – an investment in the development of Newly Qualified Social Workers through to becoming experienced social workers to improve recruitment and retention. . Supporting People – Carry forward of underspend to alleviate several commitments in future years, with a falling reserve balance during the period of contract negotiation. . Town Centre Decongestion – Improvements to road layouts in the town centre, including Batts Ford Bridge. This initial funding is for preparatory works. . Transformation Reserve – To invest in resource capacity, project management skills, IT solutions and training to enable transformation proposals to be further evaluated. . Troubled Families – A new Reserve for the carry forward of unspent Trouble Families Grant. The funding supports a number of fixed term posts to work with partner organisations in supporting families in line with the purpose of the grant. . Reserves Supporting Capital – Revenue funding for future capital projects. . Vehicle & Plant – This reserve covers the replacement cost of Council equipment, vehicles and plant where lease finance is either unavailable or inappropriate. . Waste & Recycling – Funding to support the continuation of a weekly household refuse collection. . Other Services Carry-forwards – This is made up of several smaller amounts carried forward by Directorates to use on one-off projects not completed by year-end. . Other Service Reserves – This reserve is the accumulation of all reserves not shown separately. . Schools Reserves – Balances of funds transferred to schools through the dedicated schools grant. . General Fund – Required to cushion the impact of unexpected events or emergencies and is assessed on a risk basis giving consideration to budget pressures, demographic pressures, legislative impacts and the extent to which some services are reliant on external funding.
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10) Other Operating Expenditure
Other Operating Expenditure includes corporate costs to the Authority which are not allocated to specific service lines within the Net Cost of Services. The majority of the note value relates to the disposal of school land and buildings due to the change of their status and is included within (gains) / losses on the disposal of non-current assets. During 2015/2016 two of the larger maintained schools converted to Academy status creating a large disposal of assets.
2014/2015 2015/2016
£000 £000 1,380 Parish council precepts 1,429 625 Levies 629 3 Payments to the Government Housing Capital Receipts Pool 0 2,676 (Gains)/losses on the disposal of non-current assets 22,169 4,684 Other Operating Expenditure Total 24,227
11) Financing and Investment Income and Expenditure
Financing and investment income and expenditure includes corporate income and expenditure associated with capital financing, investment properties and pension IAS19 adjustments.
2014/2015 2015/2016
£000 £000 3,714 Interest payable and similar charges 3,671 9,838 Net interest on the net defined benefit liability (asset) 9,195 -678 Interest receivable and similar income -1,484 -3,204 Income and expenditure in relation to investment properties -3,428 -2,223 Changes in Fair Value of investment properties -16,192 1,264 (Gain)/Loss on disposal of investment properties -949 8,711 Financing and Investment Income and Expenditure Total -9,187 Over the 12 month period the property market has seen significant growth and activity. This is evident in the significant upward revaluations and the additional profit generated from the sale of investment property. Financial assets yielded significantly higher returns during the year in comparison to 2014/2015. This reflects the change in Treasury Strategy to invest for longer in new instruments to generate higher yields.
12) Taxation and Non Specific Grant Income
Taxation and Non Specific Grant Income note incorporates all non-service specific financing sources including, Council Tax, National Non-Domestic Rates, Revenue Support Grant, Non-service specific grants and Capital Grants recognised during the financial year. For more information on the figures quoted please refer to Note 36.
2014/2015 2015/2016
£000 £000 -71,699 Council Tax -72,922 -27,931 National Non-domestic Rates -29,156 -45,685 Non-ring fenced government grants -39,380 -28,872 Capital grants and contributions -30,919 -174,187 Taxation and Non Specific Grant Income Total -172,377 . Council Tax has increased by £1.223 million (16.7%) due mainly to an increase in Taxbase between years. The Average Band D Council Tax charged to residents was the same in both years. For more information please refer to the Collection Fund Statement in section 9. . Non-domestic rates increased by £1.875 million . Non-specific government grants reduced by £6.305 million between financial years, primarily driven by a £7.708 million reduction in Revenue Support Grant. This is in line with Central Government policy to cut public sector spending and reduce the national deficit. . Capital grants and contributions recognised during the year have remained at a high level to support the ongoing Capital Programme.
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13) Property Plant and Equipment (PPE)
Movements in balance in year are shown in the table below: Vehicles, Other Land Infrastructure Community Surplus Assets Under Total Plant & and Buildings Assets Assets Assets Construction PP&E Equipment £000 £000 £000 £000 £000 £000 £000 Cost or Valuation At 1 April 2015 341,728 37,243 175,108 4,993 2,894 13,624 575,590 Additions / Donations 13,331 4,131 8,647 44 0 13,293 39,446 Accumulative Depreciation written out to Gross Book Value -8,276 -60 -8,336 Revaluation increases/(decreases) recognised in the 18,319 2,473 20,792 Revaluation Reserve Revaluation increases/(decreases) recognised in the 806 -112 694 Surplus/Deficit on the Provision of Services De-recognition - Disposals -101 -238 -339 De-recognition - Other -21,517 -3,589 -473 -25,579 Assets reclassified (to)/from Held for Sale -2,146 -2,146 Assets reclassified (to)/from Investment Property -31 182 -1,900 -1,749 Componentisation of assets -815 815 0 Other movements in Cost or Valuation 2,540 123 152 21 -2,836 0 At 31 March 2016 345,984 38,485 183,434 5,219 1,170 24,081 598,373 Accumulated Depreciation and Impairment At 1 April 2015 -10,421 -11,163 -40,659 0 -48 0 -62,291 Depreciation charge -5,734 -4,084 -6,279 -8 -16,105 Accumulative Depreciation written out to Gross Book Value 8,276 60 8,336 De-recognition - Disposals 1 172 173 De-recognition - Other 264 2,123 473 2,860 Assets reclassified (to)/from Investment Property 7 7 Other movements in Depreciation and Impairment 24 -24 0 At 31 March 2015 -7,583 -12,952 -46,465 0 -20 0 -67,020 Net Book Value At 31 March 2015 331,307 26,080 134,449 4,993 2,846 13,624 513,299 At 31 March 2016 338,401 25,533 136,969 5,219 1,150 24,081 531,353 Upward revaluations of £21.486 million in Property Plant & Equipment during 2015/2016 contributed towards a total growth of £18.054 million over the 12 month period. A high level of capital expenditure (£39.446 million) was partially offset by two large disposals of maintained schools due to Academy conversions.
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Comparative movements for 2014/2015 are shown in the table below: Vehicles, Other Land Infrastructure Community Surplus Assets Under Total Plant & and Buildings Assets Assets Assets Construction PP&E Equipment £000 £000 £000 £000 £000 £000 £000 Cost or Valuation At 1 April 2014 320,401 34,103 165,430 4,961 4,269 12,564 541,728 Additions / Donations 15,238 7,329 9,513 2 285 9,057 41,424 Accumulative Depreciation written out to Gross Book Value -5,966 -5,966 Revaluation increases/(decreases) recognised in the 12,770 182 12,952 Revaluation Reserve Revaluation increases/(decreases) recognised in the -1,923 -1,119 -3,042 Surplus/Deficit on the Provision of Services De-recognition - Other -1,858 -5,760 -2,216 -558 -10,392 Assets reclassified (to)/from Held for Sale -225 -225 Assets reclassified (to)/from Investment Property -874 -874 Assets reclassified (to)/from Intangibles -15 -15 Componentisation of assets -1,429 1,429 0 Other movements in Cost or Valuation 5,369 142 165 30 1,493 -7,199 0 At 31 March 2015 341,728 37,243 175,108 4,993 2,894 13,624 575,590 Accumulated Depreciation and Impairment At 1 April 2014 -10,496 -11,832 -34,707 -202 -57,237 Depreciation charge -6,082 -3,729 -5,952 -58 -15,821 Accumulative Depreciation written out to Gross Book Value 5,966 5,966 Impairment Charge -2,004 -2,004 De-recognition - Other 130 4,398 2,216 6,744 Assets reclassified (to)/from Investment Property 61 61 At 31 March 2015 -10,421 -11,163 -40,659 0 -48 0 -62,291 Net Book Value At 31 March 2014 309,905 22,271 130,723 4,961 4,067 12,564 484,491 At 31 March 2015 331,307 26,080 134,449 4,993 2,846 13,624 513,299 Comparatively 2015/2016 has seen a similar level of capital expenditure and annual depreciation. The two noticeable variances are higher disposals, due to the school conversions, and greater property upward revaluations experienced during 2015/2016.
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Depreciation The useful lives used in the calculation of depreciation are given within the Accounting Policies for Property, Plant and Equipment.
Capital Commitments At 31 March 2016, the Council had entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment in 2016/2017 and future years. The major commitments are:
Capital Scheme £000 Superfast Broadband Projects (Central Bedfordshire collaborative contracts) 1,364 Carbon Management Programme 1,842 Vehicle Replacement Programme 983 School Maintenance 271 Schools 2 Tier Conversion 3,231 Fusion Lifestyle 1,900 Total 9,591
Effects of Changes in Estimates There are no material effects or changes in estimates.
Schools As at 1 April 2015 there were 54 maintained schools of which 29 were Foundation or Trust Schools. During 2015/16 two schools converted to Academy status (none in 2014/2015). This has generated a higher comparative loss on disposal reported in Note 10 for 2015/2016 in comparison to 2014/2015.
Revaluations The Council carries out a rolling programme that ensures that all Property, Plant and Equipment required to be measured at fair value is revalued at least every five years. All valuations were carried out internally. Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. Valuations of vehicles, plant, furniture and equipment are based on historic prices. The significant assumptions applied in estimating the fair values are: . Internal services (e.g. electrics, heating or other building service apparatus) are assumed to be in good repair and condition. . Service installations will not be tested and it is assumed that they are of adequate supply and capacity, in satisfactory working order and comply with statutory requirements. . Inspections undertaken will typically be external only and it is assumed that the inspection of assets or parts of assets that have not been inspected would not cause the valuer to alter their initial opinion of value . It has been assumed that no deleterious or hazardous substances are present and that no latent defects exist. . It is assumed that there are no contamination issues on individual properties but should it subsequently be identified that contamination, pollution or seepage exists or that the property is being put to a contaminative use this would likely reduce the values reported. . No title check or local search are to be carried out and it is assumed that the property and its value are unaffected by any matters which would be revealed by a local search or inspection of any register, nor subject to any unusual or especially onerous restrictions, encumbrances or outgoings and that the use and occupation are lawful. . Any mineral value is excluded unless specifically reflected in the valuation. . Where an asset has been damaged by an insured peril it is assumed that the asset is reinstated with a new facility utilising any insured losses. . It is assumed that non-operational freehold properties will be well maintained that there is no significant backlog and that the asset will have a useful life in excess of 50 years. For leased out properties it is assumed that the parties to the lease/agreement have complied with the required repairing and decorating covenants. Bedford Borough Council 2015/2016 Statement of Accounts
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. It is assumed that the Authority will continue to provide sufficient maintenance resources to enable the operational properties to continue to provide the existing level of service for the medium term, unless otherwise stated. All permanent operational properties are considered to have a useful life of 100 years or as stated individually. . It is assumed that there is no breach of planning regulations relating to the properties being valued. The planning position on specific properties has not been researched although consideration has been given to potential alternative uses under the Local Plan in respect of some properties where considered appropriate. Any specifics or planning assumptions have been stated on the individual valuation. . It is assumed that ground lease rents will revert to open market values, either rental or capital, upon reversion whenever that may be. . It is also assumed that commercial leases will be renewed on expiry unless specifically stated in the individual valuation. . For the valuation of long ground leases of industrial buildings held freehold it is assumed that at the end of the lease the building will no longer be fit for use, or alternatively will not be of a construction type or design suitable for modern requirements. This there will be no demand for the building in the market and its value shall be that of the site only. . No allowance has been made in respect of the costs of sale unless the property is classified as ‘Assets Held For Sale’, or as stated on the individual property valuation. . Where capital expenditure on an asset is considered to have no effect on the value of the asset a valuation may not have been undertaken purely as a result of such expenditure having been incurred. . It is assumed that the properties are compliant with the Disability Discrimination Act 1995, The Equality and Diversity Act 2010, The Fire Precautions Act 1971, The Regulatory Reform (Fire Safety) Order 2005, The Health and Safety at Work Act 1974, et al. The table below shows the values of assets split by type and according to the year in which they were formally valued.
Vehicles, Other Plant, Community Surplus Assets Under Land and Furniture Infrastructure Total assets Asset Construction Buildings and Equipment £000 £000 £000 £000 £000 £000 £000 Carried at historical cost 25,534 136,969 5,219 24,081 191,803 Valued at fair value as at: 31 March 2016 219,371 2,879 222,250 31 March 2015 163,616 1,725 165,341 31 March 2014 121,447 2,097 123,544 31 March 2013 68,272 70 68,342 Total Cost or Valuation 572,706 25,534 136,969 5,219 6,771 24,081 771,280 A significant percentage of the property portfolio was revalued during 2014/2015 due to the restatement of Foundation Schools and greater than normal non added value reviews. The 2015/2016 Property Market Review identified a strong growth in the value of price per acre for specific development sites. In particular Fairfield Employment and Marston Vale Employment sites were identified as having significant growth in the value of their sites. These two sites have been revalued accordingly as at 31 March 2016.
14) Investment Properties
Income & Expenditure The following items of income and expense have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement:
2014/2015 2015/2016 £000 £000 -4,012 Rental income from investment property -4,223 808 Direct operating expenses arising from investment property 795 -3,204 Net (gain)/loss on investment property for the financial year -3,428
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The Council would expect to be able to realise the value and receive the proceeds of disposal inherent in its investment property if disposed of in a strategic manner over a period of time and typically receives income as defined by the existing lease arrangements. The Council has varying repair and maintenance responsibilities associated with leases that require works to be undertaken periodically.
Balance Sheet Fair Values The following table summarises the movement in the fair value of investment properties:
Current Non-Current Current Non-Current 2014/2015 2014/2015 2015/2016 2015/2016 £000 £000 £000 £000 0 77,439 Balance at start of the year 32,429 46,891 Additions: 431 - Purchases 80 -1,586 Disposals -515 -630 563 1,660 Net gains/losses from fair value adjustments 14,224 1,968 Transfers: 33,452 -33,452 - to/from Held for Sale 813 - to/from Property, Plant and Equipment 1,742 32,429 46,891 Balance at end of the year 46,138 50,051 During 2014/2015, £33.452 million worth of the Investment Property portfolio was reclassified as Current Assets to reflect the intention to sell the property during the next 12 months. These assets have seen substantial growth during the financial year of £14.224 million. This growth was largely associated to a number of Development Sites currently being marketed for sale. These asset sales are intended to finance the Capital Programme over a number of years and therefore minimise the need for any additional borrowing.
Fair Value Hierarchy Details of the authority’s investment properties and information about the fair value hierarchy as at 31 March 2016 are as follows:
Quoted prices in 31 March 2016 Other significant Significant active markets Fair value as at Recurring fair value measurements observable unobservable for identical 31 March 2016 using: inputs (Level2) inputs (Level3) assets (Level1) £000 £000 £000 £000 Commercial 0 42,738 543 43,281 Development 0 2,257 44,351 46,608 Rural 0 6,300 0 6,300 Total 0 51,295 44,894 96,189 The fair values as at 31 March 2015 are as follows:
Quoted prices in 31 March 2015 Other significant Significant active markets Fair value as at Recurring fair value measurements observable unobservable for identical 31 March 2016 using: inputs (Level2) inputs (Level3) assets (Level1) £000 £000 £000 £000 Commercial 0 40,764 515 41,279 Development 0 981 31,239 32,220 Rural 0 5,821 0 5,821 Total 0 47,566 31,754 79,320 The majority of the upward revaluations within Investment Properties when compared to the previous balance sheet position relates to Development Sites classified within the Level 3 asset category. Revaluation growth has occurred due to the general uplift in the property market and an increasing degree of certainty around some of the larger development sites held by the Council. The general market uplift has created an even uplift to all of the categories with properties classified as Level 2.
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Transfers between Levels of the Fair Value Hierarchy There were no transfers between Levels 1 and 2 during the year.
Valuation Techniques used to Determine Level 2 and 3 Fair Values for Investment Properties
Significant Observable Inputs – Level 2 The fair value for the properties classified as Level 2 has been based on the market approach using current market conditions and recent sales prices and other relevant information for similar assets in the local authority area. Market conditions are such that similar properties are actively purchased and sold and the level of observable inputs are significant, leading to the properties being categorised at Level 2 in the fair value hierarchy.
Significant Unobservable Inputs – Level 3 The properties classified as Level 3 located in the local authority area are measured using the income approach, by means of the discounted cash flow method, where the expected cash flows from the properties are discounted (using a market-derived discount rate) to establish the present value of the net income stream or by the means of direct market comparisons . Both methods have been developed using the authority’s own and relevant market data requiring it to factor in assumptions such as the duration and timing of cash inflows and outflows, rent growth, occupancy levels, bad debt levels, maintenance costs, etc. The relevant property valuations are therefore categorised as Level 3 in the fair value hierarchy as the measurement technique uses significant unobservable inputs to determine the fair value measurements (and there is no reasonably available information that indicates that market participants would use different assumptions).
Highest and Best Use of Investment Properties In estimating the fair value of the authority’s investment properties, the highest and best use of the properties is their current use.
Valuation Techniques There has been no change in the valuation techniques used during the year for investment properties.
Reconciliation of Fair Value Measurements (using Significant Unobservable Inputs) Categorised within Level 3 of the Fair Value Hierarchy The significant balance of Level 3 valuations are in respect of Development properties. These are reconciled in the table below.
31 March 2015 31 March 2016 Development categorised as Level 3 £000 £000 Opening 29,676 31,239 Transfers into Level 3 Transfers out of Level 3 Total gains for the period including Surplus or Deficit on the Provision of Services 2,580 13,732 resulting from changes in the fair value Additions 5 Disposals -1,022 -620 Closing 31,239 44,351 Gains or losses arising from changes in the fair value of the investment property are recognised in Surplus or Deficit on the Provision of Services – Financing and Investment Income and Expenditure line.
Quantitative Information about Fair Value Measurement of Investment Properties using Significant Unobservable Inputs – Level 3
Commercial 88 of the 92 property valuations classified as commercial are based on observable inputs evidenced by strong market information. The remaining 4 valuations, totalling £543,000, are for sites which are unique in their characteristics and require professional judgements to be made. Each Commercial Property valuation incorporates unique and varying judgements which are not easily summarised and are not considered material in nature.
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Development
A significant proportion of category 3 valuations are for properties classified as Development. The valuation of these sites is based on an income approach using a discounted cash flow (DCF) technique and direct market comparisons of similar site transactions. This technique is supported by a number of unobservable inputs, which are summarised in the table below.
Development categorised as Level 3 Minimum Maximum Weighted Unobservable Input Description Applied Applied Average Development Land (Gross:Net) 60% 75% 62% % of land estimated to be viable for development
Infrastructure Obligations % of gross receipt required for infrastructure requirements 14% 34% 18% e.g. S106 contributions, Community Infrastructure Levy or developer works
Discount Rate Discount rates applied to estimated cash flows (this reflects cash 0.71 0.96 0.93 flow timing assumptions and the time value of money)
Scheme Risk Overall scheme risk, including the risk of other assumptions and 10% 30% 13% the approval of planning consent for the site
Valuation Process for Investment Properties The fair value of the authority’s investment property is measured annually at each reporting date as a minimum. All valuations are carried out internally, in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. The authority’s valuation experts work closely with finance officers reporting directly to the chief financial officer on a regular basis regarding all valuation matters.
15) Intangible Assets
The Council accounts for its software and licences as intangible assets. The intangible assets include both purchased licenses and internally generated software. In year movements on Intangible Assets are included in the table below:
2014/2015 2015/2016 Internally Internally Other Other Generated Total Generated Total Assets Assets Assets Assets £000 £000 £000 £000 £000 £000 Balance at start of year: 29 2,749 2,778 · Gross carrying amounts 29 3,862 3,891 -9 -982 -991 · Accumulated amortisation -12 -1,261 -1,273 20 1,767 1,787 Net carrying amount at start of year 17 2,601 2,618 Additions: 1,102 1,102 · Purchases 1,332 1,332 15 15 · Transferred from PPE 0 -3 -3 Other disposals 0 -3 -280 -283 Amortisation for the period -3 -379 -382 17 2,601 2,618 Net carrying amount at end of year 14 3,554 3,568 Comprising: 29 3,862 3,891 · Gross carrying amounts 29 5,131 5,160 -12 -1,261 -1,273 · Accumulated amortisation -15 -1,577 -1,592 17 2,601 2,618 14 3,554 3,568 Intangible Assets are amortised to the relevant service line(s) in the CIES over the economic life of the asset (between 5 and 15 years).
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The carrying amount of intangible assets is historical cost, amortised on a straight-line basis. The amortisation for the period has been charged to the relevant service area, and if charged to the IT Service, the cost is then subsequently absorbed as an overhead across all the service headings, in the CIES. There are three types of capitalised intangible assets that are individually identified in the table below:
Remaining Remaining 31 March 2015 Amortisation Description of Intangible Assets 31 March 2016 Amortisation Period Period £000 £000 2,143 6 Purchased software 3,171 5 17 6 Internally generated software 15 5 458 8 Licences, trademarks and artistic originals 382 7 2,618 3,568
16) Financial Instruments
Classifications A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Non-exchange transactions, such as those relating to taxes and government grants, do not give rise to financial instruments.
Financial Liabilities A financial liability is an obligation to transfer economic benefits controlled by the Council and can be represented by a contractual obligation to deliver cash or financial assets or an obligation to exchange financial assets and liabilities with another entity that are potentially unfavourable to the Council. The Council’s non-derivative financial liabilities held during the year are measured at amortised cost and comprised: . long-term loans from the Public Works Loan Board and commercial lenders . finance leases detailed in Note 39 . trade payables for goods and services received The financial liabilities disclosed in the Balance Sheet are analysed across the following categories:
31 March 2015 31 March 2016 Current Long Term Financial Liabilities Current Long Term £000 £000 £000 £000 Loans at amortised cost: -3,300 -79,976 · Principal sum borrowed -3,300 -76,737 -724 · Accrued interest -706 -62 · EIR adjustments -66 -4,024 -80,038 Total Borrowing -4,006 -76,803 Loans at amortised cost: · Bank overdraft Total Cash Overdrawn Liabilities at amortised cost: -1,206 · Finance leases -834 0 -1,206 Total Other Long-term Liabilities 0 -834 Liabilities at amortised cost: -33,933 · Trade payables -33,932 -449 · Finance leases -372 -34,382 0 Included in Creditors -34,304 0 -38,406 -81,244 Total Financial Liabilities -38,310 -77,637 Current Creditors on the Balance Sheet includes balances totalling £11.706 million that do not meet the definition of a financial liability (e.g. balances with Government Bodies).
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Financial Assets A financial asset is a right to future economic benefits controlled by the Council that is represented by cash or other instruments or a contractual right to receive cash or another financial asset. The financial assets held by the Council during the year are held under the following classifications. Loans and receivables (financial assets that have fixed or determinable payments and are not quoted in an active market) comprising: . cash in hand . bank current and deposit accounts with National Westminster Bank . loans to other local authorities . lease receivables detailed in Note 39 . trade receivables for goods and services delivered Available for sale financial assets (those that are quoted in an active market) comprising: . money market funds and other collective investment schemes managed by CCLA, Payden & Rygel, UBS, Schroders, M&G and City Financial. . Covered Bonds issued by banks and building societies . Corporate Bonds issued by UK & Overseas companies The financial assets disclosed in the Balance Sheet are analysed across the following categories:
31 March 2015 31 March 2016 Current Long Term Financial Assets Current Long Term £000 £000 £000 £000 Loans and receivables: 11,000 9,000 · Principal at amortised cost 7,000 13,000 61 50 · Accrued interest 43 120 Available-for-sale investments: 14,438 13,300 · Principal at amortised cost 3,457 25,404 43 -402 . Fair Value Adjustments 8 -280 29 · Accrued interest 25,571 21,948 Total Investments 10,508 38,244 Loans and receivables: 2,276 · (including bank accounts) 12,968 · Cash equivalents at amortised cost 8,867 61 · Accrued interest Available-for-sale investments: 5,041 · Cash equivalents at amortised cost 20,346 Total Cash and Cash Equivalents 8,867 0 Loans and receivables: 15,085 1,619 · Trade receivables 17,806 1,623 287 · Lease receivables 287 15,085 1,906 Included in Debtors 17,806 1,910 61,002 23,854 Total Financial Assets 37,181 40,154 Current Debtors on the Balance Sheet includes balances totalling £5.874 million that do not meet the definition of a financial liability (e.g. balances with Government Bodies).
Reclassifications In 2015/16 the Council did not reclassify any financial investments.
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Income, Expense, Gains and Losses This table shows amounts recognised in the Comprehensive Income and Expenditure Statement during the year.
Financial Liabilities Financial Assets Finance Lease Finance Lease Borrowing Loans & Available-for- 2015/16 2015/2016 Interest Interest Amortised Cost Receivables Sale Assets Total Amortised Cost Amortised Cost £000 £000 £000 £000 £000 £000 Interest expense 3,508 127 3,635 Losses on de-recognition 54 54 Impairment losses 0 Interest payable and similar charges 3,508 127 54 0 0 3,689 Interest income -1,461 -23 -1,484 Gains on de-recognition -18 -18 Interest and investment income 0 0 -1,479 0 -23 -1,502 Gain on Revaluation -523 -523 Losses on Revaluation 437 437 Impact of revaluation in Other Comprehensive Income 0 0 0 -86 0 -86 Net (Gain)/Loss for the Year 3,508 127 -1,425 -86 -23 2,101 Comparative information for the previous year is set out in the table below:
Financial Liabilities Financial Assets Finance Lease Finance Lease Borrowing Loans & Available-for- 2014/15 2014/2015 Interest Interest Amortised Cost Receivables Sale Assets Total Amortised Cost Amortised Cost £000 £000 £000 £000 £000 £000 Interest expense 3,558 118 3,676 Losses on de-recognition 56 56 Impairment losses 1,271 1,271 Interest payable and similar charges 3,558 118 1,327 0 0 5,003 Interest income -655 -23 -678 Gains on de-recognition -18 -18 Interest and investment income 0 0 -673 0 -23 -696 Gain on Revaluation -42 -42 Losses on Revaluation 422 422 Impact of revaluation in Other Comprehensive Income 0 0 0 380 0 380 Net (Gain)/Loss for the Year 3,558 118 654 380 -23 4,687
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Fair Values of Assets and Liabilities Financial assets classified as loans and receivables and all non-derivative financial liabilities are carried in the Balance Sheet at amortised cost. Their fair values have been estimated by calculating the net present value of the remaining contractual cash flows at 31 March 2016, using the following methods and assumptions: . The fair values of long-term “Lender’s Option Borrower’s Option” (LOBO) loans have been increased by the value of the embedded options. Lenders’ options to propose an increase to the interest rate on the loan have been valued according to Bloomberg’s proprietary model for Bermudan cancellable swaps. Borrower’s contingent options to accept the increased rate or repay the loan have been valued at zero, on the assumption that lenders will only exercise their options when market rates have risen above the contractual loan rate. . The fair values of other long-term loans and investments have been discounted at the market rates for similar instruments with similar remaining terms to maturity on 31 March. . No early repayment or impairment is recognised for any financial instrument. . The fair value of short-term instruments, including trade payables and receivables is assumed to approximate to the carrying amount. Fair values are shown in the table below, split by their level in the fair value hierarchy: . Level 1 – fair value is only derived from quoted prices in active markets for identical assets or liabilities, e.g. bond prices . Level 2 – fair value is calculated from inputs other than quoted prices that are observable for the asset or liability, e.g. interest rates or yields for similar instruments. . Level 3 – fair value is determined using observable inputs, e.g. non-market data such as cash flow forecasts or estimated creditworthiness.
Fair 31 March 2015 31 March 2016 Financial Liabilities Value Balance Sheet Fair Value Balance Sheet Fair Value Level £000 £000 £000 £000 Financial Liabilities held at amortised cost: Long-term loans from PWLB 2 -75,809 -90,501 -72,557 -88,680 Long-term LOBO loans 2 -8,253 -12,509 -8,252 -12,541 Lease payables 2 -1,655 -1,655 -1,206 -1,206 Total -85,717 -104,665 -82,015 -102,427 Liabilities for which fair value is not disclosed -48,385 -45,638 Total Financial Liabilities -134,102 -127,653 Recorded on balance sheet as: Short-term creditors -48,385 -45,638 Short-term borrowing -4,024 -4,006 Other short-term liabilities -449 -372 Long-term borrowing -80,038 -76,803 Other long-term liabilities -1,206 -834 Total Financial Liabilities -134,102 -127,653
The fair value of short-term financial liabilities including trade payables is assumed to approximate to the carrying amount. The fair value of financial liabilities is higher than the carrying amount because the authority’s portfolio of loans includes a number of loans where the interest rate payable is higher than the current rates available for similar loans as at the Balance Sheet date.
Fair 31 March 2015 31 March 2016 Financial Assets Value Balance Sheet Fair Value Balance Sheet Fair Value Level £000 £000 £000 £000 Financial Assets held at fair value: Money market funds 1 5,843 5,843 5,571 5,571 Bond, equity and property funds 1 17,050 17,050 23,153 23,153 Corporate, covered and government bonds 2 5,326 5,326 5,434 5,434 Financial assets held at amortised cost: Long-term loans to local authorities 2 9,049 9,078 13,120 13,238 Lease receivables 2 287 287 287 287 Total 37,555 37,584 47,565 47,683
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Fair 31 March 2015 31 March 2016 Financial Assets Value Balance Sheet Fair Value Balance Sheet Fair Value Level £000 £000 £000 £000 Assets for which fair value is not disclosed 54,042 35,644 Total Financial Assets 91,597 83,209 Recorded on balance sheet as: Long-term debtors 1,906 1,910 Long-term investments 21,948 38,244 Short-term debtors 21,827 23,680 Short-term investments 25,571 10,508 Cash and Cash equivalents 20,345 8,867 Total Financial Assets 91,597 83,209 The fair value of short-term financial assets including trade payables is assumed to approximate to the carrying amount. The fair value for long term assets at the Balance Sheet date is higher than the carrying amount because the interest rate on similar investments is now lower than that obtained when the investment was originally made.
17) Inventories
A breakdown of the Council’s inventories is given below: Leisure
and ICT Other Total Cemeteries Environment Recreation £000 £000 £000 £000 £000 £000 Balance as at 1 April 2014 21 105 112 3 37 278 Purchases 1,843 11 1,854 Recognised as an in year expense -15 -7 -1,892 -2 -9 -1,924 Written off balances 0 Balance as at 31 March 2015 6 98 63 1 39 208 Purchases 1,572 1,572 Recognised as an in year expense -6 7 -1,577 -1 -3 -1,580 Written off balances 0 Balance as at 31 March 2016 0 105 58 0 36 200
18) Short-Term Debtors
The main categories of Short-Term Debtors (and impairments) on the Balance Sheet are disclosed in the table below: Impairment of Impairment of 31 March 2015 31 March 2016 Debtors Debtors £000 £000 £000 £000 -184 5,272 Central government bodies -176 4,069 -474 2,939 Other local authorities -256 1,187 -1,504 2,616 NHS bodies -2,011 5,742 -101 321 Public corporations and trading funds -90 531 -2,574 15,516 Other entities and individuals -2,846 17,530 -4,837 26,664 Total -5,379 29,059 -4,837 Less Impairment of Debtors -5,379 21,827 Total 23,680 The level of outstanding debtors between years has increased by £2.395 million. The increase has been seen within the Health Bodies category (£3.126 million) and other entities and individuals category (£2.014 million). The increase in Health Bodies relates to ongoing discussions with the local Clinical Commissioning Group in conjunction with joint funded health and social care clients. To reflect the uncertainty of collecting specific debts a prudent increase in the impairment of debtors has been charged to General Fund. Further analysis on the age of debt is included within Note 45, Nature and Extent of Risks Arising from Financial Instruments.
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19) Cash and Cash Equivalents
The balance of Cash and Cash Equivalents is made up of the following elements:
31 March 2015 31 March 2016 £000 £000 78 Cash held by the Council 76 2,198 Bank current accounts 3,148 18,069 Short-term deposits in UK banks & investments in money market funds 5,643 20,345 Total Cash and Cash Equivalents 8,867 Cash and Cash Equivalents have reduced by £11.478 million between Balance Sheet dates. This reflects the Council’s decision to invest in new long term investment vehicles and the reduction in the overall level of cash balances during the year. For more detail on the movement in Cash and Cash Equivalents please refer to Notes 25, 26 and 27.
20) Assets Held for Sale
The following table shows movements in Property, Plant and Equipment (PPE) held for sale:
2014/2015 2015/2016 £000 £000 0 Balance outstanding at start of year 225 Assets newly classified as held for sale: 225 Property, Plant and Equipment 2,146 Revaluation losses Assets declassified as held for sale: Assets sold 225 Balance outstanding at year-end 2,371 The current balance of £2.371 million represents two sites currently being actively marketed for sale; 2A Castle Lane (£0.225 million) and the former Putnoe Lower School site (£2.146 million), both of which are expected to be sold during 2016/2017.
21) Short-Term Creditors
The main categories of Short-Term Creditors on the Balance Sheet are disclosed in the table below:
31 March 2015 31 March 2016 £000 £000 -12,897 Central government bodies -11,190 -1,551 Other local authorities -2,183 -198 NHS bodies -101 -53 Public corporations and public funds -177 -33,686 Other entities and individuals -31,987 -48,385 Total -45,638 The value of outstanding creditors as at 31 March 2016 is £45.638 million, which is a reduction of £2.747 million over the 12 month period. This reduction represents a fall in activity in the final months of the 2015/2016 financial year in comparison to 2014/2015 in terms of supplier invoices for capital work and the level of revenue government grants received in advance of satisfying all grant conditions as at the 31 March.
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22) Provisions
A breakdown of the Council’s provision movements during the year are given below: Transfer Balance at between Balance at New Release Discount 2015/2016 1 April current 31 March Provisions Provision Provision 2015 and non 2016 current £000 £000 £000 £000 £000 £000 Elstow Landfill Decommissioning -5,414 146 -20 -5,288 Insurance Provision -1,746 480 7 -1,259 NNDR Appeals (BBC 49% portion) -2,286 -200 -2,486 Compulsory Purchase Orders -533 -533 House Sales Debts -124 -124 Other -328 -406 440 -294 Total -10,431 -606 1,066 0 -13 -9,984 Current Provision -4,519 -606 1,066 -449 -4,508 Non Current Provision -5,912 449 -13 -5,476 Total -10,431 -606 1,066 0 -13 -9,984 Further information on provision movements during the previous year are given below: Transfer Balance at between Balance at New Release Discount 2014/2015 1 April current 31 March Provisions Provision Provision 2014 and non 2015 current £000 £000 £000 £000 £000 £000 Elstow Landfill Decommissioning -5,701 301 -14 -5,414 Insurance Provision -1,722 -25 1 -1,746 NNDR Appeals (BBC 49% portion) -1,078 -1,208 -2,286 Compulsory Purchase Orders -433 -100 -533 House Sales Debts -124 -124 Other -113 -285 70 -328 Total -9,171 -1,618 371 0 -13 -10,431 Current Provision -4,035 -1,618 371 763 -4,519 Non Current Provision -5,136 -763 -13 -5,912 Total -9,171 -1,618 371 0 -13 -10,431 Brief explanations of what the main provisions represent are: . Elstow Landfill Decommissioning is to cover the future statutory revenue and capital costs associated with the closed landfill site in Elstow. . National Non-Domestic Rates Appeals is 49% of the appeal provision created in the Collection Fund for potential appeals against Non-Domestic Rates Bills. . Insurance Provision is set aside for specific and known insurance liabilities. Approximately 25% is expected to be spent within 1 year, 50% within 2 – 5 years, and the remainder after 5 years. . Compulsory Purchase Orders (CPO) relates to amounts anticipated to be incurred as a result of making CPOs, but where the owner has not yet made a claim. . House Sale Debts is to set aside amounts were the value of assets secured against debts is likely to be less than the value of the debt. All other provisions are individually insignificant.
23) Usable Reserves
Movement in the Council’s Usable Reserves are detailed in the Movement in Reserves Statement (see Section 3), and the disclosure notes Adjustments between Accounting Basis and Funding Basis under Regulations (Note 8) and Transfers to / from Earmarked Reserves (Note 9). In this era of austerity and financial insecurity, the council has established sufficient levels of Usable Reserves to mitigate financial risk. There will be an ongoing need to review and establish a level of Reserves which both allows
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55 the Council to withstand the financial impacts of future funding reductions, at a local or national level, and provides funding to enable the Council to transform to deliver fit for purpose services which meet the changing needs and expectations of service users.
24) Unusable Reserves
The table below provides a breakdown of the Unusable Reserves values included in the Movement in Reserves Statement (see Section 3). 31 March 2015 31 March 2016 £000 Notes £000 -69,630 Revaluation Reserve (a) -88,937 358 Available for Sale Financial Instruments Reserve (b) 272 -413,573 Capital Adjustment Account (c) -434,356 319 Financial Instruments Adjustment Account (d) 283 -435 Deferred Capital Receipts Reserve (e) -425 287,563 Pensions Reserve (f) 238,653 -1,703 Collection Fund Adjustment Account (g) -277 1,531 Accumulated Absences Account (h) 1,632 -195,570 Total Unusable Reserves -283,155 For more detail please refer to the proceeding notes on each of the Unusable Reserves quoted.
(a) Revaluation Reserve The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its Property, Plant and Equipment.
2014/2015 2015/2016 £000 £000 -58,477 Balance at 1 April -69,630 -15,538 Upward revaluation of assets -23,491 Downward revaluation of assets and impairment losses not charged to the 2,586 2,699 Surplus/Deficit on the Provision of Services (Surplus) or deficit on revaluation of non-current assets not posted to the -12,952 -20,792 Surplus or Deficit on the Provision of Services 65 Revaluation Reserve written out on revaluation transfer 1,057 Difference between fair value depreciation and historical cost depreciation 1,378 677 Accumulated gains on assets sold or scrapped 107 1,799 Amount written off to the Capital Adjustment Account 1,485 -69,630 Balance at 31 March -88,937 The balance is reduced when assets with accumulated gains are: . Revalued downwards or impaired and the gains are lost . Used in the provision of services and the gains are consumed through depreciation, or . Disposed of and the gains are realised. The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account. During 2015/2016 Property Plant and Equipment has been upwardly revalued by a net movement of £20.792 million. This upward revaluation is included within the Property, Plant and Equipment (PPE) disclosure, Note 13. These upward revaluations are not recognised within the Provision of Services section of the Comprehensive Income and Expenditure Statement (Section 4) until the asset is disposed of and the gain is achieved. The net revaluation gain is included within the lower part of the note in the section titled Other Comprehensive Income and Expenditure.
(b) Available for Sale Financial Instruments Reserve The Available for Sale Financial Instruments Reserve contains the gains made by the Council arising from increases in the value of its investments that have quoted market prices or otherwise do not have fixed or
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56 determinable payments. The balance is reduced when investments with accumulated gains are: . Revalued downwards or impaired and the gains are lost . Disposed of and the gains are realised.
2014/2015 2015/2016 £000 £000 -21 Balance at 1 April 358 -42 Upward revaluation of investments -523 421 Downward revaluation of investments 437 358 Balance at 31 March 272 The significant downward revaluation in 2014/2015 is due to the CCLA Lamit Property Fund that was invested in during February 2015. This revaluation loss was expected as the principal value of the investment reduces on entry due to bid-offer spread. This downward revaluation has been reversed by steady gains in the CCLA Lamit Property Fund, as reflected in the £0.523 million upward revaluations in 2015/2016. During 2015/2016 the Council invested £11 million in pooled equity and bond funds to maximise investment yields. Investment returns increased by £0.806 million, as shown in Note 11, but conversely the pooled investments incurred unrecognised losses of £0.437 million during the financial year.
(c) Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement.
2015/2016 2014/2015 £000 £000 £000 -395,379 Balance at 1 April -413,573 Reversal of capital items debited or credited to the CIES: 17,826 Depreciation & impairment of non current assets 16,105 5,961 Revaluation losses on Property, Plant and Equipment 4,435 -2,919 Revaluation gains reversing previous losses -5,129 283 Amortisation of intangible assets 382 5,405 Revenue expenditure funded from capital under statute 3,446 Investment property written off on disposal or sale as part of 1,586 1,145 the gain/loss on disposal Non current assets (excl. investment property) written off on 3,149 22,886 disposal or sale as part of the gain/loss on disposal -676 Accumulated gains on assets sold or scrapped -107 30,615 43,163 -1,057 Adjusting amounts written out of the Revaluation Reserve -1,378 29,558 Net written out of non current assets consumed in the year 41,785 Capital financing applied in the year: -839 Use of the Capital Receipts Reserve to finance capital -2,821 Capital grants and contributions credited to the CIES that -23,809 -24,337 have been applied to capital financing Application of grants to capital financing from the Capital -5,724 -4,144 Grants Unapplied Account -64 Revaluation reserve balances written out on transfer Statutory provision for the financing of capital investment -4,360 -4,602 charged against the General Fund -544 Statutory repayment of debt (finance lease liabilities) -549 -10,189 Capital expenditure charged against the General Fund -9,923 -45,529 -46,376 -2,223 Movements in the market value of Investment Properties debited or credited to the CIES -16,192 -413,573 Balance at 31 March -434,356
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The account contains accumulated gains and losses on Investment Properties and also revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007 (the date that the Revaluation Reserve was created to hold such gains). Note 8 provides details of the source of all the transactions posted to the account, apart from those involving the Revaluation Reserve. The Capital Adjustment Account increased by £20.783 million during 2015/2016. The main increased were capital funding (£41.225 million), revaluation gains (£16.886 million) and Minimum Revenue Provision (£5.151 million). These increases were offset in part by disposals (£23.924 million), depreciation/amortisation (£15.109 million) and REFCUS expenditure (£3.446 million).
(d) Financial Instrument Adjustment Account The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The Council uses the account to manage premiums paid on the early redemption of loans. Premiums are debited to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out of the General Fund Balance to the account in the Movement in Reserves Statement (Note 8). Over time, the expense is posted back to the General Fund Balance in accordance with statutory arrangements for spreading the impact on Council Tax. The Council also uses the account to reverse the impact on the General Fund of charging interest foregone on soft loans to the Comprehensive Income and Expenditure Statement (Section 4). 2014/2015 2015/2016 £000 £000 357 Balance at 1 April 319 Proportion of premiums incurred in previous financial years to be charged against 18 18 the General Fund Balance in accordance with statutory requirements Amount by which finance costs charged to the Comprehensive Income and -56 Expenditure Statement are different from finance costs chargeable in the year in -54 accordance with statutory requirements 319 Balance at 31 March 283
(e) Deferred Capital Receipts Reserve The Council holds a balance of Long Term Debtors and a matching balance relating to Deferred Capital Receipts. These balances relate to mortgages arising from the sale of Council houses which are not immediately payable, but are repayable over a longer period and in respect of a finance lease. When principal payments are received the Long Term Debtor is reduced and a matching amount is transferred from Deferred Capital Receipts to Capital Receipts Reserve in respect of the mortgages. However, for finance leases in existence before 31 March 2010 statutory mitigation (SI 2010/454) applies whereby principal payments are classified as revenue (not capital), as such a matching amount is transferred from Deferred Capital Receipts to the Comprehensive Income and Expenditure Statement.
2014/2015 2015/2016 £000 £000 -467 Opening balance -435 32 Transfer from Capital Receipts Deferred to Capital Receipts Reserve 10 -435 Closing Balance -425
(f) Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post-employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pension funds or eventually pay any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid. The balance of the Pensions Reserve has reduced by £48.910 million during 2015/2016. The table over the page reconciles the movement and includes a significant change due to Actuarial gains or losses on pension’s assets and liabilities. This movement is explained in more detail within Note 42.
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2014/2015 2015/2016 £000 £000 229,539 Balance at 1 April 287,563 49,340 Actuarial gains or losses on pensions assets and liabilities -57,291 Reversal of items relating to retirement benefits debited or credited to the Surplus or 22,507 22,610 Deficit on the Provision of Services in the CIES -13,823 Employer’s pensions contributions and payments to pensioners payable in the year -14,229 287,563 Balance at 31 March 238,653
(g) Collection Fund Adjustment Account
The Collection Fund Adjustment Account manages the differences arising from the recognition of Council Tax and National Non Domestic Rates income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund. 2014/2015 2015/2016 Council Council NNDR NNDR Tax Tax £000 £000 £000 £000 -946 -232 Balance at 1 April -2,734 1,031 Amount by which Collection Fund income credited to the CIES on -1,788 1,263 an accruals basis varies from taxation income allowable in 520 906 accordance with statutory requirements -2,734 1,031 Balance at 31 March -2,214 1,937
The credit position in relation to Council tax reflects the unallocated surplus position held by the Collection Fund on behalf of the Council. This has been created by the higher than expected growth in the Taxbase during the financial year. Conversely, the debit position shown for the Non National Domestic Rates reflects the Council proportion of the deficit position held within the Collection Fund. The deficit has been created by the ongoing pressure created by the national increase in the level of appeals being lodged. For additional information on the Collection Fund and the calculation of the Council’s share of surplus or deficit please refer to section 9.
(h) Accumulated Absences Account
The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the account.
2014/2015 2015/2016 £000 £000 1,984 Balance at 1 April 1,531 Amount by which officer remuneration charged to the CIES on an accruals basis -453 101 varies from remuneration chargeable in accordance with statutory requirements 1,531 Balance at 31 March 1,632
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25) Cash Flow Statement – Operating Activities
The table below represents the operating cash flow movements for 2015/2016 and the 2014/2015 comparator year: 2014/2015 2015/2016 £000 £000 677 Interest Received 1,517 351,614 Other Operating Income 346,775 352,291 Total Operating Income 348,292 -3,763 Interest Paid -3,718 -327,473 Other Operating Expenditure -331,737 -331,236 Total Operating Expenditure -335,455
21,055 Net surplus or (deficit) from Operating Activities 12,837
The detailed note highlights operational cash flow was positive for 2014/2015 and 2015/2016. The majority of the surplus shown is used each year to finance the Capital Financing Requirement (CFR) in the form of Direct Revenue Financing and the statutory Minimum Revenue Provision (MRP) charge to the General Fund. The significant reduction between years of £8.218 million reflects the movement of Working Capital balances. Working Capital balances increased in 2014/2015 and then reduced during 2015/2016. Working Capital reflects the amounts of Debtors, Creditors and other balances held, such as third party monies or the Collection Fund.
26) Cash Flow Statement – Investing Activities
The table below represents the investing cash flow movements for 2015/2016 and the 2014/2015 comparator year: 2014/2015 2015/2016 £000 £000 -45,019 Purchase of property, plant & equip., investment property & intangible assets -47,030 -77,900 Purchase of short-term and long-term investments -58,042 850 Proceeds from the sale of PPE, investment property and intangible assets 2,811 62,570 Proceeds from short-term and long-term investments 56,875 23,886 Other receipts from investing activities (including capital grants) 25,375 -35,613 Net surplus or (deficit) from Investing Activities -20,011 Capital investment continued to drawdown cash resources with another noticeable reduction in capital grants held in advance and the continued operational cash resources used to finance capital (shown in Note 25 above). The most noteworthy change between years is the level of net cash resources invested in financial instruments, which reduced to £1.167 million (£15.330 million in 2014/2015). This was comparatively higher last year due to the changes in Investment Strategy being initiated.
27) Cash Flow Statement – Financing Activities
The table below represents the financing cash flow movements for 2015/2016 and the 2014/2015 comparator year: 2014/2015 2015/2016 £000 £000 1,213 Cash receipts of short and long-term borrowing 0 183 Other receipts from financing activities 0 -551 Cash payments for the reduction of the outstanding liabilities (finance leases) -449 -3,303 Repayments of short-term and long-term borrowing -3,300 -396 Other payments for financing activities -555 -2,854 Net surplus or (deficit) from Financing Activities -4,304 The current Treasury Strategy of financing capital expenditure by applying internal cash balances as a replacement for external debt has continued to create negative financing cash flows for the Council.
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28) Amounts Reported for Resource Allocation Decisions
The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the CIPFA Service Reporting Code of Practice. However, decisions about resource allocation are taken by the Council’s Executive on the basis of budget reports analysed across Directorates. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular: . no charges are made in relation to capital expenditure (whereas depreciation, revaluation and impairment losses in excess of the balance on the Revaluation Reserve and amortisations are charged to services in the Comprehensive Income and Expenditure Statement) . the cost of retirement benefits is based on cash flows (employer’s pensions contributions paid) rather than current service cost of benefits accrued in the year . expenditure on some support services is budgeted for within Chief Executive and not charged to Directorates.
The income and expenditure of the Council’s principal Directorates recorded in the budget reports for the year is as follows:
Adults & Environment & Chief Corporate Directorate Income and Expenditure Childrens Sustainable Financing Total Executive Budgets Services Communities 2015/2016 Figures £000 £000 £000 £000 £000 £000 Fees, charges & other service income -23,536 -25,371 -15,503 -4,016 0 -68,426 Government grants & contributions -87,523 -534 -64,713 -8,716 -136,307 -297,793 Total Income -111,059 -25,905 -80,216 -12,732 -136,307 -366,219
Employee expenses 29,844 20,811 19,468 8,384 0 78,507 Other service expenses 158,710 33,379 78,259 12,847 1,429 284,624 Total Expenditure 188,553 54,190 97,727 21,231 1,429 363,130 Net Expenditure 77,494 28,285 17,511 8,499 -134,878 -3,088
Comparatives for the previous year are:
Adults & Environment & Chief Corporate Directorate Income and Expenditure Childrens Sustainable Financing Total Executive Budgets Services Communities 2014/2015 Figures £000 £000 £000 £000 £000 £000 Fees, charges & other service income -24,261 -23,712 -22,055 -3,503 0 -73,532 Government grants & contributions -84,276 -1,977 -64,653 -295 -146,605 -297,806 Total Income -108,537 -25,689 -86,709 -3,799 -146,605 -371,338
Employee expenses 28,323 20,941 20,672 8,108 0 78,044 Other service expenses 155,922 34,941 84,138 14,703 1,379 291,083 Total Expenditure 184,246 55,882 104,810 22,811 1,379 369,127 Net Expenditure 75,709 30,192 18,101 19,012 -145,226 -2,211
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Reconciliation of Directorate Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement
This reconciliation shows how the figures in the analysis of Service income and expenditure relate to the cost of services included in the Comprehensive Income and Expenditure Statement.
2014/2015 Reconciliation of Directorate Income and Expenditure to Cost of Services in the CIES 2015/2016 £000 £000 -2,211 Net expenditure in the Directorate Analysis -3,088 0 Net expenditure of services and support services not included in the Analysis 0 24,945 Amounts in the Comprehensive Income and Expenditure Statement not reported to management in the Analysis 26,632 126,741 Amounts included in the Analysis not included in the Comprehensive Income and Expenditure Statement 120,017 149,475 Cost of Services in Comprehensive Income and Expenditure Statement 143,561
Reconciliation to Subjective Analysis This reconciliation shows how the figures in the analysis of Service income and expenditure for the year relate to a subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.
Amounts not Services reported to Amounts Allocation Directorate and Support Cost of Corporate management not included of Total Analysis Services not Services Amounts for decision in CIES Recharges in Analysis making 2015/2016 figures £000 £000 £000 £000 £000 £000 £000 £000
Fees, charges & other service income -62,920 -3,604 0 8,463 6,268 -51,793 0 -51,793 Interest and investment income -5,506 -282 0 5,788 0 0 -5,707 -5,707 Income from council tax -73,444 0 0 73,444 0 0 -72,922 -72,922 Government grants and contributions -224,349 -384 -1,087 71,574 0 -154,246 -99,455 -253,701 Total Income -366,219 -4,270 -1,087 159,269 6,268 -206,039 -178,084 -384,123
Employee expenses 78,507 50,066 8,482 -9,195 -14,179 113,681 9,195 122,876 Other service expenses 279,028 -45,796 0 -24,196 -8,751 200,285 544 200,829 Support Service recharges 0 0 0 -265 18,514 18,249 265 18,514 Depreciation, amortisation and impairment 0 0 19,237 -1,852 17,385 -16,192 1,193 Interest Payments 3,552 0 0 -3,552 0 0 3,671 3,671 Precepts & Levies 2,044 0 0 -2,044 0 0 2,044 2,044 Gain or Loss on Disposal of Fixed Assets 0 21,220 21,220 Total expenditure 363,131 4,270 27,719 -39,252 -6,268 349,600 20,747 370,347
Surplus or deficit on the provision of services -3,088 0 26,632 120,017 0 143,561 -157,337 -13,776
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The outturn position of £3.089 million has been allocated to the Transformation Reserve as explained in the Outturn section of the Narrative Report. The key variances between Directorate Analysis and the Cost of Services are; . Inclusion of £19.237 million capital charges for depreciation, revaluation losses and Revenue Expenditure Funded Under Statute (REFCUS) . Removal of the major financing sources of Council Tax (£72.922 million), NNDR (£29.156 million) and Non-ring fenced Government Grants (£39.380 million) . Removal of Capital Financing, including Minimum Revenue Provision of £5.151 million, and financing income and expenditure included in Corporate Amounts
Amounts not Services reported to Amounts Allocation Directorate and Support Cost of Corporate management not included of Total Analysis Services not Services Amounts for decision in CIES Recharges in Analysis making 2014/2015 figures £000 £000 £000 £000 £000 £000 £000 £000
Fees, charges & other service income -68,428 -5,218 21,043 3,534 -49,069 -49,069 Interest and investment income -5,105 5,105 0 -4,657 -4,657 Income from council tax -69,909 69,909 0 -71,699 -71,699 Government grants and contributions -227,897 -2,540 -2,055 79,550 76 -152,866 -102,521 -255,387 Total Income -371,339 -7,758 -2,055 175,607 3,610 -201,935 -178,877 -380,812
Employee expenses 78,045 51,956 -1,607 -1,898 -13,948 112,548 9,838 122,386 Other service expenses 285,465 -44,198 -41,097 -4,453 195,717 565 196,282 Support Service recharges -253 15,952 15,699 253 15,952 Depreciation, amortisation and impairment 28,607 -1,161 27,446 -2,222 25,224 Interest Payments 3,624 -3,624 0 3,714 3,714 Precepts & Levies 1,994 -1,994 0 1,994 1,994 Payments to Housing Capital Receipts Pool 0 3 3 Gain or Loss on Disposal of Fixed Assets 0 3,940 3,940 Total expenditure 369,128 7,758 27,000 -48,866 -3,610 351,410 18,085 369,495
Surplus or deficit on the provision of services -2,211 0 24,945 126,741 0 149,475 -160,792 -11,317 The comparator period note represents similar costs and accounting adjustments as 2014/2015. There are however some variances of note which are explained below; . Disposals totalled £21.220 million for 2015/2014, which was an increase of £17.280 million. This relates to the conversion of two large schools to Academy status. . Capital charges to the Net Cost of Services reduced to £19.237 million (£28.607 million in 2014/2015) due to the improvement in the property market witnessed in 2015/2016 creating more upward revaluations of operational properties. . The improved level of capital charges within the ‘Amounts not reported to management for decision making’ column have been offset by a noticeable movement in the IAS19 pension’s adjustments included within the Net Cost of Services. This reflects changes in actuarial assumptions supporting the valuation of future pension liabilities.
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29) Trading Operations
The Council has a number of trading operations providing services to other public services bodies under specific service legislation. Details of these and their financial performance for the year are set out in the table below: 2014/2015 2015/2016 Surplus/ Surplus/ Income Expenditure Income Expenditure Deficit Deficit £000 £000 £000 £000 £000 £000 -350 207 -143 Market Trading -317 226 -91 -503 542 39 Music Service -532 558 26 -2,375 2,174 -201 Refuse -2,561 2,436 -125 -316 421 104 Building Control -304 403 99 -226 215 -11 Drainage -92 123 31 -3,770 3,559 -212 Total Trading -3,806 3,746 -60
30) Agency Services
The Council provides a number of services on behalf of other public bodies on an Agency basis. The income and expenditure recognised in the accounts is only those elements relating to the Council, and not income and expenditure relating to third parties. The significant Agency Services are shown in the table below, with the exception of Business Rates and Council Tax Collection (which are shown as a separate note). 2014/2015 2015/2016 Income Expenditure Net Income Expenditure Net £000 £000 £000 £000 £000 £000 -473 466 -7 Business Improvement District -432 428 -4 -113,303 113,303 0 Payroll Services -107,923 107,923 0
31) Pooled Budgets
Bedfordshire Joint Equipment Store This is a pooled fund for the provision of a high quality, seamless, cost effective joint community equipment service to people in Bedfordshire with needs related to short term or chronic disability of physical impairment. The partnership is between the Council, Central Bedfordshire Council and Bedfordshire Clinical Commissioning Group (BCCG). 2014/2015 2015/2016 £000 £000 £000 £000 Funding provided to the pooled budget: -279 Bedford Borough Council -256 -1,376 Bedfordshire Client Commissioning Group (BCCG) -1,260 -430 Central Bedfordshire Council -393 -2,085 Total Funding -1,909 2,085 Less Expenditure 1,909 0 Net surplus/ (overspend) the pooled budget during the year 0
Better Care Fund From the 1st April 2015, Bedfordshire CCG entered into a section 75 pooled fund agreement with Bedford Borough Council for the Better Care Fund (BCF). Bedford Borough Council provides financial management for this Pooled Fund. The BCF is a policy initiative between local authorities, CCG's and NHS providers which has resulted in pooled funds being used to jointly commission or deliver health and social care. Apart from the integrated equipment store arrangements, the terms of the Section 75 agreement means that contracts are stand-alone with financial risk being retained by the lead body. In relation to the equipment store, the arrangement is hosted by Central Bedfordshire Council and accounted for as a pooled budget. The Clinical Commissioning Group and Bedford Borough Council have signed a Framework Partnership Agreement relating to the BCF and commissioning of health and social care services. The agreement has established a Partnership Board with joint membership from each organisation. The Partnership Board determines Bedford Borough Council 2015/2016 Statement of Accounts
64 which schemes are funded in the CCH locality. Each partner then manages the contracts with their own providers of Better Care Fund services and each partner retains any financial risk relating to those contracts. 2014/2015 2015/2016 £000 £000 £000 £000 Funding provided to the pooled budget: Bedford Borough Council -5,511 Bedfordshire Client Commissioning Group (BCCG) -4,540 0 Total Funding -10,051 Bedford Borough Council lead commissioner 5,511 Bedfordshire CCG lead commissioner 4,540 0 Net surplus/ (overspend) the pooled budget during the year 0
The total funding of the Better Care Fund has been fully allocated out to the participating partners during the financial year. However £345,000 of Bedford Borough Council schemes has slipped into 2016/2017. This funding has been carried forward as a reserve (as shown in Note 9).
32) Member Allowances
The Council paid the following amounts to members of the council during the year. 2014/2015 2015/2016 £000 £000 634 Allowances 647
33) Officers Remuneration
The table below discloses details of individual remuneration for senior employees of the Council. Staff whose salary is above £150,000 are named; otherwise they are listed by way of Job Title. Salary, Benefits in Pension Year Fees and Total Kind Contribution Allowances Chief Executive - Philip Simpkins 2015/16 170,000 23,877 193,877 2014/15 170,000 23,877 193,877 Director Childrens & Adults Services 2015/16 133,575 133,575 2014/15 132,374 132,374 Executive Director of Environment Sustainable 2015/16 133,575 18,778 152,353 Communities 2014/15 133,575 18,778 152,353 Director of Public Health 2015/16 100,669 14,171 114,840 2014/15 98,214 13,827 112,041 Assistant Chief Executive & Chief Finance Officer 2015/16 96,321 13,562 109,883 2014/15 92,355 13,007 105,362 Assistant Chief Executive (Governance & HR) 2015/16 94,637 13,326 107,963 (Monitoring Officer) * Combined post for 2015/16 2014/15 0 Assistant Chief Executive (Governance) * 2015/16 0 (Monitoring Officer) 2014/15 99,127 13,955 113,082 Assistant Chief Executive (HR & OD) * 2015/16 0 2014/15 60,540 8,553 69,093 Chief Education Officer 2015/16 96,322 54 13,547 109,923 (Started in post July 2014) 2014/15 85,420 12,021 97,441 Head of Economic Development 2015/16 75,992 10,716 86,708 2014/15 72,965 10,292 83,257 Head of Corporate Policy & Programme 2015/16 67,872 9,579 77,451 Management 2014/15 0 Head of Property Services 2015/16 72,767 10,264 83,031 2014/15 71,593 10,100 81,693 Head of Procurement & Business Transformation 2015/16 54,575 7,718 62,293 (Started in post July 2015) 2014/15 0 0 Total in 2015/16 1,096,305 54 135,537 1,231,896 Total in 2014/15 1,016,163 0 124,410 1,140,573 *These posts were merged from 1st April 2015 to create Assistant Chief Executive (Governance & HR)
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No senior employee received any bonuses, expenses or compensation for loss of office in either financial year. In addition to the figures above, the Chief Executive received payments in respect of his duties for elections and referendum. For 2015/2016 he was entitled to claim £27,387 as Returning Officer for the five elections held but only claimed £16,224. In respect of 2014/2015 this was £5,853 as Returning Officer for European Parliamentary Elections. The pension contribution is based on the Actuarial calculation of the current cost of pensions. This has been taken from the Triennial Valuation report that indicates that the employer's contribution for current costs is 14.0% of salary costs for 2015/2016 The Council’s other employees receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) were paid the following amounts:
2014/2015 2015/2016 Remuneration band Number of employees Number of employees Teaching Staff From To Council Officers Council Officers Teaching Staff RESTATED £000 £000 13 4 50 - 55 18 9 23 8 55 - 60 19 8 7 4 60 - 65 8 4 3 5 65 - 70 4 6 12 4 70 - 75 11 5 2 75 - 80 2 1 1 80 - 85 1 4 85 - 90 4 3 90 - 95 1 2 95 - 100 5 1 100 - 105 2 2 130 - 135 2 1 170 - 175 1 74 25 TOTAL 78 33 . The table above includes those employees specifically reported in the previous table. . Bands with no employees in that range are omitted. . Teaching Staff includes those at Community and VC Schools only. . Remuneration includes redundancy cost, but excludes pension contributions.
Exit Packages The numbers of exit packages with total cost per band and total cost of the compulsory and other redundancies are set out in the table below:
(a) (b) (c) (d) (e) Exit package cost Number of Total number of exit Total cost of exit Number of other band (including compulsory packages by cost packages in each departures agreed special payments) redundancies band [(b) + (c)] band 2015/ 2014/ 2015/ 2014/ 2015/ 2014/ 2015/ 2014/
2016 2015 2016 2015 2016 2015 2016 2015 £000 £000 £0 - £20,000 33 89 38 17 71 106 418 488 £20,001 - £40,000 4 11 8 8 12 19 338 546 £40,001 - £60,000 2 3 0 4 2 7 108 342 £60,001 - £80,000 0 1 0 0 0 1 0 63 £80,001 - £100,000 0 0 0 1 0 1 0 93 £100,000 - £150,000 0 0 0 0 0 0 0 0 £150,000 - £250,000 1 0 0 0 1 0 153 0 Total 40 104 46 30 86 134 1,017 1,532 This shows that the number of exit packages in 2015/2016 was 86, a reduction of 48 from 134 recorded in 2014/2015. Following the reorganisation of the Bedford Academy cluster of schools during 2014/2015 which resulted in the closure of two middle schools there was an increase in the number of compulsory redundancies. The ‘other departures’ column includes a number of voluntary redundancies, which mitigated the need for compulsory redundancies.
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34) External Audit Costs
The Council has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to non-audit services provided by the Council’s external auditors. 2014/2015 2015/2016 £000 £000 Fees payable to external auditors with regard to external audit services carried 147 111 out by the appointed auditor for the year Fees payable to external auditors for the certification of grant claims and returns 26 18 for the year 19 Fees payable to external auditors for other work 10 192 Total 139 In 2014/2015 the fees were reduced by a rebate of £15,000.
35) Dedicated Schools Grant (DSG)
The Council's expenditure on Schools is funded primarily by grant monies provided by the Department for Education, the Dedicated Schools Grant (DSG). An element of DSG is recouped by the Department to fund academies in the Council's area. DSG is ring-fenced and can only be applied to meet expenditure properly included in the Schools Budget, as defined in the School and Early Years Finance (England) Regulations 2014. The Schools Budget includes elements for a range of educational services provided on an authority-wide basis and for the Individual Schools Budget, which is divided into a budget share for each maintained school. Details of the deployment of DSG receivable for 2015/2016 are as follows:
2015/2016 DSG Figures Individual Central Schools Expenditure Budget Total £000 £000 £000 Final DSG for 2015/2016 before Academy Recoupment 23,393 108,097 131,490 Academy figure recouped for 2015/2016 -3,628 -54,097 -57,725 Total DSG after Academy recoupment for 2015/16 19,765 54,000 73,765 Brought Forward from 2014/2015 5,115 558 5,673 Carry-forward to 2016/2017 agreed in advance 0 0 0 Agreed initial budgeted distribution in 2015/16 24,880 54,558 79,438 In year adjustments 163 163 Final budgeted distribution for 2015/2016 24,880 54,721 79,601 Less Actual central expenditure 21,731 0 21,731 Less Actual ISB deployed to Schools 0 53,690 53,690 Plus Local authority contribution for 2015/2016 0 0 0 Carry-forward to 2016/2017 3,149 1,031 4,180
2014/2015 DSG Figures Individual Central Schools Expenditure Budget Total £000 £000 £000 Final DSG for 2014/2015 before Academy Recoupment 24,228 102,784 127,012 Academy figure recouped for 2014/2015 -3,556 -47,342 -50,898 Total DSG after Academy recoupment for 2014/15 20,672 55,442 76,114 Brought Forward from 2013/2014 2,342 728 3,070 Carry-forward to 2015/2016 agreed in advance 0 Agreed initial budgeted distribution in 2014/15 23,014 56,170 79,184 In year adjustments -224 252 28 Final budgeted distribution for 2014/2015 22,790 56,422 79,212 Less Actual central expenditure 19,558 19,558 Less Actual ISB deployed to Schools 53,980 53,980 Plus Local authority contribution for 2014/15 0 Carry-forward to 2015/2016 3,232 2,442 5,674
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Individual Central Schools Expenditure Budget Total £000 £000 £000 Final budgeted distribution for 2014/2015 22,790 56,422 79,212 Final budgeted distribution for 2015/2016 24,880 54,721 79,601 Variance 2,090 -1,701 389 The final DSG for 2015/2016 after academy recoupment of £73.765 million includes an estimate of the early years block derived from the 2014/2015 data. The final allocation for the 2015/2016 early years block is expected shortly using the January 2016 census. This estimated adjustment to the final allocation of £0.033 million has been treated as an in-year adjustment and revises the final DSG allocation to £73.798 million. In year adjustments have also been made of £0.082 million for the clawback of an excess surplus balance at 31 March 2015 for one school and £0.048 million relating to the net adjustment to academy funding allocation for permanently excluded pupils during 2015/2016.
Central Expenditure Variance The brought forward amount from the previous financial year increased by £2.773 million. This is offset by a £0.683 million reduction in the early years block allocation for 2015/2016 due to the 2 year old capacity building allocation received for 2014/2015.
Individual Schools Budget Variance The ISB reduced by £1.531 million for additional academy recoupment and a reduction of £0.170 million in the brought forward amount from the previous financial year.
36) Grants, Contributions and Taxation
The Council credited the following grants, contributions and donations to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement:
2014/2015 2015/2016 £000 Credited to Taxation and Non Specific Grant Income £000 £000 -71,699 Council Tax -72,922 -27,931 National Non-Domestic Rates -29,156 Non-ring fenced government grants -36,168 Revenue Support Grant -28,460 -5,317 New Homes Bonus Grant -6,860 -772 Council Tax Freeze Grant -788 -199 Local Support Services Grant -155 -1,387 Section 31 Grants -1,655 -1,842 Education Services Grant -1,462 -45,685 -39,380 Capital grants and contributions -8,140 Department of Education -7,185 -10,378 Department of Transport -5,403 -1,060 Homes & Communities Agency -7,342 SEMLEP - Bedford Western Bypass specific funding -2,500 Community Infrastructure Levy -1,014 -8,124 Section 106 Developer Contributions -6,353 -1,170 Other Grants & Contributions -1,124 -28,872 -30,919
-174,187 Taxation and Non Specific Grant Income Total -172,377 The largest movement between years was in the level of Revenue Support Grant received from Central Government. Current medium term projections reflect Central Government’s policy whereby Revenue Support Grant will continue to reduce further over the next few financial years as part of ongoing austerity measures. These reductions are expected to be offset by annual increases in the level of average Band D Council Tax charges and continued increase in Taxbase.
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The below table includes all grants, contributions and donations credited to the Net Cost of Services.
2014/2015 2015/2016 £000 Capital Grants Credited to Services £000 £000 Revenue -73,538 Dedicated Schools Grant -75,421 -56,748 Housing and Council Tax Benefit Administration -56,938 -8,906 Department for Education -9,333 -7,343 Public Health Grant -8,139 -4,276 Other Revenue Grants -3,327 -150,811 -153,158 Revenue Expenditure Funded Capital Under Statute Department of Education -18 -174 Department of Transport 0 Better Care Funding - Disabled Facilities Grants -873 -440 Department of Works & Pensions 0 -553 Department of Health 0 -134 Heritage Lottery Fund 0 -526 Section 106 Developer Contributions -189 -228 Other Grants & Contributions -8 -2,055 -1,088
-152,866 -154,246 The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the provider. The balances of capital grants and contributions receipts in advance are set out in the table below:
31 March 2015 31 March 2016 £000 £000 Grants -4,160 Homes & Communities Agency - Growth Area Funding -153 -2,925 Homes & Communities Agency - Bedford Western Bypass -876 Homes & Communities Agency - Gypsy & Traveller Sites -466 -365 Department for Education -141 -25 Department of Transport -183 -88 Other Grants -27 Contributions -5,085 Section 106 -6,334 -664 Section 278 -515 -67 Other Contributions -25 Donated Assets -1,296 Sports Facilities -1,191 -15,551 Total -9,035 This note identifies the capital grants and contributions which have been utilised during the financial year, leading to reduced external financing being held on the Balance Sheet as at 31 March 2016. The main reductions are the Home & Communities Agency grants which have been released to finance the Bedford Western Bypass.
37) Related Parties
The Council is required to disclose material transactions with related parties, bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council.
Central Government Central Government has effective control over the general operations of the Council, as it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants, and prescribes the terms of many of the transactions that the Council has with other parties (e.g. Council Tax bills, Housing Benefits). Grants received from government departments are set out in the subjective analysis
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Members Members of the council have direct control over the council’s financial and operating policies. The total of members’ allowances paid is shown in Note 32. During 2015/2016 there were no interests of a material nature declared.
Officers During 2015/2016 there were no interests of a material nature declared.
Other Public Bodies The Council has two pooled budget arrangements which are detailed in Note 31. The Other Public Bodies involved in these arrangements are Bedfordshire Clinical Commissioning Group (BCCG) and Central Bedfordshire. Both pooled budget are related to the provision of Social Care services.
Pension Fund Pension Fund details are set out in the Pension Fund section of this document. The Pension Fund has a separate bank account and therefore has no cash deposited with the Council. The Council charged the Fund £1.1 million in 2015/2016 (£1.0 million in 2014/2015) for expenses incurred in administering the Fund. The Council took over administering the Fund on 1 April 2009. As at 31 March 2016, the amount due to the Council from the Pension Fund for March salaries was £0.2 million (£0.2 million as at 31 March 2015); with £1.7 million being owed by the Council to the Pension Fund for March pension contributions (£1.6 million as at 31 March 2015).
Entities Controlled or Significantly Influenced by the Council The Council has interests in entities that have the controlling nature of subsidiaries. There are five trust funds (House of Industry, Freemans Common Trust, Norah Mavis Trust, Bedford Park and Grange Trust) which have their current assets, liabilities, income and expenditure disclosed within Note 47. The most significant transaction during 2015/2016 between the Council and these entities was a payment of £50,000 to House of Industry for the rent of St Peter’s car park (£50,000 in 2014/2015).
38) Capital Expenditure and Capital Financing
The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. RESTATED 2014/2015 2015/2016 £000 £000 118,037 Opening Capital Financing Requirement 119,099 Capital investment 41,424 Property, Plant and Equipment 39,446 431 Investment Properties 80 1,102 Intangible Assets 1,332 -43 Capital Long-Term Debtors -43 7,460 Revenue Expenditure Funded from Capital under Statute 3,446 Sources of finance -839 Capital receipts -2,821 -33,380 Government grants and other contributions (includes REFCUS) -28,376 Sums set aside from revenue: -10,189 · Direct revenue contributions -9,923 -544 · Statutory repayment of debt (finance leases liabilities) -549 -4,360 · Minimum Revenue Provision (MRP) -4,602 119,099 Closing Capital Financing Requirement 117,089
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The Capital Financing Requirement (CFR) reduced by £2.010 million during the financial year. The Capital Programme for 2015/2016 had a net cost of £3.141 million which was more than offset by the Minimum Revenue Provision charge to revenue of £5.151 million. The below table explains how the movement in Capital Financing Requirement (CFR) has been financed by the Council. The level of unfinanced government supported CFR is expected to reduce year on year as no further government supported borrowing is anticipated. This means future capital investment will be financed by prudential borrowing or other forms of financial liabilities funded by Council Tax. RESTATED 2014/2015 2015/2016 £000 Explanation of movements in year £000 -3,594 Increase in underlying need to borrowing supported by government -3,450 4,494 Increase in underlying need to prudential borrowing 1,889 162 Assets acquired under finance leases -449 1,062 Increase/(decrease) in Capital Financing Requirement -2,010
39) Leases
Council as Lessee Finance Leases The Council has acquired a number of vehicles and equipment under finance leases. The assets acquired under these leases are classified as Property, Plant and Equipment in the Balance Sheet at the following net amounts:
31 March 2015 31 March 2016 £000 £000 965 Vehicles, Plant, Furniture and Equipment 682 965 682 The Council is committed to making minimum payments under these leases comprising settlement of the long-term liability for the interest in the assets acquired by the Council, and finance costs that will be payable by the Council in future years while the liability remains outstanding. The minimum lease payments are made up of the following amounts:
31 March 2015 31 March 2016 £000 £000 Finance lease liabilities (net present value of minimum lease payments): -449 Current -372 -1,206 Non current -834 -351 Finance costs payable in future years -228 -2,006 Minimum lease payments -1,434 The minimum lease payments will be payable over the following periods:
Minimum Lease Finance Lease Minimum Lease Finance Lease
Payments Liabilities Payments Liabilities 31 March 2015 31 March 2015 31 March 2016 31 March 2016 £000 £000 £000 £000 -572 -449 Not later than one year -463 -372 -1,402 -1,187 Between one and five years -941 -815 -32 -19 Later than five years -30 -19 -2,006 -1,655 -1,434 -1,206 The Council does not have any payments that are contingent on events taking place after the lease was entered into.
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Operating Leases The Council has acquired a number of equipment by entering into operating leases, with typical lives of 3 - 5 years. The future minimum lease payments due under non-cancellable leases in future years are:
31 March 2015 31 March 2016 £000 £000 385 Not later than one year 194 1,122 Between one and five years 241 224 Later than five years 206 1,731 Total 641
The expenditure charged to the relevant Service lines in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was:
2014/2015 2015/2016 £000 £000 452 Minimum lease payments 228 452 Total 228
The amount of operating lease payments and commitments have fell consistently over the last few years as the policy of ceasing lease agreements of satellite offices continues.
Council as Lessor Finance Leases The Council has one property leased to a third party which is classified as a finance lease. The lease agreement as at 31 March 2016 has a remaining term of 106 years. The Council has a gross investment in the lease, made up of the minimum lease payments expected to be received over the remaining term. The residual value is considered to be immaterial and has therefore been ignored for the purpose of the calculation. The minimum lease payments comprises settlement of the long-term debtor for the interest in the property acquired by the lessee and finance income that will be earned by the Council in future years whilst the debtor remains outstanding. The gross investment is made up of the following amounts:
31 March 2015 31 March 2016 £000 £000 Finance lease debtor (net present value of minimum lease payments): 0 Current 0 287 Non current 287 287 Gross investment in the lease 287 The gross investment in the lease and the minimum lease payments will be received over the following periods: Gross Gross Minimum Lease Minimum Lease Investment in the Investment in the Payments Payments Lease Lease 31 March 2015 31 March 2015 31 March 2016 31 March 2016 £000 £000 £000 £000 0 23 Not later than one year 0 23 0 92 Between one and five years 0 92 287 2,340 Later than five years 287 2,340 287 2,455 Total Lease Payments 287 2,455 As at the balance sheet date, the possibility of circumstances that might result in lease payments not being made is considered immaterial, and therefore the Council has not set aside an allowance for uncollectible amounts. The Council does not have any payments that are contingent on events taking place after the commencement of the leases. Operating Leases The Council leases out property under operating leases for income generation, provision of community based facilities, provision of employment, business development opportunities and provision of specific services on behalf of the Council.
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The future minimum lease payments receivable under non-cancellable leases in future years are set out in the following table:
31 March 2015 31 March 2016 £000 £000 2,378 Not later than one year 2,361 6,945 Between one and five years 7,091 49,898 Later than five years 51,188 59,221 Total Operating Future Lease Payments 60,640 The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2015/2016, contingent rents totalling £72,114 were received by the Council (2014/2015 was £22,559).
40) Impairment Losses
During 2014/2015 the demolition of the Town Hall building caused an impairment loss of £2.004 million as detailed in Note 13. The Gross Book Value and accumulated impairment were treated as a disposal as at 31 March 2015. There were no impairments during 2015/2016.
41) Pensions Schemes Accounted for as Defined Contribution Schemes
Teachers’ Pension Scheme Teachers employed by the Council are members of the Teachers’ Pension Scheme, administered by the Department for Education. The Scheme provides teachers with specified benefits upon their retirement, and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The Scheme is technically a defined benefit scheme. However, the Scheme is unfunded and the Department for Education uses a notional fund as the basis for calculating the employers’ contribution rate paid by local authorities. The Council is not able to identify its share of underlying financial position and performance of the Scheme with sufficient reliability for accounting purposes. For the purposes of this Statement of Accounts, it is therefore accounted for on the same basis as a defined contribution scheme. Year Retirement Benefits Pensionable Pay 2014/2015 (actual) £3.21 million 14.1% 2015/2016 (actual) £3.36 million 14.1% 2016/2017 (estimate) £3.39 million 14.1% The Council is not liable to the scheme for any other entities obligations under the plan.
NHS Pension Scheme Public Health officers employed by the Council are members of the NHS Pension Scheme, administered by the Department for Health. The Scheme provides officers with specified benefits upon their retirement, and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The Scheme is technically a defined benefit scheme. However, the Scheme is unfunded and the Department for Health uses a notional fund as the basis for calculating the employers’ contribution rate paid by local authorities. The Council is not able to identify its share of underlying financial position and performance of the Scheme with sufficient reliability for accounting purposes. For the purposes of this Statement of Accounts, it is therefore accounted for on the same basis as a defined contribution scheme. Year Retirement Benefits Pensionable Pay 2014/2015 (actual) £0.11 million 14.0% 2015/2016 (actual) £0.11 million 14.0% 2016/2017 (estimate) £0.18 million 14.0% The Council is not liable to the scheme for any other entities obligations under the plan.
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42) Defined Benefit Pension Scheme
Participation in Pension Schemes As part of the terms and conditions of employment of its officers, the Council makes contributions towards the cost of post-employment benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to disclose payments which will be due at the time an employee earns their future entitlement. The Council participates in one post-employment schemes: . The Local Government Pension Scheme (LGPS), administered locally by Bedford Borough Council – is a funded defined benefit final salary scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets. . Arrangements for the award of discretionary post-retirement benefits upon early retirement – this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there is no investment assets built up to meet these pension liabilities, and cash has to be generated to meet actual pension payments as they eventually fall due. . The Bedfordshire Pension Fund is operated under the regulatory framework for the Local Government Pension Scheme and the governance of the scheme is the responsibility of the Pensions Committee of Bedford Borough Council. Policy is determined in accordance with the Pensions Fund Regulations. Further details can be obtained from the Pension Fund accounts starting on page 87. . The principal risks to the authority of the scheme are the longevity assumptions, statutory changes to the scheme, structural changes to the scheme (i.e. large-scale withdrawals from the scheme), changes to inflation, bond yields and the performance of the equity investments held by the scheme. These are mitigated to a certain extent by the statutory requirements to charge the General Fund the amounts required by statute as described in the accounting policies note.
Transactions Relating to Post-employment Benefits The Council recognises the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge the Council is required to make against council tax is based on the cash payable in the year, so the real cost of post-employment / retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The table on the following page contains all transactions relating to the Bedfordshire Pension Fund for the 2015/2016 Financial Year and comparator figures for 2014/2015. This includes; . Transactions included in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year. . Movements in the Pensions Net (Liability)/Asset The cumulative amount of actuarial gains and losses recognised in the Comprehensive Income and Expenditure Statement to the 31 March 2016 is a loss of £123.130 million (£180.421 million as at 31 March 2015). The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets. The actual return on scheme assets in the year was £3.198 million (£37.410 million in 2014/2015).
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Pensions Fund transactions during 2015/2016 and comparator figures for 2014/2015 2014/2015 2015/2016 Net (liability) Net (liability) Assets Obligations Assets Obligations /asset /asset £000 £000 £000 £000 £000 £000 300,326 300,326 Fair Value of employer assets 336,397 336,397 518,326 -518,326 Present value of funded liabilities 612,137 -612,137 11,539 -11,539 Present value of unfunded liabilities 11,823 -11,823 300,326 529,865 -229,539 31 March 2014 Opening Position 31 March 2015 336,397 623,960 -287,563 Service cost 11,761 -11,761 Current service cost 15,086 -15,086 908 -908 Past service cost ( including curtailments ) 392 -392 0 Effect of settlements -117 -2,180 2,063 0 12,669 -12,669 Total Service Cost -117 13,298 -13,415 Net Interest 12,877 12,877 Interest Income on plan assets 10,743 10,743 22,715 -22,715 Interest cost on defined benefit obligation 19,938 -19,938 12,877 22,715 -9,838 Total net interest 10,743 19,938 -9,195 12,877 35,384 -22,507 Total defined benefit cost recognised in Profit or (Loss) 10,626 33,236 -22,610 Cashflows 3,330 3,330 0 Plan participants contributions 3,441 3,441 0 13,022 13,022 Employer contributions 13,468 13,468 801 801 Contributions in respect of unfunded benefits 761 761 -17,691 -17,691 0 Benefits paid -18,162 -18,162 0 -801 -801 0 Unfunded benefits paid -761 -761 0 311,864 550,087 -238,223 Expected closing position 345,770 641,714 -295,944 Remeasurements 0 Changes in demographic assumptions 0 78,715 -78,715 Changes in financial assumptions -55,657 55,657 -4,841 4,841 Other experience -9,179 9,179 24,533 24,533 Return on assets excluding amounts included in net interest -7,545 -7,545 24,533 73,874 -49,341 Total remeasurements recognised in Other Comprehensive -7,545 -64,836 57,291 Income (OCI) 336,397 336,397 Fair Value of employer assets 338,225 338,225 612,137 -612,137 Present value of funded liabilities 566,486 -566,486 11,823 -11,823 Present value of unfunded liabilities 10,392 -10,392 336,397 623,960 -287,563 31 March 2015 Closing Position 31 March 2016 338,225 576,878 -238,653
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A summary of the movements in assets and liabilities is given in the table below:
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016
£000 £000 £000 £000 £000 Present value of LGPS Liabilities -444,174 -511,540 -529,866 -623,960 -576,878 Fair value of LGPS Assets 265,159 289,770 300,326 336,397 338,225 LGPS Surplus/(deficit) -179,015 -221,770 -229,540 -287,563 -238,653
The liabilities show the underlying commitments that the Council has in the long run to pay post-employment (retirement) benefits. The total liability of £576.878 million at 31 March 2016 (£623.960 million at 31 March 2015) has a substantial impact on the net worth of the Council as recorded in the Balance Sheet, resulting in a negative overall balance of £238.653 million at 31 March 2016 (£287.564 million at 31 March 2015). However, statutory arrangements for funding the deficit mean that the financial position of the Council remains healthy; The deficit on the local government scheme will be made good by increased contributions in accordance with Bedfordshire Pension Fund’s Funding Strategy which is currently targeting a 20 year deficit recovery plan. Finance is only required to be raised to cover discretionary benefits when the pensions are actually paid. Member Type Liability Split Weighted Average Duration Active members 43.1% 23.1 Deferred members 20.4% 26.4 Pensioner members 36.5% 13.4 Please note that the above figures are for the funded obligations only and do not include any unfunded pensioner liabilities. The durations are as they stood at the previous formal valuation as at 31 March 2013. The total employer contributions expected to be made to the Local Government Pension Scheme by the council in the year to 31 March 2016 is £13.263 million. Expected contributions for the Discretionary Benefits scheme in the year to 31 March 2016 are £0.7 million.
Basis for estimating assets and liabilities Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. Both the Local Government Pension Scheme and Discretionary Benefits liabilities have been assessed by Hymans Robertson LLP, an independent firm of actuaries, estimates for the Pension Fund being based on the latest full valuation of the scheme as at 31 March 2013. The principal assumptions used by the actuary have been:
LGPS Assumptions LGPS Assumptions 2014/2015 2015/2016 Long-term expected rate of return on assets in the scheme: 3.20% Equity investments 3.50% 3.20% Bonds 3.50% 3.20% Property 3.50% 3.20% Cash 3.50% Mortality assumptions: Longevity at 65 for current pensioners: 22.4 Men 22.4 24.3 Women 24.3 Longevity at 65 for future pensioners: 24.4 Men 24.4 26.8 Women 26.8 3.30% Rate of increase in salaries 3.20% 2.40% Rate of increase in pensions 2.20% 3.20% Expected Return on Assets 3.50% 3.20% Rate for discounting scheme liabilities 3.50% Take-up of option to convert annual pension into retirement lump sum: 50% Pre April 2008 Service 50% 75% Post April 2008 Service 75% Salaries increases are assumed to be 1% until 31 March 2016 reverting to the assumption shown thereafter.
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The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analyses below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the other assumptions remain constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be interrelated. The estimations in the sensitivity analysis have followed the accounting policies for the scheme, i.e. on an actuarial basis using the projected unit credit method. The methods and types of assumptions used in preparing the sensitivity analysis below did not change from those used in the previous period. Change in assumptions at 31 March 2016: Approximate % increase Approximate monetary amount to Employer Liability £000 0.5% decrease in Real Discount Rate 10% 58,334 1 year increase in member life expectancy 3% 17,306 0.5% increase in the Salary Increase Rate 2% 14,117 0.5% increase in the Pension Increase Rate 8% 43,687 The Discretionary Benefits arrangements have no assets to cover liabilities. The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:
31 March 2015 31 March 2016 Quoted Quoted Quoted Quoted prices prices prices in % of prices in % of not in Total not in Total active Total Asset Category active Total active £000 active £000 markets Assets markets Assets markets markets £000 £000 £000 £000 Equity Securities: 3,147 3,147 0.9% Consumer 2,792 2,792 0.8% Manufacturing 6,547 6,547 1.9% Energy and Utilities 6,906 6,906 2.1% Financial Institutions 7,015 7,015 2.1% Health and Care 5,305 5,305 1.6% Information Technology 4,186 4,186 1.2% Other Debt Securities: 35,566 35,566 10.6% UK Government 29,234 29,234 8.6% Real Estate: 22,398 10,909 33,307 9.9% UK Property 5,670 32,591 38,261 11.3% 20 20 0.0% Overseas Property 6 6 0.0% Investment Funds and Unit Trusts: 6,553 130,113 136,666 40.6% Equities 8,906 160,866 169,772 50.1% 27,893 27,893 8.3% Bonds 32,632 32,632 9.6% 46,101 46,101 13.7% Other 60,760 60,760 17.9% Cash and Cash Equivalents: 20,946 20,946 6.3% All 8,284 8,284 2.5% 159,789 176,608 336,397 100.0% 116,252 222,697 338,949 100.0% During 2015/2016, the remaining balances invested through segregated investment managers were transferred into Pooled Funds. This is recognised in the note above by the transfer of assets between Equity Securities and Investment Funds and Unit Trusts.
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History of experience gains and losses The history of actuarial gains identified as movements on the Pensions Reserve to 2015/2016 can be analysed into the following categories, measured as a percentage of assets or liabilities at 31 March 2016:
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 % % % % % Experience gains and losses on assets (expressed as a -6.58 5.03 3.58 17.76 0.54 percentage of plan assets at balance sheet date) Experience gains and losses on liabilities (expressed as a 5.30 10.17 3.64 12.01 -7.55 percentage of plan liabilities at balance sheet date)
43) Contingent Liabilities
At 31 March 2016, the Council had no known material contingent liabilities.
44) Contingent Assets
At 31 March 2016, the Council had no known material contingent assets.
45) Nature and Extent of Risks Arising from Financial Instruments
The Council’s activities expose it to a variety of financial risks: . Credit risk – the possibility that the counterparty to a financial asset will fail to meet its contractual obligations, causing a loss to the Council. . Liquidity risk – the possibility that the Council might not have cash available to make contracted payments on time. . Market risk – the possibility that an unplanned financial loss will materialise because of changes in market variables such as interest rates or equity prices. The Council’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund services. Risk management is carried out by the Treasury Team using policies approved by Full Council which are outlined in the annual Treasury Management Strategy. The Council provides written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk and the investment of surplus cash.
Credit risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Council’s customers. This risk is minimised through the Annual Investment Strategy, which requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria, as laid down by recognised credit rating agencies. The Annual Investment Strategy also imposes a maximum sum to be invested with a financial institution located within each category. Recognising that credit ratings are imperfect predictors of default, the Council has regard to other measures including credit default swaps and equity prices. The credit criteria in respect of financial assets held by the Council are detailed below: . Council investments are with Central Government, other Local Authorities or institutions with a high credit rating . The Council considers the ratings of each of the three major credit rating agencies (Fitch, Moody’s and Standard & Poors) in establishing the criteria that shall apply to its investment decisions; the lowest of the three ratings shall apply . A- Fitch credit rating or equivalent has been determined by the Council to be the minimum long term credit rating as “high”. . The maximum that may be deposited with each institution is £5 million for deposit takers and £20 million aggregate with AAA rated money market funds. There is no limit on the level of investment with Central Government. Customers for goods and services are assessed, taking into account their financial position, past experience and other factors, with individual credit limits being set in accordance with internal ratings in accordance with
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78 parameters set by the Council. The Council’s maximum exposure to credit risk in relation to its investments in banks and building societies of £54 million cannot be assessed generally, as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. Recent experience has shown that it is rare for such entities to be unable to meet their commitments. A risk of irrecoverability applies to all of the Council’s deposits, but there was no evidence at the 31 March 2016 that this was likely to crystallise. No counterparty credit limits were exceeded during the reporting period, and furthermore the Council would not expect any investment losses from counterparties of fixed term deposits or bonds.
The Council does not enter into customer credit arrangements, and as such a significant amount (£7.499 million) of the total balance of £9.797 million is past its due date for payment. The outstanding amount can be analysed by age as follows: 31 March 2015 31 March 2016 £000 £000 7,212 Less than three months 5,194 655 Three to six months 1,281 599 Six months to one year 706 2,680 More than one year 2,617 11,146 Total 9,797
Liquidity risk The Council has a comprehensive cash flow management system that seeks to ensure that cash is available for operational requirements. If unexpected movements occur, the Council is capable of accessing short term funds from the money markets, Public Works Loan Board and other Local Authorities. There is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. Nonetheless, the risk is that the Council will be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates. The Council sets limits on the proportion of its fixed rate borrowing during specified periods. This is achieved using a strategy to ensure that not more than 15% of loans are due to mature within any one year through a combination of careful planning of new loans and assessing the potential to make early repayments. The maturity analysis of financial liabilities is set out in the following table: 31 March 2015 Time to maturity 31 March 2016 £000 (years) £000 4,024 Not over 1 4,006 3,300 Over 1 but not over 2 3,300 9,900 Over 2 but not over 5 8,900 14,053 Over 5 but not over 10 15,115 27,217 Over 10 but not over 20 23,922 0 Over 20 but not over 30 8,146 Over 30 but not over 40 17,403 9,256 Over 40 8,167 Uncertain date * 8,163 84,063 Total 80,809 *The uncertain date category relates to Money Market LOBO borrowing, these borrowings allow the lender to reset the interest rate on the deal every six months. Due to the low interest rate environment it is unlikely that the lender will exercise its option, and therefore trigger the repayment of these loans. The maturity data is therefore uncertain. All trade and other payables are due to be paid in less than one year. Aged Debt Analysis During the course of 2015/2016 the total value of sundry debt invoices issued was £189.7 million. The outstanding debt brought forward at 1 April 2015 was £11.1 million giving a total amount due of £200.8 million collectable. At 31 March 2016 £191.0 million (95.1%) of the total due was paid leaving an outstanding balance of £9.797 million. However, £2.298 million of the outstanding balance related to invoices issued in the final 28 days of the financial year and therefore not yet due. The table below shows the outstanding sundry debt position as at 31 March 2016 in respect of sundry debts owed to the Council. The analysis illustrates that 34.7% of the total debt is owed by NHS Bedfordshire CCG, which equates to £3.4 million.
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Sundry Debts 0-28 days 29-56 days 57-84 days 85+ days TOTAL £000 £000 £000 £000 £000 Total Debt 2,298 1,300 1,596 4,603 9,797 Profile of Debt 23% 13% 16% 47%
NHS Bedfordshire CCG Debt 246 966 945 1,245 3,401 NHS Bedfordshire CCG Profile 7% 28% 28% 37%
All Other Debt 2,052 334 651 3,358 6,396 All Other Profile 32% 5% 10% 53% The profile of debt for “All other debt” shows that £4.603 million (47%) has been outstanding for more than 85 days and, as such, represents a risk of non-recovery. In particular £2.617 million relates to invoices issued prior to 2014/2015 and represents a heightened risk of non-payment. In addition to Sundry Debts, there are also significant sums owed to the Council in respect of overpayments of Housing Benefits totalling £4.019 million. The table below shows an analysis of outstanding amounts as at 31 March 2016 by the financial year in which the overpayment occurred:
Housing Benefit 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 TOTAL Overpayments and earlier £000 £000 £000 £000 £000 £000 Total Debt 827 395 484 871 1,442 4,019 Profile of Debt 21% 10% 12% 22% 36% Overpayments of Housing Benefit are difficult debts to recover because the person who was overpaid frequently remains of limited means. The Council is proactive in the collection of overpayments, but has considered it pragmatic to make a prudent provision for non-payment of this particular category of debt. During 2015/2016, Housing Benefit overpayments to a value of £2.1 million were identified in comparison to the overall amount of Housing Benefit paid of £55.8 million. The majority of overpayments arose as a result of delays on the part of benefit claimants in notifying the Council of changes in circumstances that affected their entitlement. Where an overpayment of Housing Benefit occurs the Council is allowed to retain a proportion of the original government subsidy it received in respect of the Housing Benefit paid. The amount of subsidy retained in 2015/2016 was £0.9 million, and a further £1.6 million was repaid by claimants. A review of the Bad Debt Provision has been undertaken taking into consideration the debt profile of outstanding sundry debts, benefit overpayments and the relatively high percentage of Bedfordshire CCG debt at 31 March 2016. The annual budgeted contribution to the Bad Debt Provision was £0.450 million in 2015/2016. The total Bad Debt Provision as at 31 March 2016 is £5.378 million. The review concluded that an additional balance of £1.489 million was considered necessary to bring the existing provision to a prudent level. A further review of the annual revenue contribution for bad debt provision will be made as part of the 2017/2018 budget setting process.
Market risk Interest rate risk The Council is exposed to risk in terms of its exposure to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the Council. For instance, a rise in interest rates would have the following effects: . borrowings at variable rates – the interest expense charged to the Surplus or Deficit on the Provision of Services will rise . borrowings at fixed rates – the fair value of the liabilities borrowings will fall . investments at variable rates – the interest income credited to the Surplus or Deficit on the Provision of Services will rise . investments at fixed rates – the fair value of the assets will fall Borrowings are not carried at fair value, so nominal gains and losses on fixed rate borrowings would not impact on the Surplus of Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in Other Comprehensive Income and Expenditure. The Council’s Annual Investment Strategy incorporates a number of measures to manage interest rate risk. The Bedford Borough Council 2015/2016 Statement of Accounts
80 measures aim to keep a maximum of 75% of its net borrowings (by reference to the interest payable) in variable rate loans. During periods of falling interest rates, and where economic circumstances make it favourable, fixed rate loans will be repaid early to limit exposure to losses. The risk of loss is ameliorated by the fact that a proportion of government grant payable on financing costs will normally move with prevailing interest rates or the Council’s cost of borrowing and provide compensation for a proportion of any higher costs. The Annual Investment Strategy incorporates active measures for assessing interest rate exposure that feeds into the setting of the annual budget and which is used to update the budget quarterly during the year. This strategy allows any adverse changes to be accommodated. The mechanism will also inform whether new borrowing taken out is fixed or variable. According to this assessment strategy, at 31 March 2016, if interest rates had been 1% higher with all other variables held constant, the financial effect would be:
2014/2015 2015/2016 £000 £000 -931 Increase in interest receivable on variable rate investments -742 -817 Increase in government grant receivable for financing costs -784 -1,748 Impact on Surplus or Deficit on the Provision of Services -1,526 42 Increase in fair value of available for sale financial assets 523 -422 Decrease in fair value of available for sale financial assets -437 -2,128 Impact on Comprehensive Income and Expenditure -1,440 0 Effect of a 1% rise in interest rates on loans/receivables -359 -10,920 Effect of a 1% rise in interest rates on borrowings/liabilities -9,982 The impact of a 1% fall in interest rates would be as above but with the movements being reversed. Price risk The council has several investments in pooled funds through the purchase of shares in these funds, the shares are valued every business day and so the Council is exposed to movements in price. The investments are shown below: 31 March 31 March 31 March 31 March Fund Name 2015 2015 2016 2016 No of Shares Valuation No of Shares Valuation (£'000) (£'000) 738,304 7,467 Payden & Rygel Sterling Reserve Fund 243,572 2,459 3,468,008 9,582 CCLA Property Fund 3,468,008 10,000 UBS Multi Asset Income Fund 3,872,967 1,907 Schroders Income Maximiser Fund 9,960,159 4,812 City Financial Multi Asset Diversified Fund 1,623,640 1,888 M&G Global Dividend Fund 1,272,669 2,088 4,206,312 17,049 Total 20,441,015 23,154 The investments are classified as ‘available for sale’, meaning that all movements in price will impact on gains and losses recognised in Other Comprehensive Income and Expenditure. A general shift of 5% in the general price of shares (positive or negative) would thus have resulted in a £0.85 million gain or loss being recognised in the Other Comprehensive Income and Expenditure for 2015/2016. There is no impact on the General Fund until the investments are sold. Foreign exchange risk The Council has no financial asset or liability held in foreign currency denominations, and thus has no exposure to any losses arising from movements in exchange rates.
46) Heritage Assets
Heritage assets are assets that are held by the authority principally for their contribution to knowledge or culture. The Council has reviewed the definition of heritage assets and has concluded that the Council has the following heritage assets that required reviewing: . Historical assets held in Archives o Bedfordshire and Luton Archives & Records Service (hosted by Bedford Borough Council, but jointly funded under Service Level Agreements by Central Bedfordshire Council and Luton Borough Council) Bedford Borough Council 2015/2016 Statement of Accounts
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holds the historic and administrative archives for the County of Bedfordshire, some five kilometres of records dating from 1166 to the present. The archives, ranging from a single piece of paper to thousands of documents, are held by the Council under a variety of terms, the most common being outright gift or long-term loans. In some cases, former long-term loans have been converted into gifts, often on the death of the depositor. However, the majority of archives deposited with us are on long- term loan. There has been no attempt made to assign a cash or insurance value to this irreplaceable historical and cultural heritage. o Four prominent archives which are actually owned by the authority and its funding partners are outlined below: • Orlebar family and estate collection, Hinwick, Podington and environs; deeds and a wide-ranging collection of family papers. Purchased in 1986 following an appeal after the collection, on loan here, was threatened with sale and dispersal. • Bedford Borough own archives, including the first known Charter of 1166, and corporation minute books from 1647. • Osbourne family collection of papers and images. • Luton Fraternity Guild book, 1527-1547, including manorial court rolls, 1470-1558 purchased with the aid of the Victoria and Albert museum grant fund, 1983 o The archive service has a comprehensive set of policies, plans and procedures for collection development, care and access in line with national recommendations and as assessed by the national scheme for Archive Service Accreditation (application pending). This involves everything from the building in which the archives are housed, to the measures taken to ensure the long term preservation of the archives themselves.
. Art Gallery and Museum artefacts o The majority of the Art Gallery collection is owned by the Cecil Higgins Trustees. The items below are those under Council ownership. • Several hundred works of art (prints, drawings, watercolours and oil paintings). Of these, the Sisley has by far the highest value at around £1.2 million – the majority of the remaining works have not been valued. • Several hundred pieces of costume and textiles, as well as a large collection of local lace – the vast majority has not been valued. • Several hundred items of jewellery, furniture, objets d’art etc – the vast majority of which has not been valued. o Several excavation archives from archaeological investigations within the Museum’s collecting area, numbering many thousands of single objects. These are extremely difficult to assign a value to as they are historical records. o A large collection (several thousand) of local archaeological objects, for which no up-to-date valuation is available. Within this, objects or collections of significance include: • Medieval stone corbels • Church silver and manuscripts • Several thousand coins • Antiquarian and recent finds of pottery and metalwork • Items falling under the Treasure Act o A collection (several hundred) of foreign archaeological objects, for which no up-to-date valuation is available. Objects or collections of significance include: • Greek, Cypriot and Roman pottery • Egyptian archaeology • Mesopotamian/Assyrian archaeology o A large collection (several thousand) of social history objects relating to local industry, domestic life, arts & crafts. • Several hundred lace bobbins and a large collection of local lace-making material • The Sharnbrook horsedrawn manual fire engine and the Adams ‘Mail Phaeton’ car. • A small collection of furniture • A small collection of antique firearms • The Newman collection of Bedfordshire books. o Other collections and artefacts with minimal or no valuation available. • Several hundred ethnographic objects • Several hundred natural history specimens, including taxidermy and entomology • Several hundred geological specimens, including rocks, fossils and minerals • Several hundred works of art (prints, drawings, watercolours and oil paintings), maps and topographical prints of Bedfordshire of historical rather than artistic interest. o Collections held by The Higgins Bedford are subject to the organisation’s Care and Conservation
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Policy and Plan, Documentation Policy and Plan, and Documentation Procedural Manual, in line with the requirements of Arts Council England’s Museum Accreditation Scheme.
. Mayor’s Chain, Mace, and other Civic Regalia. The principal items of note are as follows:- o Sterling Silver Mayor’s Mace – Hallmarked London 1665 o One pair of very rare Bailiff’s Maces tested and valued as Sterling Silver and Silver Gilt, each c. 1665 o Mayor’s Chain of Office tested and valued as Sterling Silver Gilt o The Mayoress’ Chain of Office – tested and valued as 15ct gold o The collection also contains a number of salvers, including a sterling silver octagonal tray recovered from the R101 Airship crash site, drinking vessels, bowls, desk and table accessories, trophies and awards. o The Council has recognised the assets listed above as a single asset, labelled Civic Regalia, using a value of £170,000 based on its current insurance policy. o Since the demolition of the Town Hall, all Civic Regalia has remained locked away awaiting decisions on a new way of displaying these items in Borough Hall. In line with the accounting policy on Heritage Assets, the Council has separately recognised some of these assets on its Balance Sheet. Some assets have not been recognised in the Balance Sheet due to the disproportionate cost of obtaining valuations. In addition to the above, there are some assets previously classified as Community Assets, for example: Bromham Mill, Moot Hall and Castle Mound. The current Heritage Asset balances held with Long Term Assets is as listed below. 2015/2016 Heritage Artefacts Civic Memorials Total Sites Regalia £000 £000 £000 £000 £000 Balance at start of year: Gross carrying amounts 3,940 2,090 272 220 6,522 Accumulated amortisation 0 Net carrying amount at start of year 3,940 2,090 272 220 6,522
There have been no movement in this classification of asset in the last five financial years in excess of £1,000.
47) Trust Funds
The main funds for which the council acts as sole trustee are listed below. These are not assets of the Council and have not been included in the Balance Sheet.
Income Expenditure Assets Liabilities 2015/2016 £000 £000 £000 £000 a) House of Industry Estate -212 204 5,006 -696 b) Freeman's Common Trust -1 0 262 c) Grange Trust -11 9 159 d) Norah Mavis Campbell -1 23 95 e) Bedford Park -20 32 181 Total -245 268 5,703 -696 Prior year comparatives are shown below:
Income Expenditure Assets Liabilities 2014/2015 £000 £000 £000 £000 a) House of Industry Estate -243 528 5,060 -812 b) Freeman's Common Trust -16 0 261 c) Grange Trust -20 10 156 d) Norah Mavis Campbell -2 9 108 e) Bedford Park -38 49 192 Total -319 596 5,777 -812 A brief description of each of the Trust Funds is included over the page.
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(a) House of Industry Estate Set up under the Bedford Corporation Act 1964, the estate owns significant land holdings, income from which (together with investment income) is used to provide financial assistance within the scheme approved by the Charity Commissioners. The current scheme was effective from 1 April 1988. (b) Freeman's Common Trust Maintained under an Order of the Charity Commissioners in 1970, this fund owns 32 acres of farmland and various investments, income from which is used to provide financial assistance within the terms of the Order. (c) Grange Trust The Council also maintains the Grange a property in Addison Howard Park. This was left to the Council to provide social housing. Any surplus on this account is retained to provide a contribution towards the upkeep of the building. The assets held by the Trust are not included in the Balance Sheet, as they are not Borough Council Assets (d) Norah Mavis Campbell Created in 1999 and transferred from the County Council. The Trust’s objective is to provide benefit to elderly people in need who reside within the area of the Borough. (e) Bedford Park The purpose of the charity is the preservation of Bedford Park in perpetuity by the use of the Council as the conservator of Bedford Park, as an open space for the recreation and enjoyment of the public.
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9) Collection Fund These accounts represent the transactions of the Collection Fund, which is a statutory fund under the provisions of the Local Government Finance Acts 1988, 1992 and 2012, and covers all Council Tax and National Non-Domestic Rates (NNDR). Bedford Borough being the billing authority maintains this account. 2014/2015 Collection Fund Annual Accounts 2015/2016 Council Council NNDR NNDR Tax Tax £000 £000 £000 £000 INCOME -85,014 Council Tax Receivable -87,289 -64,525 Business Rates Receivable -65,189 25 Transitional Protection Payments receivable 488 -64,500 -85,014 -64,701 -87,289 EXPENDITURE Apportionment of Previous Years Surplus 243 Central Government 216 238 863 Bedford Borough Council 206 2,416 5 56 Bedfordshire Fire & Rescue Authority 4 159 99 Police & Crime Commissioner for Bedfordshire 284 486 1,018 426 2,859 Precepts, Demands and Shares 31,702 Central Government 32,383 31,068 69,046 Bedford Borough Council 31,741 71,027 634 4,537 Bedfordshire Fire & Rescue Authority 648 4,771 8,118 Police & Crime Commissioner for Bedfordshire 8,538 63,404 81,701 64,772 84,336 Charges to Collection Fund 264 -16 Less write offs of uncollectable amounts 261 286 228 189 Less: Increase/(Decrease) in Bad Debt Provision 449 417 2,466 Less: Increase/(Decrease) in Provision for Appeals 406 234 Less: Cost of Collection 233 3,192 173 1,349 703
2,582 -2,122 (Surplus)/Deficit arising during the Year 1,846 609 -474 -1,116 (Surplus)/Deficit b/fwd 1st April 2,108 -3,238 2,108 -3,238 (Surplus)/Deficit c/fwd 31st March 3,954 -2,629 Both the billing authority and major preceptors (i.e. the Police & Crime Commissioner for Bedfordshire, Bedfordshire Fire & Rescue Authority and Central Government) are required to accrue the income for the year in their own accounts. Since the collection of Council Tax and NNDR are agency functions the cash collected, and any unpaid sums are shared proportionately between the major preceptors and billing authority. This resulting debtor/creditor position is shown in each authority’s accounts. A split of the Collection Fund balances share by major preceptor is shown below: 2014/2015 Analysis of Collection Fund Balance by Major Preceptors 2015/2016 Council Council NNDR NNDR Tax Tax £000 £000 £000 £000 1,054 Central Government 1,977 1,033 -2,735 Bedford Borough Council 1,937 -2,214 -323 Police & Crime Commissioner for Bedfordshire -266 21 -180 Bedfordshire Fire & Rescue Authority 40 -149 2,108 -3,238 Balance at 31 March 3,954 -2,629
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(i) National Non-Domestic Rates Under the arrangements for National Non-Domestic Rates, the Council collects Non-Domestic Rates for the area based on local rateable values. These rateable values are multiplied by a uniform rate (the Multiplier) set by Central Government and applied across the country. Certain reliefs are available and the figure shown as collectable is net of these reliefs. The total amount less deductions for the cost of collection, bad and doubtful debts and a provision for appeals is collected in the Collection Fund. The collected Non-Domestic rates are then distributed to the funds major preceptors at set percentages; which are Central Government 50%, Bedford Borough Council 49% and Bedfordshire Fire & Rescue Authority 1%. The total Non-Domestic rateable value at 31 March 2016 was £162.9 million (£162.2 million at 31 March 2015). The rate in the pound for 2015/2016 is 49.3p (48.2p in 2014/2015) and the small business multiplier is 48.0p in the pound for 2015/2016 (47.1p in 2014/2015). There is inherent volatility in the Non-Domestic Rates yield as the tax base is calculated using notional property rental values. The creation or enhancement of new Non-Domestic properties will increase the tax base whilst demolitions or impairments will reduce the tax base. Bedford Borough Council now benefits from any growth in yield, subject to a levy on disproportionate gains, but also shares the risk of any negative volatility in yield. This is subject to a national safety net system that will ensure retained yield does not fall below 92.5% of the Council’s baseline funding requirement as determined by the Government. Ratepayers have a right to appeal against the rateable value attributed to their property under certain circumstances. Ratepayers are required to pay the rates demanded whilst an appeal is outstanding and where an appeal is successful are then entitled to a refund of the resulting overpayment, which in some instances can relate to overpayments in respect of rates paid in previous financial years. The revaluation of non-domestic properties originally due to take effect from 1 April 2015 was postponed by the Government until 1 April 2017 due to the effect of the recession on property values. The postponement extended the life of the current rating list from the normal five years to seven years and resulted in a significant number of appeals submitted in the final quarter of 2014/15 due to a restriction on backdating coming into effect on 1 April 2015. The majority of those appeals remain outstanding at 31 March 2016. The Council has reviewed the provision that it considers appropriate to allow for the effect of successful appeals. Reviews take into account the current rateable value and any exceptional settlements that were known at the time of making the assessment.
(ii) Council Tax Council Tax is charged on residential properties, which are classified into one of eight valuation bands based on estimated values at 1 April 1991. The Band D tax is calculated by dividing the total amount of income required by the Collection Fund to pay the Borough, Police and Fire precepts for the forthcoming year by the Council tax base. The Council tax base used in the calculation is based on the number of dwellings in each band on the Valuation list at the relevant date, adjusted for exemptions, discounts and disabled banding changes. The tax base for 2015/2016 was 53,475.61 Band D equivalent properties, (51,858.30 equivalents for 2014/2015). The tax base calculation for 2015/2016 is shown below:
Band D Valuation Band Number in Adjustments Revised Ratio to Equivalent Band Dwellings Band D Dwellings A (Disabled) 3.10 3.10 5/9 1.72 A 9,435.00 -4,386.60 5,048.40 6/9 3,365.60 B 17,277.00 -5,318.10 11,958.90 7/9 9,301.37 C 17,361.00 -3,462.50 13,898.50 8/9 12,354.22 D 10,435.00 -1,200.49 9,234.51 9/9 9,234.51 E 7,597.00 -617.90 6,979.10 11/9 8,530.01 F 4,842.00 -268.60 4,573.40 13/9 6,606.02 G 2,848.00 -149.50 2,698.50 15/9 4,497.50 H 227.00 -27.50 199.50 18/9 399.00 Total 70,022.00 -15,428.09 54,593.91 54,289.95 Less allowance for non collection -814.34 Council Tax Base 2015/2016 53,475.61
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The average Council Tax for 2014/2015 was £1,577.11 (£1,575.47 in 2014/2015), with a breakdown set out in the table below. However, the effect of special item charges and parish precepts results in a variation in the average Band D Tax in all areas of the Borough.
2014/2015 Average Band D Property 2015/2016 Uplift £ £ % 1,304.84 Bedford Borough Council 1,301.50 -0.256% 26.60 Parish Precepts 26.72 0.451% 156.55 Police & Crime Commissioner for Bedfordshire 159.67 1.993% 87.48 Bedfordshire Fire & Rescue Authority 89.22 1.989% 1,575.47 Average Band D Total 1,577.11 0.104%
(iii) Income Collection
A breakdown of the income received for Council Tax and National Non-Domestic Rates are set out in the table below.
2014/2015 Analysis of Collection Fund Income Collection 2015/2016 Council Council NNDR NNDR Tax Tax £000 £000 £000 £000 78,544 104,647 Gross Liability 79,669 107,540 -1,806 854 Amended Liability -2,598 -370 -9,815 -114 Reliefs -9,816 -110 -7,957 Discounts -7,930 -2,398 -1,686 Exemptions -2,066 -1,623 64,525 95,744 65,189 97,507 -10,730 Council Tax Support -10,218 64,525 85,014 65,189 87,289
(iv) Provision for Uncollectable Amounts A record of the movement in the provision for uncollectable amounts and outstanding appeals are set out in the tables below. 2014/2015 2015/2016
Uncollectable Debts Appeals Uncollectable Debts Appeals Council Council NNDR NNDR NNDR NNDR Tax Tax £000 £000 £000 £000 £000 £000 1,281 4,399 2,200 Balance as at 1 April 1,509 4,589 4,666 -264 16 Less write off in year -261 -286 493 173 2,466 Contributions made 710 703 406 1,510 4,588 4,666 Balance at 31 March 1,958 5,005 5,072
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10) Bedfordshire Pension Fund Statements
Introduction
The Bedfordshire Pension Fund (the Fund) is part of the Local Government Pension Scheme and is administered by Bedford Borough Council. The Borough Council is the reporting entity for the Fund. The following description of the Fund is a summary only. For more detail reference should be made to the Bedfordshire Pension Fund Annual Report & Accounts 2015/2016 and the underlying statutory powers underpinning the scheme, namely the Superannuation Act 1972 and the Local Government Pension Scheme (LGPS) Regulations. The Fund is governed by the Public Service Pensions Act 2013 and is administered in accordance with the following secondary legislation: . The LGPS (Administration) Regulations 2013 (as amended) . The LGPS (Management and Investment of Funds) Regulations 2009 (as amended) . The LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 (as amended) Membership of the Fund The Fund is a contributory pension scheme administered by Bedford Borough Council to provide pensions and other benefits for pensionable employees of Bedford Borough, Central Bedfordshire and Luton Borough Councils and a range of other scheduled and admitted bodies within the Bedfordshire area. Teachers, Police Officers and Firefighters are not included as they come within other national pension schemes. Organisations participating in the Fund include: . Scheduled bodies - which are local authorities and similar bodies whose staff are automatically entitled to be members of the Fund; . Admitted bodies - which are other organisations that participate in the Fund under an admission agreement between the Fund and the relevant organisation. Admitted bodies include voluntary, charitable and similar bodies or private contractors undertaking a local authority function following outsourcing to the private sector. A full list of participating bodies as at 31 March 2016 is shown at the end of this section. As at 31 March 2016, the total number of employees (i.e. from Councils within Bedfordshire and the other scheduled and admitted bodies) contributing to the Fund was 20,428 (19,931 at 31 March 2015), the number of pensioners was 14,889 (14,281) and the number of deferred pensioners was 27,409 (24,910). Membership of the LGPS is voluntary and employees are free to choose whether to join the scheme, remain in the scheme or make their own personal arrangements outside of the scheme. How the Scheme works Local Government Pension Funds are required to be funded, being financed by contributions from employees and employers and by earnings from investments. Triennial actuarial valuations are undertaken and employers’ contributions reviewed to ensure that the Fund’s assets are sufficient to meet its funding targets. The Borough Council is required to enable employees to make additional voluntary contributions (AVCs) to supplement their pension benefits. Pension benefits payable under the LGPS are based on final pensionable pay and the length of pensionable service. Benefits are index-linked by reference to the Consumer Prices Index (CPI). Full details of the contributions payable by employees and benefits receivable can be found in the Fund’s scheme handbook “A member’s guide to the Local Government Pension Scheme”, available from Borough Hall and available in full or in summary on the Fund’s website. http://www.bedspensionfund.org/active_members/guides_to_the_lgps.aspx Statement of Investment Principles The Pension Fund has produced a Statement of Investment Principles which sets out the policies adopted and principles guiding the selection of Pension Fund investments. It includes policy on the spread of, and return from, investments, risk and the extent to which ethical and environmental considerations are taken into account and the exercise of voting rights. The Statement shows the Authority’s compliance with the Myners principles of investment management.
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A copy of the Statement of Investment Principles is available from Borough Hall or on the Fund’s website http://www.bedspensionfund.org/fund_information/fund_governance.aspx Investment Management The balance of the Pension Fund, not immediately required to meet pensions and other benefits, is invested in a selection of fixed interest securities, equities of United Kingdom and overseas companies, property and unit trusts etc. under the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 and subsequent amendments. Management of the Fund’s investments is undertaken by external investment managers. The managers and the portfolios they hold are shown below, together with the proportion of the Fund’s assets that each represents. Custody arrangements are undertaken on behalf of the Fund by The Northern Trust Company. Manager Asset Class 2015/2016 £ million % Legal & General Passive UK Equities 308 18% Blackrock Advisors Passive Multi-Asset 292 17% CBRE Global Investors Indirect Property 193 11% Legal & General MSCI All World 180 10% Insight Investment Absolute Return Bonds 162 9% Legal & General Global Equities 142 8% Invesco Asset Management Absolute Return Multi-Asset 130 8% Pyrford Absolute Return Multi-Asset 101 6% Trilogy Global Advisors Global Equities 88 5% Newton Investment Management Absolute Return Multi-Asset 78 5% Net Assets Managed by External Bodies 1,674 97% Net Assets Managed by the Administering Authority 59 3% Total Assets 1,733 100% The investing powers relating to the Pension Fund are more permissive than those generally available to local authorities. For instance pension funds are able to invest in currencies other than sterling or take part in stock lending. Use of these powers exposes fund investments to different risks. The management and mitigation of those risks is described in the Fund’s Statement of Investment Principles.
Administration of the Fund Bedford Borough Council is the administering authority for the Bedfordshire Pension Fund. Scheme administration is the responsibility of the Assistant Chief Executive & Chief Finance Officer. A separate detailed report on the Pension Fund is available from the Head of Pensions, Borough Hall, Cauldwell Street, Bedford, MK42 9AP.
Critical Judgements in Applying Accounting Policies
Pension Fund Liability The pension fund liability is calculated every three years by the Fund’s actuary, with annual updates in the intervening years. The methodology used is in accordance with International Accounting Standard (IAS) 19. Assumptions underpinning the valuations are agreed with the Actuary and are summarised in the Actuarial Report on page 108. This estimate is subject to significant variances based on changes to the underlying assumptions.
Unquoted Investments The fair value of unquoted securities is estimated by the Fund’s investment managers and subject to the professional judgement and assumptions used by those managers. It is considered that changes in those assumptions would not produce significant variations in the value of those assets other than normal market fluctuations.
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Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty
The Statement of Accounts contains estimated figures that are based on assumptions made about the future or events that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. There are no items in the net assets statement at 31 March 2016 for which it is considered that there is a significant risk of material adjustment in the forthcoming financial year.
Events after the Balance Sheet Date
These are events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. Two types of events can be identified: (a) those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period), and (b) those that are indicative of conditions that arose after the reporting period (non-adjusting events after the reporting period). An example of an adjusting event would be if new information came to light regarding the methodology employed in the valuation of an asset.
Pension Fund Accounting Policies
Accounting Standards The accounts of the Pension Fund have been prepared to meet the requirements of the Local Government Pension Scheme (Administration) Regulations 2013 and in accordance with the Statement of Recommended Practice on Financial Reports of Pension Schemes (Revised 2015). The accounts are also compliant with the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom 2015/2016 (the Code), which is based on International Financial Reporting Standards (IFRS) as amended for the UK public sector. Under IFRS the Fund is required to disclose the actuarial present value of promised retirement benefits, either in the net assets statement, in the notes to the accounts or in an accompanying actuarial report. The financial statements include a separate actuarial report to meet this requirement. The accounts summarise the transactions and net assets of the Fund and do not take account of liabilities to pay pensions and other benefits in the future. They should therefore be read in conjunction with the actuarial reports which take account of such liabilities.
Basis of Preparation The accounts have been prepared on an accruals basis unless otherwise stated.
Contribution Income Normal contributions, both from the members and from the employer, are accounted for on an accruals basis at the percentage rate recommended by the actuary in the payroll period to which they relate. Employer deficit funding contributions are accounted for on the due dates on which they are due under the schedule of contributions set by the actuary or on receipt if earlier than the due date. Employer’s augmentation and pension strain contributions are accounted for in the period in which the liability arises. Any amount due in year but unpaid is classed as a current financial asset.
Benefits Payable All pensions and lump sums payments have been included on the accruals basis other than some death gratuities. Lump sums are accounted for in the period in which the member becomes a pensioner. Any amounts due but unpaid are disclosed in the net assets statement as current liabilities. The payment of some death gratuities is dependent upon the receipt of probate or letters of administration. Where death occurs before the end of the year but probate or letters of administration has not been received by the balance sheet date, then no accrual is made. The departure from the accruals basis for these death gratuities does not materially affect the reported figure. Only benefits paid under local government pension scheme regulations are included in the fund account. For administrative ease, the Fund also pays out compensatory added years benefits on behalf of scheme employers;
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Refunds of Contributions Refunds have been included on a cash basis. Accounting for refunds on an accruals basis would not materially alter the reported figure.
Transfer Values Transfer values to and from other schemes have been included on a cash basis. Bulk (group) transfers are accounted for on an accruals basis in accordance with the terms of the transfer agreement. Due to scheme changes there are delays in processing transfer values as further actuarial factors are awaited.
Management Expenses The Code of Practice does not require any breakdown of pension fund administrative expenses. However in the interests of greater transparency, the Council discloses its pension fund management expenses in accordance with CIPFA 2014 and 2015 Guidance on Accounting for LGPS management costs.
Administrative Expenses The administration of the Fund is undertaken by the Borough Council in its role as administering authority. The Council’s costs of administering the scheme, agreed by the relevant committees of both the Council and the Pension Fund, are charged to the Fund.
Oversight and Governance Costs All oversight and governance expenses are accounted for on an accruals basis. All staff costs associated with governance and oversight are charged direct to the fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the fund.
Investment Management Expenses Fees of the external investment managers and custodian are agreed in the respective mandates governing their appointments. Broadly, these are based on the market value of the investments under their management and therefore increase or reduce as the value of these investments change. In addition the fund has negotiated with the following managers that an element of their fee be performance related. . Insight Investment – Absolute Return Bonds . Trilogy – Global Equities Where an investment manager’s fee note has not been received by 31 March 2016, an estimate based upon the market value of their mandate as at the end of the year is used for inclusion in the fund account. Following guidance from CIPFA in 2014 and 2015, Accounting for Local Government Pension Scheme Management Costs, the Fund extracts transactional costs from Funds where the information is available to make an estimate or where this is readily available from the Custodian. This is included within the investment management costs. For the Property Manager management costs have been extracted reflecting the unit management costs based on the NAV (Net Asset Value) of each separate fund.
Investments Investments are shown in the accounts at market value, determined as follows: (i) Quoted securities are valued by reference to market bid price at the close of business on 31 March 2016. (ii) Traded futures are valued by reference to their exchange prices as at 31 March 2016. (iii) Other unquoted securities are valued having regard to latest dealings, professional valuations, asset values and other appropriate financial information. (iv) Unit trust and managed fund investments are valued by reference to the latest bid prices quoted by their respective managers prior to 31 March 2016. If bid prices are unavailable, mid prices or net asset value will be used. (v) Assets, including investments, denominated in foreign currencies are valued on the relevant basis and translated into sterling at the rate ruling on 31 March 2016. Exchange gains and losses arising from movements in current assets and liabilities are included in the fund account for the year. Investment assets include cash balances held by the fund managers and debtor and creditor balances in respect of investment activities.
Investment Income (i) Interest Income is recognised in the fund account as it accrues, using the effective interest rate of the financial instrument as at the date of acquisition or origination. Income includes the amortisation of any discount or
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premium, transaction costs or other differences between the initial carrying amount of the instrument and its amount at maturity calculated on an effective interest rate basis. (ii) Dividend Income is recognised on the date the shares are quoted ex-dividend. Any amount not received by the end of the reporting period is disclosed in the net assets statement as a current financial asset. (iii) Distributions from pooled funds are recognised at the date of issue. Any amount not received by the end of the reporting period is disclosed in the net assets statement as a current financial asset. (iv) Changes in the net market value of investments are recognised as income and comprise all realised and unrealised profits/losses during the year. Acquisition Costs of Investments Where shown, the cost of investments includes direct costs of acquisition.
Additional Voluntary Contribution (AVC) Investments The Borough Council has arrangements with its AVC providers to enable employees to make additional voluntary contributions (AVCs) to supplement their pension benefits. AVCs are invested separately from the Fund’s main assets and the assets purchased are specifically allocated to provide additional benefits for members making AVCs. The value of AVC assets is not included in the Fund’s net asset statement.
Taxation The Fund is an exempt approved fund under section 1(1) of Schedule 36 of the Finance Act 2004, and as such is exempt from tax on capital gains and from UK income tax on interest receipts. As the Council is the administering authority for the Fund, VAT is recoverable on all expenditure where appropriate, and all of the fund’s income is outside the scope of VAT. The Fund is liable to tax at a rate of 20% on small pensions that have been compounded into a lump sum. The Fund is exempt from United States withholding tax. Where the Fund is subject to other foreign tax, income is shown as the grossed up figure and the tax withheld as an item of expenditure.
New Accounting Standards For any new accounting standard or policy introduced, the Pension Fund is required to provide information explaining how these changes have affected the accounts. There were no new accounting standards introduced in 2015/2016 relating to the Pension Fund.
Accounting Standards that have been issued but have not yet been adopted The Pension Fund is required to disclose information relating to the impact of the accounting change on the financial statements as a result of the adoption by the Code of a new standard that been issued, but is not yet required to be adopted by the Pension Fund. There are no such disclosures.
Assumptions made about the future and other major sources of estimation uncertainty The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date and the amounts reported for the revenues and expenses during the year. Estimates and assumptions are made taking into account historical experience, current trends and other relevant factors. However, the nature of estimation means that the actual outcomes could differ from the assumptions and estimates.
Events after the reporting date There have been no major post balance sheet events since 31 March 2016, however the impact of the European Union Referendum (BREXIT) has had a significant effect on currency market and the Fund believes that the currency risk within note 22 of these accounts should reflect this and be updated accordingly.
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Five Year Financial Summary of Net Asset Statement 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 £million £million £million £million £million Net assets at 1 April 1,280 1,317 1,467 1,544 1,710 Contributions 86 86 92 102 106 Investment and other income 21 20 14 16 23 Total income 107 106 106 118 129 Benefits and other expenses -82 -82 -89 -116 -95 Change in market value of investments 12 126 59 164 -11 Increase/(decrease) in value of fund 38 150 77 166 23 Net Assets at 31 March 1,317 1,467 1,544 1,710 1,733
Fund Account for the Year Ended 31 March 2016
2014/2015 2015/2016 See £000 £000 Note Contributions and Benefits 101,539 Contributions 106,220 1 4,687 Transfers in from other pension funds 12,175 2 132 Other Income 105 106,358 118,500 -80,266 Benefits -83,775 3 -28,705 Payments to and on account of leavers -2,725 4 -2,613 Net additions/(withdrawals) from dealings with members 32,000 -7,090 Management Expenses -8,476 5 Returns on Investments 11,528 Investment income 10,792 6 -575 Taxes on income -290 7 Profit and losses on disposal of investments and changes in 164,346 -11,168 value of investments 175,299 Net return on investments -666 165,596 Net increase/(decrease) in the fund during the year 22,858 1,544,360 Net assets of the fund at 1 April 1,709,956 1,709,956 Net assets of the fund at 31 March 1,732,814
Net Assets Statement 31 March 31 March 2015 2016 See £000 £000 Note Investment Assets 177,506 Equities 0 8.1 1,484,539 Managed and unitised funds 1,668,421 8.2 14,585 Cash deposits & other assets 12,312 8.3 1,676,630 1,680,733 Investment Liabilities -1,048 Other liabilities 0 8.4 1,675,582 1,680,733 2,825 Long Term Assets 2,302 9 33,625 Current Assets 52,704 10 -2,076 Current Liabilities -2,925 11 1,709,956 Net assets of the fund available to fund benefits at the period end 1,732,814 The financial statements do not take account of liabilities to pay pensions and other benefits after the end of the financial year.
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Notes to the Accounts
Fund Account 1) Contributions 2014/2015 Contributions 2015/2016 £000 £000 21,503 Employees’ normal contributions 22,406 557 Employees’ additional voluntary contributions 367 50,285 Employers’ normal contributions 51,896 27,408 Employers’ deficit funding 29,880 1,786 Employers’ augmentation contributions 1,671 101,539 106,220 16,637 Administering authority 18,695 72,834 Scheduled bodies 74,818 12,068 Admitted and other bodies 12,707 101,539 106,220 Employers’ augmentation contributions relate to payments for the cost of enhanced benefits and early retirements. Refunded payments from employers in respect of compensatory added years’ benefits are excluded from the accounts.
2) Transfers in from other pension funds 2014/2015 2015/2016 £000 Transfers in from other pension funds £000 0 Transfers in from other pension funds - bulk 3,079 4,687 Individual transfers from other pension funds 9,096 4,687 12,175
3) Benefits 2014/2015 2015/2016 £000 Benefits £000 64,556 Pensions 62,529 14,015 Commutations of pensions and lump sum retirement benefits 19,541 1,695 Lump sum death benefits 1,704 80,266 83,775 Further analysed as: 11,706 Administering authority 10,931 60,586 Scheduled bodies 64,248 7,974 Admitted and other bodies 8,596 80,266 83,775 Payments to employees in respect of compensatory added years’ benefits are excluded from the accounts.
4) Payments to and on account of leavers 2014/2015 2015/2016 £000 Payments to and on account of leavers £000 91 Refunds of contributions 345 23,407 Transfers to other schemes – bulk 0 5,208 Transfers to other schemes – individuals 2,380 28,705 2,725 In 2014/2015 there was a bulk transfer out in relation to The Probation Service of £23.407 million. There were no bulk transfers out in 2015/2016.
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5) Management Expenses 2014/2015 2015/2016 £000 Management Expenses £000 1,073 Administrative expenses 1,134 5,617 Investment management expenses 6,887 400 Oversight and governance costs 455 7,090 8,476
2014/2015 2015/2016 £000 Investment Management Expenses £000 26 Transaction costs 78 4,381 Management fees 4,812 235 Performance related fees 347 926 Underlying property fees 1,610 49 Custody fees 40 5,617 6,887 The administering authority charged £1.1 million of Management Expenses. In 2015/2016, £0.8 million of Investment Managers’ fees were based on estimates as the final fee notes had not been received. This compares with £0.9 million in 2014/2015.
6) Investment Income 2014/2015 2015/2016 £000 Investment Income £000 3,212 Dividends from equities 2,241 7,878 Income from pooled investment vehicles 8,247 438 Interest on cash deposits 304 11,528 Total Investment Income 10,792
7) Taxes on Income 2014/2015 2015/2016 £000 £000 -575 Irrecoverable with-holding tax -290
8) Investments 2014/2015 2015/2016
£000 Investments £000
8.1 Equities 11,103 UK quoted equities 0
166,403 Overseas quoted equities 0
177,506 0
8.2 Managed and Unitised Funds 3 UK un-authorised unit trusts 3
778,377 UK insurance managed funds 903,670
167,849 UK property unit trusts 187,797
538,310 Overseas unit trusts 576,951
1,484,539 1,668,421
8.3 Cash Deposits 1,380 Amount receivable for sales of investments 31
637 Investment income outstanding 233
2,017 Other Investment Assets 264
12,568 Cash deposits 12,048
14,585 12,312
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2014/2015 2015/2016
£000 Investments £000
8.4 Investment Liabilities -1,048 Amount Payable for purchases of investments 0
-1,048 0
1,675,582 Total 1,680,733
Quoted/Un-quoted Investments
717,801 Quoted 585,358
957,781 Un-quoted 1,095,375
1,675,582 1,680,733
Investment liabilities at year end mainly relate to equity market purchases which occurred close to 31 March 2016. These are included in our Equities holding but have not been settled. This is normal accounting practice and reflects the timing of the transactions that were settled in the following financial year’s April. In 2014/2015 there were Fund Manager Creditors of £0.1 million but were none at the end of 2015/2016. 8.5 Value of Investments Market Value Purchases at Sale Change in Market Value at 31 March cost & proceeds & Market Value at 31 March 2015 derivative derivative 2016 payments receipts £000 £000 £000 £000 £000
Equities UK 11,103 0 -12,136 1,033 0 Overseas 166,403 25,083 -173,921 -17,565 0 177,506 25,083 -186,057 -16,532 0
Managed Funds 778,377 359,143 -229,690 -4,160 903,670
Unit Trusts Property 167,849 30,817 -21,829 10,960 187,797 Other 538,314 57,237 -17,191 -1,406 576,954 706,163 88,054 -39,020 9,554 764,751
Other Assets 30 0 0 -30 0
Total 1,662,076 472,280 -454,767 -11,168 1,668,421
Cash & other 13,506 12,312
Total 1,675,582 1,680,733 The investments held at 31 March 2016 had a market value of £1,681 million compared to a cost of £1,355 million (at 31 March 2015 the market value of investments was £1,676 million with a cost of £1,262 million). The increase in the cost of investments of £92 million (2014/2015: £59 million) represents the net effect of purchases of £472 million (2014/2015: £429 million) and the cost price of sales of £379 million (2014/2015: £343 million) plus movements in cash of - £1 million (2014/2015: -£27 million). Brokers’ commissions and other costs of acquisition are included in the cost of investments purchased. Managed and unitised investments, other than property unit trusts, are predominantly in Blackrock Advisers’ Aquila Life Funds and Legal & General’s Pooled Pension Fund Policy. Invesco Perpetual Global Targeted Return Fund, Pyrford Global Total Return (Sterling) Fund and Trilogy Global Diversified Fund each comprise over 5% of the total fund. The amount and the percentage of the net assets of the fund, as at 31 March 2016, that these represent are shown below: Managed and Unitised Investment 2015/2016 % of Total £000 Market Value Legal & General Pooled Pension Fund Policy 450 27% Blackrock Advisers Aquila Life Fund* 323 19% Invesco Perpetual Global Targeted Return Fund 130 8% Pyrford - Absolute Return Multi-Asset 101 6% Trilogy Global Diversified Fund 88 5% No other assets comprised more than 5% of the net assets of the fund as at 31 March 2016. *Blackrock also holds other funds which are below the 5% threshold reported in this note.
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9) Long Term Asset In 2005, Magistrates Courts’ staff transferred from the Local Government Pension Scheme to the Civil Service Scheme. Whilst transfers of value were effected then, agreement on funding the deficit position was not finalised until February 2011 when it was agreed that the Bedfordshire Pension Fund would receive ten annual payments of £0.608 million, commencing April 2011. The fair value of these payments has been recognised in the Fund’s accounts for 2015/2016. Those instalments falling due more than one year from the balance sheet date are shown as a long term debtor, £2.302 million at 31 March 2016 (£2.825 million at 31 March 2015). The amount falling due within less than a year is shown as current assets.
10) Current Assets 2014/2015 Current Assets 2015/2016 £000 £000 1,093 Contributions due from Administering Authority 1,131 6,119 Contributions due from other scheme employers 6,923 505 Civil Service Pensions Scheme - see note 9 above 524 139 Other 275 7,856 8,853 25,769 Cash 43,851 33,625 Current Assets 52,704 The cash balance of £43.9 million is held in the Fund’s own bank accounts. Cash held by the fund’s managers is included in cash deposits in Note 8.3 above.
See Note 8.3 above also for details of other investment assets of £0.3 million.
11) Current Liabilities 2014/2015 Current Liabilities 2015/2016 £000 £000 276 Administration costs etc. due to Administering Authority 10 1,310 Investment managers' fees 1,127 48 Other professional fees 121 9 AVCs in transit 0 196 Death grants 272 175 Other 1,239 2,014 2,769 62 Provision for Tax Reclaims over 1 Year (Note 12) 156 2,076 Current liabilities 2,925
12) Provision for Tax reclaims over 1 year The fund’s managers reclaim tax withheld from investment income where international treaties allow. Allowance is made for those claims that are over one year old and considered unlikely to be recovered. The balance at 31 March 2016 was £0.2 million.
13) Self-investment The regulations governing investment of pension funds require the disclosure of any self-investment by the fund. As at 31 March 2016 there was no self-investment by the fund.
14) Related party transactions Administration and investment management costs include charges by Bedford Borough Council for providing services in its role as administering authority. For 2015/2016 these amounted to £1.1 million (2014/2015 £1.1 million). The Administration team provide the legacy payroll for Teachers added years. The Fund pays compensatory added years benefits on behalf of some of its employers. The costs of these are invoiced to the employer. In 2015/2016 £3.2 million (2014/2015 £3.2 million) was paid and recovered from their employer.
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The senior officers involved in the financial management of Bedfordshire Pension Fund in 2015/2016 were the Assistant Chief Executive & Chief Finance Officer (The Fund Administrator) and the Head of Pensions. Both of these officers charges a proportion of their time to Bedfordshire Pension Fund as part of Bedford Borough Council’s charge as administering authority. A specific declaration has been received from Pension Committee members and relevant senior officers regarding transactions and relationships between themselves, and their related parties, and the Pension Fund. A number of the members also act as councillors or board members of the Fund’s scheduled or admitted bodies, who maintain a conventional employer relationship with the Fund. These are listed below but do not include representation of their respective bodies as Committee members: . Councillor Doug McMurdo is a member of the Bedfordshire & River Ivel Drainage Board. . A member of Councillor McMurdo’s immediate family is an employee of the Sharnbrook Academy Federation. . Councillor Shan Hunt is a board member of BPHA, a scheme employer. There were no material transactions between members and officers and the Fund during 2015/2016. The only material related party transactions during 2015/2016 were in respect of contributions paid by the employing bodies into the fund please see Note 1.
15) Contingent Liabilities and Contractual Commitments There were no material contingent liabilities and/or contractual liabilities as at 31 March 2016.
16) Stock Lending The Fund did not undertake any stock lending in 2015/2016.
17) Additional Voluntary Contributions (AVC) Scheme members have the option to make additional voluntary contributions to enhance their pension benefits. These contributions are invested separately from the Fund’s other assets with the Standard Life Assurance Company and Prudential. 2014/2015 Additional Voluntary Contributions 2015/2016 £000 £000 4,002 Value at 1 April 4,174 Income 783 Contributions received 822 783 822 Expenditure -905 Retirements -734 -41 Transfers values paid -29 -946 -763 335 Change in market value 2 4,174 Value at 31 March 4,235 In accordance with Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009, additional voluntary contributions are excluded from the Fund Account and Net Assets Statement. The Prudential AVC information included in the 2012/2013 Statement of Accounts was provisional. The adjustment to the opening value in 2014/2015 reflects the increase following confirmation of the 2012/2013 values. The balance of AVCs is held by Standard Life.
18) Post Balance Sheet Events There have been no major post balance sheet events since 31 March 2016, however the impact of the European Union Referendum (BREXIT) has had a significant effect on currency market and the Fund believes that the currency risk within note 22 of these accounts should reflect this and be updated accordingly.
19) Actuarial Present Value of Promised Retirement Benefits In accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2015/2016, based on International Financial Reporting Standards and issued by the Chartered Institute of Public Finance and Accountancy, the future liabilities of the Fund to pay pensions and other benefits are disclosed in a report by the Fund’s actuary as set out on page 108.
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20) Financial Instruments Classification of Financial Instruments Accounting policies describe how different asset classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying amounts of financial assets and liabilities by category and net assets statement heading. No financial assets were re-classified during 2015/2016. 2014/2015 2015/2016
Designated Designated Financial Financial as fair as fair liabilities liabilities value Loans & value Loans & at at through receivables through receivables amortised amortised profit & profit & cost cost loss loss £000 £000 £000 £000 £000 £000
Financial Assets 177,506 Equities Managed & unitised 1,484,539 1,668,398 funds 38,638 Cash 55,899 1,380 637 Other investment assets 31 257 4,175 Debtors 4,842 1,663,425 43,451 0 1,668,429 60,998 0 Financial Liabilities Other investment -1,048 0 liabilities -62 -1,819 Creditors -156 -2,497 -62 0 -2,867 -156 0 -2,497 1,663,363 43,451 -2,867 1,668,273 60,998 -2,497 Some of the values in Net Asset Statement are not financial instruments (for example contributions payable); therefore the totals above will not be found elsewhere in the notes to the accounts. The Pension Fund has not entered into any financial guarantees that are required to be accounted for as financial instruments.
Net Gains & Losses on Financial Instruments All gains and losses arising in respect of financial instruments are attributable to those classified as “designated as fair value through profit & loss”.
Fair Value of Financial Instruments All financial instruments are carried in the balance sheet at their fair value.
21) Valuations of financial instruments carried at fair value The valuation of financial instruments has been classified by the Code into three levels, according to the quality and reliability of information used to determine fair values. Level 1 Financial instruments at Level 1 are those where the fair values are derived from unadjusted quoted prices in active markets for identical assets or liabilities. Products classified as level 1 comprise quoted equities, quoted fixed securities, quoted index linked securities and unit trusts. Listed investments are shown at bid prices. This bid value of the investment is based on the bid market quotation of the relevant stock exchange. Level 2 Financial instruments at Level 2 are those where quoted market prices are not available; for example, where an instrument is traded in a market that is not considered to be active, or where valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data. Level 3 Financial instruments at Level 3 are those where at least one input that could have a significant effect on the instrument’s valuation is not based on observable market data. Such instruments would include unquoted equity
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31 March 2016 With Using significant Quoted Observable unobservable Market Price Inputs inputs Level 1 Level 2 Level 3 Total £000 £000 £000 £000 Financial Assets Financial Assets at Fair Value through profit 519,353 1,031,909 117,167 1,668,429 and loss Loans and Receivables 60,998 60,998 Total Financial Assets 580,351 1,031,909 117,167 1,729,427 Financial Liabilities Financial liabilities at fair value through profit 0 and loss Financial liabilities at amortised cost -2,653 -2,653 Total financial liabilities -2,653 0 0 -2,653 Net financial assets 577,698 1,031,909 117,167 1,726,774
31 March 2015 With Using Quoted significant Observable Market Price unobservable Inputs inputs Level 1 Level 2 Level 3 Total £000 £000 £000 £000 Financial Assets Financial Assets at Fair Value through profit 652,151 892,482 118,793 1,663,426 and loss Loans and Receivables 43,451 43,451 Total Financial Assets 695,602 892,482 118,793 1,706,877 Financial Liabilities Financial liabilities at fair value through profit -1,048 -1,048 and loss Financial liabilities at amortised cost -1,881 -1,881 Total financial liabilities -2,929 0 0 -2,929 Net financial assets 692,673 892,482 118,793 1,703,948
22) Nature and Extent of Risks Arising from Financial Instruments The Pension Fund’s assets are fully comprised of financial instruments which are managed by the Council, predominantly by the appointment of external investment managers as determined by the Pension Fund Committee. Each investment manager is required to invest the assets in accordance with the terms of a written mandate or fund prospectus. The Pension Fund Committee has determined that the appointment of these managers is appropriate for the Fund and is in accordance with the Funds’ investment strategy. The Pension Fund Committee receives regular reports from each of the managers on the nature of the investments made on the Fund’s behalf and the associated risks. The allocation of assets between various types of financial instrument is determined by the Pension Fund Committee, in line with the Statement of Investment Principles. Divergence from benchmark asset allocations and the composition of each portfolio is monitored by the Pension Fund Committee.
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The Fund’s investment activities expose it to the following risks from the use of financial instruments: . Market risk . Credit risk . Liquidity risk
The nature and extent of the financial instruments employed by the Fund and the associated risks are discussed below. This note presents information on the Fund’s exposure to each of the above risks and the Fund’s policies and processes for managing those risks. The Fund’s Statement of Investment Principles is formulated to identify the risks managed by its investment managers, to set appropriate risk limits and to monitor adherence to those limits. The Statement of Investment Principles is reviewed regularly to reflect changes in market conditions and the Fund’s activities.
Market Risk Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices will affect the Fund’s income or the value of its assets. The object of market risk management is to control market risk exposures within acceptable parameters while optimising returns. The fund has used State Street to help it identify market risks.
Interest Rate Risk Interest rate risk is the risk that interest rate fluctuations will cause the value of fixed interest securities to deviate from expectations. The Fund manages interest rate risk by: . The use of specialist external investment managers to manage the Fund’s cash and fixed interest assets. . Ensuring asset allocations include a diversity of fixed interest investments with appropriate durations.
The Fund’s direct exposure to interest rate risk, as at the period end, is shown in the table following. The table also shows the effect in the year on the net assets available to pay benefits of a +/- 100 basis points (bps) change in interest rates. Comparatives for the previous year are shown in the table below. Carrying Change in year in Carrying Change in year in net value at net assets available Asset type value at assets available to pay 31/03/2015 to pay benefits 31/03/2016 benefits +100 bps -100 bps +100 bps -100 bps
£000 £000 £000 £000 £000 £000
266,632 2,666 -2,666 Fixed interest securities 285,722 2,857 -2,857 59,566 596 -596 Cash & cash equivalents 106,409 1,064 -1,064 326,198 3,262 -3,262 Total 392,131 3,921 -3,921 NB. The Fund’s direct exposure includes managed fund assets.
Currency Risk Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Fund manages currency risk by instructing Investment managers to use hedging techniques with foreign currencies. The following table summarises the Fund’s currency exposure as at 31 March 2016 and also shows the increase/decrease in the value of net assets available to pay benefits arising. After consultation with State Street, the Fund initially considered 6.18% to be the likely volatility associated with foreign exchange rate movements in 2014/2015 previously 5.96%. However the impact of the European Union Referendum (BREXIT) has had a significant effect on currency markets and the Fund believes 15.00% to be more reflective of the volatility associated with foreign exchange rate movements since 31 March 2016. Comparatives for the previous year, using the same criteria but adjusted for the different weightings then applying, are shown in the table below.
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Currency Risk by Asset Class 2015/2016 Value on Value on Asset Type Value Change Increase Decrease £000 % £000 £000 Overseas Equities 599,005 15.00% 688,856 509,154 Overseas Bonds 48,712 15.00% 56,019 41,405 Overseas Property 6 15.00% 7 5 Overseas Alternatives 182,835 15.00% 210,260 155,409 Overseas Cash 0 15.00% 0 0 Total 830,558 15.00% 955,141 705,974
2014/2015 Value on Asset Type Value Change Value on Increase Decrease £000 % £000 £000 Overseas Equities 607,734 5.96% 643,970 571,497 Overseas Bonds 36,610 5.96% 38,793 34,427 Overseas Property 27 5.96% 29 25 Overseas Alternatives 210,062 5.96% 222,587 197,537 Overseas Cash 134 5.96% 142 126 Total 854,567 5.96% 905,521 803,612
Market Price Risk Market price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether from factors specific to individual assets or those applying to the market as a whole. As the Fund’s assets are valued at market value, with changes to that value reflected in the Fund account, all changes in market conditions will directly affect the Fund’s income. The Fund manages market risk by the application of the following principles: . Ensuring a diversity of exposures to different financial markets and market sectors . By ensuring that investments have the sufficient liquidity to enable the appropriate response to changing market conditions
Sensitivity analysis Following analysis of historical data and expected investment return movement during the financial year, in consultation with the Fund’s advisers (State Street), the Fund has determined that the following movements in market price risk are reasonably possible for the 2015/2016 reporting period. Asset Type % Change UK Equities 9.80% Overseas Equities 10.02% Total Bonds 4.23% Cash 0.01% Property 2.25% Alternatives 13.62% Total Assets 5.70% Had the market price of the Fund’s investments increased/decreased in line with the above, the change in the net assets available to pay benefits would have been as shown in the following table. Comparatives for the previous year are shown in the table overleaf.
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2015/2016 Value on Value on Asset Type Value Change Increase Decrease £000 % £000 £000 UK Equities 371,016 9.80% 407,376 334,657 Overseas Equities 599,005 10.02% 659,026 538,985 Total Bonds 285,722 4.23% 297,808 273,636 Cash 106,303 0.01% 106,313 106,292 Property 187,827 2.25% 192,053 183,601 Alternatives 182,941 13.62% 207,857 158,024 Total Assets 1,732,814 5.70% 1,831,585 1,634,044 The % change for Total Assets includes the impact of correlation across asset classes. 2014/2015 Value on Value on Asset Type Value Change Increase Decrease £000 % £000 £000 UK Equities 378,333 10.04% 416,317 340,348 Overseas Equities 607,734 8.69% 660,546 554,922 Total Bonds 266,632 4.23% 277,911 255,354 Cash 59,700 0.01% 59,706 59,694 Alternatives 167,880 2.81% 172,598 163,163 Property 229,677 13.44% 260,546 198,809 Total Assets 1,709,956 5.20% 1,798,873 1,621,038 The % change for Total Assets includes the impact of correlation across asset classes.
Credit Risk Credit risk is the risk that a counterparty to a transaction involving a financial instrument will fail to discharge an obligation or commitment it has entered into with the Fund. The net market value of the Fund’s assets, as shown in the Net Assets Statement, represents the Fund’s maximum exposure to credit risk in relation to those assets. The Fund does not have any significant exposure to any individual counter-party or industry. Credit risk is monitored through ongoing reviews of the investment managers’ activity. Apart from a small number of outstanding tax reclaims, represented by the provision for tax reclaims over 1 year in the Net Assets Statement, the Fund has no assets that are past due or impaired.
Liquidity Risk Liquidity risk is the risk that the Fund will not be able to meet its financial obligations when they fall due. The Fund’s liquidity is monitored on a daily basis, and the Fund seeks to ensure that it will always have sufficient liquid funds to pay benefits to members and liabilities when due, without incurring unacceptable losses or risking damage to the Fund’s reputation. The Fund manages liquidity risk by: . giving careful consideration to the anticipated income and expenditure required for the administration of the Fund and the payment of benefits and by maintaining in-house managed cash balances sufficient to meet day-to-day cash flows. . a large proportion of the Fund being held in highly liquid investments such as actively traded equities and unit trusts.
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BODIES PARTICIPATING IN THE BEDFORDSHIRE PENSION FUND Scheduled Bodies: Academy of Central Bedfordshire Active Education Academy Trust (was River Bank Free School) Alameda Academy Alban Church of England Academy Aley Green Parish Council All Saints Academy (Dunstable) All Saints Lower (Clifton) Ampthill Town Council Ardley Hill Academy Arlesey Town Council Arnold Academy Barnfield College Bedford Academy Bedford Borough Council Bedford College Bedford Free School Bedfordshire Fire & Rescue Service Bedfordshire and River Ivel Drainage Board Beecroft Academy Biddenham Parish Council Biggleswade Academy Trust Biggleswade Town Council Blunham Parish Council Bolnhurst Parish Council Brickhill Parish Council Bromham Parish Council Brooklands Middle School Caddington Parish Council Cedars Academy Central Bedfordshire College Central Bedfordshire Council Central Bedfordshire UTC Chantry Academy Chief Constable Chiltern Learning Trust CMAT – Hastingbury – commenced November 2015 CMAT – Lancot – commenced November 2015 CMAT – Robert Bruce – commenced November 2015 Cranfield Church of England Academy Daubeney Academy Dunstable Town Council Eastcotts Parish Council Eaton Bray Academy Etonbury Academy Eversholt Lower Ferrars Academy Flitwick Town Council Fulbrook Academy Gilbert Inglefield Academy Goldington Academy Goldington Green Academy Gothic Mede Lower Academy Grange Academy Gravenhurst Academy Greenfield & Pulloxhill Academy Greys Education Centre Hadrian Academy Harlington and Sundon Academy Trust
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Harlington Area Schools Trust Harlington Academy Harlington Parish Council Haynes Parish Council Henlow Church of England Academy Holywell School Houghton Conquest Parish Council Houghton Regis Academy Houghton Regis Town Council Icknield Academy John Gibbard Academy Kempston Burial Joint Committee Kempston Rural Parish Council Kempston Town Council Kensworth Parish Council – commenced October 2015 Langford Lower Academy Lark Rise Academy Leighton Linslade Town Council Linslade Academy Trust Luton Borough Council Luton Sixth Form College Mark Rutherford School Trust Marston Moretaine Parish Council Marston Vale Middle School Meppershall Lower Academy School Northill Parish Council Oak Bank Special School Academy Police and Crime Commissioner for Bedfordshire Potton Town Council Priory Academy Putnoe Academy Queens Park Academy Queensbury Academy Raynsford Church of England Academy Redborne Academy Robert Bloomfield Academy Samuel Whitbread Academy Sandy Town Council Sandye Place Academy Shared Learning Trust (was Barnfield Academy Trust / West) Sharnbrook Parish Council Sharnbrook Academy Federation SACA – Cardinal Newman – commenced September 2015 SACA – St Margaret of Scotland – commenced September 2015 SACA – St Martin de Porres – commenced September 2015 St Augustine’s Academy St Christopher’s Academy St. Francis of Assisi Academies Trust St Johns Special School and College Stanbridge Parish Council St Mary’s School, (Stotfold) Staploe Parish Council Stotfold Town Council Stratton Educational Trust The Firs Academy The Hills Academy Tilsworth Parish Council Toddington Parish Council Toddington St. George Church of England School Turvey Parish Council University of Bedfordshire
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Ursula Taylor Academy Vandyke Upper School Weatherfield Academy Whipperley Infant Academy Woodland Academy Wootton Academy Trust Wootton Parish Council
Admitted and Other Member Bodies: Active Luton (Leisure Trust) Amey Infrastructure Services – left March 2016 Aragon Housing Association Bedfordshire Pilgrims Housing Association Churchill Cleaning Services Civica UK Limited Cranfield University Creative Support East London NHS Foundation – Luton – commenced April 2015 East London NHS Foundation – Beds – commenced April 2015 Fusion Lifestyle Grand Union Housing Luton Cultural Services Trust Macintyre Housing Mitie Ridge Crest Cleaning Services – commenced September 2015 St Christopher’s Fellowship St Francis Children's Society Stevenage Leisure Ltd
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Pension Fund Accounts Reporting Requirement
Introduction
CIPFA's Code of Practice on Local Authority Accounting 2015/16 requires Administering Authorities of LGPS funds that prepare pension fund accounts to disclose what IAS26 refers to as the actuarial present value of promised retirement benefits.
The actuarial present value of promised retirement benefits is to be calculated similarly to the defined benefit obligation under IAS19. There are three options for its disclosure in pension fund accounts:
• showing the figure in the Net Assets Statement, in which case it requires the statement to disclose the resulting surplus or deficit; • as a note to the accounts; or • by reference to this information in an accompanying actuarial report.
If an actuarial valuation has not been prepared at the date of the financial statements, IAS26 requires the most recent valuation to be used as a base and the date of the valuation disclosed. The valuation should be carried out using assumptions in line with IAS19 and not the Pension Fund’s funding assumptions.
I have been instructed by the Administering Authority to provide the necessary information for the Bedfordshire Pension Fund, which is in the remainder of this note.
Present value of Promised Retirement Benefits
Present value of Promised Retirement Benefits Year ended (£m) 31 March 2016 31 March 2015 Active members 1,423 1,440 Deferred pensioners 592 671 Pensioners 903 999 Total 2,918 3,110
Liabilities have been projected using a roll forward approximation from the latest formal funding valuation as at 31 March 2013. The approximation involved in the roll forward model means that the split of scheme liabilities between the three classes of member may not be reliable. However, I am satisfied the aggregate liability is a reasonable estimate of the actuarial present value of benefit promises. I have not made any allowance for unfunded benefits.
The above figures include both vested and non-vested benefits, although the latter is assumed to have a negligible value.
It should be noted the above figures are appropriate for the Administering Authority only for preparation of the accounts of the Pension Fund. They should not be used for any other purpose (i.e. comparing against liability measures on a funding basis or a cessation basis).
Assumptions The assumptions used are suitable for IAS19 purposes as required by the Code of Practice. They are given below. I estimate that the impact of the change of assumptions to 31 March 2016 is to decrease the actuarial present value by £288m.
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Financial assumptions My recommended financial assumptions are summarised below:
31 March 2016 31 March 2015 Year ended % p.a. % p.a. Inflation/pensions increase rate 2.2% 2.4% Salary increase rate 3.2% 3.3% Discount rate 3.5% 3.2%
Longevity assumptions As discussed in the accompanying report, the life expectancy assumption is based on the Fund's VitaCurves with improvements in line with the CMI 2010 model, assuming the current rate of improvements has reached a peak and will converge to long term rate of 1.25% p.a. Based on these assumptions, the average future life expectancies at age 65 are summarised below:
Average future life expectancies at age 65 (years) Males Females Current pensioners 22.4 24.3 Future pensioners* 24.4 26.8 * Future pensioners are assumed to be aged 45 at the most recent formal valuati on as at 31 March 2013.
Please note that the assumptions are identical to last year's IAS26 disclosure for the Fund.
Commutation assumption An allowance is included for future retirements to elect to take 50% of the maximum additional tax-free cash up to HMRC limits for pre-April 2008 service and 75% of the maximum tax-free cash for post-April 2008 service.
Sensitivity Analysis CIPFA guidance requires the disclosure of the sensitivity of the results to the methods and assumptions used. The sensitivities regarding the principal assumptions used to measure the liabilities are set out below:
Change in assumptions for the year ended Approximate % Approximate monetary 31 March 2016 increase to liabilities amount (£m) 0.5% decrease in discount rate 11% 307 1 year increase in member life expectancy 3% 88 0.5% increase in salary increase rate 3% 95 0.5% increase in pensions increase rate 7% 208
Professional notes This paper accompanies my covering report titled ‘Actuarial Valuation as at 31 March 2016 for accounting purposes’. The covering report identifies the appropriate reliance’s and limitations for the use of the figures in this paper, together with further details regarding the professional requirements and assumptions.
Prepared by:-
Gemma Sefton FFA 19 April 2016
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Bedfordshire Pension Fund Actuarial Statement for 2015/16 This statement has been prepared in accordance with Regulation 57(1)(d) of the Local Government Pension Scheme Regulations 2013. It has been prepared at the request of the Administering Authority of the Fund for the purpose of complying with the aforementioned regulation.
Description of Funding Policy The funding policy is set out in the Administering Authority’s Funding Strategy Statement (FSS), dated March 2014. In summary, the key funding principles are as follows:
• to ensure the long-term solvency of the Fund, using a prudent long term view. This will ensure that sufficient funds are available to meet all benefits as they fall due for payment;
• to ensure that employer contribution rates are reasonably stable where appropriate;
• to minimise the long-term cash contributions which employers need to pay to the Fund, by recognising the link between assets and liabilities and adopting an investment strategy which balances risk and return (NB this will also minimise the costs to be borne by Council Tax payers);
• to reflect the different characteristics of different employers in determining contribution rates. This involves the Fund having a clear and transparent funding strategy to demonstrate how each employer can best meet its own liabilities over future years; and
• to use reasonable measures to reduce the risk to other employers and ultimately to the Council Tax payer from an employer defaulting on its pension obligations.
The FSS sets out how the Administering Authority seeks to balance the conflicting aims of securing the solvency of the Fund and keeping employer contributions stable. For employers whose covenant was considered by the administering authority to be sufficiently strong, contributions have been stabilised below the theoretical rate required to return their portion of the Fund to full funding over 20 years if the valuation assumptions are borne out. Asset-liability modelling has been carried out which demonstrate that if these contribution rates are paid and future contribution changes are constrained as set out in the FSS, there is still a better than a 2/3rds chance that the Fund will return to full funding over 20 years.
Funding Position as at the last formal funding valuation The most recent actuarial valuation carried out under Regulation 36 of the Local Government Pension Scheme (Administration) Regulations 2008 was as at 31 March 2013. This valuation revealed that the Fund’s assets, which at 31 March 2013 were valued at £1,467 million, were sufficient to meet 70% of the liabilities (i.e. the present value of promised retirement benefits) accrued up to that date. The resulting deficit at the 2013 valuation was £625 million.
Individual employers’ contributions for the period 1 April 2014 to 31 March 2017 were set in accordance with the Funding Strategy Statement.
Principal Actuarial Assumptions and Method used to value the liabilities Full details of the methods and assumptions used are described in the valuation report dated 20 March 2014.
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Method The liabilities were assessed using an accrued benefits method which takes into account pensionable membership up to the valuation date, and makes an allowance for expected future salary growth to retirement or expected earlier date of leaving pensionable membership.
Assumptions A market-related approach was taken to valuing the liabilities, for consistency with the valuation of the Fund assets at their market value.
The key financial assumptions adopted for the 2013 valuation were as follows:
31 March 2013 Financial assumptions % p.a. % p.a. Nominal Real Discount rate 4.90% 2.40% Pay increases 3.30% 0.80% Price inflation/Pension increases 2.50% - The key demographic assumption was the allowance made for longevity. The life expectancy assumptions used were based on the Fund's VitaCurves with improvements in line with the CMI_2010 model, assuming the current rate of improvements has reached a peak and will converge to long term rate of 1.25% p.a. Based on these assumptions, the average future life expectancies at age 65 are as follows:
Males Females
Current Pensioners Future 22.4 years 24.3 years Pensioners* 24.4 years 26.8 years *Future pensioners were assumed to be aged 45 as at the last formal valuation date
Copies of the 2013 valuation report and Funding Strategy Statement are available on request from the Administering Authority to the Fund.
Experience over the period since April 2013 Experience has been worse than expected since the last formal valuation (excluding the effect of any membership movements). Real bond yields have fallen placing a higher value on liabilities. The effect of this has been only partially offset by the effect of strong asset returns. Funding levels are therefore likely to have worsened and deficits increased over the period. The next actuarial valuation will be carried out as at 31 March 2016. The Funding Strategy Statement will also be reviewed at that time.
Gemma Sefton FFA
Fellow of the Institute and Faculty of Actuaries For and on behalf of Hymans Robertson LLP 22 April 2016
Hymans Robertson LLP 20 Waterloo Street Glasgow
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11) Annual Governance Statement
Scope of Responsibility
Bedford Borough Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for. The Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and putting in place proper arrangements for the governance of its affairs, facilitating the effective exercise of its function, and which includes arrangements for the management of risk. The Council has approved and adopted corporate governance arrangements which are consistent with the principles of the 2012 CIPFA/SOLACE Framework Delivering Good Governance in Local Government but going forward may require changes in line with the 2016 Framework which will be effective from 2016/2017. This statement explains how the Council meets its Governance responsibilities and duties under the Accounts and Audit Regulations 2015 in relation to the annual review of the effectiveness of the system of internal control and production of its annual governance statement.
Purpose of the Governance Framework
The governance framework comprises the systems and processes, and culture and values, by which the Council is directed and controlled and its activities through which it accounts to, engages with and leads the community. It enables the Council to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of 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 eliminate all risk of failure to achieve policies, aims and objectives of the Council, and the overarching philosophy is about being risk aware, not risk averse. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the Council’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. The governance framework has been in place at the Council for the year ended 31 March 2016 and up to the date of approval of the statement of accounts.
The Governance Framework
This is set out in detail on Appendix A to this statement and includes any amendments, revisions or updates undertaken during the past financial year relating to the following key aspects of the Framework: . How the Council ensures that it meets legal obligations (see Appendix A – Section (1)) . How the Council focuses on its purpose and on outcomes for the community and creating and implementing a vision for the local area (see Appendix A – Section (2)). . How Members and Officers work together to achieve a common purpose with clearly defined functions and roles (see Appendix A – Section (3)) . How the Council promotes values for the Authority and demonstrates the values of good governance through upholding high standards of conduct and behaviour (See Appendix A – Section (4)) . How the Council takes informed and transparent decisions which are subject to effective scrutiny (see Appendix A – Section (5)) . How the Council develops the capacity and capability of Members and officers to be effective (see Appendix A – Section (6)) . How the Council engages with local people and other stakeholders to ensure robust accountability (see Appendix A – Section (7))
Review of Effectiveness
The Council has responsibility for conducting, at least annually, a review of the effectiveness of the governance framework including the system of internal control. The annual review is informed by the work of senior officers responsible for the development and maintenance of governance arrangements (as part of an established Corporate Governance Working Group), the annual internal audit report and by assessments made by external audit and other review agencies and inspectorates.
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The process of maintaining and reviewing the effectiveness of the governance framework is effected by: . The Council – being committed to governance arrangements through the operation of a regularly reviewed constitution including roles and responsibilities critical to governance. . The Executive – through the Mayor taking responsibility for an effective annual review of governance arrangements and acting on any Audit Committee recommendations. . The Audit Committee – assessing the adequacy of governance arrangements and advising the Mayor accordingly as well as dealing with any governance related issues during the year. . The Overview and Scrutiny Committees – providing effective “checks and balances” within the Council to aid the governance process. . The Standards Committee – in accordance with their statutory duty to promote and maintain high standards of conduct by Members and to assist Members to observe the Council’s Code of Conduct. . The Chief Executive – arranging for an annual review of the adequacy of internal control arrangements in the Council as part of the Governance review. . The Assistant Chief Executive and Chief Finance Officer – ensuring that key internal financial control mechanisms are in place and putting into effect CIPFA guidance on the role and responsibilities of the Chief Finance Officer. . The Assistant Chief Executive (Governance & Human Resources) Monitoring Officer and Solicitor to the Council – ensuring that the constitution is maintained and there is lawfulness and fairness in decision making, together with supporting the Standards Committee. . Internal Audit – test checking the effective operation of internal control mechanisms and financial systems. . Corporate Governance Working Group – reviewing the governance arrangements in detail and proposing amendments where these are needed.
Significant Governance Issues
The review of the Council’s governance arrangements, including the Code of Corporate Governance, for the financial year 2015/2016 has been completed and, whilst various references in Appendix A relate to material actions taken in this financial year, the review has highlighted the scope for further actions to improve the effectiveness of governance arrangements. The Action Plan for addressing these needs is set out in Appendix B to this statement (This Appendix also summaries action taken against the 2014/2015 Governance Action Plan). We propose over the coming year to take steps to address the matters set out in Appendix B to this statement to further enhance our governance arrangements.
……………………………………………… ………………………………………………
ELECTED MAJOR CHIEF EXECUTIVE
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APPENDIX A
Bedford Borough Council Governance Framework 2015/2016
1. How the Council meets legal obligations The first duty of any local authority is to ensure that it meets all of its legal responsibilities. The Council achieves this by way of the following measures. 1.1 Council Constitution
(a) The Council Constitution, approved in accordance with section 37 of the Local Government Act 2000, complies with the requirements of the Local Government Act 2000 (Constitutions) (England) Direction 2000 and includes the following:
. Summary and explanation . Articles of the Constitution . Responsibilities for functions . Full Council Procedure Rules . Access to Information Procedure Rules . Executive Procedure Rules . Overview and Scrutiny Committee Procedure Rules . Regulatory Committee Procedure Rules . Standards Committee Procedure Rules . Officer Employment Procedure Rules . Contract Procedure Rules . Financial Procedure Rules . Budget and Policy Framework Procedure Rules . Schemes of Delegations to Officers . Joint Arrangements . Standards of Conduct . Register of Members of the Council . Members’ Allowances Scheme . Complaints Procedure . Management Structure
(b) All Members and officers have access to the Constitution, which is also available on the Council’s intranet and website.
(c) The senior officer Corporate Governance Working Group maintain an ongoing review of the working of the Constitution and report on any areas of potential change to the Council’s General Purposes Committee in the first instance, who are responsible for recommending any changes to the Constitution to Full Council. The review of the Constitution is always an action point given the pursuit of continuous improvement (see Appendix B). Article 11 of the Constitution places a duty on the Monitoring Officer to monitor and review the operation of the Constitution to ensure that its aims and principles are given full effect. Only Full Council, after consideration of a proposal by the General Purposes Committee, has power to make substantive changes to the Constitution, but the Monitoring Officer has delegated authority to maintain and update the Constitution to reflect any changes made by the Council and changes required as a result of new legislation over which the Council has no discretion. This updating is undertaken as and when required throughout the year. The ongoing review of the Constitution needs to be maintained in 2016/17 in order to ensure compliance with any changing legal requirements and that it reflects current good practice.
1.2 Internal Management Arrangements
(a) The Council’s weekly senior officer management team meetings agenda includes a standing item entitled “Legal Items”. The Council’s Monitoring Officer, who is the Solicitor to the Council, is a member of the management team and attends each meeting. Any new legislative developments/legal clarification on current issues can be raised at these meetings and the legal and other implications of draft reports for Member decisions can be considered before the reports are issued.
(b) Whilst it is recognised that the financial pressures and future prospects for service delivery continue to be challenging, the Council’s management and organisational structure must continue to ensure that the Council is able to meet its statutory obligations. Respective service groupings include qualified professional
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officers who are employed to meet relevant statutory service or function requirements. Job descriptions for all post holders make responsibilities clear as does the person specification and selection criteria used for the recruitment process. The Council’s recruitment and selection procedure ensures that the Council employs officers able to carry out the duties required of them in their new posts.
(c) Having met the necessary recruitment selection criteria and, therefore, having the ability to carry out the functions for which their post is responsible, all new staff receive induction training and, where appropriate, additional training on relevant statutory requirements before they fully undertake their new duties (e.g. Housing Benefits staff are trained on the legislative requirements for that service).
(d) Where relevant, training is provided to staff to ensure they are up to date with changes in legislation or new statutory requirements which impact on their responsibilities. Additionally, under the Council’s performance development review scheme, training needs/requirements are reviewed at least annually for each member of staff.
(e) Professional officers receive up to date information on any changes in the law affecting their profession from their professional associations.
(f) Service Heads/Managers arrange for detailed staff briefings in respect of new legislation/legislative amendments affecting their particular service groups.
1.3 Ensuring Legal Implications are considered before decisions are made
(a) All reports to the Executive collectively, individual Portfolio Holders, Council and its Committees are required to set out the legal implications relating to the decision(s) that Members are being asked to take.
(b) The Executive/individual Portfolio Holders are also required, as part of their scheme of delegations, to follow the Executive decision making protocol (set out in Part 3 of the Constitution) in reaching decisions. This requires them to allow sufficient time for the Director, Assistant Chief Executive, Assistant Director or Head of Service concerned, in consultation with other senior officer colleagues as appropriate, to assess any legal and also any policy, risk, resource, equality and environmental implications of a proposal and to report back accordingly in writing before any decision is made.
(c) The Council’s Code of Conduct and Constitution requires Members to have regard to any relevant advice provided to them by the Council’s Chief Finance Officer and Monitoring Officer in pursuance of their statutory duties.
1.4 Arrangements for dealing with any non compliance
(a) Bedford Borough Council has enjoyed an excellent record in terms of compliance with legal obligations. However, where instances of non compliance are identified (e.g. as a result of customer complaints) procedures are reviewed and action is taken to eliminate the risk of further non compliance.
(b) Apart from the statutory responsibility of the Monitoring Officer (reflected within the Constitution) to deal with any non compliance with the law, there is a delegation to enable the Monitoring Officer to take any action reasonably incidental to the carrying out of the Monitoring Officer functions.
2. How the Council focuses on its purpose and on outcomes for the community and creating and implementing a vision for the local area 2.1 How the Council exercises strategic leadership by developing and clearly communicating the authority’s purpose and vision and its intended outcomes for citizens and service users
The Council has strategies and policies in place related to its priorities and vision for the Borough through:
(a) Sustainable Community Strategy (SCS) 2009/2021
This strategy aims to improve the quality of life and opportunity for all citizens in the Borough. It is overseen by the Bedford Borough Strategic Partners Board which is made up of the key statutory public sector service providers in the Borough and is chaired by the Elected Mayor. This body provides strategic oversight to partnership working across Bedford Borough.
Bedford Borough Strategic Partners Board continued to focus, during 2015/2016, on transformational
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projects to make a clear difference to people living and working in the Borough. Other areas of consideration were community engagement in the Midland Road area, the Prevent agenda and Child Sexual Exploitation. The Government repealed the duty to maintain a SCS by dint of the Deregulation Act 2015. The Board has agreed to keep the SCS as the long term vision for Bedford Borough.
(b) Corporate Plan 2016/2020
The Council's Corporate Plan sets out how its own actions will help achieve the vision, ambitions and directions outlined in the SCS in the medium term. Following public consultation a new Corporate Plan covering the period 2016-2020 was adopted by Full Council in February 2016. The new Plan focuses on three priority areas as follows: (i) A Thriving Local Economy (ii) Empowering Communities (iii) Supporting People
(c) Feedback from the Bedford Borough Strategic Partners Board and the Council's own consultation exercises, enable the ongoing development of the vision and priorities for the Borough which in turn drive other governance arrangements (e.g. budget planning).
As outlined earlier the Council must work with partners to achieve the goals and objectives of the SCS.
The Council also has other statutory and operational partnerships which aid the delivery of services and functions. These include the Health & Wellbeing Board and Community Safety Partnership. In order to ensure these partnerships comply with good governance, the Council maintains formal governance arrangements for partnerships including requirements under Financial Procedure Rule (32).
The Council publishes its annual Statement of Accounts and Governance Statement within prescribed timescales to outline current financial performance/stewardship and the effectiveness of governance arrangements.
2.2 How the Council ensures that users receive a high quality of service whether directly, or in partnership, or by commissioning
The Council has embarked on a transformation programme which will include a fundamental review of all of its services. This programme has a presumption that services are provided by digital means wherever possible. As noted above (2.1(b)) A new Corporate Plan was approved in February 2016. This Plan will require ongoing monitoring and review to ensure it meets the objectives set. Measurement, through the Council’s established performance management framework, and against clear outcomes will ensure that the priorities of the Plan remains on track. As well as the Council’s own arrangements to identify and deal with any failure in service delivery (i.e. performance management) the Council has a number of complaints procedures (see paragraphs 5.1.7 to 5.1.9 of this statement) so that it can deal with any shortcomings identified by users. The Council is also pro-active in responding to any identification of poor service quality by external audit or other external review agencies as well as service user feedback arrangements. Each Directorate is responsible for developing a Service Plan in consultation with the relevant Portfolio Holders. The current Service Plans are reviewed annually as required. The Service Plans set out in detail how services will be delivered and include targets and performance indicators.
2.3 How the Council makes best use of resources and ensures that taxpayers and service users receive excellent value for money Financial Resources (a) The Council’s Financial Procedure Rules set out the key responsibilities of the Council and Executive for the management of the Council’s financial resources including dates during the municipal year when key decisions relating to the management and allocation of financial resources have to be made. The Council’s Contract Procedure Rules provide a robust framework with which purchasing and commissioning decisions are taken. The Contract Procedure Rules were reviewed in March 2016 and approved by Full Council on 23 March 2016. The Financial Procedure Rules are currently under review which will be updated by September 2016 to ensure they remain consistent with emerging legislation and thus it is included in the Action Plan.
(b) The Medium Term Financial Strategy (MTFS) sets out the level of financial resources forecast to be available over the medium term against capital and revenue spending needs/pressures (including the needs
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of the Council’s Corporate Plan). The MTFS outlines the linkages to other resource management strategies and policies as well as guiding principles for capital and revenue budget preparation and forward financial planning. The MTFS also forecasts the level of efficiency savings targeted for each financial year. The Council’s MTFS was reviewed/refreshed in 2015/2016 and, in March 2016, an updated MTFS for 2017/2020 was approved by Full Council to reflect the Corporate Plan including its Modernisation Programme.
Prudential Financial Framework
The Council is committed to ensure that its use of financial resources meets the tests of affordability, prudence and sustainability and that adequate reserves are maintained. These matters are set out in an annual report to the Council by the Assistant Chief Executive and Chief Finance Officer before revenue and capital budgets for the forthcoming year are approved. (Section 25 of Local Government Act 2003 report to Council on 3 February 2016 relating to the 2016/2017 budget).
As part of this framework the Council ensures that its capital investment strategy/capital finance policy keeps within the local government best practice guide issued by CIPFA (Prudential Code for Capital Finance in Local Authorities).
In respect of borrowings and investments the Council has adopted a treasury management policy in line with the local government best practice guide (CIPFA’s Code of Practice for Treasury Management in the Public Services). As part of the Council’s Financial Procedure Rules, there are sound systems in place for budget monitoring and control for all capital, revenue, reserves and provision budgets. There are regular reports to the Executive on budget monitoring in order that effective corrective action can be taken on any adverse trends.
Contract Procedure Rules and the Procurement Strategy help to ensure financial resources are used to best effect.
Role of the Chief Finance Officer
A critical element in the proper stewardship of the Council’s financial arrangements is the role of the statutory officer and best practice guidance was originally produced by CIPFA on this in March 2010 (Statement on the Role of the Chief Finance Officer (CFO) in Local Government 2010) but was recently updated in April 2016. Reference is made to the duties of the Council’s CFO throughout the Governance Statement and it can be fairly stated that the Council’s financial management arrangements conform to the CIPFA guidance.
Part of the role of the CFO is to ensure timely, accurate and impartial financial advice is provided to the Council and Executive and other Committees as well as others charged with decision taking (e.g. senior officers under delegated authority). The Council’s decision making protocol ensures that those taking decisions must consider any resource consequences before finalising the decision and the Council’s Assistant Chief Executive and Chief Finance Officer is responsible for ensuring all financial resource implications are set out before any decision is taken.
The CFO is also responsible for ensuring there is an adequate system of internal control operating within the Council and he is supported in this by the work of Internal Audit which delivers an annual programme of work agreed by the Audit Committee. In relation to 2015/2016 the overall opinion provided by the Head of Internal Audit in his Annual Report was;
It is considered that, based upon the testing undertaken, the overall control framework provides good controls in most but not all areas with a medium/low risk of not achieving objectives and medium/low risk of fraud. In total six High Priority recommendations were made during 2015/16.
Human Resources
The Council acknowledges that our people are our most important asset and the achievement of corporate objectives and excellent service delivery is dependent upon a highly skilled, motivated and engaged workforce. The Council’s Workforce Strategy for 2012-2016 was agreed by General Purposes Committee at its meeting on 19 June 2012 and in order to meet the modernisation agenda a Workforce Deployment Model was approved by General Purposes Committee on 18 June 2013. The Council recognises that the changing environment for local government requires a flexible workforce capable of responding quickly and efficiently to meet emerging demands, and that workforce development will need to focus on enabling employees to adapt to change whilst maintaining service delivery. The strategy will be refreshed once the Business Transformation Programme is complete.
Land and Property
The Council maintains and periodically updates a Corporate Asset Plan which sets out how its land and property
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116 assets will be managed, controlled and optimised to meet the Council’s legal obligations and service priorities. The Plan is closely aligned to the Council’s capital investment strategy in respect of determining future land and property needs/surplus assets which can be disposed of to provide new capital finance. Following a full review of the Council's land and property assets in 2011/2012 a revised Plan 2012/2016 was approved in March 2012 to reflect needs in the Corporate Plan. A report on the progress against the approved Corporate Asset Plan is considered annually by the Portfolio Holder for Assets. The report for the period April 2015 to March 2016 was considered by the Portfolio Holder in May 2016. A further review of the Council’s land and property assets is now in progress and the results will inform the revision of the Corporate Asset Plan for the 5 year period 2017/2021.
Information Communications and Technology (ICT)
The Council’s information and communication technology systems are an important asset and enable the Council to provide services in a more efficient and cost effective manner. The Council has an ICT Strategy to guide the best use of this resource in relation to Council services and functions. This strategy was last revised in 2011. A further review is required to ensure the Council has in place a strategy which will enable it to meet its ongoing requirements and this will be undertaken during 2016 and is therefore included in the Action Plan. The wider use of mobile technology across the Council also required the Council to review and amend the Computer User Security Policy to ensure this too continues to reflect the Council’s ongoing requirements.
Value for Money (VfM) Arrangements
The Council has a VfM strategy which was reviewed/refreshed in 2014/2015 covering the period 2014-2017. The VfM Strategy is critical to the delivery of Council services. The Strategy identifies how the Council will manage its affairs/use its resources to achieve economy, efficiency and effectiveness in the provision of Council services and functions and how it inter-links to various other resource management strategies. Each year External Audit assesses the Council's VfM arrangements against proper/adequate criteria. The review undertaken as part of the Annual Statement of Accounts process for the 2014/2015 financial year by external audit confirmed that the Council's corporate resource management arrangements were meeting the criteria and proper arrangements. The Strategy also emphasises that VfM should influence every aspect of Council activity particularly in the light of the severe resource constraints faced by the Council.
Fraud and Corruption The Council is committed to the prevention and detection of fraud and has established a robust framework in this regard which includes: . Anti-Fraud and Corruption Strategy . Anti-Money Laundering Policy . Fraud risk register . Membership of the Home Counites Internal Audit group and London Audit Group which share fraud intelligence Membership of the National Anti-fraud Network (NAFN) . Participation in the bi-annual National Fraud Initiative (NFI) . Participation in the annual National Fraud Survey . Corporate whistleblowing policy The Council’s exposure to the risk of fraud and corruption is monitored on an ongoing and changes made to strengthen the resilience arrangements are made as and when necessary. Additionally a Fraud Briefing report is taken to the Audit Committee annually informing them of the current and emerging key fraud issues/risks affecting public bodies nationally and the Council’s position in relation to these risks.
Information Governance
The Council has in place an Information Governance Board (The Monitoring Officer Chairs this) whose role is to provide advice and assurance to the Council on all matters relating to Information Governance. The Council’s current Corporate Knowledge and Information Management Strategy, produced by the Board, was developed in 2010 and has been reviewed in 2015/16 to ensure it will meet the Council’s needs going forward.
Modernisation Programme
The Council’s Modernisation Programme sets out how the Council will address the forecast and ongoing funding reductions, but also how it will transform service quality, improve efficiency and radically improve customer services. For 2015/2016 a number of projects were agreed which have allowed the Council to set a balanced budget. Different themes have been adopted to achieve the required savings and additional income, most recently they have included: Workforce Deployment, Alternative Ways of Working; Customer Interface; Business and Growth; Managing Demand and Innovation & Entrepreneurship. Ongoing programme management and monitoring
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117 of these projects by the Cost Reduction Board and the Chief Executive’s Senior Management Team ensures they remain on track. Final decisions on transformation matters are made by The Executive subject to the results of public consultation.
3. How members and officers work together to achieve a common purpose with clearly defined functions and roles 3.1 Ensuring effective leadership throughout the authority and being clear about executive and non- executive functions and of the roles and responsibilities of the scrutiny function The Council’s Constitution sets out and distinguishes very clearly between:
(i) The key roles and responsibilities of the Elected Mayor and Executive, for executive functions, including:
. The Mayor’s Scheme of Delegations to individual Executive Members (Portfolio Holders) and the legal and constitutional framework within which they may exercise their decision making powers . The Mayor’s Scheme of Delegations to Officers . Details of various Committees of the Executive, including the executive functions for which they are responsible
(ii) The respective roles and responsibilities of the various Committees which have responsibility for the Council’s non-executive functions and their respective Schemes of Delegation to Officers.
(iii) The respective roles and responsibilities of the Council’s Overview and Scrutiny Committees and the framework within which they hold the Executive to account and undertake policy review and development work.
The Constitution (Articles 2, 7 & 11) also sets out the respective roles of the Mayor, Executive Members, non- Executive Members, the Council’s Statutory Officers (i.e. the Head of Paid Service, the Chief Finance Officer, the Monitoring Officer, the Director of Children’s and Adults’ Services and the Scrutiny Officer) and the role of Officers generally.
The Constitution also includes a Protocol governing the relationship between Members and Officers which includes a commentary on the respective roles of Executive and non-Executive Members, Councillors generally and Officers.
3.2 Ensuring that a constructive working relationship exists between elected members and officers and that the responsibilities of authority members and officers are carried out to a high standard Part 3 of the Council’s Constitution sets out the schemes of delegation to the Council’s various Executive and non- Executive bodies, including the allocation of “local choice” functions. This includes a clear statement of those functions which are reserved to the Full Council for a decision. This was developed and is maintained having full regard to all relevant legislation and is monitored and updated on an ongoing basis to reflect changes in the law, as is the rest of the Constitution.
The Chief Executive is responsible to the Council for all aspects of operational management and, as Head of Paid Service, is responsible for ensuring the Council’s staffing needs are met and for the appointment and proper management of all staff. The Chief Executive is held to account for the effective exercise of those responsibilities by the Elected Mayor and Group Leaders through the Council’s performance appraisal system and by the Mayor and Portfolio Holders through regular performance monitoring meetings which cover all service areas.
The Elected Mayor and the Chief Executive have a full understanding and mutual appreciation of each other’s roles and responsibilities. They have a shared vision and meet on a regular basis to enhance the corporate management of the Council. There are also regular (monthly) meetings between the Chief Executive and the Mayor and all Group Leaders.
The Council has designated the Assistant Chief Executive & Chief Finance Officer as the statutory Chief Finance Officer who reports directly to the Chief Executive and is a member of the senior officer management team. The CFO is responsible to the Council for ensuring that appropriate advice is given on all financial matters, for keeping proper financial records and accounts, for maintaining an effective system of internal financial control and stewardship of Council financial resources.
The Council has designated the Assistant Chief Executive (Governance and Human Resources) as the Council’s statutory Monitoring Officer who reports directly to the Chief Executive and is a member of the senior officer
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118 management team. In accordance with the approved Protocol the Monitoring Officer is responsible to Council for ensuring that agreed procedures in the Constitution are followed and that all applicable statutes and regulations are complied with.
A Member/Officer Protocol is included within the Council’s Constitution and this Protocol sets out the roles and responsibilities of Members and Officers and how these should be observed in the day to day operations of the Council.
The Council has appropriate mechanisms governing the terms and conditions for remuneration of Members and officers viz:
(i) Members Allowance Scheme which is reviewed annually by an Independent Remuneration Panel which reports its findings to Full Council;
(ii) Employment contracts for all staff which set out their conditions of service and remuneration which is subject to review under the Council’s job evaluation scheme.
The areas of Portfolio Holder responsibility and the organisational structure are generally aligned to assist in establishing clear areas of responsibility for both Members and Officers.
3.3 Ensuring relationships between the authority, its partners and the public are clear so that each know what to expect of the other The Council has governance arrangements in place to deal with partnerships and partnership working. Bedford Borough Strategic Partners Board has agreed terms of reference which all partners are signed up to.
The Council has a Consultation Strategy which outlines how it will consult all relevant stakeholders on major proposals impacting on, or changing services, having an effect on them. This Strategy governed how the Council undertook, critical consultations in 2015/2016 which included:
Consultation on a range of service modernisation proposals (a wide ranging consultation exercise with all stakeholders on the Council's proposals to reduce costs of service provision to meet budgetary constraints over the next four years). The results of the consultation identified some modification to the original proposals and outcomes were reported to the Executive on 20 January 2016 for their consideration.
Specific consultation on a range of service areas and subjects, for example:
. Adult Social Care Survey . Childcare Sufficiency . Fair Care Policy . Growth Plan . Housing Strategy . Library User Survey
Another key area of relationship is how the Council reports to the public/stakeholders on the outcomes of its work each year so that both financial and service delivery performance can be assessed and that assurance can be given that the Council is managing its affairs in accordance with best practice. In this respect the key reports published annually include:
. The Statement of Accounts . The Annual Governance Statement . Performance against the Corporate Plan . Statutory Complaint Reports . Local Government Ombudsman Annual Review Letter . Modernisation Proposals
Also through its complaints procedures and customer feedback arrangements, the Council sets out what the public can expect from these mechanisms.
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4. How the Council promotes values for the authority and demonstrates the values of good governance through upholding high standards of conduct and behaviour 4.1 Ensuring authority members and officers exercise leadership by behaving in ways that exemplify high standards of conduct and effective governance The Council is committed to operating in a spirit of openness, mutual respect and support. The Council’s constitution and codes of conduct for Members and officers provide the framework necessary to ensure:
. That Members and officers conduct the Council’s business without prejudice, bias or conflicts of interest; . Public confidence in how the Council conducts its affairs; . Shared values are developed and maintained within the Council in the pursuance of the Council’s aims and objectives and for effective decision making; . That the behaviour of both Members and officers demonstrates the highest ethical standards expected from those charged with governance and in respect of all Council dealings.
The Localism Act 2011 abolished the duty for the Council to maintain a Standards Committee, however the Council has continued to retain a separate Standards Committee which has a duty to ensure the promotion of high standards of conduct by Members of the Council. The Independent Persons appointed by the Council, under the Localism Act 2011 attend and contribute to meetings of the Committee. There have been three complaints (two Borough Council and one Town & Parish Council) of a breach of the Code of Conduct for Members during 2015/16 which were not considered to require investigation.
The Council has long established guidance for Officers on the standards of conduct expected of them. This also forms part of the Constitution. Line Managers are responsible for ensuring that new employees have read and understood that guidance as part of the Council’s induction process for new staff. The guidance is also periodically re-issued to all employees. The guidance was reviewed during 2015-2016 and approved by the General Purpose Committee on 8th March 2016.
The Council’s Monitoring Officer is responsible for maintaining the Register of Members Local and Disclosable Pecuniary Interests and all Councillors have submitted their entries for that Register.
The Executive Scheme of Delegations to Officers requires that no delegation shall be exercised by an Officer who has any kind of financial or other personal interest in a matter.
The Council’s Financial Procedure Rules and Contract Procedure Rules have been developed in line with achieving appropriate ethical standards. Detailed Financial Procedure Rules are also updated and issued at least annually to all staff with resource management responsibilities (e.g. budget holders) in order to provide further guidance on key aspects of the Council’s overall financial arrangements.
4.2 Ensuring that organisational values are put into practice and are effective The Council has agreed a set of core values to which all employees are required to adhere. These were developed in consultation with staff at all levels in the organisation. Each member of staff is assessed against these values as part of the Council Staff Personal Development Review Process.
The Council has a Confidential Reporting Policy in place which is available to staff via the intranet and is available to contractors, partners and the community.
As stated in paragraph 4.1.2 above, the Council has retained a separate Standards Committee with responsibility for promoting and maintaining high ethical standards for Members. During 2015/16 there were a total of 3 complaints that Members of the Council and a Parish Council had allegedly breached the Council’s Code of Conduct for Members. Following consultation with the Independent Persons, no investigation or any other action was required.
5. How the Council takes informed and transparent decisions which are subject to effective scrutiny and managing risk 5.1 Being rigorous and transparent about how decisions are taken and listening and acting on the outcome of constructive scrutiny. The Council has continued to publish a Notice of Forthcoming Decisions for the three months ahead which sets out the Executive Decisions to be taken, the name of the decision maker and the date of the decision. Executive meetings and Council Committees are open to the public (other than where exempt or confidential information is to
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120 be considered). Reports to meetings of the Executive and Committees are published on the Council’s website one week in advance of the meeting together with, in the case of Executive reports, their background papers. Executive, Council and Committee Minutes are published on the Council’s website as are the records of decisions taken by Portfolio Holders under their delegated powers.
The Council’s decision making arrangements are robust, effective and transparent. They include:
. The requirement that any decision by Members may only be taken following the receipt of an officer report which must outline the legal, financial/other resource, risk, policy, environmental and equality implications of the proposals to the Council (as well as an evaluation of possible alternative options wherever possible) before decisions can be taken (this also applies to the decision making protocol for Executive/Portfolio Holders). . All decisions are properly documented and recorded together with supporting data (e.g. background papers/report to members). . That in respect of legal and financial implications, the relevant professional advice has been included in the officer report being considered by Members. . A relevance test for equality is required to be conducted in respect of each decision. Where it is determined that the decision is relevant to the Council’s statutory equality duty an equality analysis must be conducted. The equality analysis may include consultation with those groups of persons with protected equality characteristics that may be adversely affected by the decision. The outcome of the analysis is set out in the final report so that the decision makers can have regard to the statutory equality duty in reaching their decision. . A comprehensive scheme of delegation for decision making is provided for relevant senior officers and this is annually updated.
Both the Members and Officers Codes of Conduct require the declaration of interests. In the case of Members, such declarations are recorded in the Minutes of the meetings at which they are made or (where applicable) on the record of Portfolio Holder decisions. The agenda for each Member meeting includes, before any business is to be considered, an agenda item under which Members are asked to disclose any interests they have in any business to be dealt with at that meeting.
The Council has dedicated Overview and Scrutiny Support in place which supports its five Overview and Scrutiny Committees. The Service Manager (Scrutiny and Member Support) is the Council’s Statutory Scrutiny Officer with responsibility for:
. Promoting the role of the Council’s Overview and Scrutiny Committees . Providing support to the Council’s Overview and Scrutiny Committees and their Members . Providing support and guidance to all Members and Officers of the Council in relation to the functions of the Council’s Overview and Scrutiny Committees
During 2015/16 no Executive Decisions were ‘called-in’ for consideration by the relevant Overview and Scrutiny Committees. The Overview and Scrutiny Committees’ Annual Report for 2015/16 contains information on the Committees’ work programmes for the year and was presented to Full Council on 20 July 2016.
The Council has a dedicated Audit Committee which is independent of the Executive and the Overview and Scrutiny functions. Its terms of reference accord with CIPFA guidance and its work is supported by the Chief Finance Officer and the Head of Internal Audit. The Audit Committee:
. Reviews governance and internal control arrangements (including an annual report of the Finance Portfolio Holder and Chief Finance Officer on the adequacy of financial administration in the Council); . Receives, considers and approves the annual statement of accounts and governance statement and action plan; . Receives and considers all reports from external audit on behalf of the Council and agrees any action plans to deal with issues identified by external audit; . Receives and approves the internal audit plan drafted by the Head of Internal Audit and considers progress against the plan during the year; . Receives and considers periodic and annual reports relating to the outcome of internal audit work. . The Committee has a responsibility to ensure there are effective risk management arrangements in place but currently does not receive any form of direct report regarding the Risk Management Strategy or the Corporate Risk Register. However, this will be addressed in 2016-2017. . Audit Committee Members receive appropriate training to enable them to carry out their role in relation to the annual statement of accounts. Further training in relation to the role and responsibilities of the Audit Committee members is planned for 2016-2017.
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The Council has transparent complaints procedures which are available on the Council’s website and paper copies can be found at key local authority locations. Any complainant not satisfied with the initial response has the opportunity to use other stages set out within the respective procedures.
Finally, if still not satisfied, complainants are advised how to complain to the Local Government Ombudsman (LGO). There is an annual report to the Council’s Executive on the findings of the LGO. Where a complaint is upheld, the complainant receives an apology from the Council and steps are taken to ensure any failure in service delivery/customer response is not repeated.
As part of the Council’s response to customer feedback, annual reports are presented to the Executive which outline the service improvements that have been implemented following the receipt of complaints.
5.2 Having good quality information, advice and support to ensure that services are delivered effectively and are what the community wants/needs The Council has well developed mechanisms for reporting community intelligence and in particular information from various releases from the Office for National Statistics following the 2011 Census. Profiles have been produced for all of the ward and parish areas within Bedford Borough. Using data released from the Index of Multiple Deprivation profiles have been published for small parts of the Borough (Lower Super Output Areas) which are classed within the 20% most deprived in England. These profiles are used by services to ensure effective planning of service provision. During 2015/16 we implemented a new public community intelligence portal (Local Insights) which publishes various data relating to the communities of Bedford Borough.
To support the Council in understanding its communities the Community Engagement Team carries out a number of activities to gather information on the needs of the Borough’s residents. The Bedford Borough Equality and Diversity Network is the independent advisory, scrutiny and consultative network on issues relating to age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex (gender) and sexual orientation for Bedford Borough. It supports the Council in its statutory responsibilities in regards to equality. It also works across the Bedford Borough Strategic Partners Board to support the development and implementation of its commitment to equality and diversity outlined in the Sustainable Community Strategy. The Team also supports a Community Network which is led by the voluntary sector.
The public sector equality duty requires the Council to consider how the decisions we make, and the services we deliver, affect people from different equality groups who share a ‘protected characteristic’. To do this we have a statutory requirement to publish equality information and develop equality objectives. Equality Objectives are integral to the Council’s Corporate Plan. To help meet our statutory requirements, we assess the impact of our activities (projects, policies, strategies, functions and services) on equality. This includes existing activities, new activities or those that are being changed. We do this by carrying out an equality analysis, previously called equality impact assessments.
The Council’s Decision Making Protocol and approved report template requires that the legal, policy, risk, resource, environmental, and equalities implications of any proposals being considered by Members are set out in the Officer report, which is required before any decision can be taken by Members. There is also a requirement that all reports to the Executive and Council Committees are cleared by the Finance and Legal Services Units in order to ensure that the legal and financial implications have been fully dealt with. Any additional advice provided at a meeting on the legal or financial implications of a proposed decision is recorded in the Minutes.
5.3 Ensuring that an effective risk management system is in place The Council has had a risk management strategy in place since 2003 in order to meet legal obligations (Regulation 4 of the Accounts and Audit Regulations 2015) and also best practice governance guidelines for local authorities. The Strategy assists Council officers and Members in how to identify risk, assess them in terms of likelihood and severity, consider options for action to mitigate/reduce risks considered needing action and for regularly reviewing and reporting on this risk management work. The Strategy also sets out key responsibilities in respect of risk management relating to:
. The Council’s Executive (including the appointment of an Executive Portfolio Holder specifically responsible for risk management overview) . The Council’s Management Team . Assistant Chief Executive (Chief Finance Officer) (as lead officer) . Assistant Directors and Heads of Service . Officer Corporate Risk Management Group . The Insurance and Risk Manager . The Head of Internal Audit . All Council staff. Bedford Borough Council 2015/2016 Statement of Accounts
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The Risk Management Strategy quantifies the Council’s appetite for risk as low in consideration of its statutory responsibilities and custodianship of public funds.
An officer Corporate Risk Management Working Group assists in the review of the Council’s Corporate Risk Register and promotes good risk management practice throughout the Council.
The following key risk management actions are undertaken by the Council:
(a) During 2015/16 the Strategic Risk Register was reviewed by the Council’s Senior Management Team and subsequently approved by the Finance Portfolio holder on 7th August 2015.
As evidence of corporate risk management influencing Council policy, reports to Executive/other Council Committees now include an equalities analysis where the report is proposing a change in service provision that may have an adverse impact on persons protected under equalities legislation.
(b) The Executive decision making protocol includes the requirement that risk implications are taken into account before any decision is made (including those relating to partnerships and with partners).
(c) A key element under risk management is the requirement for each Director, Assistant Director and Head of Service reporting directly to the Chief Executive to undertake a full and regular review of risks affecting their service area and the plans in hand to mitigate these risks. A specialist Risk Management Database is used to facilitate the review and for recording, reporting and managing identified risks. Operational risk registers are in place for each service area. The outcome of the review should be considered by the relevant Executive Portfolio Holder and, if approved, fed into the corporate/budget planning process each year in line with other data from revised Service Plans. The risks and actions identified should also be added to the Risk Register. It is important that this review continues to be undertaken annually so as to ensure that new and emerging risks, in particular are captured and recorded appropriately.
(d) The Council’s resource allocation process includes the identification of risks to be taken into account before:
. Budgets are approved relating to capital and revenue needs (including insurance); . The level of reserves is agreed; . The medium term financial strategy is agreed; . Decisions are taken on capital investment schemes.
(e) The Council’s Senior Management Team is responsible for ensuring effective health and safety measures are in place in each Council Department (and regularly reviewed) in order to reduce such risks to the Council and its workforce. There is also a Corporate Safety Steering Group chaired by the Executive Director for Environment and Sustainable Communities with representatives from all Directorates which promotes and co-ordinates health and safety risk management across the organisation as a whole. There is an agreed programme of regular audits of health and safety management arrangements in place which is conducted by the Corporate Safety team.
(f) The Council has a corporate Resilience Plan for the Borough to deal with local emergencies in liaison with major partners (e.g. the Police and Fire Service).
It is also a requirement that there are business continuity plans in place for all Council services/functions to ensure arrangements are in hand to be able to continue to provide these services in the event that an incident or incidents) result in the normal service being materially affected or curtailed. These plans are reviewed and tested each year to ensure that they are effective.
(g) It is the Council’s practice to insure all risks where the insurance market provides cover and it is considered cost effective to have insurance in place. Following a full tendering exercise during early 2016 the Council entered into a five year long-term agreement with Zurich Municipal, commencing on 1 April 2016. The proposed insurance arrangements for the forthcoming year are reported to the Finance Portfolio Holder for approval each year in advance of the start of the financial year.
The Council maintains an Insurance and Risk Management Financial Reserve (in addition to an insurance provision) in the event that unexpected expenditure arises in order to mitigate risks. An actuarial review of the level of reserves and provision is commissioned periodically and at the last review undertaken in 2014/15 the actuary reported that the level of reserves and the budgeted on-going contribution to the reserve were considered satisfactory. The Council received notice during 2012/2013 that, at the meeting of the Municipal Mutual Insurance (MMI) Board of Directors held on 13 November 2012, a decision was
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taken that triggered the Scheme of Arrangement with creditors because a solvent run off of claims could no longer be foreseen. Under the Scheme of Arrangements creditors, including the Council, are required to repay a proportion of previous insurance settlements. During 2013/2014 the Council received an invoice from the administrators of the Scheme for a levy at 15%, and during April 2016 a further invoice for a levy at 10% was received and paid (i.e. 25% in total paid to date). There remains the likelihood for potential further levies and the Council continues to hold funds in reserve for this eventuality.
The Strategic Risk Register sets out all strategic risks that have been identified/assessed by way of risk value and is regularly reviewed and updated. An audit of the Council’s Risk Management arrangements has concluded that further work needs to be undertaken to ensure that major projects, as identified by the Senior Management Team, should be recorded in the JCAD System and Value for Money risks through procurement and contracting arrangements should also be recognised in the strategic risk register. It also needs to be ensured that the registers are monitored on a regular basis by managers and Directors using the available reporting functionality of the JCAD system.
The Council has a Confidential Reporting (Whistleblowing) Policy in place to which Officers, staff and all those contracting with or appointed by the Authority have access. The Policy is available on the Council’s website. In 2015/16 one complaint was made and investigated under this Policy.
5.4 Using their legal powers to the full benefit of the citizens and communities in their area All reports considered by the Council’s decision-making bodies are required to outline the legal, financial, equalities, environmental and policy implications. The Council has responded to the government’s localism agenda by publishing guidance relating to the Community Right to Challenge and Community Right to Buy (Assets of Community Value). So far five assets have been listed. The latter process supports the Council’s Community Asset Transfer Policy which is used to consider requests to transfer its own assets.
All reports to Members are required to include the legal implications of the proposals under consideration and additional legal advice provided at meetings is recorded in the Minutes of those meetings.
6. How the Council develops the capacity and capability of members and officers to be effective
6.1 Making sure that members and officers have the skills, knowledge, experience and resources they need to perform well in their roles The Council provides a structured induction programme for new members designed to introduce them to the Council and being a Councillor. This is reviewed prior to each election to ensure that it continues to be relevant and appropriate to the needs of new Members.
On an ongoing basis, the Council provides regular training and development activities for Members during the year to meet a variety of personal and professional needs, as well as the Council’s corporate requirements. This includes ensuring Members have been trained on the roles and responsibilities required of them, be it on the Executive, or as Members of Overview and Scrutiny Committees or the Council’s Regulatory Committees, such as the Planning Committee and the Licensing Committees In respect of which Members are required to complete specified training to enable to serve as Committee Members.
Comprehensive induction arrangements are in place for all new Members of staff, with core induction training being provided corporately. ‘On the job’ training is provided for new staff and for staff undertaking new roles and the Council’s induction arrangements include a requirement to identify and meet identified training needs of new staff. The Council’s Performance Development and Review process ensures that for each member of staff a review is carried out of training undertaken during the previous year and that training and development needs for the coming year are identified.
6.2 Developing the capability of people with governance responsibilities and evaluating their performance as individuals and as a group The Chief Finance Officer and the Monitoring Officer are able to call on the skills and experience of staff within their respective service areas to support them in undertaking their statutory roles.
The statutory roles of the Chief Finance Officer and the Monitoring Officer are set out in full in the Council’s Constitution which is available to all staff and Members both in electronic and hard copy format.
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Both the Chief Finance Officer and the Monitoring Officer are members of the Council’s Corporate Management Team.
Staff training and development needs are formally assessed annually through the Council’s Performance Development and Review system.
Reviews of the training and development needs of individual Members are carried out within the respective political Groups and as appropriate are reflected in the Member Training and Development Programme which is developed annually.
7. HOW THE COUNCIL ENGAGES WITH LOCAL PEOPLE AND OTHER STAKEHOLDERS TO ENSURE ROBUST ACCOUNTABILITY
7.1 Exercising leadership through a robust scrutiny function which effectively engages local people and all local institutional stakeholders, including partnerships, and develops constructive accountability relationships Bedford Borough Council’s scrutiny function has four Overview and Scrutiny Committees, which are:- . Children’s Services . Adult Services and Health . Corporate Services . Environment and Sustainable Communities . In addition the Council has a dedicated Budget Scrutiny Committee whose role is to scrutinise the budget proposals each year.
The Overview and Scrutiny function engages with local people and all local institutional stakeholders, including partnerships in a variety of ways. Some examples include:- . Adult Services and Health OSC established a Sub-Committee to review health service provision at Yarls Wood Immigration Removal Centre which involved both local and national groups and agencies. . Children’s Services OSC received a presentation from the Bedford Parent Carer Forum and also spoke with schools about support for Young Carers. . Corporate Services OSC met with the Director of the local Bedford BID and also considered how the Council’s Customer Service Centre was working. . Environment and Sustainable Communities OSC met with Bedfordshire Police to discuss community safety and also with local representatives of the “Door to Door” transport service.
There is a Joint Health Overview and Scrutiny Committee with Central Bedfordshire, established to scrutinise the Bedfordshire Strategic Health Services Review. This has involved working not only with the local Bedfordshire Clinical Commissioning Group, but also NHS England, Monitor, the Trust Development Authority as well as local health providers such as Bedford Hospital.
The scrutiny function also seeks to engage with local people and stakeholders in the development of its work programme. Each year a consultation exercise is carried out involving all local parish councils, the Bedford Partnership contact group of 300 local community groups, the Citizens Panel and the Council’s consultation website facility, asking people to suggest ideas for scrutiny reviews. Each committee considers those issues in its terms of reference as to whether these should be added to the work programme. A number of items have been added to work programmes in this way. Feedback on the outcome of the process is provided to all those who contribute an idea.
Involving local people and stakeholders in scrutiny reviews is also built in to the scrutiny review process through the use of a scoping template. This ensures that when a committee is carrying out a review that it considers who it wishes to contribute to the work of the committee and provide evidence.
The Council’s Overview and Scrutiny Committees produce an annual report each June/July on their work during the preceding Municipal Year, which is considered by the Full Council and published on the Council’s website.
7.2 Taking an active and planned approach to dialogue with and accountability to the public to ensure effective and appropriate service delivery whether directly by the authority, in partnership or by commissioning The Council’s adopted Consultations Strategy outlines the steps that are taken to ensure that the authority has proper dialogue with the public. A process called ‘stakeholder mapping’ is recommended to ensure that all
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125 appropriate groups, organisations or individuals are offered the opportunity to take part in consultations relating to proposed service changes.
In addition to Bedford Borough Strategic Partners Board there are a number of networks (e.g. Parish & Town Council Community and Equality & Diversity) and service user partnership boards which also enable service changes to be scrutinised properly and allow opportunities for appropriate dialogue.
To meet our equality duties we also ensure that we assess the impact of our activities (projects, policies, strategies, functions and services) on equality. This includes existing activities, new activities or those that are being changed. We do this by carrying out an equality analysis the findings of which are reported to the Council’s decision making bodies.
As part of the Council’s approach to accountability and in response to the Government’s Transparency Code, we publish a range of information relating to our spending, decision-making and staff pay.
7.3 Making the best use of human resources by taking an active and planned approach to meet responsibilities to staff The Council acknowledges that our workforce needs to feel engaged and motivated in order to meet the needs of our community and service users. In addition to regular team meetings and briefings, corporate communications through Connect and One Team make sure that employees are kept informed, the staff suggestion scheme enables staff to put forward suggestions for business improvements and the ‘GEM’ scheme is an opportunity to recognise and reward outstanding contribution.
Health, safety and wellbeing are high priorities and support is offered to employees through the Occupational Health and Employee Support service. Employment policies are written to reflect legislative requirements, reflect best practice and aim to provide employees with an appropriate work life balance.
Principals of fairness and equity are upheld through the Council’s pay policy, job evaluation and grading system and in 2014 the Council increased salaries of the lowest paid workers to reflect the ‘living wage’. A bi-annual staff survey provides employees an opportunity to express their views about working for the Council and an opportunity for Management Team to consider how to increase levels of employee engagement.
The Council is an ‘Investors in People’ employer and has also achieved the two ticks ‘Positive about Disabled People’ award to demonstrate commitment to employees with a disability. The Council works constructively with its recognised trade unions to engender positive and harmonious industrial relations.
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APPENDIX B (i)
2014/2015 REVIEW OF ACTION PLAN/KEY MILESTONES
Action Timescale Lead Status Update Officer(s) 1 Maintain review of Council On-going ACE(GOV & Complete The Constitution is reviewed on an Constitution. HR) ongoing basis to ensure compliance with changing legal requirements and the latest amendments were approved by
Full Council on 23 March 2016. 2 Review and re-issue the 31.12.15 ACE(CFO) In Progress Completion of this review has been Council’s ICT Strategy delayed as it will need to be informed (30.9.16) by the outcome of the Total Operating Model work undertaken by PWC (Price Waterhouse Coopers).
3 Review and 31.12.15 ACE(CFO) Complete The Computer User Security Policy re-issue the has been reviewed and updated to Council’s ensure compliance with the Public Computer Services Network connectivity User Security standards and was issued to all staff Policy and also published on the Council’s intranet in March 2016.
4 Review and update 31.10.15 ACE(GOV & Complete The revised Contract Procedure Rules were approved by Full Council Contract Procedure HR) & Rules ACE(CFO) on 23 March 2016.and issued to all relevant Borough Staff and published on the Intranet Governance section.
5 To review the Council’s 31.03.16 All Heads of Complete The Council’s Risk Management Risk Management Service Strategy was reviewed and a revised arrangements in order to Strategy approved by the Executive at ensure that the current its meeting of 5 November 2015. Strategy meets the The Strategic Risk Register was Council’s requirements subject to a detailed review by and is supported by appropriate Risk Management Team during 2015 and a Registers which are kept revised register approved by up to date Executive Decision of the Finance Portfolio Holder on 7 August 2015. A review of operational risk registers has been completed and the revised register will be subject to regular review as required by the nature of risk for each operational area.
6 Review and re-issue the 31.03.16 ACE(GOV & In Progress The Knowledge and Information Information Governance HR) Strategy has been updated and (31.5.16) Strategy reviewed by members of the Information Governance Board (IGB) and will be formally adopted at the next IGB meeting in May 2016.
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APPENDIX B (ii)
2015/2016 ACTION PLAN/KEY MILESTONES
Action Timescale Lead Officer(s)
1 Maintain review of the Council’s On-going Assistant Chief Executive (Governance Constitution and the Code of Corporate &HR) Governance.
2 Review and re-issue the Council’s ICT 30.09.16 Assistant Chief Executive & Chief Strategy. Finance Officer
3 Review and re-issue the Council’s 30.09.16 Assistant Chief Executive & Chief Computer User Security Policy. Finance Officer
4 The Financial procedure Rules to be 30.09.16 Assistant Chief Executive & Chief reviewed and updated as necessary. Finance Officer
5 The Audit Committee to review the 31.03.17 Assistant Chief Executive & Chief Council’s Risk Management arrangements Finance Officer in order to ensure that the current Strategy meets the Council’s requirements and is supported by appropriate Risk Registers which are kept up to date.
6 Review and re-issue the Information 31.05.16 Assistant Chief Executive (Governance & Governance Strategy. HR)
7 Ensure the Audit Committee receives 31.12.16 Assistant Chief Executive & Chief further training in line with the CIPFA Code Finance Officer of Practice.
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12) Glossary of Terms For the purpose of this Statement of Accounts, the following definitions have been adopted: Accounting Period The period of time covered by the accounts, being 1 April to 31 March for Bedford Borough Council. Accrual A sum included in the final accounts attributable to the accounting period but for which payment has yet to be made or income received. Amortisation Amortisation is the gradual writing-off in value of an asset over time – similar to depreciation. More specifically, this method measures the consumption of the value of intangible assets, such as software or a copyright. Appointed Auditors These are the external auditors appointed by the Audit Commission. They may be from the Audit Commission’s own operations directorate or from a major accountancy firm. The Council’s current approved auditors are from the Audit Commission’s own operations directorate. Asset An item having value measureable in monetary terms. Assets can either be defined as long term or current. A long term asset (e.g. land and buildings) has use and value for more than one year whereas a current asset (e.g. stocks or short-term debtors) can readily be converted into cash. Audit of Accounts An independent examination of the Council’s accounts to ensure that the relevant legal obligations, accounting standards and codes of practice have been followed. Balance Sheet A financial statement that summarises the Council’s assets, liabilities and other balances at the end of the accounting period. Billing Authority A local authority charged by statute with responsibility for the collection of and accounting for Council Tax and Non- Domestic rates (NNDR; business rates). Bedford Borough Council is the Billing Authority for its area. Budget A budget is a financial statement that expresses a council’s service delivery plans and capital programmes in monetary terms. Capital Expenditure Expenditure to acquire or enhance assets that will be used to provide services for more than one year. Capital Financing Capital Financing is the generation of funding to pay for capital expenditure. There are various methods of financing capital expenditure including borrowing, direct revenue financing, usable capital receipts, capital grants, capital contributions and revenue reserves. Capital Programme The capital schemes the Council intends to carry out over a specified time period. Capital Receipt The proceeds from the disposal of land and other assets, as long as the amount is £10,000 or more. These can be used to finance new capital expenditure. They cannot be used for revenue purposes. Cashflow Statement A statement that summarises the inflows and outflows of cash within the Council’s bank accounts. CIPFA Chartered Institute of Public Finance and Accountancy. The principal accountancy body dealing with local government finance. Collection Fund A separate fund maintained by a billing authority that records the expenditure and income relating to council tax and Non-Domestic Rates, including the amounts raised on behalf of Precepting Authorities. Community Assets Assets that the Council intends to hold in perpetuity, that have no determinable useful life and that may have restrictions in their disposal. Examples of community assets are parks and historical buildings.
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Community Infrastructure Levy (CIL) The Community Infrastructure Levy is a planning charge, introduced by the Planning Act 2008 as a tool for local authorities in England and Wales to help deliver infrastructure to support the development of their area. It came into force on 6 April 2010 through the Community Infrastructure Levy Regulations 2010. Contingent Liability/Asset Contingent Liability: a possible obligation arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the Council’s control. Alternatively, a present obligation arising from past events where it is not probable that a transfer of economic benefits will be required or the amount of that obligation cannot be measured with sufficient reliability. Contingent Asset: a possible asset that arises from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the Council’s control. Core Financial Statements The main accounting statements of the Council comprising the Movement in Reserves Statement, Comprehensive Income and Expenditure Statement, Balance Sheet and Cash Flow Statement. Council Tax This is one of the main sources of income to a local authority. Council tax is levied on households within its area by the billing authority and the proceeds are paid into the Collection Fund for distribution to precepting authorities and for use by the billing authorities own General Fund. Creditor Amounts owed by the Council for works done, goods received or services rendered before the end of the accounting period but for which payments have not been made by the end of that accounting period. Debtor Amounts due to the Council for works done, goods received or services rendered before the end of the accounting period but for which payments have been received by the end of that accounting period. Depreciation The measure of the benefits a long term asset has consumed during the financial period. Consumption includes the wearing out, using up or other reduction in the useful life of the asset whether arising from use, passage of time or obsolescence through either changes in technology or demand for the goods and services produced by the asset. Estimates Where definitive figures are not available/cannot be found, estimates are used to produce the statement of accounts. These estimates are based on the best information available at the time of production. Exceptional Items Material items which derive from events or transactions that fall within the ordinary activities of the Council and which need to be disclosed separately by virtue of their size or incidence so that the financial statements give a true and fair view. Extraordinary Items Material items possessing a high degree of abnormality which derive from events or transactions that fall outside the ordinary activities of an authority and which are not expected to recur. Finance Lease A lease which transfers substantially all of the risks and rewards of ownership of a fixed asset to the lessee. Financial Year The period of time covered by the accounts, being 1 April to 31 March for Bedford Borough Council. Government Grants Grants made by central government towards either revenue or capital expenditure to help with the cost of providing services and capital projects. Some government grants have restrictions on how they may be used whilst others are general purpose. Gross Expenditure The total cost of providing the Council’s services before taking into account income from fees and charges and government grants. Housing Benefits A system of financial assistance to individuals towards certain housing costs administered by local authorities and subsidised by central government.
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Impairment This is a reduction in value of a fixed asset as shown in the balance sheet to reflect its true value. Impairment of Debtors Outstanding debtors as at the Balance Sheet date have been impaired to reflect the uncertainty of the asset being realised. Income This is the money that the Council receives or expects to receive from any source, including fees, charges, sales, grants and investment interest. Income and Expenditure Account An account which summarises resources generated and consumed in the provision of services for which the Council is responsible. Infrastructure Assets Fixed assets belonging to the Council which do not necessarily have a resale value (e.g. highways) and for which a useful life span cannot be readily assessed. Intangible Assets These are non-financial fixed assets that do not have physical substance but are identifiable and are controlled by the authority through custom or legal rights e.g. computer software. International Financial Reporting Standards (IFRS) International Financial Reporting Standards cover particular aspects of accounting practice and set out the correct accounting treatment for assets and liabilities. These have been applied to Local Authorities for the first time in 2010/11. Compliance with these statements is mandatory and any departure from them must be disclosed and explained. Liability A liability arises when the Council owes money to others and it must be included in financial statements. Long Term Assets Tangible assets that yield benefits to the Council and the services it provides for a period of more than one year. Long Term Investments These are investments intended to be held for use on a continuing basis in the activities of the authority. They should be classified as long term only where an intention to hold the asset for longer than one year can be clearly demonstrated. Minimum Revenue Provision (MRP) The minimum amount which must be charged to the revenue account by statute each year for the repayment of borrowing. National Non-Domestic Rate (NNDR) A standard rate in the pound set by the Government payable on the assessed rateable value of properties used for business purposes. Also known as Non-Domestic or Business rates. Operating Lease A lease which does not transfer substantially all of the risks and rewards of ownership of a fixed asset to the lessee. Precept The levy made by Precepting authorities on billing authorities. Precepting Authorities Within Bedford Borough, the precepting authorities are Bedford Borough Council, the Police & Crime Commissioner for Bedfordshire, Bedfordshire Fire & Rescue Authority, and Parish Councils. Prior Period Adjustments These are material adjustments applicable to prior years arising from changes in accounting policies or from the correction of fundamental errors. A fundamental error is one that is of such significance as to destroy the validity of the financial statements. They do not include normal recurring corrections or adjustments of accounting estimates made in prior years. Provision An amount set aside for liabilities or losses that are certain to arise but owing to their inherent nature cannot be quantified with any certainty.
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Prudence This is one of the main accounting concepts. It ensures that an organisation only includes income in its accounts if it is sure it will receive the money. Prudential Code The Prudential Code, introduced in April 2004, sets out the arrangements for capital finance in local authorities. It constitutes ‘proper accounting practice’ and is recognised as such by statute. Rateable Value The annual assumed rental value of a property that is used for business purposes. Related Parties Two or more parties are related parties when at any time during the financial period:- . One party has direct or indirect control of the other party . The parties are subject to common control from the same source . One party has influence over the financial and operational policies of the other party to an extent that the other party might be inhibited from pursuing its own interests . The parties, in entering a transaction, are subject to influence from the same source to such an extent that one of the parties to the transaction has subordinated its own interests Related Party Transactions The transfer of assets, liabilities or services between the Council and its related parties. Reserves The accumulation of surpluses and deficits over past years. Reserves of a revenue nature are available and can be spent or earmarked at the discretion of the Council. Residual Value This is the net realisable value of an asset at the end of its useful life. Revaluation Reserve An account containing any unrecognised gains or losses arising from the revaluation of Property, Plant and Equipment assets held by the Council. When assets are sold, the gain or loss on sale will be recognised in the Comprehensive Income and Expenditure Statement. Revenue Expenditure The day to day expenses associate with the provision of services. Revenue Expenditure funded from Capital under Statute Capital expenditure which may be properly treated as such, but which does not result in the creation of an asset on the Council’s Balance Sheet. An example would be capital expenditure on improvement grants. Revenue Support Grant A grant paid by the Government to councils, contributing towards the costs of their services. Section 106 Agreements (S106) Section 106 (S106) of the Town and Country Planning Act 1990 allows a Local Planning Authority (LPA) to enter into a legally-binding agreement or planning obligation with a landowner in association with the granting of planning permission. The obligation is termed a Section 106 Agreement. These agreements are a way of delivering or addressing matters that are necessary to make a development acceptable in planning terms. They are increasingly used to support the provision of services and infrastructure, such as highways, recreational facilities, education, health and affordable housing. Section 256 Agreements (S256) A S256 Agreement is the form of legal agreement giving the NHS powers to transfer funding to the Council for activities with health benefits. Section 278 Agreements (S278) Agreements for the private-sector funding of works on the strategic road network are made under section 278 of the Highways Act 1980, as amended by section 23 of the New Roads and Street Works Act 1991. These agreements provide a financial mechanism for ensuring delivery of mitigation works identified and determined as necessary for planning permission to be granted. Section 75 Agreements (S75) Section 75 of the National Health Service Act 2006, enables joint working arrangements between NHS bodies and local authorities. Pooled funds enable health bodies and local authorities to work collaboratively to address specific local health issues.
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SERCOP Service Reporting Code of Practice. The system of local authority accounting and reporting which reflects, in particular, the duty to secure and demonstrate ‘best value’ in the provision of services. SERCOP lays down the required content and presentation of costs of service activities. Stocks and Work in Progress These comprise of one or more of the following categories: goods or other assets purchased for resale; consumable stores; raw materials and components purchased for incorporation into products for sale; products and services in intermediate stages of completion; long term contract balances and finished goods. Supplementary Financial Statements Additional financial statements comprising the Collection Fund and Pension Fund. Temporary Investment Money invested for a period of less than one year. Trust Funds Funds administered by the Council for such purposes as prizes, charities and specific projects usually as a result of individual legacies and donations. Useful Life This is the period over which an organisation will derive benefits from the use of a fixed asset. Work in Progress The value of works that has been completed or is partially complete at the end of the accounting period that should be included in the financial statements.
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13) Independent Auditor’s Report The Independent Auditor’s report commences on page 134.
Bedford Borough Council 2015/2016 Statement of Accounts
Ernst &Young LLP Tel: + 44 2380 382000 Wessex House Fax: + 44 2380 382001 EY 19 Threefield Lane ey.com Southampton Building a better so14 3Q8 working world
Independent Auditor's Report to the Members of Bedford Borough Council
Opinion on the pension fund financial statements
We have audited the pension fund financial statements for the year ended 31 March 2016 under the Local Audit and Accountability Act 2014. The pension fund financial statements comprise the Fund Account, the Net Assets Statement, pension fund accounting policies and the related notes 1 to 22. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16.
This report is made solely to the members of Bedford Borough Council in accordance with Part 5 of the Local Audit and Accountability Act 2014 and for no other purpose, as set out in paragraph 43 of the Statement of Responsibilities of Auditors and Audited Bodies published by Public Sector Audit Appointments Limited. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the authority and the authority's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the Chief Finance Officer and auditor
As explained more fully in the Statement of the Chief Finance Officer's Responsibilities set out on page 13, the Chief Finance Officer is responsible for the preparation of the Authority's Statement of Accounts, which includes the pension fund financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16, and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the fund's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Chief Finance Officer and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Statement of Accounts 2015/16 to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
The UK firm Emsl & Vounq ;.LP is a limited liability partnership regislered m England antl 1Vales with registered number OC300001 and is a memtrer flrm of Ernst 8 Young Global Limitetl. A list of members' names is avatlable for insGection at 1 More Lc~don Place. Lordon SE 1 2AF,;he (i~m's priraFal plxe of business and registered office Emst 8 Young LLP is a multf-tlisciplinary practice arC s au~hoii~ed a^tl regulated D'; the Institute o! Ch.lrlered Acmunlanls ir. Englantl antl lNales, the Solicitors Regulation Au;honty and other regulators. Pur~her details can 5e IounA at n t t p://ww w.ey.com/U K /e n/Home/Legd I. Ernst &Young LLP Tel: + 44 2380 382000 Wessex House Fax: + 44 2380 382001 EY 19 Threefield Lane ey.com Southampton ~uiidinc~ a b2§~er 5014 3QB Wo~6ii~c~ wo~l~ Opinion on financial statements
In our opinion the pension fund financial statements: • give a true and fair view of the financial transactions of the pension fund during the year ended 31 March 2016 and the amount and disposition of the fund's assets and liabilities as at 31 March 2016; and • have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16.
Opinion on other matters
In our opinion, the information given in the Statement of Accounts 2015/16 for the financial year for which the financial statements are prepared is consistent with the financial statements.
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Tim Sadler(Executive Director) for and on behalf of Ernst &Young LLP, Appointed Auditor Southampton Date: ,Z~ c~~u~~ 2~jj(
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