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CONTENTS

Page ACCOUNTS INTRODUCTION

1) Explanatory Foreword 3 A guide to significant matters in the accounts

2) Statement of Responsibilities for the Statement of Accounts 7 Setting out the principal financial responsibilities

CORE FINANCIAL STATEMENTS

3) Movement in Reserves Statement 8 Shows the movement in the year between the different reserves held by the Council

4) Comprehensive Income and Expenditure Statement 9 A summary of the accounting cost in the year of providing services in accordance with Internal Financial Reporting Standards (IFRS), rather than the amount to be funded from taxation

5) Balance Sheet 10 A summary of assets, liabilities and reserves of the Council at year end

6) Cash Flow Statement 11 The inflows and outflows of cash for operating, financing and investing purposes

7) Notes to the Core Financial Statements 12 Supplementary information to support the core financial statements, including Accounting Policies

SUPPLEMENTARY STATEMENTS

8) Collection Fund 78 A summary of Council Tax and National Non-Domestic Rates collection performance, including supporting notes

9) Pension Fund 82 The accounts of the Pension Fund – administered by the Council, including supporting notes

10) Annual Governance Statement 108 A statement on the governance controls in place within the Council

OTHER

11) Glossary of Terms 125 An explanation of accounting terms used within these accounts

12) Independent Auditor Reports 130 There are two reports that give an independent statement on the accounts of the Council and the Pension Fund

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1) EXPLANATORY FOREWORD

a) Introduction

2013/14 has been another challenging year for Bedford Borough Council with increasing demand for services at the same time as budgets being constrained. The Council has continued to be faced with external challenges from the impact of the credit crunch, recession, inflation fluctuations and the global financial market issue. Alongside this, demand led pressures and other one-off expenditure has required careful management of the financial situation facing the Council.

b) Outturn Position

The Council monitors its budget on a monthly basis against the impact on the General Fund (and therefore Council tax) that reflects the Council’s management structure. The Council is required to report its Statement of Accounts using International Financial Reporting Standards (IFRS) that follow a prescribed layout. This means that there are significant differences when comparing the financial position reported under IFRS from that reported to Executive throughout the year. Note 28 aims to assist in explaining these differences.

Due to various statutory instruments the Council is required to charge various 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.

The outturn for 2013/14 shows an underspend of £1.279 million. This reflects all expenditure incurred and income due and relevant year end accounting entries, including transfers to existing reserves or provisions.

During 2013/14 the Executive has been presented with regular reports showing Revenue and Capital Budget trends and a number of corrective actions have been taken during the year to ensure stability of those budgets.

The table below sets out the revenue outturn position for each Directorate, as reported to Executive on 25 June 2014.

Net Net Net Budget Outturn Variance Directorate £million £million £million Adult Social Care 46.637 46.084 -0.553 Chief Executives’ 6.735 6.247 -0.488 Children's Services, Schools & Families 26.705 27.747 1.042 Finance & Corporate Services 14.758 13.727 -1.031 Environment & Sustainable Communities 32.926 32.124 -0.802 Public Health 0 0 0 Operational Net Cost 127.761 125.929 -1.831 Capital Financing 8.380 7.563 -0.817 Contingency 0 -0.013 -0.013 Corporate Budgets 10.634 12.884 2.249 Total 146.775 146.363 -0.411 Financing -146.775 -147.642 -0.868 % of Total Net Budget 0 -1.279 -0.87%

It is best practice to ascertain a risk assessed level of all reserves for review by the Council. This was undertaken and the exercise indicated that the General Fund balance should be within the range of £7.5 million to £10.1 million. The assessment takes into account past experience of budget pressures, demographic pressures, legislative impacts and the extent to which services are reliant on external funding among others.

It was approved by the Executive on 25 June 2014 that the whole of the General Fund surplus of £1.279 million will be transferred to two reserves. The Transitional Cost Reserve has been increased by £0.783 million and the Transformation Reserve has been increased by £0.496 million to fund future IT investment.

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The projected General Fund balance of £8.205 million at the year end is well within the range of the risk profile for General Fund, which enables greater flexibility with budget planning going forward.

Supplementing this risk assessment are other factors that mitigate financial pressures: Continuation in 2014/15 of the contingency at £2 million; Embedded budget monitoring culminating in monthly management reports and Portfolio Holder budget review and challenge meetings; Revenue and capital budget trend reports to the Executive at regular intervals.

The risk assessed level of General Fund Reserve was recommended to the Executive for approval on 25 June 2014.

The capital outturn position for 2013/14 is shown in the table below. This identifies a total net underspend for the year amounting to £0.302 million.

Directorate Net Net Net Budget Outturn Variance £million £million £million Adult Social Care 0.213 0.124 -0.089 Chief Executive 3.588 3.595 0.007 Children's Services, Schools & Families -0.747 -0.734 0.013 Finance & Corporate Services 0.489 0.305 -0.184 Environment & Sustainable Communities 2.095 2.046 -0.049

Total 5.638 5.336 -0.302

Capital can be funded from a number of sources, including capital grant & contributions, revenue budgets, capital receipts and borrowing. A breakdown of the Council’s financing of the capital programme is shown in Note 38 – which shows expenditure on a gross expenditure basis.

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.

Further information on both the revenue and capital monitoring and outturns are available in the report presented to the Executive on 25 June 2014, which can be accessed on the Council’s website.

c) Commentary on Statement of Accounts

Movement in Reserves Statement (page 8)

This provides a summary in the movements of all the different reserves of the Council. The movement in 2013/14 shows that overall reserves have increased by £20 million, which equates to the net worth of the Council. Within this, usable reserves, which are cash-backed, reduced by £1.9 million, with the General Fund balance remaining unchanged at £8.2 million.

Comprehensive Income and Expenditure Statement (page 9)

This shows a surplus of £20 million, however, this contains a number of items which are subsequently reversed out (due to statutory requirements) because they would otherwise have a dramatic year-on-year impact on the level of Council Tax. This includes capital asset revaluations, depreciation and Pensions IAS19 adjustments.

Balance Sheet (page 10)

The Council has long term assets of £485 million and long term liabilities of £341 million. There are also current assets of £95 million and current liabilities of £54 million.

The balance is supported by reserves and balances of £185 million and represents the total net worth of the Council, which saw an increase of £20 million over the past twelve months.

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Long Term Assets There is an increase of £25 million on Long Term Assets between the opening and closing balance sheet figures, which was mainly due to significant upward revaluations for Investment Property and operational land and buildings.

Long Term Liabilities Long term liabilities increased by £8 million, mainly due to increases in the Pension Liability of £7 million and Capital Grants received in advance of £5 million. These increases and are offset by reduced provisions and long term borrowing.

The majority of the Council’s long-term borrowing is with the Public Works Loans Board and stands at £83 million, a reduction of £3 million. This reflects the Council on-going strategy of not replacing matured borrowing and relying on internal borrowing.

Reserves The total net worth of the Council has increased by £20 million with Usable reserves decreasing by £2 million and Unusable Reserve increasing by £22 million. Unusable reserves are not cashable, and a breakdown of these amounts is given in Note 24.

The General Fund balance at the year-end is within the range of the risk profile for General Fund, which enables greater flexibility with budget planning going forward into 2013/14 and beyond.

Cashflow Statement (page 11)

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 2013/14 cash flow statement illustrates an increase in operating cash and cash equivalents due to increased working capital balances and unutilised capital financing. This increase is offset by negative cash flows relating to financing and investing activities which reflects the decision to use internal borrowing to finance the net costs of the capital programme.

Notes to the Core Financial Statements (page 12)

These notes provide extra information to support the Core Financial Statement and to provide a greater understanding.

Collection Fund (page 78)

This statement represents the transactions of the Collection Fund, which is a statutory fund under the provisions of the Local Government Finance Acts 1988 and 1992. 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. The balance accounted for but not required by regulation to be credited to the General Fund, is held in the Collection Fund Adjustment Account.

2013/14 is the first year in which National Non-Domestic Rates are retained by the major preceptors and not operated as an agency pool on Central Government’s behalf. With effect from 1 April 2013 the Non-Domestic Rates yield from a billing authority area is shared between local and central government. In unitary authority areas such as Bedford Borough, the Council will retain 49% of the rates yield. There is inherent volatility in the Non-Domestic rates yield as the tax base is based on 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. The Council will benefit, in future, from any growth in yield, subject to a levy on disproportionate gains, but will also share the risk of any negative volatility in yield, 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.

Pension Fund (page 82)

Bedford Borough Council administers the Local Government Pension Fund, which looks after the current and future pension entitlements on behalf of 136 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 £77m (5.3%) compared to 31 March 2013, which is in line with the other local authorities in England and Wales. Page 6 of 133

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 108)

Councils are required to publish an Annual Governance Statement (AGS) as part of their Statement of Accounts, in accordance with Regulation 4 of the Accounts and Audit (England) Regulations 2011. The AGS is focused around the six core principles set out in the CIPFA/SOLACE Framework ‘Delivering Good Governance in Local Government’ listed below: Focusing on the purpose of the authority and on outcomes for the community and creating and implementing a vision for the local area; Members and officers working together to achieve a common purpose with clearly defined functions and roles; Promoting values for the authority and demonstrating the values of good governance through upholding high standards of conduct and behaviour; Taking informed and transparent decisions which are subject to effective scrutiny and managing risk; Developing the capacity and capability of members and officers to be effective; and Engaging with local people and other stakeholders to ensure robust public accountability. Page 7 of 133

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 2014 and income and expenditure for the year ended 31 March 2014.

Signed: Date: 23 September 2014 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 23 September 2014.

Signed: Date: 23 September 2014 Councillor Yasin, Chair of Audit Committee Page 8 of 133

3) MOVEMENT IN RESERVES STATEMENT

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. The Net (Increase) /Decrease before Transfers to Earmarked Reserves line shows the statutory position before any discretionary transfers to or from earmarked reserves undertaken by the Council.

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 2012 -8,205 -30,273 0 -3,558 -42,036 -169,526 -211,562

Movement in Reserves in 2012/13

(Surplus) or deficit on provision of 11,931 11,931 11,931 services Other Comprehensive Expenditure 0 35,041 35,041 and Income Total Expenditure and Income 11,931 0 0 0 11,931 35,041 46,971

Adjustments between accounting -17,359 -2,398 -19,756 19,756 0 basis & funding basis under regulations (Note 8)

Net Increase/Decrease before -5,428 0 0 -2,398 -7,826 54,797 46,971 Transfers to Earmarked Reserves

Transfers to/from Earmarked 5,428 -5,428 0 0 Reserves (Note 9)

Increase/Decrease in Year 0 -5,428 0 -2,398 -7,826 54,797 46,971

Balance at 31 March 2013 -8,205 -35,700 0 -5,956 -49,861 -114,730 -164,591

Movement in Reserves in 2013/14

(Surplus) or deficit on provision of -8,512 -8,512 -8,512 services Other Comprehensive Expenditure 0 -11,589 -11,589 and Income Total Expenditure and Income -8,512 0 0 0 -8,512 -11,589 -20,101

Adjustments between accounting 9,449 978 10,427 -10,427 0 basis & funding basis under regulations (Note 8)

Net Increase/Decrease before 937 0 0 978 1,915 -22,016 -20,101 Transfers to Earmarked Reserves

Transfers to/from Earmarked -937 937 0 0 Reserves (Note 9)

Increase/Decrease in Year 0 937 0 978 1,915 -22,016 -20,101

Balance at 31 March 2014 -8,205 -34,763 0 -4,978 -47,946 -136,746 -184,692 Page 9 of 133

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.

2012/13 2013/14 Gross Gross Net Gross Gross Net Spend Income Spend Spend Income Spend £000 £000 £000 £000 £000 £000

Continuing Operations

15,674 -13,541 2,132 Central services to the public 4,093 -2,775 1,318 22,255 -9,683 12,571 Cultural & related services 21,932 -9,003 12,929 30,639 -10,525 20,114 Environmental & regulatory services 20,735 -6,512 14,223 6,767 -3,637 3,130 Planning services 6,338 -3,496 2,842 164,734 -128,906 35,829 Education and children’s services 128,640 -90,523 38,117 22,325 -6,540 15,786 Highways and transport services 25,631 -6,933 18,698 66,001 -58,930 7,072 Other housing services 65,030 -58,025 7,004 63,348 -23,474 39,873 Adult social care 63,382 -15,534 47,848 4,293 -224 4,070 Corporate and democratic core 5,475 -1,175 4,300 5,440 -2,476 2,964 Non distributed costs 4,464 -2,747 1,717 401,476 -257,936 143,540 Continuing Operations Total 345,720 -196,723 148,996

Acquired Operations

1 Public Health 6,538 -6,692 -153

401,476 -257,936 143,540 Cost Of Services 352,258 -203,415 148,843

10,075 10,075 Other Operating Expenditure 12,600 12,600 (Note 10) 13,129 -5,262 7,867 Financing and Investment Income and -1,665 -5,203 -6,868 Expenditure (Note 11) -149,551 -149,551 Taxation and Non-Specific Grant Income -163,087 -163,087 (Note 12) 11,931 (Surplus) or Deficit on Provision of Services -8,512

Revaluation (gain) / loss of Property, Plant -2,370 -12,417 and Equipment (Note 24a) Revaluation (gain) / loss of available for -48 37 sale financial assets (Note 24b) Remeasurement of the net defined benefit 37,459 791 liability (asset) (Note 42) (Surplus) or Deficit on Other Comprehensive Income & 35,041 -11,589 Expenditure

(Surplus) or Deficit on Total Comprehensive Income & 46,971 -20,101 Expenditure

The audited 2012/2013 comparative figures have been adjusted by £7.08 million for internal recharges. This has reduced the gross expenditure and income amounts within service lines, but the net expenditure amounts are unchanged for each service line.

1 Public Health services transferred to the Council on the 1 April 2013, for more information please refer to Disclosure Note 2 on Acquired Operations. Page 10 of 133

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’.

31 March 2013 Notes 31 March 2014 £000 £000 385,203 Property, Plant & Equipment 13 397,590 6,521 Heritage Assets 46 6,522 59,455 Investment Property 14 77,439 1,840 Intangible Assets 15 1,787 5,032 Long Term Investments 16 0 2,001 Long Term Debtors 16 1,897 460,053 Long Term Assets 485,235

27,061 Short Term Investments 16 32,555 70 Assets Held for Sale 20 0 431 Inventories 17 278 23,735 Short Term Debtors 18 24,413 37,698 Cash and Cash Equivalents 19 37,757 88,995 Current Assets 95,003

-6,704 Short Term Borrowing 16 -4,052 -41,755 Short Term Creditors 21 -45,695 -2,015 Provisions 22 -4,035 -622 Other Short Term Liabilities 16 & 39 -598 -51,096 Current Liabilities -54,380

-6,327 Provisions 22 -5,136 -86,520 Long Term Borrowing 16 -83,276 -1,487 Other Long Term Liabilities 16 & 39 -895 -221,769 Pension Liability 42 -229,539 -17,258 Capital Grants Receipts in Advance 36 -22,320 -333,361 Long Term Liabilities -341,166

164,591 Net Assets 184,692

-49,861 Usable reserves 23 -47,946 -114,730 Unusable Reserves 24 -136,746 -164,591 Total Reserves -184,692

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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 (i.e. borrowing) to the Council.

2012/13 2013/14 £000 £000

-11,931 Net surplus or (deficit) on the provision of services 8,512 815 Adjustments to net surplus or (deficit) on the provision of services for non cash 3,495 movements 24,704 Adjustments for items included in the net surplus or (deficit) on the provision of 535 services that are investing and financing activities 13,588 Net surplus or (deficit) from Operating Activities (Note 25) 12,542 -23,841 Net surplus or (deficit) from Investing Activities (Note 26) -8,135 -6,241 Net surplus or (deficit) from Financing Activities (Note 27) -4,348 -16,494 Net increase or (decrease) in cash and cash equivalents 59

54,192 Cash and cash equivalents at the beginning of the reporting period 37,698 37,698 Cash and cash equivalents at the end of the reporting period 37,757 (Note 19)

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7) NOTES TO THE CORE FINANCIAL ACCOUNTS

Note Title Page

A Accounting Policies 13 1 New Accounting Standards 29 2 Acquired Operations 29 3 Accounting Standards That Have Been Issued But Have Not Yet Been Adopted 29 4 Critical Judgements in Applying Accounting Policies 29 5 Assumptions Made About the Future / Major Sources of Estimation Uncertainty 30 6 Material Items of Income and Expenses 30 7 Events after the Balance Sheet Date 31 8 Adjustments between Basis & Funding Basis Under Regulations 31 9 Transfers to / from Earmarked Reserves 33 10 Other Operating Expenditure 35 11 Financing & Investment Income and Expenditure 36 12 Taxation & Non-specific Grant Income 36 13 Property, Plant & Equipment 37 14 Investment Property 40 15 Intangible Assets 41 16 Financial Instruments 42 17 Inventories 45 18 Short-Term Debtors 46 19 Cash & Cash Equivalents 46 20 Assets Held for Sale 46 21 Short-term Creditors 46 22 Provisions 47 23 Useable Reserves 48 24 Unusable Reserves 48 25 Cash Flow Statement - Operating Activities 52 26 Cash Flow Statement - Investing Activities 52 27 Cash Flow Statement - Financing Activities 52 28 Amounts Reported for Resource Allocation 53 29 Trading Operations 56 30 Agency Services 56 31 Pooled Budgets 56 32 Members’ Allowances 57 33 Officer Remunerations 58 34 External Audit Costs 60 35 Dedicated Schools Grant 60 36 Grant, Contributions & Taxation 62 37 Related Parties 63 38 Capital Expenditure & Capital Financing 64 39 Leases 65 40 Impairments 67 41 Pensions Schemes Accounted for as Defined Contribution Schemes 67 42 Defined Benefit Pension Schemes 67 43 Contingent Liabilities 72 44 Contingent Assets 72 45 Nature & Extent of Risks Arising from Financial Instruments 72 46 Heritage Assets – In year notes 75 47 Trust Funds 77

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A STATEMENT OF ACCOUNTING POLICIES

A1 GENERAL

The Accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2013/14 (“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.

A2 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. Page 14 of 133

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.

A3 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 is made for flexi leave, maternity leave or sickness, as the amounts are 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 Page 15 of 133

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.

A4 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.

A5 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 contact 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.

A6 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 date of acquisition 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.

A7 CONTINGENT ASSETS

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.

A8 CONTINGENT LIABILITIES

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.

A9 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; Page 16 of 133

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.

A10 EXCEPTIONAL ITEMS

When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the CIES or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance.

A11 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.

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 Page 17 of 133

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.

A12 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 2014 the Council had given no financial guarantees but may do so in the future.

A13 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.

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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 Financial Instruments Adjustment Account in the Movement in Reserves Statement.

A14 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.

A15 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) is capitalised (above a de minimis limit of £2,000 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. Page 19 of 133

A16 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.

A17 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.

A18 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.

Civil 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.

A19 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 asset’s 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 arm’s-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. Page 20 of 133

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.

A20 JOINTLY CONTROLLED OPERATIONS AND JOINTLY CONTROLLED ASSETS

Jointly controlled operations are activities undertaken by the Council in conjunction with other ventures that involve the use of the assets and resources of the ventures 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 ventures, with the assets being used to obtain benefits for the ventures. 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.

A21 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 Page 21 of 133

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 (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.

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A22 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 2013/14 (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.

A23 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 £2,000 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 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.

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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 by: 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 incurred in the statutory obligations of the site, whether capital or revenue, will be charge 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 by: 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 Page 24 of 133

useful life (i.e. Freehold land and Community Assets) and assets that are not yet available for use (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 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.

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 previously 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. Page 25 of 133

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: Trust Schools, Foundation Schools, Voluntary Aided (VA) and Voluntary Controlled (VC) schools (though the playing fields of VA / VC schools are included).

A24 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 these accounts, flexi-time and leave accrued during maternity leave and long term sickness have been excluded, as they are immaterial.

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 and are charged on an accruals basis to the Non Distributed Costs line in the CIES when the Council is demonstrably Page 26 of 133

committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy.

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 projected earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate of 4.3% (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: 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 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 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 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 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 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 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 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.

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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.

A25 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.

A26 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.

A27 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 making of a 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 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. Page 28 of 133

A28 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 to score against 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.

A29 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.

A30 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. Page 29 of 133

1. New Accounting Standards

For any new accounting standard or policy introduced, the Council is required to provide information explaining how these changes have affected the accounts.

For 2013/14 there has been one significant accounting standard adopted. The 2011 amendment to IAS 19 and IAS 1 is associated with the classes of components of defined benefit costs recognised in the financial statements. The amendment to the code reclassifies certain income and expenditure between sections of the Comprehensive Income and Expenditure Statement.

In terms of the impact the amendment of IAS 19 has on the Financial Statements for the Authority, it has been deemed immaterial and no prior year comparators have been restated. The valuation of the Pensions’ Liability and Reserve has not changed. The reclassification of income & expenditure between the Surplus or Deficit on the Provision of Services and Other Comprehensive Income and Expenditure is only £265,000.

2. Acquired Operations

From the 1 April 2013 the responsibility for delivering Public Health Services was transferred from the NHS to Local Authorities. The Service transferred with minimal disruption following a shadow year in 2012/2013. The Council agreed a two year shared service for public health with Central Bedfordshire Council, and with a joint Director of Public Health (who is also shared with Milton Keynes). The Public Health Grant for 2013/2014 was £6.676 million; there were no assets or liabilities associated with the transfer that had a significant impact on the balance sheet.

3. Accounting Standards That Have Been Issued But Have Not Yet Been Adopted

The Council 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 has been issued, but is not yet required to be adopted by the Council.

The adoption of the following accounting policy changes are expected in the 2014/15 Statement of Accounts: IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IAS 27 Separate Financial Statements (as amended in 2011) IAS 28 Investments in Associates and Joint Ventures (as amended in 2011) IAS 32 Financial Instruments: Presentation Annual Improvements to IFRSs 2009 – 2011 Cycle.

These are not expected to have any significant impact on the Council’s accounts.

4. Critical Judgements in Applying Accounting Policies

In applying the accounting policies set out in Note A, 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 is a high degree of uncertainty about future levels of funding for local government. The Council has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Council might be impaired as a result of a need to close facilities and reduce levels of service provision. A number of Reserves have been established to cover the financial impact of these risks. 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. These are carried out by a qualified valuer, and these assumptions are set out in Note 13.

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5. 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 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 2014 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

Reserves Local Government is encountering the Corporate Reserves total £14.7 million. toughest financial outlook for many An increase of 10% above these years. The future prospects for service estimated requirements would have the delivery continue to be challenging; and effect of adding £1.47 million to the the Council has identified through its funding required. Medium Term Financial Strategy that significant levels of savings will need to be made. Changes such as the Localisation of business rates, also increases the level of financial risk to the Council. The annual review of reserves has considered these circumstances and endeavours to mitigate, to some extent, the potential impacts.

Pensions Estimation of the net liability to pay The effects on the net pensions liability Liability pensions depends on a number of of changes in individual assumptions complex judgements relating to the have been calculated as being: discount rate used, the rate at which salaries are projected to increase, A decrease in the Discount Rate of changes in retirement ages, mortality 0.5% would increase the employer rates and expected returns on pension liability by approximately 9% (£49.7 fund assets. A firm of consulting million) actuaries is engaged to provide the An increase in the life expectancy of Council with expert advice about the member by 1 year would increase the assumptions to be applied. employer liability by approximately 3% (£15.9 million) An increase in the salary increase rate of 0.5% would increase the employer liability by approximately 2% (£12.6 million) An increase in the pension increase rate of 0.5% would increase the employer liability by approximately 7% (£36.7 million)

This list does not include assets and liabilities that are carried at fair value based on a recently observed market price.

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 2013/14, the CIES incurred depreciation and impairment charges of £15 million (£15 million in 2012/13) and revaluation losses of £5 million (£11 million in 2012/13). 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. Page 31 of 133

7. Events after the Balance Sheet Date

The Statement of Accounts was authorised for issue by the Assistant Chief Executive & Chief Finance Officer on 23 September 2014. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2014, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.

The June 2013 Spending Round announced the creation of a £3.8 billion Integration Transformation Fund – now referred to as the Better Care Fund – described as a single pooled budget for health and social care services to work more closely together in local areas, based on a plan agreed between the NHS and local authorities. Bedford Borough Council is working with the Bedfordshire Clinical Commissioning Group (CCG) to develop six work streams to reshape, redesign and improve the pathways and services for vulnerable people.

A Section 75 agreement and pooled budget of £10 million will be put in place from 2015/2016 to deliver joint services. Currently the Council provides services equivalent to £5.3 million which will form part of the pooled budget.

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.

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Usable Usable Reserves Reserves (2012/13) (2013/14) General Capital Capital Movement General Capital Capital Movement Fund Receipts Grants in Fund Receipts Grants in Balance Reserve Unapplied Unusable Balance Reserve Unapplied Unusable Reserves Reserves £000 £000 £000 £000 Reversal of items debited or credited to the CIES £000 £000 £000 £000 -472 472 Amortisation of intangible assets -410 410 -14,935 14,935 Depreciation and Impairment of non-current assets -14,734 14,734 -12,956 12,956 Revaluation losses on Property, Plant and Equipment -10,470 10,470 1,704 -1,704 Revaluation gains reversing previous losses 5,920 -5,920 -322 322 Movement in market value of investment property 16,051 -16,051 -25 25 Net gain or loss on sale of investment property -25 25 -148 148 Movement in value of held for sale assets 11,249 -11,249 Capital Grants and Contributions credited to the CIES 10,847 -10,847 -4,545 4,545 Revenue expenditure funded from capital under statute (net of grants) -505 505 -8,612 -958 9,570 Net gain or loss on sale of non-current/current assets -11,145 -1,157 12,302 (excluding investment property) -144 144 Finance costs adjustment between the Code and statutory requirements 7 -7 Insertion of items not debited or credited to the CIES 6,087 -6,087 Capital expenditure charged to the General Fund balance 11,173 -11,173 4,239 -4,239 Statutory Provision for Repayment of Debt (MRP) 3,962 -3,962 979 -979 Statutory Repayment of Debt (Finance Lease Liabilities) 279 -279 Adjustments involving the capital grants unapplied account 6,284 -6,284 0 Capital grants and contributions unapplied credited to the CIES 5,113 -5,113 3,886 -3,886 Application of grants to capital financing (to capital adjustment account) 6,091 -6,091 Adjustments involving the capital receipts reserve 996 -996 Capital Receipts applied to fund Capital Expenditure 1,152 -1,152 -9 9 0 Capital Receipts payable to the Housing Capital Receipts Pool -5 5 -22 22 Transfer from Capital Receipts Deferred to Capital Receipts Reserve Adjustments involving the collection fund adjustment account 177 -177 Council Tax income adjustment between the Code and statutory -3 3 requirements Adjustment involving the pension reserve -17,774 17,774 Reversal of items relating to retirement benefits debited or credited to the -20,290 20,290 CIES 12,478 -12,478 Employer's pension contributions and direct payment to pensioners payable 13,311 -13,311 in year Adjustment involving the accumulated absences account -641 641 Remuneration adjustment between the Code and statutory requirements 373 -373

-17,359 0 -2,398 19,756 Total Adjustments 9,449 0 978 -10,427 Page 33 of 133

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 Balance Transfers Balance 31 to/from Other 31 31 to/from Other 31 March CIES March March CIES March 2012 2013 2013 2014 £000 £000 £000 £000 £000 £000 £000 £000 -1,611 771 840 0 Adults Social Care Transformation 0 0 -263 -342 -605 Bedford Western Bypass -605 417 -188 -350 -350 Benefit Subsidy -350 -350 0 -110 -110 Better Bus Area -110 -110 -177 -177 BTAC -177 177 0 -200 -200 Business Growth Incentive -200 -200 -1,000 -1,000 Business Rate Retention -1,000 -1,000 -886 196 -690 Capital Contingency -690 192 -498 -328 143 -185 Contingency Carry-forward -185 10 -175 -100 -100 Council Tax Reduction Scheme -100 -100 -119 90 -29 Disaggregation Reserve -29 -29 0 -1,005 -1,005 Early Intervention Strategy -1,005 1,005 0 -200 -69 -269 Elections -269 -269 -3,579 -2,242 -5,821 Vehicles & Plant -5,821 806 2,468 -2,547 -273 77 -196 IFRS Transitional Costs -196 -20 -216 -1,592 -129 -1,721 Insurance & Risk Management -1,721 -259 -1,981 0 0 IT Infrastructure 0 -237 -2,468 -2,705 -100 -100 Legal Fees -100 -100 -1,308 28 -1,280 Local Strategic Partnership -1,280 44 -1,236 0 0 Local Welfare Provision 0 -325 -325 -133 34 -99 Members Ward Fund -99 -99 0 -1,151 -1,151 Older Peoples Accommodation Reserve -1,151 281 -870 -625 -21 -646 Other Service Carry-forward -646 -280 -926 -614 -95 20 -689 Other Service reserves -689 170 -519 -577 -476 -1,053 Planning Highways s38 Income -1,053 -274 -1,327 -238 181 -58 Plans & Strategies -58 -1 -59 0 -100 -100 Property Development/Disposal -100 -100 -341 56 -285 Property Holding Costs -285 134 -152 -410 59 -351 Property Repairs & Renewals -351 -1,012 -1,363 0 0 Public Health 0 -749 -749 -100 -40 -140 Public Health Reserve -140 -140 0 0 Railway Station Quarter 0 -150 -150 0 0 Repairs to Bridges 0 -112 -112 -120 114 -6 Reprographics Machinery -6 -6 -484 310 -174 Revenue Grants Unapplied -174 135 -39 0 0 Revenue Financing of Future Capital 0 -2,440 -2,440 0 -200 -200 School Land Purchases -200 -100 -300 0 165 -2,325 -2,160 Social Care Costs -2,160 2,160 0 -867 -100 -967 Software Fund -967 -253 -1,220 -176 6 16 -154 Staff Benefits -154 154 0 -1,034 110 -924 Supporting People -924 111 -813 0 0 Town Centre Decongestion 0 -500 -500 -900 -900 Town Centre Improvement -900 900 0 -1,577 -979 1,449 -1,107 Transformation Reserve -1,107 -496 -1,603 -3,000 14 -2,986 Transitional Costs -2,986 236 -2,750 0 -186 -186 Troubled Families -186 -156 -342 0 -596 -596 Weekly Collection Service -596 -572 -1,168

-23,283 -5,485 0 -28,769 Earmarked Reserves -28,769 -1,007 0 -29,776 -6,989 58 -6,931 School Reserves -6,931 1,944 -4,987 -30,273 -5,427 0 -35,700 Earmarked Reserves -35,700 937 0 -34,763 -8,205 -8,205 General Fund -8,205 -8,205 -38,478 -5,427 0 -43,905 Total Reserves -43,905 937 0 -42,968 Page 34 of 133

A brief description of those reserves with a balance remaining of over £100,000 at either year-end is provided below:

Adults Social Care Transformation – To provide the capacity to transform aspects of the service in order to secure essential and sustainable improvements. Bedford Western Bypass – To manage future remaining costs relating to the capital project (Phase 1). Benefits Subsidy – To provide for amendments to the benefit subsidy claim following external Audit/DWP scrutiny. Better Bus Area – A new Reserve for the funding received from the Department for Transport to improve bus services, including the introduction of multi operator smartcard ticketing and expanding real-time information. BTAC (Bedford Training and Assessment Centre) – NVQ qualifications for the Early Years workforce are committed over 18 months and funding for delivery to 31 March 2014 Business Growth Incentive – To provide investment to facilitate business rate growth as part of discretionary relief policy. Business Rate Retention – To manage the short-term financial impact in the event of an unpredictable reduction in retained rate receipts occurring and timing differences on the cash flow between the general fund and collection fund. Capital Contingency – it is Council policy to retain a capital contingency to fund any variation in costs of approved schemes over that budgeted as a result of the tender or contract implementation phases; Contingency Carry-forward – Approved Contingency items that could not be spent in year and need to be carried forward as commitments. Council Tax Reduction Scheme – To manage risks associated with the implementation of the new scheme from 1 April 2013. Disaggregation Reserve – To cover unexpected costs arising from the disaggregation of the former County Council’s assets and liabilities. Early Intervention Strategy – Pump priming funding to support the implementation of the new Early Years Intervention Strategy. Elections – To provide funding for the election in 2014/15 and remove the need for a one-off allocation for elections in the revenue budget. IFRS Transitional Costs – This reserve mostly represents the value of discounting applied to non- current provisions. Insurance & Risk Management Reserve – This reserve is available to cover unexpected claims, including a top-up of the provision should that prove necessary. IT Infrastructure - This reserve covers the replacement cost of Council equipment where lease finance is either unavailable or inappropriate. Legal Fees – To cover unforeseen and unexpected service requirements. 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 Members Ward Fund – This protects the unspent balance in order to continue to fund committed projects into future years. Older Peoples’ Accommodation – To provide funding for transitional costs associated with the development of the homes within the Older Peoples’ Accommodation Review. 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. Planning Highways s38 Income – Income received from developers for Planning and Highways Section 38 Agreements. This is to fund the supervision of future highway developments by both the service and Amey when developers request the provision of the service. 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 Holding Costs – To fund satellite offices in the short term until opportunities taken to exit existing lease arrangements. 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. Public Health Reserve – To mitigate the risks of demand led public health services recently transferred to the Local Authority. Page 35 of 133

Railway Station Quarter - Reserve to fund future capital investment in the redevelopment of the Railway Station Quarter Repairs to Bridges – Funding for bridge repairs across the borough Reprographics Machinery – To cover the cost of replacement reprographic machinery. Vehicle & Plant - This reserve covers the replacement cost of Council equipment, vehicles and plant where lease finance is either unavailable or inappropriate. Revenue Financing of Future Capital – Funding for future capital projects that have not yet been formulated and approved. Revenue Grants Unapplied – holds the income from grants with no grant conditions. School Land Purchases – To cover the cost of School Land Purchases, including the potential purchase of land at Cotton End / Cople. Social Care Costs – To provide extra cover for costs of growth in Children Social Care placements. Software Fund - This reserve is required for the purchase of new software for the Council’s systems or for major upgrades of existing systems. Staff Benefits – this reserve is to cover potential costs as a consequence of the harmonisation process and changes to staff benefits. 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. Town Centre Improvement – For the future development of Bedford Town Centre. Transformation Reserve – To invest in resource capacity, project management skills, IT solutions and training to enable transformation proposals to be further evaluated. Transitional Costs – Additional – This covers the redundancy and costs associated with efficiency reviews of services areas. 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. Weekly Collection Service – Funding to support the continuation of a weekly household refuse collection. 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.

10. Other Operating Expenditure

2012/13 2013/14 £000 £000 1,367 Parish council precepts 1,340 90 Levies 90 9 Payments to the Government Housing Capital Receipts Pool 5 0 (Surplus) or deficit on trading undertakings (Note 29) 0 8,610 (Gains)/losses on the disposal of non-current assets 11,165 10,075 Other Operating Expenditure Total 12,600

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. The most significant disposal in 2013/14 relates to Great Denham Primary School converting to Foundation status.

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11. Financing and Investment Income and Expenditure

2012/13 2013/14 £000 £000 4,063 Interest payable and similar charges 3,865 8,263 Net interest on the net defined benefit liability (asset) 9,867 -785 Interest receivable and similar income -220 -3,674 Income and expenditure in relation to investment properties and changes in -20,380 their fair value 7,867 Financing and Investment Income and Expenditure Total -6,868

Financing and Investment Income and Expenditure note incorporates financing income and expenditure incurred by the Authority which is not allocated to service specific lines in the Net Cost of Services. This includes balances relating to the annual cost of borrowing, income generated by investments and annual pension’s net interest. In addition, all entries relating to Investment Property is allocated to this note, this includes annual revenue income and expenditure, disposals and revaluations for the financial year. For 2013/14, Investment Property has seen significant upward revaluations totalling £16 million creating a variance between years. The aforementioned £16 million upward revaluation is treated as negative expenditure within the Comprehensive Income and Expenditure Statement (CIES). This creates a net credit of £1.665 million for expenditure on the Financing and Investment Income and Expenditure line within the CIES.

12. Taxation and Non Specific Grant Income

2012/13 2013/14 £000 £000 -76,416 Council Tax -69,306 -50,184 National Non-Domestic Rates -27,929 -5,419 Non-ring fenced government grants -49,892 -17,533 Capital grants and contributions -15,960 -149,551 Taxation and Non Specific Grant Income Total -163,087

Taxation and Non Specific Grant Income note incorporate the key Authority financing sources including, Council Tax, National Non-Domestic Rates, Revenue Support Grant, Non-service specific grants and Capital Grants recognised during the financial year. There are a number of variances between years for multiple reasons as explained below; Council Tax (after statutory adjustments) has reduced significantly due to the changes in Council Tax Benefit and Taxbase calculations. National Non-Domestic Rates has changed between years with the Authority now receiving 49% of NNDR collected during the financial year, net of a tariff payment to Central Government. Non-ring fenced government grants has increased considerably due to the changes in NNDR and the amalgamation of previously ring fenced grants (i.e. Social Care Health Grant). Capital grants and contributions include all capital financing which has been received and conditions met during the financial year. There is no significant variance between years.

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13. Property, Plant and Equipment (PP&E)

Movements in Balance in year are shown in the table below:

Vehicles, Other Land Plant & Infrastructure Community Surplus Assets Under Total and Buildings Equipment Assets Assets Assets Construction PP&E £000 £000 £000 £000 £000 £000 £000 Cost or Valuation At 1 April 2013 232,836 32,288 159,464 4,961 1,801 14,369 445,718 Additions / Donations 11,203 5,249 7,407 0 0 8,392 32,251 Accum Depreciation & Impairment written out to GCA -8,273 -1 -398 -8,672 Revaluation increases/(decreases) recognised in the 12,178 238 12,416 Revaluation Reserve Revaluation increases/(decreases) recognised in the -3,866 -56 -628 -4,550 Surplus/Deficit on the Provision of Services Derecognition - Disposals -133 -133 Derecognition - Other -13,657 -9,073 -136 -22,866 Assets reclassified (to)/from Held for Sale 0 Assets reclassified (to)/from Investment Property -694 -70 -764 Assets reclassified (to)/from Intangibles 0 0 Componentisation of assets 0 Other movements in Cost or Valuation 7,907 211 -1,305 57 3,255 -10,127 0 At 31 March 2014 237,502 28,675 165,431 4,961 4,269 12,564 453,400

Accumulated Depreciation and Impairment At 1 April 2013 -14,389 -16,688 -29,095 0 -343 0 -60,515 Depreciation charge -5,445 -3,471 -5,748 -70 -14,734 Accum Depreciation written out to GCA 8,273 1 398 8,672 Derecognition - Disposals 0 Derecognition - Other 1,986 8,646 136 10,767 Assets reclassified (to)/from Held for Sale 0 Other movements in Depreciation and Impairment 188 -1 -187 0 At 31 March 2014 -9,388 -11,513 -34,707 0 -202 0 -55,810

Net Book Value At 31 March 2013 218,446 15,600 130,369 4,961 1,458 14,369 385,203 At 31 March 2014 228,114 17,162 130,723 4,961 4,067 12,564 397,590

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Comparative Movements in the previous year are shown in the table below:

Vehicles, Other Land Plant & Infrastructure Community Surplus Assets Under Total and Buildings Equipment Assets Assets Assets Construction PP&E £000 £000 £000 £000 £000 £000 £000 Cost or Valuation At 1 April 2012 242,446 28,856 152,990 4,712 219 9,437 438,659 Additions / Donations 14,396 3,630 5,674 114 0 8,553 32,368 Accum Depreciation & Impairment written out to GCA -5,308 -5,308 Revaluation increases/(decreases) recognised in the 2,370 2,370 Revaluation Reserve Revaluation increases/(decreases) recognised in the -11,252 -11,252 Surplus/Deficit on the Provision of Services Derecognition - Disposals -167 -167 Derecognition - Other -9,092 -1,446 -10,538 Assets reclassified (to)/from Held for Sale -235 -235 Assets reclassified (to)/from Investment Property -178 -178 Assets reclassified (to)/from Intangibles 0 Componentisation of assets -661 661 0 Other movements in Cost or Valuation 350 754 800 135 1,582 -3,621 0 At 31 March 2013 232,836 32,288 159,464 4,961 1,801 14,369 445,718

Accumulated Depreciation and Impairment At 1 April 2012 -14,923 -13,789 -23,496 -52,208 Depreciation charge -5,327 -3,777 -5,599 -233 -14,935 Accum Depreciation written out to GCA 5,308 5,308 Derecognition - Disposals 132 132 Derecognition - Other 424 745 1,169 Assets reclassified (to)/from Held for Sale 17 17 Other movements in Depreciation and Impairment 110 -110 0 At 31 March 2013 -14,390 -16,688 -29,095 0 -343 0 -60,515

Net Book Value At 31 March 2012 227,523 15,067 129,493 4,712 219 9,437 386,451 At 31 March 2013 218,446 15,600 130,369 4,961 1,458 14,369 385,203

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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 2014, the Council had entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment in 2014/15 and future years. The major commitments are:

Capital Project £000 Carbon Management Project 2,680 Bedford Town Hall & Riverside House Demolition 358 Replacement Bedford Bus Station 2,678 Local Broadband Project 440 Relocation of Kempston Rural Lower School 1,609 Completion of the Bedford Academy site 336 Allhallows Multi Storey Car Park Refurbishment 700

Effects of Changes in Estimates

There are no material effects of changes in estimates.

Schools

As at 1 April 2013 there were 56 maintained schools of which 28 were Foundation or Trust Schools and whose assets do not appear on the Council’s Balance Sheet. During 2013/14, nine schools achieved Academy status, which were all Foundation or Trust schools. Any value of these schools assets in the Council’s balance sheet have been written out of the Long Term Assets section during the year, and shown as a loss on disposals in the Comprehensive Income and Expenditure Statement – Other Operating Expenditure (see Note 10).

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 Page 40 of 133

assumed that the parties to the lease/agreement have complied with the required repairing and decorating covenants. 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. 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. 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, Plant, Assets Other Land Furniture Under and and Infrastruct Community Surplus Constructi Buildings Equipment ure assets Asset on Total £000 £000 £000 £000 £000 £000 £000 Carried at historical cost 17,162 130,723 12,564 160,449 Valued at fair value as at: 31 March 2014 121,447 2,097 123,544 31 March 2013 68,272 70 68,342 31 March 2012 86,831 13 11 86,855 31 March 2011 71,591 60 2,348 73,999 Total Cost or Valuation 348,141 17,162 130,723 73 4,526 12,564 513,189

14. Investment Properties

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:

2012/13 2013/14 £000 £000 -4,477 Rental income from investment property -4,984 481 Direct operating expenses arising from investment property 630 -3,996 Net (gain)/loss -4,354

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 two exceptions to this are in relation to the farms estate inherited from the former County Council where it has been agreed that a proportion of the rental income from the whole estate irrespective of where it is located and capital receipts are shared between Bedford Borough Council (BBC) and Central Bedfordshire Council (CBC) and the sites subject to an Local Delivery Framework (LDF) submission by the former County Council, within both Councils’ boundaries, where the net proceeds of these will be apportioned between BBC and CBC. The Council has no current contractual obligations to purchase, construct or develop investment property, it does have varying repair and maintenance responsibilities associated with leases that require works to be undertaken periodically.

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The following table summarises the movement in the fair value of investment properties:

31 March 2013 31 March 2014 £000 £000 59,594 Balance at start of the year 59,455 Additions: 31 - Purchases 1,194 -25 Disposals -25 -322 Net gains/losses from fair value adjustments 16,051 Transfers: 178 - to/from Property, Plant and Equipment 764 59,455 Balance at end of the year 77,439

15. Intangible Assets

The Council accounts for its software and licences as intangible assets. The intangible assets include both purchased licenses and internally generally software.

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).

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, has then been subsequently absorbed as an overhead across all the service headings, in the CIES.

The movement on Intangible Asset balances during the year is as follows:

2012/13 2013/14

Internally Other Total Internally Other Total Generated Assets Generated Assets Assets Assets £000 £000 £000 £000 £000 £000 Balance at start of year: 29 4,601 4,630 · Gross carrying amounts 29 4,793 4,822 -3 -2,506 -2,509 · Accumulated amortisation -6 -2,976 -2,980 26 2,094 2,120 Net carrying amount at start of year 23 1,817 1,840 Additions: 196 196 · Purchases 356 356 0 · Transferred from PPE 0 -4 -4 Other disposals 0 -3 -469 -472 Amortisation for the period -3 -407 -410 23 1,817 1,840 Net carrying amount at end of year 20 1,767 1,787 Comprising: 29 4,793 4,822 · Gross carrying amounts 29 2,749 2,778 -6 -2,976 -2,981 · Accumulated amortisation -9 -982 -991 23 1,817 1,840 20 1,767 1,787

There are three items of capitalised software that are individually material to the financial statements:

31 March 2013 Remaining Description of Intangible Assets 31 March 2014 Remaining Amortisation Amortisation Period Period £000 £000 1,318 4 Purchases software 1,262 6 23 8 Internally generated software 21 7 499 7 Licences, trademarks and artistic originals 504 8 1,840 1,787

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16. Financial Instruments

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 2013 31 March 2014 Current Long Term Financial Liabilities Current Long Term £000s £000s £000s £000s Loans at amortised cost: -5,892 -86,465 · Principal sum borrowed -3,300 -83,217 -812 · Accrued interest -752 -55 · EIR adjustments -59 -6,704 -86,520 Total Borrowing -4,052 -83,276 Loans at amortised cost: · Bank overdraft Total Cash Overdrawn Liabilities at amortised cost: -1,487 · Finance leases -894 0 -1,487 Total Other Long-term Liabilities 0 -894 Liabilities at amortised cost: -34,107 · Trade payables -32,685 -622 · Finance leases -598 -34,729 0 Included in Creditors -33,283 0 -41,433 -88,007 Total Financial Liabilities -37,335 -84,170

Current Creditors on the Balance Sheet includes balances totalling £13.010 million that do not meet the definition of a financial liability (i.e. balances with Government Bodies).

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 fixed term deposits with banks and building societies 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 Payden & Rygel certificates of deposit issued by banks and building societies

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The financial assets disclosed in the Balance Sheet are analysed across the following categories:

31 March 2013 31 March 2014 Current Long Term Financial Assets Current Long Term £000s £000s £000s £000s Loans and receivables: 27,000 5,000 · Principal at amortised cost 23,000 61 32 · Accrued interest 124 Available-for-sale investments: · Principal at amortised cost * 9,414 · Accrued interest 17 27,061 5,032 Total Investments 32,555 0 Loans and receivables: 7,591 · (including bank accounts) 5,634 21,024 · Cash equivalents at amortised cost 32,063 62 · Accrued interest 53 Available-for-sale investments: 9,021 · Cash equivalents at amortised cost 7 37,698 Total Cash and Cash Equivalents 37,757 0 Loans and receivables: 16,071 1,714 · Trade receivables 16,657 1,610 287 · Lease receivables 287 · Accrued interest 16,071 2,001 Included in Debtors 16,657 1,897 80,830 7,033 Total Financial Assets 86,969 1,897

Current Debtors on the Balance Sheet includes balances totalling £7.756 million that do not meet the definition of a financial liability (i.e. balances with Government Bodies).

Reclassifications

In 2013/14 the Council did not reclassify any financial investments. Page 44 of 133

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 Interest Loans & Available-for- Interest 2013/14 Amortised Cost Amortised Cost Receivables Sale Assets Amortised Cost Total £000 £000 £000 £000 £000 £000 Interest expense 3,697 144 3,840 Losses on de-recognition 25 25 Impairment losses 906 906 Interest payable and similar charges 3,697 144 931 0 0 4,771 Interest income -197 -23 -220 Gains on de-recognition -18 -18 Interest and investment income 0 0 -215 0 -23 -238 Amounts recycled to surplus/deficit on provision of services 37 37 Impact of revaluation in Other Comprehensive Income 0 0 0 37 0 37 Net Gain/(Loss) for the Year 3,697 144 716 37 -23 4,570

Comparative information for the previous year is set out in the table below:

Financial Liabilities Financial Assets Finance Lease Finance Lease Borrowing Interest Loans & Available-for- Interest 2012/13 Amortised Cost Amortised Cost Receivables Sale Assets Amortised Cost Total £'000 £'000 £'000 £'000 £'000 £'000 Interest expense 3,873 190 4,063 Impairment losses 870 870 Interest payable and similar charges 3,873 190 870 0 0 4,933 Interest income -927 -927 Gains on de-recognition -144 -144 Interest and investment income 0 0 -1,071 0 0 -1,071 Amounts recycled to surplus/deficit on provision of services -62 -62 Impact of revaluation in Other Comprehensive Income 0 0 0 -62 0 -62 Net Gain/(Loss) for the Year 3,873 190 -201 -62 0 3,800

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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 31st March 2014, using the following methods and assumptions: The fair values of loans from the PWLB have been discounted at the published interest rates for new PWLB certainty rate loans with an identical remaining term to maturity arranged on 31st March. The fair values of long-term “Lender’s Option Borrower’s Option” (LOBO) loans have been calculated by discounting the contractual cash flows over the whole life of the instrument at the appropriate interest rate swap rate on 31st March plus a margin for local authority credit risk and adding 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 31st March. The fair values of financial guarantees have been estimated based on the likelihood of the guarantees being called and the likely payments to be made. 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.

The fair values calculated are as follows:

31 March 2013 31 March 2014 Balance Sheet Fair Value Balance Sheet Fair Value £'000 £'000 £'000 £'000 Financial Liabilities: 93,225 104,330 Long and short term borrowing 87,330 93,350 Financial Assets: 5,032 5,054 Long-term investments 27,061 27,061 Short-term investments 32,555 32,555

The fair value of long-term 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.

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 are given below:

Leisure ICT Other Total and Cemeteries Environment Recreation £'000 £'000 £'000 £'000 £'000 £'000 Balance outstanding at 1 April 2012 139 97 96 7 1 340

Purchases 26 2,012 1 348 2,387 Recognised as an expense in the year -17 -9 -1,962 -1 -307 -2,296 Balance outstanding at 31 March 2013 148 88 146 7 42 431

Purchases 17 2,209 6 2,232 Recognised as an expense in the year -21 -2,243 -4 -11 -2,279 Written off balances -106 -106 Balance outstanding at 31 March 2014 21 105 112 3 37 278 Page 46 of 133

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 31 March 2013 Impairment of 31 March 2014 Debtors Debtors £000 £000 £000 £000 -2 5,154 Central government bodies -179 5,729 -690 3,822 Other local authorities -436 2,705 -265 1,614 NHS bodies -565 1,678 -93 567 Public corporations and trading funds -96 580 -2,413 16,041 Other entities and individuals -2,705 17,702 -3,463 27,198 Total -3,981 28,394 -3,463 Less Impairment of Debtors -3,981 23,735 Total 24,413

19. Cash and Cash Equivalents

The balance of Cash and Cash Equivalents is made up of the following elements:

31 March 2013 31 March 2014 £000 £000 91 Cash held by the Council 83 7,500 Bank current accounts 5,551 30,107 Short-term deposits in UK banks & investments in money market funds 32,123 37,698 Total Cash and Cash Equivalents 37,757

20. Assets Held for Sale

The following table shows the movements in Asset Held for Sale:

Current Non-Current Current Non-Current 2012/13 2012/13 2013/14 2013/14 £000 £000 £000 £000 243 0 Balance outstanding at start of year 70 0 Assets newly classified as held for sale: 218 Property, Plant and Equipment -148 Revaluation losses Assets declassified as held for sale: -243 Assets sold -70 70 0 Balance outstanding at year-end 0 0

21. Short-Term Creditors

The main categories of Short-Term Creditors on the Balance Sheet are disclosed in the table below:

31 March 2013 31 March 2014 £000 £000 -6,122 Central government bodies -11,350 -3,632 Other local authorities -3,415 -762 NHS bodies -1,852 -22 Public corporations and public funds -57 -31,218 Other entities and individuals -29,021 -41,755 Total -45,695

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22. Provisions

A breakdown of the Council’s provision movements during the year are given below:

Transfer between Balance at current Balance at 1 April New Release and non- Discount 31 March 2013/14 2013 Provisions Provision current Provision 2014 £000 £000 £000 £000 £000 £000

Elstow Landfill Decommissioning -5,829 646 -518 -5,701 Insurance Provision -1,722 -55 55 -1,722 NNDR Appeals (BBC 49% portion) 0 -1,078 -1,078 Compulsory Purchase Orders -303 -130 -433 House Sales Debts -130 6 -124 School Redundancies -171 171 0 Other -187 -96 167 3 -113 Total -8,342 -1,359 984 0 -454 -9,171

Current Provision -2,015 -1,359 984 -1,645 -4,035 Non-Current Provision -6,327 1,645 -454 -5,136 Total -8,342 -1,359 984 0 -454 -9,171

Further information on provision movements during the previous year are given below:

Transfer between Balance at current Balance at 1 April New Release and non- Discount 31 March 2012/13 2012 Provisions Provision current Provision 2013 £000 £000 £000 £000 £000 £000

Elstow Landfill Decommissioning 0 -5,829 -5,829 Insurance Provision -1,440 -285 3 -1,722 Compulsory Purchase Orders -303 -303 House Sales Debts -130 -130 School Redundancies 0 -171 -171 Other -15 -169 -3 -187 Total -1,887 -6,454 0 0 0 -8,342

Current Provision -701 -1,242 -71 -2,015 Non-Current Provision -1,186 -5,212 71 -6,327 Total -1,887 -6,454 0 0 0 -8,342

Brief explanations of what the main provisions represent are: Elstow Landfill Decommissioning is to cover the future statutory 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. CPO (Compulsory Purchase Orders) 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. School Redundancies is to cover the costs of redundancies in schools that are the responsibility of the Council.

All other provisions are individually insignificant. Page 48 of 133

23. Usable Reserves

Movement in the Council’s Usable Reserves are detailed in the Movement in Reserves Statement (see page 8), and the disclosure notes Adjustments between Accounting Basis and Funding Basis under Regulations and Transfers to / from Earmarked Reserves relating to Adjustments between Accounting Basis and Funding Basis Under Regulations and Transfer to/from Earmarked Reserves, respectively.

24. Unusable Reserves

31 March 2013 31 March 2014 £000 Notes £000 -48,646 Revaluation Reserve (a) -58,477 -59 Available for Sale Financial Instruments Reserve (b) -22 -288,865 Capital Adjustment Account (c) -308,481 364 Financial Instruments Adjustment Account (d) 357 -467 Deferred Capital Receipts Reserve (e) -467 221,769 Pensions Reserve (f) 229,539 -1,181 Collection Fund Adjustment Account (g) -1,178 2,357 Accumulated Absences Account (h) 1,984 -114,730 Total Unusable Reserves -136,746

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. 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.

2012/13 2013/14 £000 £000 -47,488 Balance at 1 April -48,646 -8,107 Upward revaluation of assets -16,860 5,737 Downward revaluation of assets and impairment losses not charged to the 4,443 Surplus/Deficit on the Provision of Services -2,370 (Surplus) or deficit on revaluation of non-current assets not posted to the -12,417 Surplus or Deficit on the Provision of Services 109 Revaluation Reserve written out on revaluation transfer 862 Difference between fair value depreciation and historical cost depreciation 975 242 Accumulated gains on assets sold or scrapped 1,610 1,213 Amount written off to the Capital Adjustment Account 2,585 -48,646 Balance at 31 March -58,477

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 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.

2012/13 2013/14 £000 £000 -11 Balance at 1 April -59 -48 Upward revaluation of investments 37 -59 Balance at 31 March -22

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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.

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.

2012/13 2013/14 £000 £000 £000 -301,484 Balance at 1 April -288,865 Reversal of items relating to capital expenditure debited or credited to the CIES: 14,935 Charges for depreciation and impairment of non-current 14,734 assets 12,956 Revaluation losses on Property, Plant and Equipment 10,470 -1,704 Revaluation gains reversing previous losses -5,920 472 Amortisation of intangible assets 410 4,545 Revenue expenditure funded from capital under statute 505 25 Investment property written off on disposal or sale as part of 25 the gain/loss on disposal to the CIES 9,571 Noncurrent assets (excluding investment property) written off 12,302 on disposal or sale as part of the gain/loss on disposal to the CIES -242 Accumulated gains on assets sold or scrapped -1,610 40,558 30,916 -862 Adjusting amounts written out of the Revaluation Reserve -975 39,696 Net written out amount of the cost of non-current assets 29,941 consumed in the year Capital financing applied in the year: -997 Use of the Capital Receipts Reserve to finance new capital -1,152 expenditure -11,249 Capital grants and contributions credited to the CIES that -10,847 have been applied to capital financing -3,886 Application of grants to capital financing from the Capital -6,091 Grants Unapplied Account -109 Revaluation reserve balances written out on transfer -4,239 Statutory provision for the financing of capital investment -3,962 charged against the General Fund -979 Statutory repayment of debt (finance lease liabilities) -279 -6,087 Capital expenditure charged against the General Fund -11,173 -27,547 -33,505 322 Movements in the market value of Investment Properties debited or credited to the -16,051 CIES 148 Movements in assets held for sale debited or credited to the CIES -288,865 Balance at 31 March -308,480

d) Financial Instruments 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 Page 50 of 133

Movement in Reserves Statement. 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.

2012/13 2013/14 £000 £000 221 Balance at 1 April 364 18 Proportion of premiums incurred in previous financial years to be charged against 18 the General Fund Balance in accordance with statutory requirements 238 382 126 -25 Amount by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements 364 Balance at 31 March 357

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 respective 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.

2012/13 2013/14 £000 £000 -489 Opening balance -467 22 Transfer from Capital Receipts Deferred to Capital Receipts Reserve 0 -467 Closing Balance -467

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.

2012/13 2013/14 £000 £000 179,014 Balance at 1 April 221,769 37,459 Actuarial gains or losses on pensions assets and liabilities 791 17,774 Reversal of items relating to retirement benefits debited or credited to the 20,290 Surplus or Deficit on the Provision of Services in the CIES -12,478 Employer’s pensions contributions and direct payments to pensioners payable in -13,311 the year 221,769 Balance at 31 March 229,539

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g) Collection Fund Adjustment Account

The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax 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.

2012/13 2013/14 £000 £000 -1,004 Balance at 1 April -1,181 -177 Amount by which council tax income credited to the CIES is different from council 3 tax income calculated for the year in accordance with statutory requirements -1,181 Balance at 31 March -1,178

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.

2012/13 2013/14 £000 £000 1,716 Balance at 1 April 2,357 641 -373 Amount by which officer remuneration charged to the CIES on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements 2,357 Balance at 31 March 1,984

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25. Cash Flow Statement – Operating Activities

2012/13 2013/14 £000 £000 729 Interest Received 635 0 Dividends received 0 379,547 Other Operating Income 350,345 380,276 Total Operating Income 350,980

-3,854 Interest Paid -3,858 -362,834 Other Operating Expenditure -334,580 -366,688 Total Operating Expenditure -338,438

13,588 Net surplus or (deficit) from Operating Activities (Note 25) 12,542

The audited 2012/2013 comparative figures have been adjusted by £7.08 million for internal recharges. This has reduced the other operating expenditure and income amounts within the note above, but the net surplus or (deficit) from operating activities is unchanged.

26. Cash Flow Statement – Investing Activities

2012/13 2013/14 £000 £000 -45,750 Purchase of property, plant and equipment, investment property and intangible -35,425 assets -150,600 Purchase of short-term and long-term investments -103,500 Other payments for investing activities 0 811 Proceeds from the sale of property, plant and equipment, investment property 1,132 and intangible assets 154,100 Proceeds from short-term and long-term investments 102,969 17,598 Other receipts from investing activities (including capital grants) 26,690 -23,841 Net surplus or (deficit) from Investing Activities (Note 26) -8,135

27. Cash Flow Statement – Financing Activities

2012/13 2013/14 £000 £000 1,029 Cash receipts of short and long-term borrowing 23 549 Other receipts from financing activities -387 -644 Cash payments for the reduction of the outstanding liabilities (finance leases) -605 -6,267 Repayments of short-term and long-term borrowing -5,894 -908 Other payments for financing activities 2,515 -6,241 Net surplus or (deficit) from Financing Activities (Note 27) -4,348

Cash and cash equivalents have remained consistent throughout the year. An increase in operating cash has been offset by a deficit in financing and investing cash flow. This has been generated by an increase in working capital and some cash backed reserves, while capital investment have been financed by internal borrowing.

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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 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 Finance & Corporate Services 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:

Directorate Income and Expenditure Environment Children's, & Adults Chief Schools & Corporate Sustainable Corporate Services Executive Families Finance Communities Budgets Financing Total 2013/14 Figures £000 £000 £000 £000 £000 £000 £000 £000 Fees, charges & other service income -23,703 -8,134 -5,632 -13,516 -27,145 -3,586 -81,716 Government grants & contributions -37 -6,855 -80,424 -57,381 -1,464 -181 -148,983 -295,324 Total Income -23,740 -14,989 -86,056 -70,897 -28,609 -3,767 -148,983 -377,040

Employee expenses 16,114 9,260 13,759 13,771 18,045 8,174 79,124 Other service expenses 58,176 11,976 100,044 70,853 38,221 17,306 1,340 297,916 Support service recharges 0 Total Expenditure 74,290 21,236 113,803 84,625 56,266 25,479 1,340 377,040

Net Expenditure 50,550 6,247 27,747 13,727 27,658 21,713 -147,643 0

Comparatives for the previous year are:

Directorate Income and Expenditure Environment Children's, & Adults Chief Schools & Corporate Sustainable Corporate Services Executive Families Finance Communities Budgets Financing Total 2012/13 Figures £000 £000 £000 £000 £000 £000 £000 £000 Fees, charges & other service income -19,428 -3,459 -8,119 -13,106 -27,228 -3,701 -75,042 Government grants & contributions -14,006 -868 -104,335 -69,459 -2,676 -4,423 -127,395 -323,162 Total Income -33,435 -4,328 -112,454 -82,565 -29,904 -8,124 -127,395 -398,204

Employee expenses 17,491 7,901 16,137 13,451 18,368 4,397 77,744 Other service expenses 60,103 3,922 119,667 83,684 39,976 11,740 1,367 320,460 Support service recharges 0 Total Expenditure 77,595 11,823 135,803 97,135 58,344 16,137 1,367 398,204

Net Expenditure 44,160 7,496 23,349 14,570 28,440 8,013 -126,028 0 Page 54 of 133

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.

2012/13 Reconciliation of Directorate Income and Expenditure to Cost of Services in the CIES 2013/14 £000 £000 0 Net expenditure in the Directorate Analysis 0 0 Net expenditure of services and support services not included in the Analysis 0 29,025 Amounts in the Comprehensive Income and Expenditure Statement not reported to management in the Analysis 16,938 114,515 Amounts included in the Analysis not included in the Comprehensive Income and Expenditure Statement 131,905 143,540 Cost of Services in Comprehensive Income and Expenditure Statement 148,843

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.

Services Amounts not and Support reported to Amounts Services management not Allocation Directorate not in for decision included in of Cost of Corporate Analysis Analysis making CIES Recharges Services Amounts Total 2013/14 figures £000 £000 £000 £000 £000 £000 £000 £000

Fees, charges & other service income -76,082 -4,068 25,153 6,793 -48,204 -48,204 Interest and investment income -5,634 5,634 0 -5,178 -5,178 Income from council tax -69,542 69,542 0 -69,306 -69,306 Government grants and contributions -225,782 -7,531 -5,039 83,116 25 -155,211 -93,805 -249,016 Total Income -377,040 -11,598 -5,039 183,445 6,818 -203,414 -168,290 -371,704

Employee expenses 79,124 51,937 -3,261 -2,141 -15,542 110,117 9,867 119,984 Other service expenses 292,724 -40,339 -43,942 -8,774 199,669 365 200,034 Support Service recharges -265 19,378 19,113 265 19,378 Depreciation, amortisation and impairment 25,238 -1,881 23,357 -16,050 7,307 Interest Payments 3,764 -3,764 0 3,865 3,865 Precepts & Levies 1,428 -1,428 0 1,428 1,428 Payments to Housing Capital Receipts Pool 0 5 5 Gain or Loss on Disposal of Fixed Assets 0 11,190 11,190 Total expenditure 377,040 11,598 21,977 -51,540 -6,818 352,258 10,934 363,192

Surplus or deficit on the provision of services 0 0 16,938 131,905 0 148,843 -157,355 -8,512 Page 55 of 133

Comparatives for the previous year are:

Services Amounts not and Support reported to Amounts Services management not Allocation Directorate not in for decision included in of Cost of Corporate Analysis Analysis making CIES Recharges Services Amounts Total 2012/13 figures £000 £000 £000 £000 £000 £000 £000 £000

Fees, charges & other service income -69,682 -3,865 7,348 7,592 -58,607 -11 -58,618 Interest and investment income -5,377 5,377 0 -5,251 -5,251 Income from council tax -76,238 76,238 0 -76,416 -76,416 Government grants and contributions -246,907 -7,093 -14,029 68,372 328 -199,329 -73,135 -272,464 Total Income -398,204 -10,958 -14,029 157,335 7,920 -257,936 -154,813 -412,749

Employee expenses 77,744 106,867 -2,326 -1,415 -15,777 165,093 8,263 173,356 Other service expenses 315,137 -95,909 -36,038 -9,590 173,600 437 174,038 Support Service recharges -44 19,232 19,188 44 19,232 Depreciation, amortisation and impairment 45,380 -1,786 43,594 322 43,916 Interest Payments 3,867 -3,867 0 4,063 4,063 Precepts & Levies 1,456 -1,456 0 1,456 1,456 Payments to Housing Capital Receipts Pool 0 9 9 Gain or Loss on Disposal of Fixed Assets 0 8,610 8,610 Total expenditure 398,204 10,958 43,055 -42,820 -7,920 401,476 23,203 424,679

Surplus or deficit on the provision of services 0 0 29,025 114,515 0 143,540 -131,610 11,931

The audited 2012/2013 comparative figures have been adjusted by £7.08 million for internal recharges. This has reduced the gross expenditure and income figures within the ‘amounts not included in CIES’, but the total surplus or deficit on the provision of services is unchanged for each column. Page 56 of 133

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:

2012/13 2013/14 Income Expenditure Surplus/ Income Expenditure Surplus/ Deficit Deficit £000 £000 £000 £000 £000 £000

-312 224 -88 Market Trading -318 211 -107 -456 437 -19 Music Service -487 475 -12 -1,971 1,718 -253 Refuse -2,160 1,810 -350 -417 519 102 Building Control -343 528 185 -334 344 10 Drainage -371 380 9 -218 325 107 Grounds -226 331 105

-3,708 3,567 -141 Total -3,905 3,735 -170

Trading operations are incorporated into the CIES within Net Cost of Services.

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).

2012/13 2013/14 Income Expenditure Net Income Expenditure Net £000 £000 £000 £000 £000 £000

-489 459 -30 Business Improvement District -481 452 -29 -85,774 85,774 0 Payroll Services -120,925 120,925 0

31. Pooled Budgets

Bedford 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 Primary Care Trust (PCT)

2012/13 2013/14 £000 £000 £000 £000 Funding provided to the pooled budget: -291 · Bedford Borough Council -305 -1,435 · Bedfordshire PCT -1,503 -448 · Central Bedfordshire Council -493 -2,174 Total Funding -2,301

2,174 Less Expenditure 2,301 0 Net surplus/ (overspend) arising on the pooled budget during 0 the year

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Bedfordshire Mental Health Partnership Agreement

This is a pooled fund for the integrated provision of services to those persons with mental health problems. The Partnership is between the Council and South Essex University Partnership Trust (SEPT),

2012/13 2013/14 £000 £000 £000 £000 Funding provided to the pooled budget: -1,830 · Bedford Borough Council -1,756 -4,700 · South Essex University Partnership Trust -2,948 -6,530 Total Funding -4,704

6,530 Less Expenditure 4,704 0 Net surplus/ (overspend) arising on the pooled budget during 0 the year

32. Members’ Allowances

The Council paid the following amounts to members of the council during the year.

2012/13 2013/14 £000 £000 626 Allowances 635 626 Total 635

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33. Officers’ Remuneration

The table below discloses details of individual remuneration for senior employees of the Authority. Staff whose salary is above £150,000 are named; otherwise they are listed by way of Job Title. Senior employees are defined as designated Head of Paid Service, (Chief Executive), direct reports and statutory chief officers (i.e. Section 151 Officer, Monitoring Officer, Chief Education Officer, Director of Social Services, Director of Public Health, and Director of Children’s Services).

Salary, Compensation Fees and Expenses for Loss of Benefits in Pension Allowances Bonuses Allowances Office Kind Contribution Total £ £ £ £ £ £ £ Chief Executive - Philip Simpkins 2013/14 170,000 0 0 0 0 23,877 193,877 2012/13 169,450 0 0 0 0 23,800 193,250 Executive Director Children’s Services 2013/14 0 0 0 0 0 0 0 (Covered by Agency since May 2012) 2012/13 26,686 0 0 16,500 0 3,749 46,935 Executive Director Adults Services 2013/14 134,633 0 0 42,384 97 18,926 196,040 (Left post 24th March 2014) 2012/13 133,202 0 0 0 494 18,725 152,421 Executive Director Children’s & Adults Services 2013/14 10,778 0 0 0 0 1,509 12,287 (Started in post 1st March 2014) 2012/13 0 0 0 0 0 0 0 Executive Director of Environment 2013/14 133,575 0 0 0 0 18,778 152,353 2012/13 132,936 0 0 0 0 18,688 151,624 Director of Finance and Corporate Services 2013/14 129,889 0 0 68,688 0 18,261 216,839 (s151 Officer) (Left post 31st March 2014) 2012/13 129,510 0 0 0 43 18,208 147,761 Assistant Chief Executive (Governance) 2013/14 82,200 0 0 0 0 11,585 93,785 (Monitoring Officer) 2012/13 81,650 0 0 0 0 11,508 93,158 Assistant Chief Executive (HR & CP) 2013/14 78,132 0 0 0 211 11,015 89,358 (Part-time from 1st October 2013) 2012/13 94,060 0 0 0 170 13,245 107,476 Chief Education Officer 2013/14 105,397 0 0 0 0 14,818 120,215 (Overlap of post during 2012/13) 2012/13 121,479 0 0 0 0 17,101 138,580 Head of Economic Development 2013/14 71,201 0 0 0 0 10,045 81,246 2012/13 70,123 0 0 0 0 9,894 80,017 Director of Public Health 2013/14 98,214 0 0 0 0 13,827 112,041 (New post 1st April 2013) 2012/13 0 0 0 0 0 0 0 Total in 2013/14 1,014,019 0 0 111,073 308 142,641 1,268,040 Total in 2012/13 959,096 0 0 16,500 707 134,918 1,111,221

In addition to the figures above, the Chief Executive received payments in respect of his duties for elections and referendum. For 2013/14 this was £1,439 as Returning Officer for Parliamentary Elections. In respect of 2012/13, these were £4,318 as Returning Officer for Police Commissioner 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 2013/14 (14.0% in 2012/13) for all employees. The role of Director of Public Health transferred to Local Government from 1 April 2013. The Director of Public Health is jointly funded with Central Bedfordshire Council and Milton Keynes Council. Bedford Borough Council contributes 24% of the post's salary. The Benefits in Kind mainly relate to car loans taken, which are available to all Designated Car Users. Page 59 of 133

The Council’s other employees receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) were paid the following amounts:

2012/13 Remuneration band 2013/14 Number of employees Number of employees Council Officers Teaching Staff From To Council Officers Teaching Staff £000 £000 14 9 50 - 55 14 11 27 8 55 - 60 25 9 3 4 60 - 65 4 6 4 5 65 - 70 2 1 20 1 70 - 75 16 5 1 1 75 - 80 5 1 8 80 - 85 1 1 85 - 90 7 2 90 - 95 1 2 95 - 100 1 100 - 105 4 105 - 110 2 2 125 - 130 1 2 130 - 135 2 1 135 - 140 1 165 - 170 1 1 170 - 175 1 195 - 200 1 89 28 TOTAL 88 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 Number of other Total number of exit Total cost of exit band (including compulsory departures agreed packages by cost packages in each special payments) redundancies band [(b) + (c)] band 2013/14 2012/13 2013/14 2012/13 2013/14 2012/13 2013/14 2012/13 £000 £000 £0 – £20,000 38 23 24 46 62 69 453 384 £20,001 – £40,000 6 0 6 11 12 11 333 295 £40,001 – £60,000 2 0 2 3 4 3 185 159 £60,001 – £80,000 0 1 1 1 1 2 77 149 £80,001 – £100,000 0 0 1 1 1 1 88 95 £100,000 – £150,000 1 0 1 2 2 2 255 218 £150,000 – £250,000 1 0 0 0 1 0 238 0 Total 48 24 35 64 83 88 1,629 1,300

This shows that the number of exit packages in 2013/14 was 83, a reduction from 2012/13 of 5. This includes staff at Community and VC Schools.

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.

2012/13 2013/14 £000 £000 132 Fees payable to external auditors with regard to external audit services carried 127 out by the appointed auditor for the year 87 Fees payable to external auditors for the certification of grant claims and returns 33 for the year 25 Fees payable to external auditors for other work 0 244 Total 160

For 2013/14 the fees were reduced by a rebate of £20,000 (£16,000 in 2012/13).

35. Dedicated Schools Grant

The accumulated reserves of schools operating under local management arrangements were £5.0 million as at 31 March 2014 (£6.9 million as at 31 March 2013).

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 academy schools 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 Finance (England) Regulations 2011. 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 are as follows:

2013/14 DSG Figures Individual Central Schools Expenditure Budget Total £000 £000 £000 Final DSG for 2013/2014 before Academy Recoupment 22,162 101,955 124,117 Academy figure recouped for 2013/2014 -3,228 -45,171 -48,399 Total DSG after Academy recoupment for 2013/14 18,933 56,784 75,717

Brought Forward from 2012/2013 278 278 Carry-forward to 2014/2015 agreed in advance Agreed initial budgeted distribution in 2013/14 18,933 57,062 75,995

In year adjustments -54 -54 Final budgeted distribution for 2013/2014 18,933 57,008 75,941

Less Actual central expenditure 17,510 17,510 Less Actual ISB deployed to Schools 55,361 55,361 Plus Local authority contribution for 2013/2014 Carry-forward to 2014/2015 1,423 1,647 3,070

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2012/13 DSG Figures Individual Central Schools Expenditure Budget Total £000 £000 £000 Final DSG for 2012/2013 before Academy Recoupment 10,929 107,615 118,544 Academy figure recouped for 2012/2013 -691 -31,150 -31,841 Total DSG after Academy recoupment for 2012/13 10,238 76,465 86,703

Brought Forward from 2011/2012 348 764 1,112 Carry-forward to 2013/2014 agreed in advance Agreed initial budgeted distribution in 2012/13 10,586 77,229 87,815

In year adjustments 505 -505 Final budgeted distribution for 2012/2013 11,091 76,724 87,815

Less Actual central expenditure 10,813 10,813 Less Actual ISB deployed to Schools 76,724 76,724 Plus Local authority contribution for 2012/13 Carry-forward to 2013/2014 278 0 278

Note – Reconciliation to 2012/2013

Individual Central Schools Expenditure Budget Total £000s £000s £000s

Final budgeted distribution for 2012/2013 11,090 76,724 87,815 Final budgeted distribution for 2013/2014 18,933 57,008 75,941 Variance 7,843 -19,716 -11,873

Central Expenditure

In 2012/2013, the additional support funding for pupils with special education needs was within the individual schools budgets. In 2013/2014 this funding is reported within the central expenditure as it is now distributed through high needs £10m. The balance relates to Greys Education Centre which converted to Academy status during 2012/2013 (£2m).

Individual Schools Budget

In 2012/2013 the additional support funding for pupils with special education needs was within the individual schools budgets. In 2013/2014 this funding is reported within the central expenditure as it is now distributed through high needs (£10m). The balance relates to schools that have converted to Academy status during 2012/2013 (£10m).

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36. Grant, Contributions and Taxation

The Council credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement:

2012/13 2013/14 £000 £000

Credited to Taxation and Non Specific Grant Income Revenue -76,416 Council Tax -69,306 -50,184 National Non-Domestic Rates -27,929 -973 Revenue Support Grant -42,435 -2,426 New Homes Bonus Grant -3,965 -1,844 Council Tax Freeze Grant -749 -176 Local Support Services Grant -181 Section 31 Grants -697 Education Services Grant -1,865

Capital -391 Lottery Fund -512 -3,364 Department for Transport -4,537 -4,359 Section 106 -2,670 -772 Growth Area Funding -1,468 -7,024 Department for Education -5,738 -914 Homes & Communities Agency -453 -528 Other -300 -178 Section 278 -116 -3 Department of Health -166 -149,551 Total -163,087

Credited to Services Revenue -86,703 Dedicated Schools Grant -75,941 -68,915 Housing and Council Tax Benefit Administration -56,390 -13,085 Department for Education -6,820 -10,253 Learning Disability & Health Reform Public Health Grant -6,676 -6,345 Other Revenue Grants -4,369

REFCUS -184 Section 106 -1,715 -12,482 Department for Education -1,674 -893 Disabled Facilities Grant -593 -253 Growth Area Funding -216 Other Grant -1,056 -199,330 Total -155,234

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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 2013 31 March 2014 £000 £000

Contributions -4,506 Section 106 -6,976 -466 Section 278 -589 Other Contributions -155

Grants -5,354 Growth Area Funding -3,886 -4,170 Bedford Western Bypass - Homes & Communities Agency -4,173 Bedford Western Bypass - DfT Pinch Point Funding -4,500 -1,843 Department for Education -1,065 -659 Department of Transport -640 -52 Department of Health -218 -185 EEDA -117 -23 Other Grants -1 -17,258 Total -22,320

Please note £586,085 of Section 106 contributions has been reclassified to current liabilities because it has conditions stating it must be spent before 31 March 2015.

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 – 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 in Note 28 on reporting for resources allocation decisions. Grant receipts not yet recognised as income in the Comprehensive Income and Expenditure Statement are shown in Note 36.

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 2013/14 there was no significant interests declared:

Officers

During 2013/14 there were no significant interests declared.

Other Public Bodies

The Council has pooled budget arrangements with Bedfordshire Client Commissioning Group (CCG) and South Essex Partnership Trust (SEPT) for the provision of social care services. Transactions and balances outstanding are detailed in Note 31.

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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 £1.0 million in 2013/14 (£1.0 million in 2012/13) for expenses incurred in administering the Fund. The Council took over administering the Fund on 1 April 2009.

As at 31 March 2014, the amount due to the Council from the Pension Fund was nil (£0.2 million as at 31 March 2013), with £1.6 million being owed by the Council to the Pension Fund (£1.4 million as at 31 March 2013).

Entities Controlled or Significantly Influenced by the Council

The Council has interests in entities that have the nature of subsidiaries. There are three trust funds (House of Industry, Freemans Common Trust, and Grange Trust).

The most significant transaction during 2013/14 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 2012/13).

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. The CFR is analysed in the second part of this note.

2012/13 2013/14 £000 £000 107,422 Opening Capital Financing Requirement 117,210 Capital investment 32,368 Property, Plant and Equipment 32,251 31 Investment Properties 1,194 196 Intangible Assets 356 Heritage Assets 164 Capital Long-Term Debtors 26 18,574 Revenue Expenditure Funded from Capital under Statute 5,543

Sources of finance -1,076 Capital receipts -1,152 -29,164 Government grants and other contributions (includes REFCUS) -21,976 Sums set aside from revenue: -6,087 · Direct revenue contributions -11,173 -979 · Statutory repayment of debt (finance leases liabilities) -279 -4,239 · Minimum Revenue Provision (MRP) -3,962 117,210 Closing Capital Financing Requirement 118,037

Explanation of movements in year -3,617 Increase/(decrease) in underlying need to borrowing -3,473 (supported by government financial assistance) 13,090 Increase/(decrease) in underlying need to borrowing 4,916 (unsupported by government financial assistance) 315 Assets acquired under finance leases -616

9,788 Increase/(decrease) in Capital Financing Requirement 827

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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 carried as Property, Plant and Equipment in the Balance Sheet at the following net amounts:

31 March 2013 31 March 2014 £000 £000 2,361 Vehicles, Plant, Furniture and Equipment 1,579 2,361 1,579

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 2013 31 March 2014 £000 £000 Finance lease liabilities (net present value of minimum lease payments): -622 current -598 -1,487 non-current -895 -338 Finance costs payable in future years -235 -2,447 Minimum lease payments -1,728

The minimum lease payments will be payable over the following periods:

Minimum Lease Finance Lease Payments Liabilities Minimum Lease Finance Lease Payments Liabilities 31 March 2013 31 March 2013 31 March 2014 31 March 2014 £000 £000 £000 £000 -747 -622 Not later than one year -704 -598 -1,650 -1,444 Between one and five years -989 -875 -50 -43 Later than five years -35 -20 -2,447 -2,109 -1,728 -1,493

The Council does not have any payments that are contingent on events taking place after the lease was entered into.

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 2013 31 March 2014 £000 £000 562 Not later than one year 383 1,924 Between one and five years 1,084 1,500 Later than five years 432 3,986 Total 1,899

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The expenditure charged to the relevant Service lines in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was:

2012/13 2013/14 £000 £000 528 Minimum lease payments 445 528 Total 445

Council as Lessor

Finance Leases

The Council has one leased out property as a finance lease with a remaining term of 110 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 2013 31 March 2014 £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 Investment in the Minimum Lease Investment in the Minimum Lease Lease Payments Lease Payments 31 March 2013 31 March 2013 31 March 2014 31 March 2014 £000 £000 £000 £000 0 23 Not later than one year 0 23 0 92 Between one and five years 0 92 287 2,386 Later than five years 287 2,363 287 2,501 Total Lease Payments 287 2,478

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 lease was entered into.

Operating Leases

The Council leases out property under operating leases for income generation, provision of community based facilities, provision of employment and business development opportunities and provision of specific services on behalf of the Council

The future minimum lease payments receivable under non-cancellable leases in future years are set out in the following table:

31 March 2013 31 March 2014 £000 £000 3,259 Not later than one year 3,348 10,660 Between one and five years 10,705 83,104 Later than five years 82,218 97,024 Total Operating Future Lease Payments 96,270

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 2013/14 no contingent rents were receivable by the Council (2012/13 £2,000).

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40. Impairment Losses

There were no impairment losses during 2013/14.

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 2012/2013 (actual) £5.0 million 14.1% 2013/2014 (actual) £3.4 million 14.1% 2014/2015 (estimate) £3.3 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 2013/2014 (actual) £88,075 14.0% 2014/2015 (estimate) £182,000 14.0%

The Council is not liable to the scheme for any other entities obligations under the plan.

42. Defined Benefit Pension Schemes

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 make the payments that needs to be disclosed at the time that employees earn their future entitlement.

The Council participates in two post-employment schemes: The Local Government Pension Scheme (LGPS), administered locally by Bedford Borough Council – this 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 pensions 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.

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However, there are no investment assets built up to meet these pensions’ liabilities, and cash has to be generated to meet actual pension’s payments as they eventually fall due. The Bedford Borough Council pension scheme 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. More details can be obtained from the Pension Fund accounts starting on page 82. 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 to 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 Pension Fund for the 2013/14 Financial Year and comparator figures for 2012/13. 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 2014 is a loss of £131.081 million (£130.290 million as at 31 March 2013).

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 £14.506 million (£27.510 million in 2012/13).

The comparator figures for 2012/13 have not been updated for the change in accounting policy for IAS19. The accounting change would have restated £265,000 between Interest Income on plan assets and Return on assets excluding amounts included in net interest. This was determined to be immaterial and not restated.

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Pensions Fund transactions during 2013/14 and comparator figures for 2012/13

2012/13 2013/14 Net (liability) Net (liability) Assets Obligations /asset Assets Obligations /asset £000 £000 £000 £000 £000 £000 265,160 265,160 Fair Value of employer assets 289,770 289,770 444,175 -444,175 Present value of funded liabilities 499,793 -499,793 0 Present value of unfunded liabilities 11,747 -11,747 265,160 444,175 -179,015 31 March 2012 Opening Position 31 March 2013 289,770 511,540 -221,770 Service cost 9,899 -9,899 Current service cost 11,751 -11,751 918 -918 Past service cost ( including curtailments ) 557 -557 -2,053 -3,359 1,306 Effect of settlements -2,649 -4,534 1,885 -2,053 7,458 -9,511 Total Service Cost -2,649 7,774 -10,423 Net Interest 12,931 12,931 Interest Income on plan assets 12,884 12,884 21,194 -21,194 Interest cost on defined benefit obligation 22,751 -22,751 12,931 21,194 -8,263 Total net interest 12,884 22,751 -9,867 10,878 28,652 -17,774 Total defined benefit cost recognised in Profit or (Loss) 10,235 30,525 -20,290 Cashflows 3,466 3,466 0 Plan participants contributions 3,350 3,350 0 11,655 11,655 Employer contributions 12,511 12,511 823 823 Contributions in respect of unfunded benefits 800 800 -15,968 -15,968 0 Benefits paid -17,162 -17,162 0 -823 -823 0 Unfunded benefits paid -800 -800 0 275,191 459,502 -184,311 Expected closing position 298,704 527,453 -228,749 Remeasurements 0 0 Changes in demographic assumptions 10,520 -10,520 52,198 -52,198 Changes in financial assumptions -10,938 10,938 -160 160 Other experience 2,831 -2,831 14,579 14,579 Return on assets excluding amounts included in net interest 1,622 1,622 14,579 52,038 -37,459 Total remeasurements recognised in Other Comprehensive 1,622 2,413 -791 Income (OCI) 289,770 289,770 Fair Value of employer assets 300,326 300,326 499,793 -499,793 Present value of funded liabilities 518,326 -518,326 11,747 -11,747 Present value of unfunded liabilities 11,539 -11,539 289,770 511,540 -221,770 31 March 2013 Closing Position 31 March 2014 300,326 529,866 -229,540

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A summary of the movements in assets and liabilities is given in the table below:

2009/10 2010/11 2011/12 2012/13 2013/14 £000 £000 £000 £000 £000

Present value of LGPS Liabilities -500,261 -410,369 -444,174 -511,540 -529,866 Fair value of LGPS Assets 253,458 271,279 265,159 289,770 300,326 LGPS Surplus/(deficit) -246,803 -139,090 -179,015 -221,770 -229,540

The liabilities show the underlying commitments that the Council has in the long run to pay post-employment (retirement) benefits. The total liability of £529.866 million at 31 March 2014 (£511.540 million at 31 March 2013) has a substantial impact on the net worth of the Council as recorded in the Balance Sheet, resulting in a negative overall balance of £229.540 million at 31 March 2014 (£221.770 million at 31 March 2013). 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 over the remaining working life of employees (i.e. before payments fall due), as assessed by the scheme actuary. 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 36.4% 23.1 Deferred members 21.0% 26.4 Pensioner members 42.6% 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 2015 is £12.487 million. Expected contributions for the Discretionary Benefits scheme in the year to 31 March 2015 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

2012/13 2013/14 Long-term expected rate of return on assets in the scheme: 4.50% Equity investments 4.30% 4.50% Bonds 4.30% 4.50% Property 4.30% 4.50% Cash 4.30% Mortality assumptions: Longevity at 65 for current pensioners: 21.6 Men 22.4 23.2 Women 24.3 Longevity at 65 for future pensioners: 23.6 Men 24.4 25.6 Women 26.8 5.10% Rate of increase in salaries 3.60% 2.80% Rate of increase in pensions 2.80% 4.50% Expected Return on Assets 4.30% 4.50% Rate for discounting scheme liabilities 4.30% 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 2015 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 2014: Approximate % increase Approximate monetary amount to Employer Liability £000

0.5% decrease in Real Discount Rate 9% 49,717 1 year increase in member life expectancy 3% 15,896 0.5% increase in the Salary Increase Rate 2% 12,613 0.5% increase in the Pension Increase Rate 7% 36,739

The Discretionary Benefits arrangements have no assets to cover its liabilities. The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:

31 March 2013 31 March 2014 Quoted Quoted Quoted prices Quoted prices prices in not in prices in not in active active % of active active % of markets markets Total Total markets markets Total Total £(000) £(000) £(000) Assets Asset Category £(000) £(000) £(000) Assets

Equity Securities: 3,628 3,628 1.3% Consumer 3,411 3,411 1.1% 2,000 2,000 0.7% Manufacturing 2,428 2,428 0.8% 4,514 4,514 1.6% Energy and Utilities 4,972 4,972 1.7% 6,571 6,571 2.3% Financial Institutions 6,301 6,301 2.1% 4,342 4,342 1.5% Health and Care 5,001 5,001 1.7% 4,114 4,114 1.4% Information Technology 3,873 3,873 1.3% 3,342 3,342 1.2% Other 2,920 2,920 1.0%

8,981 12,549 21,530 7.4% UK Property 17,439 6,014 23,453 7.8% 687 687 0.2% Overseas Property 276 276 0.1%

Investment Funds and Unit Trusts: 5,175 106,715 111,890 38.6% Equities 4,729 115,374 120,103 40.0% 25,635 34,966 60,601 20.9% Bonds 26,039 28,733 54,772 18.2% 10,424 10,424 3.6% Hedge Funds 0.0% 4,884 4,884 1.7% Commodities 0.0% 41,641 41,641 14.4% Other 53,068 53,068 17.7%

Cash and Cash Equivalents: 9,605 9,605 3.3% All 19,749 19,749 6.6% 109,941 179,829 289,770 100.0% 130,181 170,146 300,326 100.0%

History of experience gains and losses

The history of actuarial gains identified as movements on the Pensions Reserve to 2013/2014 can be analysed into the following categories, measured as a percentage of assets or liabilities at 31 March 2014:

2009/10 2010/11 2011/12 2012/13 2013/14 % % % % % Experience gains and losses on assets (expressed as a 17.02 0.03 -6.58 5.03 3.58 percentage of plan assets at balance sheet date) Experience gains and losses on liabilities (expressed as a 32.32 -16.23 5.30 10.17 3.64 percentage of plan liabilities at balance sheet date)

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43. Contingent Liabilities

At 31 March 2014, the Council had no known material contingent liabilities.

44. Contingent Assets

At 31 March 2014, 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 other parties might fail to pay amounts due to the Council Liquidity risk – the possibility that the Council might not have funds available to meet its commitments to make payments Market risk – the possibility that financial loss might arise for the Council as a result of changes in such measures as interest rates and stock market movements.

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, under policies approved by Full Council 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.

The credit criteria in respect of financial assets held by the Council are as 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 any one institution is £12 million for deposit takers and £15 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 parameters set by the Council.

The Council’s maximum exposure to credit risk in relation to its investments in banks and building societies of £64 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 2014 that this was likely to crystallise.

No credit limits were exceeded during the reporting period and the Council does not expect any losses from non-performance by any of its counterparties in relation to deposits and bonds.

The Council does not generally allow credit for customers, such that £6.7 million of the £12.4 million balance is past its due date for payment. The past due but not impaired amount can be analysed by age as follows:

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31 March 2013 31 March 2014 £000 £000 4,537 Less than three months 8,152 700 Three to six months 688 1,065 Six months to one year 688 2,569 More than one year 2,858 8,871 Total 12,387

Liquidity risk

The Council has a comprehensive cash flow management system that seeks to ensure that cash is available as needed. If unexpected movements happen, the Council has ready access to borrowings from the money markets and the Public Works Loan Board. There is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. Instead, 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. The strategy is 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 taken out and (where it is economic to do so) making early repayments. The maturity analysis of financial liabilities is set out in the following table:

31 March 2013 Time to maturity 31 March 2014 £000s (years) £000s 6,704 Not over 1 4,052 3,303 Over 1 but not over 2 3,300 9,900 Over 2 but not over 5 9,900 14,380 Over 5 but not over 10 15,585 25,774 Over 10 but not over 20 27,069 7,590 Over 20 but not over 30 1,851 Over 30 but not over 40 4,443 17,402 Over 40 12,959 8,171 Uncertain date * 8,169 93,224 Total 87,328

*The uncertain date category relates to Money Market LOBO borrowing, these borrowings allow the lender to re-set the interest rate on the deal every six months. This is why the repayment date is uncertain and we do not use the maturity date of the loan.

All trade and other payables are due to be paid in less than one year.

Aged Debt Analysis

During the course of 2013/14 the total value of sundry debt invoices issued was £204.4 million. The outstanding debt brought forward at 1 April 2013 was £10.0 million giving a total amount due of £214.4 million collectable. At 31 March 2014 £202.0 million (94%) of the total due was paid leaving an outstanding balance of £12.4 million. However, £6.7 million of the outstanding balance related to invoices issued in the final 28 days of the financial year and was not yet due at 31 March 2014.

The table below shows the outstanding sundry debt position as at 31 March 2014 in respect of sundry debts owed to the Council. The analysis illustrates that 16.9% of the total debt is owed by Central Bedfordshire Council, which equates to £2.1 million. This is comparatively high when compared to 31 March 2013, but only £0.1 million is over 56 days old. This reflects the improved working relationship with Central Bedfordshire Council.

Sundry Debts 0-28 days 29-56 days 57-84 days 85+ days TOTAL £000 £000 £000 £000 £000 Total Debt 5,658 1,997 497 4,235 12,387 Profile of Debt 46% 16% 4% 34%

Central Bedfordshire Debt 1,783 205 8 92 2,089 Central Bedfordshire Profile 85% 10% 0% 4%

All Other Debt 3,875 1,792 489 4,143 10,298 All Other Profile 38% 17% 5% 40%

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The profile of debt for “All other debt” shows that £4.1 million (36%) has been outstanding for more than 85 days and, as such, represents a risk of non-recovery. In particular £2.9 million relates to invoices issued prior to 2012/13 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 £3.1 million. The table below shows an analysis of outstanding amounts as at 31 March 2014 by the financial year in which the overpayment occurred:

Housing Benefit Overpayments 2009/10 2010/11 2011/12 2012/13 2013/14 TOTAL and earlier £000 £000 £000 £000 £000 £000 Total Debt 146 78 171 642 2,110 3,147 Profile of Debt 5% 2% 5% 20% 67%

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, due to the difficulty in collection, it is considered pragmatic to make a prudent provision for non-payment of this particular category of debt.

During 2013/14 Housing Benefit overpayments to a value of £3.4 million were identified in comparison to the overall amount of Housing Benefit paid of £55.7 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 2013/14 was £0.8 million, and a further £1.4 million was repaid by claimants.

A review of the Bad Debt Provision has been undertaken taking into consideration the outstanding sundry debts and benefit overpayments at 31 March 2014. This review took account of the change to the debt profile following five years’ experience as a unitary authority. In particular, very large value invoices were given individual consideration which revealed that the majority were owed by public bodies and represented a very low risk of default. Consequently, only very minimal provision has been made for that category of debt.

The annual budgeted contribution to the Bad Debt Provision was £0.450 million in 2013/14. The total Bad Debt Provision as at 31 March 2014 is £3.981 million. The review has concluded that an additional balance of £0.456 million is considered necessary to bring the existing provision to prudent levels

A further review of the annual revenue contribution for bad debt provision will be made as part of the 2015/16 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: o borrowings at variable rates – the interest expense charged to the Surplus or Deficit on the Provision of Services will rise o borrowings at fixed rates – the fair value of the liabilities borrowings will fall o investments at variable rates – the interest income credited to the Surplus or Deficit on the Provision of Services will rise o 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 has a number of strategies for managing interest rate risk. The policies 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

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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 Treasury Team has an active strategy 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 allows any adverse changes to be accommodated. The analysis will also advise whether new borrowing taken out is fixed or variable.

According to this assessment strategy, at 31 March 2014, if interest rates had been 1% higher with all other variables held constant, the financial effect would be:

2012/2013 2013/2014 £000 £000 -811 Increase in interest receivable on variable rate investments -816 -886 Increase in government grant receivable for financing costs -851 -1,697 Impact on Surplus or Deficit on the Provision of Services -1,667 -48 Decrease in fair value of available for sale financial assets 38 -1,745 Impact on Comprehensive Income and Expenditure -1,629 0 Decrease in fair value of loans and receivables 0 -9,867 Decrease in fair value of fixed rate borrowings/liabilities -8,349

The impact of a 1% fall in interest rates would be as above but with the movements being reversed.

Price risk

The council has an investment in a Short Duration Bond Fund, through the purchase of shares in the fund. These are subject to market price movement.

The £9,430,548 shares are all 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 £471,527 gain or loss being recognised in the Other Comprehensive Income and Expenditure for 2013/14.

Foreign exchange risk

The Council has no financial asset or liability denominated in foreign currencies and thus has no exposure to loss 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 funded under Service Level Agreements by Central Bedfordshire Council and Luton Borough Council as well) 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 us under a variety of terms, the most common ones being outright gift or long-term loan. 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. No attempt has been 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 as follows: . 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.

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. Casebourne 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

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 . 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 and Mesopotamian/Assyrian archaeology . A large collection (several thousand) of social history objects relating to local industry, domestic life, arts & crafts.

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 assets above are not recognised in the accounting statements currently due to them having a nil value, being the historic cost value. However, the Council estimates the value of the Civic Regalia to be £170,000, based on its insurance records.

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 table below provides a five-year summary of transactions relating to Heritage Assets:

Description 2009/10 2010/11 2011/12 2012/13 2013/14 £000 £000 £000 £000 £000 Cost of Acquisitions/Expenditure of Heritage Assets Heritage Buildings & Sites Statues and Memorials 167 6 Total 167 6 0 0 0

Value of Heritage Assets Transferred from Beds CC Heritage Buildings & Sites 203 Archives Records & Documentation 14 Total 217 0 0 0 0

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There has only been one small transfer of less than £1,000 into Heritage Assets during 2012/13 and 2013/14. The ongoing breakdown of Heritage Assets within Long Term Assets is as follows (there is no accumulated amortisation in each category).

£000 Heritage Sites 3,940 Artefacts 2,090 Civic Regalia 272 Memorials 220 Total 6,522

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 2013/14 £000 £000 £000 £000

a) House of Industry Estate -234 211 4,882 -566 b) Freeman's Common Trust -1 2 241 -1 c) Grange Trust -23 9 147 d) Norah Mavis Campbell -3 13 111

Total -261 235 5,381 -567

Prior year comparatives are shown below:

Income Expenditure Assets Liabilities 2012/13 £000 £000 £000 £000

a) House of Industry Estate -291 202 4,250 -150 b) Freeman's Common Trust -1 4 235 -1 c) Grange Trust -9 20 133 d) Norah Mavis Campbell -1 121

Total -302 226 4,739 -151

Notes:

a) House of Industry Estate Set up under the Bedford Corporation Act 1964, the estate owns significant land holdings, income from which (together with investments income) is used to provide financial assistance within the scheme approved by the Charity Commissioners. The current scheme was approved to have effect 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. To provide benefit to elderly person in need who reside within the area of Bedford Borough Council.

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8) 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.

2012/2013 Collection Fund Annual Accounts 2013/2014 Council Council NNDR NNDR Tax Tax £000 £000 £000 £000 INCOME

-90,427 Council Tax Receivable -82,260 -60,245 Business Rates Receivable -63,517 Transitional Protection Payments receivable -501 -60,245 -90,427 -64,018 -82,260 EXPENDITURE Apportionment of Previous Years Surplus Central Government 1,095 Bedford Borough Council 2,105 68 Bedfordshire Fire & Rescue Authority 136 119 Police & Crime Commissioner for Bedfordshire 243 0 1,282 0 2,484

Precepts, Demands and Shares Central Government 30,336 58,914 75,143 Bedford Borough Council 29,730 67,437 4,755 Bedfordshire Fire & Rescue Authority 607 4,345 8,509 Police & Crime Commissioner for Bedfordshire 7,775 58,914 88,407 60,673 79,556

Charges to Collection Fund 1,103 257 Less write offs of uncollectable amounts 461 403 -8 261 Less: Increase (-)/Decrease in Bad Debt Provision -24 94 Less: Increase (-)/Decrease in Provision for Appeals 2,200 236 Less: Cost of Collection 234 1,331 518 2,871 498

0 -220 Surplus/Deficit (-) arising during the Year -474 278

0 -1,174 Surplus/Deficit (-) b/fwd 1st April 0 -1,394

0 -1,394 Surplus/Deficit (-) c/fwd 31st March -474 -1,116

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:

2012/13 Analysis of Collection Fund Balance by Major Preceptors 2013/14 Council Council NNDR NNDR Tax Tax £000 £000 £000 £000 Central Government -237 -1,182 Bedford Borough Council -232 -946 -136 Police & Crime Commissioner for Bedfordshire -109 -76 Bedfordshire Fire & Rescue Authority -5 -61 0 -1,394 Balance at 31 March -474 -1,116

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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 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 and bad and doubtful debts 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 2014 was £162.2 million (£159.4 million at 31 March 2013). The rate in the pound for 2013/14 is 47.1p (45.8p in 2012/13) and the small business multiplier is 46.2p in the pound for 2013/14 (45.0p in 2012/13).

2013/14 is the first year in which Non-Domestic Rates are retained by the major preceptors. With effect from 1 April 2014 the Non-Domestic Rates yield from a billing authority area will be shared between local and central government. In unitary authority areas such as Bedford Borough the Council will retain 49% of the rates yield. There is inherent volatility in the Non-Domestic Rates yield as the tax base is based on 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. The 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, 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. There is a general right of appeal following a revaluation and substantial numbers of appeals remain outstanding following the most recent revaluation in 2010. 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 reduction in yield and refund of overpayments due to successful appeals was previously offset against the Council’s contribution to the national pool. Therefore, the Council did not have an established provision for losses on appeal as at 1 April 2013. However, from 1 April 2013, the overall rates yield and, therefore, the Council’s retained share of the rates yield reduces as a result of successful appeals.

It is now necessary to establish a provision for the estimated loss in yield, but this it is difficult to form an accurate estimate of the potential liability to the Council that will arise due to outstanding rating appeals at 1 April 2014 because appeals are determined independently by the Valuation Office Agency or, in some cases, the Valuation Tribunal. However, the best available estimate of overall reduction in rates yield in 2014/15 due to appeals is £2.9 million, of which it is estimated 75%, £2.2 million will relate to refunds of sums paid to the Council up to 31 March 2013. Therefore, the Council’s provision in respect of outstanding appeals at 31 March 2014 is £1.08 million (i.e. 49% of £2.2 million).

In certain circumstances ratepayers may submit an appeal in respect of a retrospective period and, therefore, there is a risk that further losses may arise in respect of 2013/14 or earlier years as a result of appeals those have not yet been made and are not, therefore, allowed for in the provision established at 31 March 2014. The Council has agreed a Business Rates Retention reserve of £1.0 million for the purposes of offsetting any unexpected reduction in rates yield. The Council is not aware of any likelihood of significant liabilities arising as a result of retrospective appeals and the reserve is considered sufficient to meet any liabilities at 31 March 2013 that may arise as a result of successful appeals submitted after that date.

(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 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 2013/14 was 50,654.74 Band D equivalent properties, (56,540.79 equivalent for 2012/13). The tax base calculation for 2013/14 is shown below:

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Band D Valuation Band Number in Adjustments Revised Ratio to Equivalent Band Dwellings Band D Dwellings

A (Disabled) 0.00 4.68 4.68 5/9 2.60 A 9,218.00 -4,869.80 4,348.20 6/9 2,898.80 B 17,010.00 -5,963.38 11,046.62 7/9 8,591.82 C 16,934.00 -3,951.31 12,982.69 8/9 11,540.17 D 9,941.00 -538.93 9,402.07 9/9 9,402.07 E 7,392.00 -746.87 6,645.13 11/9 8,121.83 F 4,703.00 -326.47 4,376.53 13/9 6,321.65 G 2,771.00 -187.33 2,583.67 15/9 4,306.12 H 218.00 -32.03 185.97 18/9 371.94 Total 68,187.00 -16,611.44 51,575.56 51,556.99

Less allowance for non-collection 902.25 Council Tax Base 2013/14 50,654.74

Income from Council Tax no longer includes any sums in respect of Council Tax Benefit subsidy from Central Government due to the abolition of this benefit from 1 April 2013. The Council is now required to provide assistance to low-income households in meeting the cost of Council Tax through the award of Council Tax Support discounts under a local Council Tax Reduction Scheme. The award of Council Tax Support discounts reduces the Council Tax Base and, therefore, the Council Tax yield which shows a significant reduction in comparison to 2012/2013. Whilst the Council receives a Council Tax Support grant from the Government to compensate, in part, for the reduction in Council Tax yield this grant is required to be credited to the Council’s general fund within the Revenue Support Grant allocation (included in note 36).

The average Council Tax for 2013/14 was £1,570.56 (£1,563.59 in 2012/13), 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.

2012/13 Average Band D Property 2013/14 Uplift £ £ % 1,304.84 Bedford Borough Council 1,304.84 0.000% 24.17 Parish Precepts 26.46 9.475% 150.49 Police & Crime Commissioner for Bedfordshire 153.49 1.993% 84.09 Bedfordshire Fire & Rescue Authority 85.77 1.998% 1,563.59 Average Band D Total 1,570.56 0.446%

(iii) Income Collection

A breakdown of the income received for Council Tax and National Non-Domestic Rates are set out in the table below.

2012/13 Analysis of Collection Fund Income Collection 2013/14 Council NNDR Council NNDR Tax Tax £000 £000 £000 £000 73,043 101,168 Gross Liability 74,913 102,693 -1,301 580 Amended Liability -275 1,002 -8,840 -106 Reliefs -8,799 -115 -8,013 Discounts -7,918 -2,657 -3,202 Exemptions -2,321 -1,909 60,245 90,427 63,517 93,753 -11,942 Council Tax Support -11,492 60,245 78,485 63,517 82,260

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(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.

2012/13 Provisions for Uncollectable Amounts & Appeals 2013/14 Uncollectable Debts Uncollectable Debts Appeals Council Council NNDR NNDR NNDR Tax Tax £000 £000 £000 £000 £000

1,312 4,044 Balance as at 1 April 1,304 4,305 -1,103 -257 Less write off in year -461 -403 1,095 518 Contributions made 437 498 2,200 1,304 4,305 Balance at 31 March 1,281 4,399 2,200

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9) PENSION FUND

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 2013/2014 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 Superannuation Act 1972 and is administered in accordance with the following secondary legislation:

The LGPS (Benefits, Membership and Contributions) Regulations 2007 (as amended) The LGPS (Administration) Regulations 2008 (as amended) The LGPS (Management and Investment of Funds) Regulations 2009

From 1 April 2014, the Fund is subject to the LGPS Regulations 2013.

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 2014 is shown at the end of this section.

As at 31 March 2014, the number of employees (i.e. from Councils within Bedfordshire and the other scheduled and admitted bodies) contributing to the Fund was 18,766, the number of pensioners was 13,841 and the number of deferred pensioners was 22,821.

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 to supplement their pension benefits.

Pension benefits payable under the LGPS are based on final pensionable pay and length of pensionable service. Benefits are index-linked by reference to the consumer prices index.

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 www.bedspensionfund.org/.

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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.

A copy of the Statement of Investment Principles is available from Borough Hall or on the Fund’s website www.bedspensionfund.org/ and is replicated in the Pension Fund Annual Report and Accounts 2013/2014.

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 £ million % Blackrock Advisors – Passive Multi-Asset 272 18 Legal & General – Passive UK Equities 300 20 Legal & General – Global Equities 127 8 CBRE Global Investors – Indirect Property 134 9 Lazard Asset Management – Global Equities 155 10 Trilogy Global Advisors – Global Equities 68 4 Insight Investment – Absolute Return Bonds 134 9 Baring – Absolute Return Multi Asset 192 12 Pyrford - Absolute Return Multi Asset 92 6 Net Assets managed by external bodies 1,474 96 Net Assets managed by the administering Authority 70 4 Total Assets 1,544 100

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, the current version of which is published in the Pension Fund Report and Accounts 2013/2014.

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 line with accepted guidelines and in accordance with IAS19. Assumptions underpinning the valuations are agreed with the Actuary and are summarised in the Actuarial Report on page 101. This estimate is subject to significant variances based on changes to the underlying assumptions.

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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.

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 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 2014 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

There have been no events since 31 March 2014, and up to the date that these accounts were authorised, that require any adjustments to these accounts.

In 2014/2015 there is to be a national centralisation of Probation LGPS assets and liabilities.

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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 2008 and in accordance with the Statement of Recommended Practice on Financial Reports of Pension Schemes (Revised May 2007). The accounts are also compliant with the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom 2013/2014 (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.

Benefits All pensions and lump sums payments have been included on the accruals basis other than some death gratuities. 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; these are refunded in full by the employer. Both the benefit paid and the subsequent reimbursements are excluded from the fund account.

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.

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.

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 2014, 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.

The cost of obtaining investment advice from external consultants is included in investment management charges.

A proportion of the Borough Council’s costs representing time spent by officers on investment management is also charged to the fund.

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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 2014.

(ii) Traded futures are valued by reference to their exchange prices as at 31 March 2014.

(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 2014. 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 2014. 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 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.

AVC Investments The 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 exempt from tax on capital gains and from income tax on interest receipts. 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 2013/2014 relating to the Pension Fund.

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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.

The adoption of the following accounting policy changes are expected in future years:

IFRS 13 Fair Value Measurement (May 2011).

FIVE YEAR FINANCIAL SUMMARY OF NET ASSET STATEMENT

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 £m £m £m £m £m

Net assets at 1 April 887 1,168 1,280 1,317 1,467

Contributions 88 92 86 86 92 Investment and other income 28 26 21 20 14 Total income 116 118 107 106 106 Benefits and other expenses -77 -83 -82 -82 -89 Change in market value of investments 242 76 12 126 59 Increase/(decrease) in value of fund 281 111 37 150 77

Net Assets at 31 March 1,168 1,280 1,317 1,467 1,544

FUND ACCOUNT FOR THE YEAR ENDED 31 MARCH 2014

2012/2013 2013/2014 See £000 £000 Note Contributions and Benefits Contributions 86,065 92,327 1 Transfers in from other pension funds 6,855 5,694 2 Other Income 165 153 93,085 98,174

Benefits ( 73,485) ( 79,626) 3

Payments to and on account of leavers ( 3,231) ( 3,578) 4 Administrative expenses ( 1,083) ( 1,348) 5 Net additions/(withdrawals) from dealings with members 15,286 13,622

Returns on Investments Investment income 13,168 8,945 6 Taxes on income ( 583) ( 521) 7 Profit and losses on disposal of investments and changes in value of investments 126,559 59,471 Investment management expenses ( 4,073) ( 4,220) 8 Net return on investments 135,071 63,675

Net increase/(decrease) in the fund during the year 150,357 77,297 Net assets of the fund at 1 April 1,316,706 1,467,063

Net assets of the fund at 31 March 1,467,063 1,544,360

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NET ASSETS STATEMENT

31 March 2013 31 March 2014 See £000 £000 Note Investment Assets Equities 144,344 147,486 9.1 Managed and unitised funds 1,274,093 1,315,180 9.2 Cash deposits & other assets 19,380 51,924 9.3 1,437,817 1,514,590

Investment Liabilities Other liabilities ( 789) ( 11,308) 9.4 1,437,028 1,503,282 9.5

Long Term Assets 3,816 3,330 10

Current Assets 29,430 40,677 11

Current Liabilities ( 3,211) ( 2,929) 12

Net assets of the fund available to fund benefits at the period end 1,467,063 1,544,360 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 2012/2013 2013/2014 £000 £000 1 Contributions Employees’ normal contributions 19,535 20,210 Employees’ additional voluntary contributions 377 424 Employers’ normal contributions 40,611 43,137 Employers’ deficit funding 23,864 26,954 Employers’ augmentation contributions 1,678 1,602 86,065 92,327

Administering authority 15,538 15,991 Scheduled bodies 60,353 66,494 Admitted and other bodies 10,174 9,842 86,065 92,327 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 Individual transfers from other pension funds 6,855 5,694 6,855 5,694

3 Benefits Pensions 57,515 61,017 Commutations of pensions and lump sum retirement benefits 14,194 16,588 Lump sum death benefits 1,776 2,021 73,485 79,626

Benefits paid are further analysed as: Administering authority 9,157 8,979 Scheduled bodies 58,018 62,298 Admitted and other bodies 6,310 8,349 73,485 79,626 Payments to employees in respect of compensatory added years’ benefits are excluded from the accounts.

4 Payments to and on account of leavers Refunds of contributions 14 15 Transfers to other schemes – individuals 3,217 3,563 3,231 3,578

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2012/2013 2013/2014 £000 £000 5 Administrative expenses Administering Authority 854 847 1 System costs & development 95 242 Actuarial fees 46 148 2 External Audit Fees (Net of Rebate) 21 24 Other 67 87 1,083 1,348 1 System costs & development in 2013/2014 include early costs associated with the upgrading of the administration system in 2014/2015 2 External Audit Fees - Audit Fees are shown (net of rebate) for 2012/2013 and for 2013/2014 no rebate was applied

6 Investment income Interest from fixed interest securities 195 - Dividends from equities 3,129 3,076 Income from pooled investment vehicles 9,656 5,503 Interest on cash deposits 188 366 13,168 8,945 7 Irrecoverable with-holding tax ( 583) ( 521) 12,585 8,424

8 Investment management expenses Administering Authority 119 119 Investment Managers’ fees 3,599 3,488 Investment Managers’ performance related fees 198 484 Investment Advice & other costs 157 128 4,073 4,219 In 2013/2014, £0.5 million of Investment Managers’ fees is based on an estimated basis. This compares with £0.7 million in 2012/2013.

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2012/2013 2013/2014 Investments £000 £000

9 Investments

9.1 Equities UK quoted equities 12,873 10,335 Overseas quoted equities 131,471 137,151 144,344 147,486

9.2 Managed and Unitised Funds UK un-authorised unit trusts 3 3 UK insurance managed funds 558,196 584,200 UK property unit trusts 112,477 130,249 Overseas unit trusts 603,417 600,728 1,274,093 1,315,180

9.3 Cash Deposits & Other Investment Assets Amount receivable for sales of investments 329 69 Investment income outstanding 1,017 635 Other Investment Assets 1,346 704 Cash deposits 18,034 51,220 19,380 51,924

9.4 Investment Liabilities Amount Payable for purchases of investments ( 789) ( 11,308) ( 789) ( 11,308)

Total 1,437,028 1,503,282

Quoted/Un-quoted Investments Quoted 556,611 658,284 Un-quoted 880,417 844,998 1,437,028 1,503,282

Investment liabilities at year end mainly relate to property trust purchases which happened very close to 31 March 2014. These are included in our Property portfolio but have not been settled. This is normal accounting practice and reflects the timing of the transactions that were settled in April 2014.

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9.5 Value of Investments Market Value Purchases at Sale Change in Market Value at 31/03/13 cost & proceeds & Market Value at 31/03/14 derivative derivative payments receipts

£000 £000 £000 £000 £000 Equities UK 12,873 456 (2,744) (250) 10,335 Overseas 131,471 20,986 (17,648) 2,342 137,151 144,344 21,442 (20,392) 2,092 147,486

Managed Funds 558,199 0 (11,000) 37,004 584,203

Unit Trusts Property 112,477 22,390 (8,416) 3,798 130,249 Other 603,417 76,816 (96,094) 16,589 600,728 715,894 99,206 (104,510) 20,387 730,977

Derivative contracts 0 0 0 0

Other Assets 23 0 0 (11) 12

Total 1,418,460 120,648 (135,902) 59,472 1,462,678

Cash & other 18,568 40,604

Total 1,437,028 1,503,282

The investments held at 31 March 2014 had a market value of £1,503 million compared to a cost of £1,204 million (at 31 March 2013 the market value of investments was £1,437 million with a cost of £1,184 million). The increase in the cost of investments of £20 million (2012/2013: £62 million) represents the net effect of purchases of £121 million (2012/2013: £424 million) and the cost price of sales of £123 million (2012/2013: £370 million) plus movements in cash of £22 million (2012/2013: £8 million).

The net gain on the sale of investments was £13 million (2012/2013: £49 million gain). This sum, together with an excess of income over expenditure of £11 million (2012/2013: £15 million), generated additional funds available for investment during the year of £ 24 million (2012/2013: £66 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 & Ascent Life Funds, Legal & General’s Pooled Pension Fund Policy and Insight Investment’s Bonds Plus Fund. Baring Alpha Funds Dynamic and Pyrford Global Total Return (Sterling) Fund also each comprise over 5% of the total fund. The amount and the percentage of the net assets of the fund, as at 31 March 2014, that these represent are shown over leaf:

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Managed and Unitised investment £ million % of the net assets of the Fund Legal & General Pooled Pension Fund Policy 427 28 Blackrock Advisers Aquila Life Fund* 242 16 Baring – Absolute Return Multi Asset 192 13 Insight Investment Management Bonds Plus Fund 134 9 Pyrford - Absolute Return Multi Asset 92 6

No other assets comprised more than 5% of the net assets of the fund as at 31 March 2014.

*Blackrock also holds other funds which are below the 5% threshold reported in this note.

10 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 affected 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 recognized in the Fund’s accounts for 2013/2014. Those instalments falling due more than one year from the balance sheet date are shown as a long term debtor, £3,330 million at 31 March 2014 (£3,816 million at 31 March 2013). The amount falling due within less than a year is shown as current assets.

11 Current Assets 2012/2013 2013/2014 £000 £000

Contributions due from Administering Authority 1,429 1,505 Contributions due from other scheme employers 5,422 5,785 Civil Service Pensions Scheme - see note 9 above 451 486 Other 185 215 7,487 7,991 Cash 21,943 32,686 Current Assets 29,430 40,677

The cash balance of £32.7 million is held in the Fund’s own bank accounts. Cash held by the fund’s managers is included in cash deposits in Note 9.3 above.

See Note 9.3 above also for details of the other investment assets of £0.7 million

12 Current Liabilities 2012/2013 2013/2014 £000 £000

Administration costs etc due to Administering Authority 242 4 Investment managers' fees 739 848 Other professional fees 98 57 AVCs in transit 10 81 Death grants 519 308 Other 1,574 1,583 3,182 2,881 Provision for Tax Reclaims over 1 Year (Note 13) 29 48 Current liabilities 3,211 2,929

See Note 9.4 for details of the other investment liabilities of £11.3 million

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13 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 and the balance at 31 March 2014 was £0.05 million.

14 Self-investment The regulations governing investment of pension funds require the disclosure of any self-investment by the fund. As at 31 March 2014, there was no self-investment by the fund.

15 Related party transactions Administration and investment management costs include charges by Bedford Borough Council for providing services in its role as administering authority. For 2013/14 these amounted to £1.0 million (2012/2013 - £1.0 million).

The Fund pays compensatory added years benefits on behalf of some of its employers. The costs of these are invoiced to the employer. In 2013/2014, £3.2 million (2012/2012 - £3.3 million) was paid and recovered from their employer

The senior officers involved in the financial management of Bedfordshire Pension Fund in 2013/2014 were the Director of Finance and Corporate Services (The Fund Administrator), Assistant Director (Finance) and the Head of Pensions and Treasury Management. Each 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 Beds & 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 Beds & River Ivel Drainage Board and of BPHA, both scheme employers. Trevor Roff, the Fund Administrator, is an elected member of Bromham Parish Council. Two members of Trevor Roff’s immediate family are employees of Bedford Borough Council, the Administering Authority.

There were no material transactions between members and officers and the Fund during 2013/2014.

The only material related party transactions during 2013/2014 were in respect of contributions paid by the employing bodies into the fund please see note 1.

16 Contingent Liabilities and Contractual Commitments There were no material contingent liabilities and/or contractual liabilities as at 31 March 2014.

17 Stock Lending The Fund did not undertake any stock lending in 2013/2014.

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18 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 & Prudential.

AVCs 2012/2013 2013/2014 £000 £000

Value at 1 April 3,558 3,800

Income Contributions received 507 760 Adjustment to opening value 12 Transfer values received - - 507 773 Expenditure Retirements ( 522) ( 713) Transfers values paid - ( 7) ( 522) ( 720) Change in market value 257 150

Value at 31 March 3,800 4,002

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 reflects the increase following confirmation of the 2012/2013 values. The balance of AVCs is held by Standard Life.

19 Post Balance Sheet Events There have been no events since 31 March 2014, and up to the date that these accounts were authorised, that require any adjustments to these accounts.

In 2014/2015 there is to be a national centralisation of Probation LGPS assets and liabilities.

20 Actuarial Present Value of Promised Retirement Benefits In accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2013/2014, 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 101.

21 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 2013/2014.

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31 March 31 March 2013 2014 Designated Designated as fair Financial as fair Financial value liabilities value liabilities through at through at profit & Loans & amortised profit & Loans & amortised loss receivables cost loss receivables cost £000 £000 £000 £000 £000 £000 Financial Assets 144,344 Equities 147,487 1,274,093 Managed & unitised funds 1,315,180 Derivative contracts 39,977 Cash 72,667 329 1,017 Other investment assets 69 635 5,263 Debtors 5,557 1,418,766 46,257 0 1,462,736 78,859 0 Financial Liabilities ( 789) Other investment liabilities ( 11,308) ( 29) ( 2,637) Creditors ( 47) ( 2,573) ( 29) 0 ( 3,426) ( 47) 0 ( 13,881)

1,418,737 46,257 ( 3,426) 1,462,689 78,859 ( 13,881)

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.

22 Valuation 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 instruments and some of the indirect property investments, which are valued using various valuation techniques that require significant judgment in determining appropriate assumptions. These valuations are prepared in accordance with the International Private Equity and Venture Capital Valuation Guidelines, which follow the valuation principles of IFRS and US GAAP. Valuations are usually undertaken

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at the end of December. Cash flow adjustments are used to roll forward the valuations to 31 March as appropriate.

The following table provides the analysis of the financial assets and liabilities of the pension fund grouped into Levels 1 to 3, based on the level at which the fair value is observable.

31 March 2014

Using With significant Quoted Market Observable unobservable Price Inputs inputs Level 1 Level 2 Level 3 Total £000 £000 £000 £000 Financial Assets Financial Assets at Fair Value through profit and loss 658,046 736,510 68,180 1,462,736

Loans and Receivables 78,859 78,859

Total Financial Assets 736,905 736,510 68,180 1,541,595

Financial Liabilities

Financial liabilities at fair value through profit and loss ( 11,308) ( 11,308)

Financial liabilities at amortised cost ( 2,620) ( 2,620)

Total financial liabilities ( 13,928) - - ( 13,928)

Net financial assets 722,977 736,510 68,180 1,527,667

31 March 2013

Using With significant Quoted Market Observable unobservable Price Inputs inputs Level 1 Level 2 Level 3 Total £000 £000 £000 £000 Financial Assets Financial Assets at Fair Value through profit and loss 556,611 795,116 67,010 1,418,737

Loans and Receivables 46,257 46,257

Total Financial Assets 602,868 795,116 67,010 1,464,994

Financial Liabilities

Financial liabilities at fair value through profit and loss ( 789) ( 789)

Financial liabilities at amortised cost ( 2,637) ( 2,637)

Total financial liabilities ( 3,426) - - ( 3,426)

Net financial assets 599,442 795,116 67,010 1,461,568

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23 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.

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.

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 net value at assets available to pay Asset type 31/03/2014 benefits +100 bps -100 bps £000 £000 £000 Fixed interest securities 311,317 3,113 -3,113 Cash & cash equivalents 106,742 1,067 -1,067 Total 418,059 4,180 -4,180

NB. The Fund’s direct exposure includes managed fund assets.

Carrying Change in year in net value at assets available to pay Asset type 31/03/2013 benefits +100 bps -100 bps £000 £000 £000 Fixed interest securities 295,248 2,952 -2,952 Cash & cash equivalents 59,406 594 -594 Total 354,654 3,546 -3,546

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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 2014 and also shows the increase/decrease in the value of net assets available to pay benefits arising from a 5.66% fluctuation in currency prices against sterling. Comparatives for the previous year, using the same criteria but adjusted for the different weightings then applying, are shown in the table below.

After consultation with The WM Company, the Fund considers 5.66% to be the likely volatility associated with foreign exchange rate movements (5.8% in 2012/2013).

Carrying Value of net assets value at available to pay benefits Asset type 31/03/2014 on increase/decrease +5.66% -5.66% £000 £000 £000 Overseas equities 510,339 539,204 481,474 Overseas bonds 233,001 246,180 219,823 Overseas Property 443 468 418 Alternatives 54,944 58,052 51,836 Total 798,728 843,904 753,551

Carrying Value of net assets value at available to pay benefits Asset type 31/03/2013 on increase/decrease +5.8% -5.8% £000 £000 £000 Overseas equities 465,833 492,857 438,809 Overseas bonds 209,232 221,370 197,094 Overseas Property 2,586 2,736 2,436 Alternatives 126,589 133,933 119,245 Total 804,240 850,896 757,584

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 (The WM Company), the Fund has determined that the following movements in market price risk are reasonably possible for the 2013/2014 reporting period.

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Asset type Potential market movement UK Equities 11.94% Overseas Equities 10.87% Total Bonds 5.37% Index Linked Gilts 7.52% Cash 0.02% Alternatives 10.27% Property 2.29%

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 below.

Value at 31 Value on Value on Asset type March 2014 % change increase decrease £000 UK Equities 388,402 11.94% 434,777 342,027 Overseas Equities 510,339 10.87% 565,813 454,865 Total Bonds 311,317 5.37% 328,034 294,599 Index Linked Gilts 42,367 7.52% 45,553 39,181 Cash 106,742 0.02% 106,763 106,720 Alternatives 54,944 10.27% 60,587 49,301 Property 130,249 2.29% 133,231 127,266 Total 1,544,360 1,674,759 1,413,960

Value at 31 Value on Value on % change Asset type March 2013 increase decrease £000 UK Equities 358,012 12.86% 404,052 311,972 Overseas Equities 465,833 11.90% 521,267 410,399 Total Bonds 295,248 4.62% 308,888 281,608 Index Linked Gilts 44,000 7.21% 47,172 40,828 Cash 64,904 0.00% 64,917 64,891 Alternatives 112,477 9.07% 122,679 102,275 Property 126,589 2.23% 129,412 123,766 Total 1,467,063 1,598,388 1,335,738

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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Actuarial Statement for 2013/14

This statement has been prepared in accordance with Regulation 34(1)(d) of the Local Government Pension Scheme (Administration) Regulations 2008, and Chapter 6 of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the UK 2013/14.

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 Fund’s funding policy as set out in its FSS.

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.

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.

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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 are 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 22.4 years 24.3 years Future Pensioners* 24.4 years 26.8 years *Currently aged 45

Copies of the 2013 valuation report and Funding Strategy Statement are available on request from Bedford Borough Council, the administering authority to the Fund.

Experience over the period since April 2013

Experience has been slightly better than expected since the last valuation (excluding the effect of any membership movements). Real bond yields have risen and asset returns have been better than anticipated meaning that funding levels are likely to have improved since the 2013 valuation.

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 30 May 2014

Hymans Robertson LLP 20 Waterloo Street Glasgow

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Pension Fund Accounts Reporting Requirement

Introduction

CIPFA’s Code of Practice on Local Authority Accounting 2013/14 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.

Balance sheet

Year ended 31 Mar 2014 31 Mar 2013 £m £m Present value of Promised Retirement Benefits 2,592 2,578

Liabilities have been projected using a roll forward approximation from the latest formal funding valuation as at 31 March 2013. I estimate this liability at 31 March 2014 comprises £1,070m in respect of employee members, £555m in respect of deferred pensioners and £967m in respect of pensioners. 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 those adopted for the Administering Authority’s IAS19 report as required by the Code of Practice. These are given below. I estimate that the impact of the change of assumptions to 31 March 2014 is to decrease the actuarial present value by £24m.

Financial assumptions

My recommended financial assumptions are summarised below: Year ended 31 Mar 2014 31 Mar 2013 % p.a. % p.a. Inflation/Pensions Increase Rate 2.80% 2.80% Salary Increase Rate 3.60% 5.10%* Discount Rate 4.30% 4.50%

*Salary increases are assumed to be 1% p.a. until 31 March 2015 reverting to the long term assumption shown thereafter.

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Longevity assumption

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:

Males Females Current Pensioners 22.4 years 24.3 years Future Pensioners* 24.4 years 26.8 years

*Future pensioners are assumed to be currently aged 45

Please note that the assumptions have changed since the previous 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.

Professional notes

This paper accompanies my covering report titled ‘Actuarial Valuation as at 31 March 2014 for IAS19 purposes’ dated 23 April 2014. The covering report identifies the appropriate reliances 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 29 May 2014 For and on behalf of Hymans Robertson LLP

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BODIES PARTICIPATING IN THE BEDFORDSHIRE PENSION FUND

Scheduled Bodies:

Academy of Central Bedfordshire – commenced 1 September 2013 Alameda Academy Alban Church of England Academy All Saints Academy Ampthill Town Council Ardley Hill Academy Arlesey Town Council Arnold Academy Barnfield Academy Trust Barnfield College Barnfield Education Services Bedford Academy Bedford Borough Council Bedford College Bedford Free School Bedfordshire Fire and Rescue Service Bedfordshire Probation Service Bedfordshire and River Ivel Drainage Board Beecroft Academy – commenced a November 2013 Biddenham Parish Council Biggleswade Academy Trust (formerly Holmemead Middle School) Biggleswade Town Council Blunham Parish Council Brickhill Parish Council Bolnhurst & Keysoe Parish Council Bromham Parish Council Brooklands Middle School (Academy) Caddington Parish Council Cedars Upper School (Academy) Central Bedfordshire College (formerly Dunstable College) Central Bedfordshire Council Central Bedfordshire UTC Challney Boys Academy – merged into Chiltern Learning Trust September 2013 Chantry Academy Chiltern Learning Trust – commenced 1 September 2013 Cranfield Church of England Academy Daubeney Academy Denbigh High Academy – merged into Chiltern Learning Trust September 2013 Dunstable Town Council Eastcotts Parish Council Eaton Bray Academy Etonbury Academy Eversholt Lower School (Academy) Ferrars Academy- commenced 1 May 2013 Flitwick Town Council Fulbrook Middle School (Academy) Gilbert Inglefield Academy Goldington Academy Goldington Green Academy – commenced 1 May 2013 Grange Academy Gothic Mede Lower Academy – commenced 1 November 2013 Gravenhurst Academy – commenced 1 September 2013 Greenfield and Pulloxhill Academy Greys Education Centre Hadrian Academy Harlington and Sundon Academy Trust – commenced 1 April 2013 Harlington Parish Council Harlington Upper School (Academy) Haynes Parish Council Henlow Church of England Academy Holywell Academy

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Houghton Conquest Parish Council Houghton Regis Academy Houghton Regis Town Council Icknield Academy John Gibbard Academy – commenced 1 April 2013 Kempston Burials Joint Committee Kempston Rural Parish Council Kempston Town Council Lark Rise Academy Leighton Linslade Town Council Linslade Academy Trust Luton Borough Council Luton VI Form College Mark Rutherford Academy Marston Moretaine Parish Council Marston Vale Middle School Meppershall Lower School Academy – commenced 1 July 2013 Northill Parish Council Oak Bank Special School Academy – commenced 1 November 2013 Police and Crime Commissioner for Bedfordshire Potton Town Council Priory Academy Putnoe Academy – commenced 1 April 2013 Queens Park Academy Queensbury Academy Raynsford CofE Academy – commenced 1 April 2013 Redborne Academy River Bank Free School – commenced September 2013 Robert Bloomfield Academy Samuel Whitbread Community College Sandy Town Council Sandye Place Academy Sharnbrook Academy Federation (previously Academy Federation of North Beds Schools) Sharnbrook Parish Council Southlands Lower School (Academy) – now merged with Holmemead to form Biggleswade Academy Trust St Augustine’s Academy (ex Downside) St Christopher’s Academy St Francis of Assisi Academy Trust (formerly Federation of Bedford Catholic Schools) – commenced 1 April 2013 St Johns Special School and College St Mary’s Lower School Stanbridge Parish Council – commenced 1 April 2013 Staploe Parish Council Stotfold Town Council Stratton Education Trust The Firs Lower School (Academy) The Hills Academy – commenced 1 April 2013 Tilsworth Parish Council – commenced 1 April 2013 Toddington Parish Council Toddington St George Lower School (Academy) Turvey Parish Council University of Bedfordshire Ursula Taylor Academy Vandyke Upper School and Community College Weatherfield Academy Whipperley Infant Academy Woodland (Middle School) Academy Wootton Academy Trust Wootton Parish Council

Admitted and Other Member Bodies:

Active Luton (Leisure Trust) Amey Infrastructure Services Aragon Housing Association

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Bedfordshire Pilgrims Housing Association Civica UK Limited Christian Family Care (ceased 30 April 2012) Churchill Cleaning Services – commenced 1 September 2013 Cranfield University Creative Support Fusion Lifestyle (commenced 1 February 2014) Grand Union Housing Harlington Area Schools Trust (HAST) Luton Cultural Services Trust Macintyre Housing Association MITIE PFI Ltd One Housing Group (formerly Community Housing Association) South Essex Partnership Trust (formerly Beds & Luton Mental Health Trust) St Christopher’s Fellowship St Francis Children's Society Stevenage Leisure Ltd

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10) 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, and used economically efficiently and effectively. 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 CIPFA/SOLACE Framework Delivering Good Governance in Local Government. A copy of the arrangements is on the Council website at (www.bedford.gov.uk). This statement explains how the Council has complied with the arrangements and also meets the requirements of regulation of the Accounts and Audit Regulations 2011 in relation to the publication of a statement of internal control.

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 2014 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. . 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.

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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.

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. . Director of Finance & Corporate Services (now 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. . 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 for financial year 2013/2014 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 2012/2013 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. In addition, we propose during 2013/14 to bring forward for adoption by the Council a Code of Corporate Governance which will document comprehensively how the Council complies with all Corporate Governance requirements and identifies the key documents which provide the detailed information as to how the Corporate Governance principles are adhered to. This will then be available to the public and partners. We are satisfied that these steps will address the need for improvements that were identified in our review of effectiveness and will monitor their implementation and operation as part of our next annual review.

………………………...... ………………………………...... ELECTED MAYOR CHIEF EXECUTIVE

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Appendix A

BEDFORD BOROUGH COUNCIL GOVERNANCE FRAMEWORK 2013/2014

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:

(i) Summary and explanation (ii) Articles of the Constitution (iii) Responsibilities for functions (iv) Full Council Procedure Rules (v) Access to Information Procedure Rules (vi) Executive Procedure Rules (vii) Overview and Scrutiny Committee Procedure Rules (viii) Regulatory Committee Procedure Rules (ix) Standards Committee Procedure Rules (x) Officer Employment Procedure Rules (xi) Contract Procedure Rules (xii) Financial Procedure Rules (xiii) Budget and Policy Framework Procedure Rules (xiv) Schemes of Delegations to Officers (xv) Joint Arrangements (xvi) Standards of Conduct (xvii) Register of Members of the Council (xviii) Members’ Allowances Scheme (xix) Complaints Procedure (xx) 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 14 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 2014/15 in order to ensure compliance with any changing legal requirements and that it reflects current good practice, Work has already commenced on reviewing the Constitution against the latest model constitution, including Financial and Contract Procedure Rules.

(d) In 2012 the Council reviewed its arrangements for dealing with Standards issues in the light of the Localism Act 2011 and resolved to continue with a separate Standards Committee. The retention of a separate Standards Committee was re-affirmed in March 2014 following a review of its operation during 2013/14.

(e) The Council’s Health and Wellbeing Board was established in line with statutory requirements with effect from 1 April 2013, having been in place in Shadow form for the previous year.

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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 all Council is able to meet its statutory obligations. Respective service groupings include qualified professional 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 basic induction training and, where appropriate, additional training on relevant statutory requirements before they fully undertake their new duties (e.g. 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 his Monitoring Officer functions.

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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

2.1.1 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 Partnership Board which is made up of various service providers in the Borough and is jointly chaired by the Elected Mayor.

Bedford Borough Partnership Board continued to focus, during 2013/2014, on transformational projects to make a clear difference to people living and working in the Borough. Update reports on these projects were presented to each Board meeting which take place quarterly. The Board’s Annual Report for 2012/2013 was agreed by the Executive on 10 July 2013. The report for 2013/2014 will be considered by the Executive on 25 June 2014.

During 2013/2014 a thorough review of the partnership has been concluded which will mean the introduction of a new Strategic Partners Board for 2014/2015. This will provide strategic oversight to partnership working across Bedford Borough.

The Government announced its intention to repeal the duty to maintain a SCS. The Partnership Board, at its meeting on 13 September 2012, considered the future provision and agreed to retain the SCS as the long term vision for Bedford Borough but recognised that many of the original aims have now been overtaken by fundamental changes in national and local policy directions. As a consequence the aims will no longer be reported against, however, the established practice of producing a succinct Annual Report will continue.

(b) Corporate Plan 2012/2016

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. Also (with these objectives in mind) the Council undertook the planning of a Modernisation Programme during 2011/2012 which, not only aimed to deal with the forecast funding reduction over the next four years, but to also transform service quality, improve efficiency and radically improve customer services. These priorities were reflected in the revised Corporate Plan approved in February 2012.

The Executive considered a revision to the Corporate Plan, at its meeting on 11 September 2013, to ensure the Plan reflects the new public health duties of the local authority from April 2013, to reflect information from the Census 2011, agreed Equality Objectives and to ensure that an annual review of the high level performance measures contained within the Plan was undertaken. This refreshed plan was adopted by Full Council in October 2013.

(c) Feedback from the Bedford Borough Partnership 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).

2.1.2 As outlined earlier (in 2.1.1 above) the Council must work with partners to achieve the goals and objectives of the SCS.

The Council also has other operational partnerships which aid the delivery of services and functions. 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).

2.1.3 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.

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2.2 How the Council ensures that users receive a high quality of service whether directly, or in partnership , or by commissioning

2.2.1 As outlined in 2.1.1(b) above, one of the main thrusts of the ambitious Modernisation Programme devised in 2011/2012 was to fundamentally review processes and needs to ensure the continuous delivery of high quality services despite severe resource constraints in the future.

The refreshed and approved Corporate Plan (October 2013)- incorporating the Modernisation Programme) will require ongoing monitoring and review to ensure it meets the objectives set. Whilst the Council has had performance monitoring in place for many years, revised Government policy has encouraged a local assessment of needs in this respect. The Corporate Plan affords the opportunity to review what level of performance management is necessary as well as how service planning will be fashioned in future. In this regard, the Executive considered a report on the Corporate Plan, at its meeting on 11 September 2013, which included an annual review of the high level performance measures contained within the Plan. This is always an action point given the pursuit of continuous improvement (see the Action Plan at Appendix B).

2.2.2 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 of service by external audit or other external review agencies as well as service user feedback arrangements.

2.2.3 Each Directorate is responsible for developing a Service Plan in consultation with the relevant Portfolio Holders. The current Service Plans cover the period from 2012 to 2016 in-line with the Corporate Plan and 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

2.3.1 Financial Resources

(a) The Framework for Major Financial Decisions, within Appendix 1 of the Financial Procedure Rules, sets 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.

(b) 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 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 2013/2014 and, in March 2014, an updated MTFS for 2015/2020 was approved to reflect the Corporate Plan including its Modernisation Programme.

(c) Prudential Financial Framework

(i) 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 Director of Finance & Corporate Services before revenue and capital budgets for the forthcoming year are approved. (Section 25 of Local Government Act 2003 report to Council on 5 February 2014 relating to the 2014/2015 budget).

(ii) 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).

(iii) 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).

(iv) As part of the Council’s Financial Procedure Rules, and Major Financial Decisions Framework, there are sound systems in place for budget monitoring and control for all capital, revenue,

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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.

(v) Contract Procedure Rules and the Procurement Strategy help to ensure financial resources are used to best effect.

(d) 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 has been produced by CIPFA on this in March 2010 (Statement on the Role of the Chief Finance Officer (CFO) in Local Government 2010). 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.

2.3.2 Human Resources

The Council has always maintained effective policies and practices relating to the employees it engages to deliver its services and functions and a Human Resources Strategy – originally approved by the General Purposes Committee on 7 January 2010 – sets out values and an action plan to deliver that strategy. A revised 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.

2.3.3 Land and Property

The Council maintains and periodically updates a Corporate Asset Plan which sets out how its land and property 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 for the period April 2013 to March 2014 was considered by the Finance and Asset Management Portfolio Holder in March 2014.

2.3.4 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 revised in 2011/2012 and approved on 30 September 2011.

2.3.5 Value for Money (VfM) Arrangements

The Council has a VfM strategy which was reviewed/refreshed in 2013/2014. The VfM Strategy will be critical to the delivery of the programme and will be further reviewed during 2014/2015 (see Action Plan at Appendix B). 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 as outlined by the Audit Commission. The review undertaken as part of the Annual Statement of Accounts process for the 2012/13 financial year 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.

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2.3.6 Modernisation Programme

The Council’s Modernisation Programme (see 2.1.1(b) above) 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.

So far since 2011/2012 a number of projects have been agreed which have allowed the Council to set balanced budgets. Different themes have been adopted to achieve the required savings and additional income, most recently they have included: Workforce Deployment, Alternative Ways of Working; Managing Demand; Business and Growth, and; Channel Shift. Ongoing programme management and monitoring of these projects ensures they remain on track.

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

3.1.1 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.

3.1.2 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.

3.1.3 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

3.2.1 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.

3.2.2 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.

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3.2.3 The Elected Mayor and the Chief Executive have a full understanding and mutual appreciation of each others 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.

3.2.4 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 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.

3.2.5 The Council has designated the Assistant Chief Executive (Governance) as the Council’s statutory Monitoring Officer who reports directly to the Chief Executive and is a member of the senior officer management team. 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.

3.2.6 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.

3.2.7 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.

3.2.8 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

3.3.1 The Council has governance arrangements in place to deal with partnerships and partnership working. Bedford Borough Partnership Board has agreed terms of reference which all partners are signed up to.

3.3.2 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 affect on them. This Strategy governed how the Council undertook, critical consultations in 2013/2014 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 6 November 2013 for their consideration.

. Specific consultation on a range of service areas, for example:

 Childcare Sufficiency  Council Tax Reduction Scheme  Discretionary Housing Payments  Local Plan  Growth Plan  Bedford River Valley Park  Putnoe Lower School  SEN and Alternative Transport Provision

3.3.3 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

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. The Governance Statement . Performance against the Corporate Plan . Complaint Reports . Modernisation Proposals

3.3.4 Also through its complaints procedures and customer feedback arrangements, the Council sets out what the public can expect from these mechanisms.

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

4.1.1 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 it’s 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.

4.1.2 During 2013/14, the Council reviewed and adopted:

a revised Code of Conduct for Members. new Guidance for Members on the disclosure of interests at meetings. new Guidance for Members dealing with Licensing and Planning Matters. revised Guidance for Members on registering gifts and hospitality.

All of the above are published as part of the Council’s Constitution.

4.1.3 Although the Localism Act 2011 abolished the duty for the Council to maintain a Standards Committee, the Council has retained 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 no complaints of breaches of the Code of Conduct for Members during 2013/14 which were considered to require investigation.

4.1.4 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 current guidance for Officer has been in place for some time and would benefit from review to ensure that it is appropriately aligned with relevant Council policies more recently introduced, for example the Anti Fraud Strategy.

4.1.5 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.

4.1.6 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.

4.1.7 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

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4.2.1 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.

4.2.2 The Council has a Confidential Reporting Policy in place which is available to staff via the intranet. The Policy needs to be available to contractors, the community and partners.

4.2.3 As stated in paragraph 3.1.3 above, the Council has retained a separate Standards Committee with responsibility for promoting and maintaining high ethical standards for Members. During 2013/14 there were a total of 5 complaints that a Member of the Council had breached the Council’s Code of Conduct for Members. Following consultation with the Independent Persons, none of those complaints were considered to require investigation or any other action.

4.2.4 A report was submitted to the General Purposes Committee on 5 November 2013 on the outcome of an Employee Survey which was undertaken in May 2013. This followed on from a previous report to the Committee on 4 October 2011 following the first employee survey undertaken in May 2011. The results of the 2013 survey demonstrated an improvement in employee engagement across the Council indicating that the satisfaction levels and perceptions of staff are improving and that the actions put in place following the 2011 survey are generating a positive response.

4.2.5 Bedford Borough Partnership has an agreed vision articulated in the Sustainable Community Strategy and has shared values as shown in its terms of reference.

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

5.1.1 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 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.

5.1.2 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.

5.1.3 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.

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5.1.4 The Council has a dedicated Overview and Scrutiny Team in place which supports its 5 Overview and Scrutiny Committees. The Principal Scrutiny and Overview Support Officer 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

5.1.5 During 2013/14 two Executive Decisions were ‘called-in’ for review by the relevant Overview and Scrutiny Committees and 17 Executive Decisions were subject to a post implementation review.

5.1.6 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 its work is supported by the Director of Finance and Corporate Services 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 Director of Finance & Corporate Services 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.

Audit Committee Members receive appropriate training to enable them to carry out their role in relation to the annual statement of accounts.

5.1.7 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. A review during 2013 refreshed the Council’s Corporate Customer Feedback Procedure, reflecting the experience gained in handling complaints and best practice. A new statutory procedure was adopted for the Council’s Public Health functions during 2013/2014.

5.1.8 5.1.8 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.

5.1.9 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

5.2.1 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.

5.2.2 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 Partnership to support the development and implementation of its commitment to equality and diversity outlined in the Sustainable Community Strategy.

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5.2.3 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 and were included in the refresh of the Plan in October 2013. 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.

5.2.4 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

5.3.1 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 2011) 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 . The Director of Finance and Corporate Services (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.

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.

5.3.2 The following key risk management actions are undertaken by the Council:

(a) The Executive considers an annual report on the review of strategic and corporate risks facing the Council and proposed measures to mitigate these risks. The Strategic Risk Register was reviewed by the Executive on 19 June 2013 at which time the Register was amended to reflect the new risks and control measures arising as a result of the transfer of responsibility for public health services to the Council.

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 Head of Service 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

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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. A programme of audits of health and safety management arrangements conducted by the Corporate Safety team was undertaken during 2013/2014.

(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 2011 the Council entered into a five year long-term agreement with Zurich Municipal, commencing on 1 April 2011. 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 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 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%, however, there remains the potential for further levies and the Council continues to hold funds in reserve for this eventuality.

5.3.3 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.

5.3.4 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 2013/14 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

5.4.1 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.

5.4.2 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.

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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

6.1.1 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.

6.1.2 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.

6.1.3 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.

During 2013/14 mandatory training was provided for all staff on Data Protection and Equality.

6.2 Developing the capability of people with governance responsibilities and evaluating their performance as individuals and as a group

6.2.1 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.

Both the Chief Finance Officer and the Monitoring Officer are members of the Council’s Corporate Management Group.

6.2.2 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

7.1.1 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.

7.1.2 The Overview and Scrutiny function engages with local people and all local institutional stakeholders, including partnerships in a variety of ways. Some examples include:- Bedford Borough HealthWatch is invited to send a representative to the Adult Services and Health OSC, who is able to ask questions and join in debate on committee items;

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Children’s Services OSC has worked with local school governors, headteachers, pupils and other education bodies on its scrutiny reviews. In 2013/14 the committee reviewed the use of the Pupil Premium by schools. Corporate Services OSC has reviewed the Bedford Borough Partnership’s Annual Report. Environment and Community Services OSC has met with representatives of the Independent Advisory Group to Bedfordshire Police, as well as Police Force representatives to discuss community safety issues.

7.1.3 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.

7.1.4 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.

7.1.5 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 ensure 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.

7.1.6 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

7.2.1 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 appropriate groups, organisations or individuals are offered the opportunity to take part in consultations relating to proposed service changes.

7.2.2 In addition to Bedford Borough Partnership there are a number of networks (e.g. Parish & Town Council and Equality & Diversity) and service user partnership boards which also enable service changes to be scrutinised properly and allow opportunities for appropriate dialogue.

7.2.3 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.

7.2.4 As part of the Council’s approach to accountability we publish ‘transparency’ 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

7.3.1 The Council has a proactive approach to its workforce. Via regular staff briefings it ensures the workforce understands the key matters the Council faces and how it will deal with them. The Council provides an Occupational Health service and Employee support service provides support and assistance to its workforce. It has a number of family Friendly policies which allow staff to maintain an appropriate work life balance. The bi annual staff survey is the litmus papers of how the workforce is feeling. The Chief Executive Chairs a staff focus group to provide him with a ‘shop floor’ view of the organisation. It also works constructively with its trade unions and employee representatives to ensure that its overall employee relations are positive and harmonious.

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Appendix B

GOVERNANCE REVIEW ACTION PLANS

1. 2012/2013 REVIEW ACTION PLAN PROGRESS

1.1 Review of Council Constitution – ongoing.

1.2 Review of Performance Measures contained within the Corporate Plan given the commitment to continuous improvement – completed.

1.3 Undertake an Annual Review of the Value for Money Strategy – completed.

1.4 Update the Customer Feedback Procedure – completed.

1.5 Ensure all Heads of Service effectively review service risks each year as part of annual Service Plan reviews and deal with such risks in accordance with the Risk Management Strategy – ongoing.

1.6 Ensure compliance with the new Public Sector Internal Audit Standards – completed.

1.7 Review and re-issue Computer User Security Policy – completed.

1.8 Finalise and test business continuity plans in all service areas – completed.

1.9 Review the effectiveness of governance arrangements in line with the new guidance on Delivering Good Governance in Local Government issued by CIPFA in associated with SOLACE – completed.

2. ACTION PLAN DETERMINED FOLLOWING 2013/2014 REVIEW OF GOVERNANCE ARRANGEMENTS

Action Timescale Lead Officer(s)

2.1 Maintain review of Council Constitution Ongoing Assistant Chief Executive (Governance)

2.2 Formally adopt a Code of Corporate 31/10/14 Assistant Chief Executive (Governance) Governance

2.3 Review and Re-issue Staff Code of Conduct 31/12/2014 Assistant Chief Executive (Governance) and Assistant Chief Executive (Human Resources and Corporate Policy)

2.4 Update Financial Procedure Rules and 31/10/2014 Assistant Chief Executive (Governance) Contract Procedure Rules in line with new and Assistant Chief Executive & Chief Models Finance Officer

2.5 Ensure all Heads of Service effectively 30/09/2014 All Heads of Service review service risks each year as part of annual service plan reviews and deal with such risks in accord with the Risk Management Strategy

2.6 Make Confidential Reporting Policy available 30/9/14 Assistant Chief Executive (Governance) to Contractors, the Community and Partners

(mm013)

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11) 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.

BVACOP Best Value Accounting 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. BVACOP lays down the required content and presentation of costs of service activities.

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.

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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.

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.

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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.

Impairment This is a reduction in value of a fixed asset as shown in the balance sheet to reflect its true value.

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 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.

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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.

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.

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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.

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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12) INDEPENDENT AUDITORS REPORT

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BEDFORD BOROUGH COUNCIL

Opinion on the Authority’s financial statements

We have audited the financial statements of Bedford Borough Council for the year ended 31 March 2014 under the Audit Commission Act 1998. The financial statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement, and Collection Fund and the related Notes to the Core Financial Statements 1 to 47 and related Collection Fund notes (i) to (iv). 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 2013/14.

This report is made solely to the members of Bedford Borough Council in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and Audited Bodies published by the Audit Commission in March 2010.

Respective responsibilities of the Assistant Chief Executive and Chief Finance Officer and auditor

As explained more fully in the Statement of the Assistant Chief Executive and Chief Finance Officer’s Responsibilities set out on page 7, the Assistant Chief Executive and Chief Finance Officer is responsible for the preparation of the Statement of Accounts, which includes the 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 2013/14, 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 Authority’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Assistant Chief Executive and Chief Finance Officer; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the explanatory foreword and the Statement of Accounts 2013/14 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.

Opinion on financial statements

In our opinion the financial statements:

give a true and fair view of the financial position of Bedford Borough Council as at 31 March 2014 and of its expenditure and income for the year then ended; and have been prepared properly in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2013/14.

Opinion on other matters

In our opinion, the information given in the explanatory foreword and the content of the Statement of Accounts 2013/14 for the financial year for which the financial statements are prepared is consistent with the financial statements.

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Matters on which we report by exception

We report to you if:

in our opinion the annual governance statement does not reflect compliance with ‘Delivering Good Governance in Local Government: a Framework’ published by CIPFA/SOLACE in June 2007 (updated as at December 2012); we issue a report in the public interest under section 8 of the Audit Commission Act 1998; we designate under section 11 of the Audit Commission Act 1998 any recommendation as one that requires the Authority to consider it at a public meeting and to decide what action to take in response; or we exercise any other special powers of the auditor under the Audit Commission Act 1998.

We have nothing to report in these respects

Conclusion on the Authority’s arrangements for securing economy, efficiency and effectiveness in the use of resources

Respective responsibilities of the Authority and auditor

The Authority is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to review regularly the adequacy and effectiveness of these arrangements.

We are required under Section 5 of the Audit Commission Act 1998 to satisfy ourselves that the Authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires us to report to you our conclusion relating to proper arrangements, having regard to relevant criteria specified by the Audit Commission.

We report if significant matters have come to our attention which prevent us from concluding that the Authority has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. We are not required to consider, nor have we considered, whether all aspects of the Authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively.

Scope of the review of arrangements for securing economy, efficiency and effectiveness in the use of resources

We have undertaken our audit in accordance with the Code of Audit Practice, having regard to the guidance on the specified criteria, published by the Audit Commission in October 2013, as to whether the Authority has proper arrangements for:

securing financial resilience; and challenging how it secures economy, efficiency and effectiveness.

The Audit Commission has determined these two criteria as those necessary for us to consider under the Code of Audit Practice in satisfying ourselves whether the Authority put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2014.

We planned our work in accordance with the Code of Audit Practice. Based on our risk assessment, we undertook such work as we considered necessary to form a view on whether, in all significant respects, the Authority had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources.

Conclusion

On the basis of our work, having regard to the guidance on the specified criteria published by the Audit Commission in October 2013, we are satisfied that, in all significant respects, Bedford Borough Council put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2014.

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Pension Fund financial statements

On 24 September 2014 we issued our opinion on the Pension Fund financial statements for the year ended 31 March 2014 included within the Statement of Accounts.

Certificate

We certify that we have completed the audit of the accounts of Bedford Borough Council in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission.

Mick West for and on behalf of Ernst & Young LLP, Appointed Auditor Luton 26 September 2014

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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 2014 under the Audit Commission Act 1998. The pension fund financial statements comprise, the Fund Account, the Net Assets Statement, the Pension Fund Accounting Policies and the related notes 1 to 23. 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 2013/14.

This report is made solely to the members of Bedford Borough Council in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and Audited Bodies published by the Audit Commission in March 2010. 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 Assistant Chief Executive and Chief Finance Officer and auditor

As explained more fully in the Statement of the Assistant Chief Executive and Chief Finance Officer Responsibilities set out on page 7, the Assistant Chief Executive and 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 2013/14, 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 Assistant Chief Executive and 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 2013/14 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.

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 2014 and the amount and disposition of the fund’s assets and liabilities as at 31 March 2014, other than liabilities to pay pensions and other benefits after the end of the scheme year; and have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2013/14.

Opinion on other matters

In our opinion, the information given in the Statement of Accounts 2013/14 for the financial year for which the financial statements are prepared is consistent with the financial statements.

Baldeep Singh for and on behalf of Ernst & Young LLP, Appointed Auditor Reading 24 September 2014