2011/2012 Statement of Accounts
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2011/2012 Statement of Accounts Brixton Windmill CONTENTS Page(s) Section 3 Foreword to the Accounts 12 Statement of Responsibilities for the Statement of Accounts 13 - 15 Independent Auditor’s Report to London Borough of Lambeth 16 - 27 Annual Governance Statement 28 - 41 Statement of Accounting Policies Main Financial Statements 42 - 46 Movement in Reserves Statement 47 - 48 Comprehensive Income and Expenditure Statement 49 - 50 Balance Sheet 51 Cash Flow Statement 52 - 57 Notes to the Accounts (General) (Note 1 to Note 3) 58 - 78 Notes to the Comprehensive Income and Expenditure Statement (Note 4 to Note 20) 79 - 118 Notes to the Balance Sheet (Note 21 to Note 40) 119 - 135 Notes to the Movement in Reserves Statement (Note 41 to Note 43) 136 - 137 Notes to the Cash Flow Statement (Note 44 to Note 48) Supplementary Financial Statements 138 Housing Revenue Account Income and Expenditure Account 139 Statement of Movement on the HRA Balance 140 - 143 Notes to the HRA (Note 49 to Note 59) 144 Collection Fund 145 - 146 Notes to the Collection Fund (Note 60 to Note 63) 147 Pension Fund 148 Pension Fund Net Asset Statement 149 - 164 Notes to the Pension Fund (Note 64 to Note 91) 165 - 172 Glossary of Terms 2 FOREWORD TO THE ACCOUNTS This document sets out the London Borough of Lambeth’s Annual Accounts for the year 2011/12, prepared on an International Financial Reporting Standard (IFRS) basis. The financial position is regularly monitored and reviewed throughout the year and this Statement of Accounts brings together the financial results of all the Council’s operations for the year and its position as at 31 March 2012. The purpose of this foreword is to offer an easily understandable guide to the most significant matters reported in the accounts. It provides an explanation in overall terms of the Council’s financial position, and assists in the interpretation of the financial statements. It also contains a commentary on the major influences affecting the Council’s income and expenditure and cash flow, and information on its financial needs and resources. It is not the purpose of the foreword to comment on the policies of the Council, rather to explain the financial facts. This foreword provides a guide to the Council’s accounts for the year ended 31 March 2012. The Accounts and Audit Regulations 2003 (as amended) require the Statement of Accounts to be approved by the Chief Finance Officer by 30 June 2012. In Lambeth, this is Mike Suarez, the Executive Director of Finance and Resources. The accounts are set out on pages 42 to 164. This section consists of a technical explanation of accounting conventions used in the Statements followed by a practical description of the main conclusions to be drawn from the accounts. The statements have been prepared in accordance with proper accounting practices and all relevant statutory requirements. Proper accounting practices represent compliance with the following: The Local Government Act 2003 (as amended) All relevant International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs) and International Financial Reporting Interpretations Committee (IFRIC) and Standing Interpretations Committee (SIC) interpretations as adopted by the European Union The Code of Practice on Local Authority Accounting in the UK 2011/12 issued by the CIPFA/LASAAC Joint Committee, a body recognised by the Accounting Standards Board (ASB) The Service Reporting Code of Practice 2011/12 (SeRCOP issued by CIPFA) that establishes proper practice for consistent financial reporting below the Statement of Accounts level and has statutory recognition. The Statement of Accounts comprises: The Statement of Responsibilities for the Statement of Accounts sets out the Council’s and the Chief Finance Officer’s responsibilities for the statement of accounts. It also carries the certification of the Chief Finance Officer. The Annual Governance Statement is not part of the accounts but is shown alongside them. The statement sets out the main components of internal control and the framework within which the Council’s internal control is managed and reviewed, including the arrangements for internal audit. It also reports on significant weaknesses and areas for improvement identified and the actions taken to rectify or strengthen these areas. The statement is signed by the Chief Executive and the Leader of the Council. The Statement of Accounting Policies explains the basis for the recognition, measurement and disclosure of figures and events in the accounts and is intended to aid the reader’s understanding of the accounts. Core Financial Statements The Movement in Reserves Statement shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (those that can be applied to fund expenditure or to reduce Council Tax or HRA rent payable) and other reserves which represent technical accounting adjustments. The statement reconciles 3 the Surplus or (Deficit) on the Provision of Services to the General Fund and Housing Revenue Account balances, which are used for council tax setting and dwellings rent setting purposes. 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 and the Housing Revenue Account for council tax setting and dwellings rent setting purposes. The Net Increase / Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council. The Comprehensive Income and Expenditure Statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Taxation is raised to cover expenditure in accordance with Council Tax regulations; this may be different from the accounting cost e.g. provision for capital debt repayment. The taxation position is shown in the Movement in Reserves Statement. The Balance Sheet is fundamental to the understanding of the Council's financial position as at 31 March 2012. It shows the balances and reserves at the Council’s disposal, its long-term indebtedness, the net assets employed in its operations, together with summarised information on the fixed assets held. It includes the Housing Revenue Account and the Council’s own share of the Collection Fund and the Pension Fund, but excludes Trust Funds. The Cash Flow Statement demonstrates the relationship between the total movements of the Council’s assets and liabilities during the financial year and cash received and paid in external transactions for revenue and capital purposes. The Notes to the Primary Statements of the Accounts provide a more detailed analysis of the entries in the Movement in Reserves Statement, the Comprehensive Income and Expenditure Account, the Balance Sheet and Cash Flow Statements. Supplementary Financial Statements The Council is required, by law, to account separately for the provision of Council housing. The Housing Revenue Account (HRA ) shows the major elements of housing revenue expenditure; repairs and maintenance; administration and capital and financing costs; and how the expenditure is financed from rents, grants and other income. The account is supported by the Statement of Movement on the HRA Balance, which reflects the items which should be included or excluded from the Income and Expenditure Account in order to arrive at the HRA balance which affects the level of rent set by the Council. The Collection Fund is a statutory statement relating to the collection of income received from Council Tax and business rates [known as National Non-Domestic Rates (NNDR)]. NNDR income is passed on to Central Government after allowing for the Council’s cost of collection. The Council Tax income is distributed between the Council and the Greater London Authority in accordance with their precept requirements at the time of setting the Council Tax. The Council’s share of income from the Collection Fund is shown in the Comprehensive Income and Expenditure Account. The Pension Fund accounts show the contributions to the Council’s Pension Fund, the benefits paid from it and the financial position as at 31 March 2012. The Council acts as trustee for the Pension Fund which is separate from all of the other accounts. The Balance Sheet shows on a single line, the net assets of the Pension Fund attributable to the Council together with the liability of the Council to pay future pensions. Changes to the 2011/12 Statement of Accounts The Statement of Accounts for 2011/12 includes the restatement of some transactions and the Housing Revenue Account (HRA) and General Fund (GF) balances with the result that some amounts presented in the financial statements are different from the equivalent figures presented in the Statement of Accounts for 2010/11. This has also necessitated the preparation of a third balance sheet showing the opening position of 2010/11. Further details are in the notes to the accounts and are summarised below. 4 The following accounting and disclosure changes resulted from new or changed requirements introduced by the updated accounting guidance issued by CIPFA: Remuneration and exit packages The 2011/12 Code requires additional disclosures in respect of remuneration and exit packages. There are two related existing disclosures required by the regulations which are ongoing requirements: • Figures for the number of officers whose remuneration was £50,000 or more, grouped in £5,000 bands • The individual remuneration of employees whose remuneration exceeds £150,000 or is a Senior Officer. Annual Governance Statement Within the annual governance statement, an authority must now include a specific statement on whether the authority’s financial management arrangements conform to the requirements of the CIPFA Statement on the Role of the Chief Financial Officer in Local Government.