BOROUGH OF POOLE
STATEMENT OF ANNUAL ACCOUNTS
2015/2016 CONTENTS
Page/ Reference
Narrative Report by the Head of Financial Services (i) to (vi)
The Statement of Responsibilities
The Accounting Statements and accompanying notes
Movement in Reserves Statement 1 Comprehensive Income and Expenditure Statement 2 Balance Sheet 3 Cash Flow Statement 4 Notes to the Accounts 5
The Housing Revenue Account (HRA) 61
The Collection Fund 66
The Auditor's Report 71
Unaudited Documents
Poole Housing Partnership Draft Summary of Accounts 74 Tricuro Draft Summary of Accounts 75
Appendices
Appendix A - The Annual Governance Statement
Appendix B - Glossary
Appendix C - Index DETAILED INDEX OF NOTES TO THE ACCOUNTS
NOTE DESCRIPTION PAGE
1 Accounting Policies 5-17 2 Critical judgements in applying accounting policies 18-19 3 Assumptions about the future and other major sources of estimation uncertainty 20 4a Accounting Standards that have been issued but not adopted 21 4b Prior Period Adjustments 21 5 Adjustments between accounting basis and funding basis under regulations 22-24 6 Detail of movement on reserves earmarked and unearmarked 25 7 Amounts reported for resource allocation decisions 26-30 8 Members' allowances paid in year 31 9 External audit costs 31 10 Related party transactions 31 11 Employee remuneration 32-34 12 Disclosure of deployment of dedicated schools grant 34 13 Grants and other contributions 35-37 14 Investment properties - Rental income and expenditure 37 15 Movement of property, plant and equipment 39-41 16 Investment property 42 17 Intangible assets 42 18 Capital expenditure and financing 43 19 Capital financing requirement and provision for repayment of debt 44 20 Significant commitments under capital contracts 44 21 Long term debtors 45 22 Debtors 45 23 Cash and cash equivalents 46 24 Investments - short term and long term 46 25 Creditors and Depositors 47 26 Short term borrowing and long term borrowing 47 27 Financial instruments 48-50 28 Capital grants and other contributions receipts in advance 51 29 Provisions 51-52 30a Revaluation reserve 53 30b Capital adjustment account 53 30c Deferred capital receipts 54 30d Movements in specific revenue reserves held for capital purposes 54 30e Usable capital receipts 54 31 Termination benefits and exit packages 55 32 Retirement benefits 55-58 33 Notes related to cashflow 59 34 Interest in related company and guarantees 60 35 Accounting for schools 60 36 Authorisation of accounts for issue and events after balance sheet date 60 37 Contingent Liabilities 60 NARRATIVE REPORT BY THE HEAD OF FINANCIAL SERVICES
1 INTRODUCTION
The Statement of Accounts, which has been prepared in accordance with The Code of Practice on Local Authority Accounting in the United Kingdom 2015/16 (the Code), based on International Financial Reporting Standards (IFRS), shows the financial performance for the activities undertaken by the Borough of Poole.
2 THE STATEMENTS
The Statement of Responsibilities for the Statement of Accounts identifies the respective responsibilities of the Authority and the Head of Financial Services for the accounts.
The Financial Statements - these comprise the Movements in Reserves, Comprehensive Income and Expenditure, Balance Sheet and Cashflow
a) Movements in Reserves Statement
This Statement shows the movement in the year on the different reserves held by the authority, analysed into 'usable reserves' (ie 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 authority'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 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.
b) Comprehensive Income and Expenditure Statement
This Statement shows the economic cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.
c) Balance Sheet
The Balance Sheet shows the value as at the Balance Sheet date of the asset and liabilities recognised by the authority. The net assets of the authority (assets less liabilities) are matched by the reserves held by the authority. Reserves are reported in two categories. The first category of reserves are usable reserves i.e. those reserves that the authority 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 are those that the authority 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".
(i) BOROUGH OF POOLE 2015-16 NARRATIVE REPORT BY THE HEAD OF FINANCIAL SERVICES
d) Cashflow
The Cash Flow statement shows the changes in cash and cash equivalents of the authority during the reporting period. The statement shows how the authority 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 authority are funded by way of taxation and grant income or from the recipients of services provided by the authority. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the authority’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (ie borrowing) to the authority.
Notes to the Financial Statements - these are intended to give the reader more information about items contained within the Core Financial Statements.
The Housing Revenue Account summarises all income and expenditure in providing local authority council housing and reflects the statutory obligation to maintain a separate account.
The Collection Fund shows the level of council tax and non-domestic rates which has been collected by the Authority and the distribution of these funds.
3 COLLECTION FUND
Good collection rates were achieved in year for both Council Tax (97.8%) and Non-Domestic Rates (98.6%). The Collection Fund has an accumulated surplus of £1,532k.This comprises two elements one relates to council tax and is an accummulated surplus of £1,189k, the other to business rates and is an accummulated deficit of £343k. Council tax surplus is shared between the Borough of Poole, the Dorset Police and Crime Commissioner and the Dorset Fire Authority. Business rates deficit is shared between Central Government, Borough of Poole and Dorset Fire Authority.
4 THE HOUSING REVENUE ACCOUNT (HRA)
The HRA cumulative surplus balance as at 31st March 2016 amounts to £580k. The account reflects the statutory obligation to account separately for social housing provision. It shows the main elements of expenditure and how these are funded by rents and other income. The HRA Accounts consist of an Income and Expenditure Account and a Statement of Movement on the HRA Balance. The HRA income and expenditure account shows a surplus of £24,261k, this is then offset by statutory adjustments to give a final surplus in year of £1k which is then deducted from previous years surpluses of £579k to give the final total surplus of £580k. There is however no impact on taxpayers as the deficit and all other HRA related items are appropriated through the reconciling items statement entries before the General Fund Balance is calculated.
5 ARMS LENGTH MANAGEMENT ORGANISATION AND GROUP ACCOUNTS
Poole Housing Partnership Ltd (PHP Ltd) was set up in April 2004 to manage the Council's Housing stock. Transactions with the company are contained within the Housing Revenue Account.
The authority has given full consideration to requirements contained within the Code with regard to the production of group accounts. It has considered both the qualitative and quantitative aspects and concluded that group accounts are not required.
Tricuro is a group of two companies established under local authority trading principles as a joint venture between Dorset County Council, Bournemouth Borough Council and Poole Borough Council. The shareholder agreement regulates the shares in profit /cost as 70%, 25% and 5% respectively. The Company is principally engaged in the provision of social care provider services for vulnerable adults across Dorset, Bournemouth and Poole. The company was launched on 1 July 2015. Poole's 5% share is shown within the accounts.
BOROUGH OF POOLE 2015-16 (ii) NARRATIVE REPORT BY THE HEAD OF FINANCIAL SERVICES
6 CAPITAL EXPENDITURE GENERAL FUND AND HOUSING REVENUE ACCOUNT
Total expenditure on capital schemes in 2015/16 was £34,209k (2014/15:£36,323k). This is £11,041k Housing Revenue Account and £23,168k General Fund.
The total expenditure was funded by capital grants, capital receipts, revenue and reserve contributions and borrowing.
A more detailed analysis of capital expenditure and its financing can be found in the Notes to the Accounts at Note 18. Note 20 details significant commitments under capital contracts.
This expenditure has enabled various enhancements to assets within the borough including; * to schools, parks, open spaces and playgrounds * the replacement of vehicles and bins * enhancements to roads and bridges and coastal protection schemes * continued delivery of the decent homes standard for council housing and disabled facilities grants
The council's general fund capital reserves total £14,515k of which £176k is held for schools and £14,339k for all other services except for council housing. These reserves are currently committed in support of the capital programme which runs until 2021 for further enhancements to assets held for service delivery.
The Housing Revenue Account has a major repairs reserve of £10,245k.
7 BORROWING FACILITIES AND CAPITAL BORROWING
The power to borrow is governed by the Local Government Act 2003. The Act states that a local authority may borrow money: a) for any purpose relevant to its functions under any enactment, or b) for the purposes of the prudent management of its financial affairs.
A local authority may not borrow money if doing so would result in a breach of: a) the limits set out in the prudential indicators approved by full Council during the budget setting process, or b) any limits set by the Secretary of State for national economic reasons.
The Council may borrow from a number of market institutions, but in the main chooses to borrow from the Public Works Loan Board (PWLB), details are contained within the Balance Sheet.
In 2015/16 it took out an interest free loan with Salix Finance ltf for £1.2m specifically to finance investment into energy efficient street lighting.
8 IAS 19 (EMPLOYEE BENEFITS)
The Pension Reserve shows a deficit of £236,992k (2014/15 £252,879k). This is offset by a Pension Liability of £235,142k. The difference of £1,850k relates to a prepayment to the Pension Fund Administrators for the liability in relation to year 2016/17. The original early repayment value of £5,550k allowed the authority to benefit from a discount of £424k. This liability includes a value in relation to Teachers of £6,161k (2014/15 £6,238k).
Further details on employee benefits can be found in Note 32 to the Core Financial Statements.
When calculating the pensions deficit for IAS 19 purposes the actuary makes various assumptions including for inflation and salary increases. The inflation assumption is required to project future cashflows to and from the Fund that are subject to future inflation levels rather than current inflation levels. The inflation assumption is therefore an assumption about average levels of future inflation rather than current levels. The actuary has advised that there are a number of market indicators that can be used but most actuaries look at the difference between fixed interest gilt yields and index linked gilt yields and adjust by historical knowldege. This results in a price inflation of 3.3% for 2015/16 (3.2% for 2014/15).
(iii) BOROUGH OF POOLE 2015-16 NARRATIVE REPORT BY THE HEAD OF FINANCIAL SERVICES
8 IAS 19 (EMPLOYEE BENEFITS) (continued)
The key assumption relating to salary increases is less market related (this is for future levels of pay increases). The actuary has stated that history tells us that in the longer term pay increases tend to exceed price inflation - typically between 1-3% per annum and that Auditors expect a consistent assumption from year to year. For this reason they have assumed 3.9% (which is 2.4% for prices(CPI) plus additional 1.5%).
The 2.4% is Consumer Price Index (CPI) rather than Retail Price Index (RPI). This is because the Government links pensions increases to CPI rather than RPI (CPI tends to run lower than RPI so has a beneficial impact on pension funds).
The IAS 19 deficit position does not feature within the calculations that the actuary makes for the actual calculations of the contribution rates to be paid by the authority.
9 FINANCIAL SUMMARY OF YEAR END POSITION
Net revenue spending for the year was a reduction to the General Fund balance of £881k. The general fund balance consists of two elements, one relating to schools and one to all other general fund services. The usage of £881k relates entirely to the schools element. Other general fund services underspent but this was added to earmarked reserves to mitigate future funding cuts. Cabinet have received regular monitoring reports throughout the year which have explained any variations to approved budgets. This public information has been available during the year and is on the Council website www.boroughofpoole.com. (from A-Z of services, select F- Financial Services, then select services, Council budget monitoring)
The statement shown on the next page reconciles the Budget and Council Budget Monitoring with the Statement of Accounts.
(iv) BOROUGH OF POOLE 2015-16 NARRATIVE REPORT BY THE HEAD OF FINANCIAL SERVICES
9 FINANCIAL SUMMARY OF YEAR END POSITION (continued)
Original Budget and Monitoring to Statement of Income and Income and (Surplus) Reconciling SMGFB Accounts Format Expenditure Expenditure Deficit Items (Increase) for SMGFB Decrease
Net operating Sources of General Fund expenditure Finance Balance £000's £000's £000's £000's £000's
Budget 113,354 (100,815) 12,539 (12,539) 0
Reported Variances 33,544 (150) 33,394 (33,394) 0
Previously Reported (Council Budget Monitoring) 146,898 (100,965) 45,933 (45,933) 0
Reconciliation to statement of accounts
Schools (162) (162) 1,043 881 Housing Revenue Account (24,260) (24,260) 24,260 0 Revaluations, depreciation, capital accounting adjustments (5,194) 0 (5,194) 5,194 0 Net payment to DCLG government pool 444 444 (444) 0 Collection Fund Adjustment Account (515) (515) 515 0 Pensions IAS19 final adjustments 1,921 1,921 (1,921) 0 Capital grants recognition in CI&E Account (11,728) (11,728) 11,728 0
Statement of Accounts format 119,647 (113,208) 6,439 (5,558) 881
(v) BOROUGH OF POOLE 2015-16 NARRATIVE REPORT BY THE HEAD OF FINANCIAL SERVICES
9 FINANCIAL SUMMARY OF YEAR END POSITION (CONTINUED)
At the final outturn position the underspending on services after application of reserves has been used to increase the revenue contribution to capital to support renovation works required at the Dolphin Multi Storey car park. In addition a remaining surplus of £335k has been added to earmarked reserves to support the implementation of savings requirements during 2016/17. Schools overspent their in year resources by £881k and used their own reserves to fund this. This is summarised in the table below.
In year variance Schools General to budget Fund Balance impact £'000 £'000 £'000 Service areas underspending (2,316) Corporate income and expenditure (231) Increased government funding via grants (150) Increased revenue contribution to capital 2,860 Repaying prudential borrowing 2,037 Funding in relation to poole bridge (2,535) Surplus at end of March to reserves 335 Schools overspending 881
Movement on GFB 0 881 881
The deficit on the Income and Expenditure Account was £6,439k ( surplus £24,260k HRA, and a deficit of £30,699k General Fund) - but this needs to then be linked with the adjustments between accounting basis and funding basis under regulations which establishes the final movement in the general fund balance for the year as being a use of of £881k as illustrated above and on the previous page.
General fund unearmarked reserves remain the same at £6,252k, and schools have reduced to £3,885k.
When schools transfer to Academy status the Authority is required to write the net book value of the land and buildings off of the balance sheet. It is treated as a disposal for nil consideration, on the date that the school converts to an Academy.
10 IMPACT OF THE VOTE TO LEAVE THE EUROPEAN UNION
On 23rd June 2016 the electorate voted to leave the European Union. The implications of this are uncertain. There is potential that risks to the authority will have increased but on the other hand there may be new opportunities to explore. The main areas of potential concern have initially been identified as follows but will become clearer as time progresses. Additional spending cuts; tax revenue impact cascading through to local government Economic Development; impact on local generation projects such as housing projects being delayed Community Cohesion; control of hate crime and reassurance to overseas workers Whitehall capacity; uncertainty around programmes of reform such as localisation of business rates The impact will become clearer as time progresses and will be factored into the authority's future planning.
BOROUGH OF POOLE 2015-16 (vi) STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS
1 THE AUTHORITY'S RESPONSIBILITIES
The Authority is required:
* to make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs. In this Authority, that officer is the Head of Financial Services;
* to manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets;
* to approve The Audited Statement of Accounts by 30 September 2016 as specified by the Secretary of State.
2 THE CHIEF FINANCIAL OFFICER'S RESPONSIBILITIES
The Head of Financial Services is responsible for the preparation of the Authority’s Statement of Accounts which, in terms of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in United Kingdom, is required give a true and fair view of the financial position of the Authority at the accounting date and its income and expenditure for the financial year ended 31 March 2016.
In preparing this Statement of Accounts, the Head of Financial Services has:
* established suitable accounting policies and then applied them consistently;
* made judgements and estimates that were reasonable and prudent;
* complied with the local authority Code.
The Head of Financial Services has also:
* kept proper accounting records which were up to date;
* taken reasonable steps for the prevention and detection of fraud and other irregularities.
3 CERTIFICATION I certify that the statement of accounts presents a true and fair view of the financial position of the Authority as at 31 March 2016, and its income and expenditure for the year then ended.
ADAM RICHENS CHIEF FINANCIAL OFFICER DATE
Certification is required by 30th June 2016
4 RE-CERTIFICATION PRIOR TO APPROVAL AT AUDIT COMMITTEE MEETING
ADAM RICHENS CHIEF FINANCIAL OFFICER DATE
5 CERTIFICATION BY THE PRESIDING MEMBER OF THE AUDIT COMMITTEE I confirm that these accounts were approved by the Committee on the 15th September 2016
COUNCILLOR DAVID NEWELL DATE
BOROUGH OF POOLE 2015-16 FINANCIAL STATEMENTS
MOVEMENT IN RESERVES STATEMENT
Total Total General Local General Earmarked Housing Capital Major Capital Capital Capital Capital Total Total Total Fund Management Fund GF Revenue Receipts Repairs Funds Funds Funds Grants Usable Unusable Authority of Schools Balance Reserves Account Reserve Reserve Schools Reserve Unapplied Reserves Reserves Reserves Restated £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1st April 2014 (5,752) (6,934) (12,686) (20,608) (590) (4,834) (11,614) (13,564) (510) (14,074) (480) (64,886) (287,978) (352,864)
(Surplus) or deficit on provision of services (accounting basis) 18,769 1,121 19,890 0 (13,712) 0 0 0 0 0 0 6,178 0 6,178 Other Comprehensive Expenditure and Income 0 0 0 0 0 0 0 0 0 0 0 0 47,178 47,178 Total Comprehensive Expenditure and Income 18,769 1,121 19,890 0 (13,712) 0 0 0 0 0 0 6,178 47,178 53,356
Adjustments between accounting basis & funding basis under regulations (Note 5) (23,247) 1,327 (21,920) 0 13,723 421 (147) 0 0 0 427 (7,496) 7,496 0
Net (Increase) / Decrease before Transfers to Earmarked Reserves (4,478) 2,448 (2,030) 0 11 421 (147) 0 0 0 427 (1,318) 54,674 53,356
Transfers (to) / from Reserves 3,978 (280) 3,698 (3,606) 0 298 0 (372) 280 (92) 0 298 (298) 0
(Increase) / Decrease in Year (500) 2,168 1,668 (3,606) 11 719 (147) (372) 280 (92) 427 (1,020) 54,376 53,356
Balance at 31 March 2015 (6,252) (4,766) (11,018) (24,214) (579) (4,115) (11,761) (13,936) (230) (14,166) (53) (65,906) (233,602) (299,508)
Balance at 1 April 2015 (6,252) (4,766) (11,018) (24,214) (579) (4,115) (11,761) (13,936) (230) (14,166) (53) (65,906) (233,602) (299,508)
(Surplus) or deficit on provision of services 30,861 (162) 30,699 0 (24,260) 0 0 0 0 0 0 6,439 0 6,439 Other Comprehensive Expenditure and Income 0 0 0 0 0 0 0 0 0 0 0 0 (37,606) (37,606) Total Comprehensive Expenditure and Income 30,861 (162) 30,699 0 (24,260) 0 0 0 0 0 0 6,439 (37,606) (31,167)
Adjustments between accounting basis & funding basis under regulations (Note 5) (26,170) 1,097 (25,073) 0 24,259 (669) 1,516 0 0 0 0 33 (33) 0
Net (Increase) / Decrease before Transfers to Earmarked Reserves 4,691 935 5,626 0 (1) (669) 1,516 0 0 0 0 6,472 (37,639) (31,167)
Transfers (to) / from Reserves (4,691) (54) (4,745) 5,091 0 420 0 (403) 54 (349) 3 420 (420) 0
(Increase) / Decrease in Year 0 881 881 5,091 (1) (249) 1,516 (403) 54 (349) 3 6,892 (38,059) (31,167)
Balance at 31 March 2016 (6,252) (3,885) (10,137) (19,123) (580) (4,364) (10,245) (14,339) (176) (14,515) (50) (59,014) (271,661) (330,675)
BOROUGH OF POOLE 2015-16 1 FINANCIAL STATEMENTS
Comprehensive Income and Expenditure Statement
2014/15 - Restated * 2015/16
Gross Net Gross Net Expenditure Income Expenditure Expenditure Income Expenditure £000’s £000’s £000’s £000’s £000’s £000’s Service Areas 52,678 (13,317) 39,361 Adult Social Care 58,798 (17,066) 41,732 3,690 (1,894) 1,796 Central services to the public 3,989 (1,892) 2,097 106,284 (73,833) 32,451 Children's and Education Services 90,812 (64,520) 26,292 13,327 (2,947) 10,380 Cultural and Related Services 14,027 (3,787) 10,240 21,091 (5,579) 15,512 Environmental and Regulatory Services 20,176 (6,074) 14,102 17,348 (6,991) 10,357 Highways and Transport Services 17,631 (6,671) 10,960 13,987 (22,557) (8,570) Local Authority Housing (Housing Revenue Account) 14,807 (23,093) (8,286) (6,246) 0 (6,246) Exceptional - Revaluation up of Housing Revenue Account assets (19,090) 0 (19,090) 54,873 (51,426) 3,447 Other Housing services 53,427 (50,396) 3,031 4,640 (1,661) 2,979 Planning Services 4,607 (1,973) 2,634 5,426 (6,057) (631) Public Health 6,624 (6,589) 35 2,820 (181) 2,639 Corporate and democratic core 3,272 (201) 3,071 311 (15) 296 Non Distributed Costs (NDC) (2,444) (4) (2,448)
290,229 (186,458) 103,771 Net cost of services 266,636 (182,266) 84,370
16,977 (729) 16,248 Loss (Gain) on the disposal of non current assets 27,578 (1,608) 25,970 189 0 189 Precept Environment Agency Levy 193 0 193 388 0 388 Contribution of housing capital receipts to Government Pool 444 0 444 219 0 219 Pensions fund administration expenses 221 0 221
17,773 (729) 17,044 Other Operating Expenditure 28,436 (1,608) 26,828
3,224 0 3,224 Interest payable and similar items 3,213 0 3,213 0 (498) (498) Interest receivable 0 (439) (439) Income and expenditure in relation to investment properties (1,499) (1,961) (3,460) and changes in their fair value (175) (2,027) (2,202) 20,514 (12,810) 7,704 Net interest on the defined benefit liability / (asset) 7,877 0 7,877
22,239 (15,269) 6,970 Financing and Investment Income and Expenditure 10,915 (2,466) 8,449
0 (23,751) (23,751) General government grants non ringfenced 0 (19,684) (19,684) 0 (65,920) (65,920) Income from Council Tax 0 (67,076) (67,076) 0 (14,886) (14,886) Income from Localised Business Rates 0 (14,720) (14,720) 0 (17,050) (17,050) Capital Grants and Contributions 0 (11,728) (11,728)
0 (121,607) (121,607) Taxation and Non-Specific Grant Income and Expenditure (Note 13) 0 (113,208) (113,208)
6,178 Net (Surplus) or Deficit on Provision of Services 6,439
(12,269) Surplus or deficit on revaluation of non current assets (10,285) 59,447 Actuarial remeasurements on pension fund assets and liabilities (27,321)
47,178 Other Comprehensive Income and Expenditure (37,606)
53,356 Total Comprehensive Income and Expenditure (31,167)
Note relating to the (surplus) or deficit on the provision of services
The (Surplus) or Deficit is split across the following fund activities 18,769 General Fund 30,861 1,121 General Fund - Schools (162) (13,712) Housing Revenue Account (24,260) 6,178 6,439
* The restatement in 2014/15 is for presentational comparative purposes in relation to the line 'Exceptional - revaluation up of assets'. This line relates to the revaluation of Council Housing which has seen an increase of approximately 10% during 2015/16. The values in relation to both years have therefore been extracted from the regular transactions of the Housing Revenue Account consolidated above to assist comparisions. Full information on the Housing Revenue Account is shown within this set of accounts on pages 61 to 65.
2 BOROUGH OF POOLE 2015-16 FINANCIAL STATEMENTS
Balance Sheet Restated Restated As at As at As at 31st March 31st March Notes 31 March 2014 2015 2016
£000's £000's £000's £000's
192,653 205,564 - Housing Revenue Account (including Council Dwellings) 15 230,743 275,001 257,478 - Other Land & Buildings 15 248,117 8,310 10,012 - Vehicles, Plant & Equipment 15 11,850 3,431 3,806 - Community Assets 15 4,273 108,577 112,594 - Infrastructure Assets 15 117,014 676 8,790 - Assets under construction 15 9,891
588,648 598,244 Property, Plant and Equipment 621,888 811 811 Heritage Assets 811 26,460 28,547 Investment Properties 16 25,894 906 1,485 Intangible Assets 17 1,793 2,751 2,961 Long Term Debtors 21 2,426 0 0 Long Term Investments 24 12,514
619,576 632,048 TOTAL LONG TERM ASSETS 665,326
6,234 12,596 Short Term Investments 24 10,111 0 375 Assets Held For Sale 0 113 110 Inventories 124 16,898 17,081 Short Term Debtors 22 17,703 32,901 22,647 Cash and Cash Equivalents 23 11,495 56,146 52,809 CURRENT ASSETS 39,433
(32,904) (33,832) Creditors and depositors 25 (34,768) (1,874) (3,494) Short Term Borrowing 26 (4,052) (108) (106) Interest on Borrowing repayable within 12 months 26 (98) (34,886) (37,432) CURRENT LIABILITIES (38,918)
(89,952) (86,459) - Long Term Borrowing 26 (84,368) (7,365) (3,549) - Provisions 29 (5,121) (7,674) (8,730) - Gov't Grants and Other receipts in advance 28 (10,535) (182,981) (249,179) - Pensions Liability 32 (235,142) (287,972) (347,917) LONG TERM LIABILITIES (335,166)
352,864 299,508 NET ASSETS 330,675
FINANCED BY:
(5,752) (6,252) General Fund balances 6 (6,252) (6,934) (4,766) General Fund Balances Schools Delegated 6 (3,885) (34,682) (38,380) Earmarked Reserves 6 (33,638) (590) (579) Housing Revenue Account (page 63) (580) (4,834) (4,115) Capital Receipts Unapplied 30e (4,364) (11,614) (11,761) Major Repairs Reserve (HRA) 30d (10,245) (480) (53) Capital Grants Unapplied (unconditional) 6 (50)
(64,886) (65,906) Usable Reserves (59,014)
(79,090) (83,640) Revaluation Reserve 30a (82,291) (393,916) (403,761) Capital Adjustment Account 30b (426,265) (341) (317) Deferred Capital Receipts 30c (292) 327 (636) Collection Fund Adjustment Account (1,151) 2,061 1,873 Short-term Accumulating Compensated Absences Account 1,346 182,981 252,879 Pensions Reserve 32 236,992
(287,978) (233,602) Unusable Reserves (271,661)
(352,864) (299,508) TOTAL NET WORTH (330,675)
These financial statements replace the unaudited financial statements certified by the Head of Financial Services by 30th June 2016 Restatement is detailed in Note 4 b
BOROUGH OF POOLE 2015-16 3 FINANCIAL STATEMENTS
Cash Flow Statement Restated 2014/15 2015/16 £000's £000's
6,178 Net Surplus / Deficit on the Provision of Services 6,439
(33,583) Adjust for non cash movements (34,718)
22,772 Adjust for items that are investing and financing activites 13,841
(4,633) Net cash flow from operating activities - (Inflow)/Outflow - see note 33a (14,438)
Investing Activities
31,628 Purchase of property,plant,equipment,investment property & intangibles 31,874 6,270 Purchase/repay of short term and long term investments 10,044 (2,207) Proceeds from sale of property,plant,equipment,investment property & intangibles (3,795) (21,620) Other receipts used in investing activities (eg capital grants) (12,419)
14,071 Net cash flows from investing activities 25,704
Financing Activities (1,058) Non Domestic Rates and Council tax preceptors increase/(decrease) 0 0 Cash receipts of short and long term borrowing (1,960) 1,874 Repayments of short and long term borrowing 3,493 0 Other payments for financing activities (1,647)
816 Net cash flows from financing activities (114)
10,254 Net (increase) / decrease in cash and cash equivalents 11,152
(32,901) Cash and cash equivalents at the beginning of the reporting period (22,647)
(22,647) Cash and cash equivalents at the end of the reporting period (Note 23) (11,495)
4 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
1 ACCOUNTING POLICIES
A GENERAL PRINCIPLES
The Statement of Accounts summarises the Authority’s transactions for the 2015/16 financial year and it’s position at the year end of 31 March 2016. The Authority is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2015. It has been prepared, except where mentioned in the notes below, in accordance with proper accounting practices primarily comprising: a) the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Local Authority Accounting in the United Kingdom 2015/16; b) the CIPFA Service Reporting Code of Practice (SeRCOP) 2015/16. c) and supported by International Financial Reporting Standards (IFRS).
Throughout the presentation of financial accounts figures, expenditure, income reductions and deficits are shown without brackets; income, expenditure reductions and surpluses within brackets. This is with the exception of Note 32 Retirement Benefits which is shown in accordance with actuarial standard practice.
The purpose of this Statement is to explain the basis for the recognition, measurement and disclosure of transactions and other events in the accounts.
The accounting convention adopted is principally historical cost, modified by the revaluation of certain categories of non - current assets and financial instruments. These accounts have been prepared on the basis that the Authority is a going concern.
B ACCRUALS OF INCOME AND EXPENDITURE
Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In Particular:
Revenue from the provision of services is recognised when the Authority 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 Authority.
Supplies are recorded as expenditure when they are consumed - there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet.
Expenses in relation to services received (including services made by employees) are recorded as expenditure when the services are received rather than when payments are made.
Interest receivable on investments and payable on borrowing is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than cash flows fixed or determined by the contract.
Where income and expenditure has 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 it is doubtful that debts will be settled, the balance of debtors is written down and a charge made to revenue for the income that might be collected.
The accounts contain all transactions relating to income derived from council housing rentals and all expenditure in relation to the management and maintenance of the council housing stock. All accruals of income and expenditure are accounted for in the same way as is referenced in the above paragraphs. The accounts contain comprehensive notes specifically in relation to the Housing Revenue Account (HRA) so that the reader of the accounts can see the values that are consolidated within the main statements.
Both Non Domestic Rates (NDR) and Council Tax are accounted for on an agency basis. For NDR this means that the Authority is dealing with the collection of business rates on behalf of the Government and Dorset Fire Authority as well as the Poole Borough. For Council Tax the Authority is collecting precepts on behalf of Dorset Police and Fire Authorities as well as the Borough of Poole Precepts. 5 BOROUGH OF POOLE 2015-16
NOTES TO THE ACCOUNTS
The accounts reflect the amount that is attributable to Poole only. Further information is contained within the Collection Fund Accounts
Analysis of debtors and creditors can be found in the Notes 22 and 25 to the Financial Statements.
VAT is included in income and expenditure accounts, only to the extent that is irrecoverable.
C CASH AND CASH EQUIVALENTS
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more that 24 hours eg a bank current account. Cash equivalents are investments that are readily convertible to known amounts of cash with insignificant risk of change in value. This Authority has determined that any fixed term deposits held are not highly liquid and therefore not readily convertible to cash. Cash equivalents are deemed to include Call Accounts, Money Market Funds and Instant Deposits. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form integral part of the Authority’s cash management.
D EXCEPTIONAL ITEMS
When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Authority’s financial performance.
E PRIOR PERIOD ADJUSTMENTS, CHANGES IN ACCOUNTING POLICIES AND 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, ie 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 Authority’s financial performance. Where a change is made, it is applied retrospectively (unless otherwise stated) by adjusting opening balances and comparative amounts for the 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.
F CHARGES TO REVENUE FOR NON-CURRENT ASSETS
General Fund Service Revenue Accounts, Central Support Services, Trading Accounts and the Housing Revenue Account are charged with the following items to record the real cost of using 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 they can be written off; - amortisation of intangible fixed assets attributable to service.
The Authority is not required to raise council tax to cover depreciation, revaluation and impairment losses or amortisations and therefore these charges are appropriated back out to the Capital Adjustment Account via the adjustments between accounting basis and funding basis under regulations. However, it is required to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement on a prudent basis. This sum is calculated in line with statutory guidance (for supported borrowing this council uses an amount equal to at least 4% of the underlying amount measured by the adjusted Capital Financing Requirement, excluding amounts attributable to Housing Revenue Account activity). This amount, 6 BOROUGH OF POOLE 2015-16
NOTES TO THE ACCOUNTS
known as the Minimum Revenue Provision (MRP), is a charge against the General Fund Balance and is an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves
Statement. For any prudential borrowing, repayments are made, as a minimum, over the life of the asset. This is accounted for as voluntary revenue provision for capital financing and is accounted for in the same way as described for MRP. In summary depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.
G EMPLOYEE BENEFITS
Benefits Payable During Employment
Short-term employee benefits are those due to be settled within 12 months of the year-end. They included such benefits as wages and salaries, paid annual leave and paid sick leave, for current employees and are recognised as an expense for services in the year in which employees render service to the Authority. An accrual is made for the cost of holiday entitlements (or any form of leave, eg time off in lieu) earned by employees but not taken before the year-end which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable as at the 31st March, to give a true liability as at 31 March date. An alternative would be to use the ‘next year’ rate for wage and salary rates as this is when the employee takes the benefits. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out 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 Authority to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy. Redundancy costs are charged on an accruals basis to the services in the Comprehensive Income and Expenditure Statement when the Authority is demonstrably committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy.
Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Authority to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits are 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.
Post Employment Benefits
The majority of the Authority’s employees are either in the Local Government Pension Scheme (LGPS) or the Teachers’ Pension Scheme (TPS).
*The LGPS is administered by Dorset County Council and employer contribution levels are set by the fund administrator taking into account government regulations. *The TPS administered by Capita Teachers’ Pensions on behalf of the Department for Education set the contributions nationally.
Both schemes provide defined benefits to members, earned as employees work for the Authority.
However, the arrangements for the Teachers’ scheme mean that liabilities for these benefits cannot be identified to the Authority. The scheme is therefore accounted for as if it were a defined contribution scheme - no liability for future payments of benefits is recognised in the balance sheet and the Children’s and Education Services line in the Comprehensive Income and Expenditure Statement is charged with the employer’s contributions payable to the TPS in the year.
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NOTES TO THE ACCOUNTS
This is with the exception of discretionary additional pension payments made to teachers which are accounted for as a defined benefit scheme and are included within pension liabilities.
The LGPS is accounted for as a defined benefit scheme and in compliance with International Financial Reporting Standard 19 (IAS 19) Retirement Benefits. In essence this requires that the accounts should reflect the liability for benefits when the Authority is committed to making them, even if the actual payment will be many years into the future.
This policy is felt to be more appropriate as it means that the full cost of employing people is recognised during the period of employment and that this is consistent with the concept of total cost as defined within CIPFA’s ‘Service Reporting Code of Practice’.
The liabilities of the Dorset County Pension Scheme attributable to the Authority 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 3.7% (based on the indicative rate of return on high quality corporate bonds)
The assets of the Dorset County Council Pension attributable to the Authority are included in the Balance Sheet at their fair value as estimated by the actuary.
The change in the net pensions liability is analysed into the following components: Service Cost comprising : - current service cost - the increase in liabilities as a result of years service earned this year allocated in the Comprehensive Income and Expenditure Statement to 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 Comprehensive Income and Expenditure Statement as part of Non Distributed Costs. - net interest on the net defined benefit liability –ie net interest expense for the authority – the change during the period in the net defined benefit liability that arises from the passage of time charged to Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement. This is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability at the beginning of the period, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments.
Remeasurement comprising: - the return on the plan assets – excluding amounts included in net interest on the net defined benefit liability – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure. - actuarial gains and loses – changes in the net pensions liability the arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure - contributions paid to the Dorset County Council Pension fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense
Statutory provisions require the General Fund Balance to be charged with the amount payable by the Authority 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 amounts payable to the fund but unpaid at the year end.
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NOTES TO THE ACCOUNTS
The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees.
Discretionary Benefits – the Authority also has restricted powers to make discretionary awards of retirement benefits in the event of early retirement. 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 Scheme
H EVENTS AFTER THE BALANCE SHEET DATE
Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of event can be identified:
- those that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts is adjusted to reflect such events
- those that are indicative of conditions that arose after the reporting period – the Statement of Accounts is not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect.
Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts.
I FAIR VALUE MEASUREMENT
The authority measures surplus assets and investment properties(non-financial assets) at fair value at each reporting date. The PWLB loan which is a financial liability is recognised in the accounts at cost but disclosure notes provide its fair value for information. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either:
a) in the principal market for the asset or liability or
b) in the absence of a principal market, in the most advantageous market for the asset or liability.
The authority measures the fair value of an asset or liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
When measuring the fair value of a non-financial asset, the authority takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The authority uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Inputs to the valuation techniques in respect of assets and liabilities for which fair value is measured or disclosed in the authority’s financial statements are categorised within the fair value hierarchy, as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the authority can access at the measurement date
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NOTES TO THE ACCOUNTS
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly
Level 3 – unobservable inputs for the asset or liability
I FINANCIAL INSTRUMENTS
Financial Liabilities
Financial liabilities are recognised on the Balance Sheet when the Authority becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and carried at their amortised cost. Annual charges to the Comprehensive Income and Expenditure Statement 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 of the Authority, this means that the amount presented in the Balance Sheet is outstanding principal repayable (plus accrued interest); and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year in the loan agreement.
Financial Liabilities (continued)
The Authority has a Loan agreement entered into during 2010/11 with the Regional Development Agency. This agreement gave access to forward funding of up to £9.96m which was for funding towards the cost of building Twin Sails Bridge. The funding was accessed via claims for reimbursement of costs incurred. This funding was then recognised on the Authority Balance Sheet as a loan. (Note that the Regional Development Agency no longer exists but has been subsumed into the Home and Communities Agency).
The intention is that this loan is forward funding of developer contributions. It is currently expected that the loan will be repaid with these future contributions.
The loan repayments are scheduled and commenced from 1st September 2013. There are two repayment schedules, one whereby the Authority does not pay any interest, the second incurring interest penalties at Bank of England Base Rate.
This loan is therefore at a preferential rate and the Authority may normally be required to treat the preferential element of the agreement as a ‘grant’ within the accounts. This adjustment which would result in a notional grant in the Comprehensive Income and Expenditure Statement which would be reversed out in the Movement on Reserves is not being processed. The reason for this is that it is considered by the Authority that this would create unnecessary confusion within the Accounts and that the true liability relating to the loan would be unclear.
Financial Assets
Financial assets are required to be 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.
This Authority only has financial assets that fall within the classification of ‘loans and receivables’.
Loans and receivables are recognised on the Balance Sheet when the Authority becomes party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. The amount presented in the
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NOTES TO THE ACCOUNTS
Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year.
In connection with the liability to the Regional Development Agency the Authority has forwarded onto a developer the potential access to a sum not exceeding £2.5m for building of a Link Road connected to the Twin Sails Bridge development. Funding was provided as costs were incurred and the loan to the developer is at zero percent. At the point of reimbursement this value was recognised on the Authority Balance Sheet as a long term asset as an agreement is in place for repayment to the Authority with repayments that commenced 31 August 2013. The Authority has chosen not to account for this as a soft loan due to desire to maintain clarity around these particular transactions.
J GOVERNMENT GRANTS AND CONTRIBUTIONS
Whether paid on account, by instalments or in arrears, government grants, third party contributions and donations are recognised as due to the Authority when there is reasonable assurance that;
*the Authority will comply with the conditions attached to the payments, and *the grants or contributions will be received.
Amounts recognised as due to the Authority are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution has been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor. The Authority’s interpretation is that if there is a right of return of the grant or contribution then the funding will be held in the receipts unapplied until such time as it is applied to relevant spend. If there is no right of return then the grant or contribution is recognised immediately in the Comprehensive Income and Expenditure Account but is backed out the through the Movement in Reserves Statement to either Earmarked Revenue Reserves or to the Capital Grants Unapplied Reserve.
Monies advanced as grants or contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. 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-ringfenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement.
Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund 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 it has been applied, 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.
K INTANGIBLE FIXED ASSETS
Expenditure on assets that do not have a physical substance but are identifiable and controlled by the Authority is capitalised when it will bring benefits to the council for more than one year.
Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Authority can be determined by reference to an active market. In practice, no intangible asset held by the Authority 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 in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment where these is an indication that the asset might be impaired. Any losses recognised are posted to the relevant line in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to 11 BOROUGH OF POOLE 2015-16
NOTES TO THE ACCOUNTS
have an impact on the General Fund Balance. The gains and losses are therefore reversed out of 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) to Capital Receipts Reserve.
L INTERESTS IN COMPANIES AND GROUP ACCOUNTS
The Authority has interests in two companies. Firstly in its’ ‘Arms Length Management Organisation’ PHP Ltd. Financial transactions with the company are recorded in the HRA and Note 34 to the Financial Statements. PHP is responsible for the management of the Authority’s housing stock
Secondly in Tricuro Ltd which is a joint venture between Dorset County Council, Bournemouth Borough Council and Poole Borough Council and is principally engaged in the provision of social care provider services for vulnerable adults. Transactions with the company are recorded within the accounts and Poole’s share of pension liability is also recognised.
The Code requires the preparation of group accounts where appropriate. This Authority has fully reviewed the requirements with regard to both the quantitative and qualitative aspects contained within the code and has concluded that there is no requirement to produce group accounts for 2015/16 accounts.
M INVESTMENT PROPERTY
Investment properties are those that are used solely to earn rentals and/or for capital appreciation.
Investment properties are measured initially at cost and subsequently at fair value, being the price that would be received to sell such an asset in an orderly transaction between market participants at the measurement date. As a non-financial asset, investment properties are measured at highest and best use. Properties are not depreciated but are revalued annually. They are revalued in accordance with IAS40 which requires that the fair value of investment property shall reflect the market conditions at the end of the reporting period. This is achieved using a revaluation date of 31 December and then certification from the valuers that the valuation is still appropriate for the year end reporting or with any appropriate adjustment.
Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal.
Rental 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.
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.
N JOINT OPERATIONS
Joint operations are arrangements where the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. The activities undertaken by the Authority in conjunction with other joint operators involve the use of the assets and resources of those joint operators. In relation to its interest in a joint operation, the Authority as a joint operator recognises: - its assets, including its share of any assets held jointly - its liabilities, including its share of any liabilities incurred jointly
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- its share of the revenue from the sale of the output by the joint operation - its expenses, including its share of any expenses incurred jointly.
O OVERHEADS AND SUPPORT SERVICES
The cost of overheads and support services are accumulated in holding accounts and then charged to the authority’s services and other accounts. They are charged in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2015/16 and on a full cost basis. Exceptions to this are limited to:
- Corporate and Democratic Core – cost relating to the Council’s status as a multi- functional, democratic organisation. - Non distributed Costs – the cost of discretionary benefits awarded to employees retiring early and impairment losses chargeable on assets held for sale.
P PROPERTY, PLANT AND EQUIPMENT (PPE)
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 PPE 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 of the item can be measured reliably. This excludes expenditure on routine repairs and maintenance of non current assets which is charged as an expense when it is incurred. The Authority operates to a working deminimus of £25,000.
Measurement Assets are initially measured at cost, comprising all expenditure that is directly attributable to bringing the asset in to working condition for its intended use.
The Authority does not capitalise borrowing costs incurred whilst assets are under construction
Assets are then carried in the Balance Sheet using the following measurement bases:
o Infrastructure, community assets and assets under construction – depreciated historical cost o council dwellings – current value, determined using the basis of existing use value for social housing (EUV-SH) o surplus assets – the current value measurement base is fair value, estimated at highest and best use from a market participant’s perspective o all other assets – current value, determined as the amount that would be paid for the asset in its existing use ie existing use value (EUV). Where there is no market-based evidence and/or because of the specialist nature of an asset, then depreciated replacement cost (DRC) is used as an estimate of current value.
Where non-property assets that have short useful lives and/or low values, depreciated historical cost basis is used as a proxy for current value.
Assets included in the Balance Sheet at current value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their current value at the year- end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service.
Where decreases in value are identified, they are accounted for by:
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NOTES TO THE ACCOUNTS
* 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 in the Comprehensive Income and Expenditure Statement.
The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before the date have been consolidated into the Capital Adjustment Account.
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 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 in the Comprehensive Income and Expenditure Statement.
Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss.
Depreciation
Depreciation is provided on all PPE assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e freehold land and certain Community Assets) and assets that are not yet available for use (i.e assets under construction). It is charged in full in any year of disposal but not in the year of acquisition.
Depreciation is calculated on the following bases:
* buildings – straight line allocation over the useful life of the property as estimated by the valuer and council dwellings are based on the life of components. Asset lives range between 5 and 60 years.
* vehicles, plant, furniture and equipment - straight line allocation over useful economic life dependent upon asset type and generally after consulting with relevant officers using asset lives ranging between 5 and 20 years.
* infrastructure - straight line allocation ranging between 10 and 125 years.
Information relating to useful economic lives of individual assets is recorded in the Fixed Asset Register. Newly acquired assets are depreciated from the year after acquisition.
Where a material item of PPE has major components whose cost is significant in relation to the total cost of the item, and the UELs are different and would create a distortion to the charge made in the Comprehensive Income and Expenditure Statement, then these will be depreciated separately. The application of this IFRS standard is prospective, that is to be applied to assets at the point of revaluation, enhancement or acquisition. A deminimus level of £2m is being used for the level at which an individual asset needs to be considered for componentisation and the component would need to be at least 20% of the value 14 BOROUGH OF POOLE 2015-16
NOTES TO THE ACCOUNTS
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.
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 Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Service. Depreciation is not charged on Assets Held for Sale.
If assets no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to non-current assets 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.
Council dwellings being sold to tenants under Right to Buy legislation will not be held in this category as the certainty of the selling decision does not rest with the Authority.
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 PPE or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal Receipts from disposals are credited to the same line in the Comprehensive Income and Expenditure Statement 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 Capital Adjustment Account.
Amounts received for a disposal in excess of £10,000 are categorised as capital receipts. A proportion of receipts relating. to housing disposals (75% for dwellings, 50% for land and other assets, net of statutory deductions and allowances) is payable to the Government. The balance of receipts is required to be credited to the Capital Receipts Reserve, and can then only be used for new capital investment (or set arise to reduce the Authority’s underlying need to borrow (the capital financing requirement)). 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 non-current 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.
Recognition of school assets and transfer of schools to academy status
The accounting treatment of land and buildings for each school is based on the legal framework underlying each type of school and any legal transfers of assets that have occurred.
School assets are retained on the Balance Sheet until they are transferred to their new status. At the point of transfer the asset is treated as a disposal at zero value and the loss is recognised in the Comprehensive Income and Expenditure Account as part of other operating expenditure. There is no impact on the tax payer as this loss is reversed in the adjustment between accounting basis and funding basis under regulations.
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NOTES TO THE ACCOUNTS
Q PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS
Provisions
Provisions are made where an event has taken place that gives the Authority 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 Authority may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation.
Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the authority 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 authority settles the obligation.
Contingent Liabilities
A contingent liability arises where an event has taken place that gives the authority 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 authority. 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.
Contingent Assets
A contingent asset arises where an event has taken place that gives the authority 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 authority.
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.
R RESERVES
The Authority sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund 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 Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund in Movement in Reserves Statement so that there is no net charge against council tax for the expenditure.
The Authority also operates reserves earmarked for capital purposes with the intention of funding future capital expenditure. Termed ’capital fund’ this has actually been established from revenue contributions. In addition the Housing Revenue Account has a major repairs reserve.
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NOTES TO THE ACCOUNTS
When the council incurs capital expenditure, the funds can be used as a source of finance. At the point of use, entries are made in the reconciling items statement and adjustments made to the capital adjustments account and the reserves.
Certain reserves are kept to manage the accounting processes for non-current assets, retirement and employee benefits and do not represent usable resources for the Authority. These reserves are explained in the relevant policies.
S REVENUE EXPENDITURE FUNDED FROM CAPITAL UNDER STATUTE (REFCUS)
Expenditure incurred during the year that may be capitalised under statutory provisions but that does not result in the creation of a non-current asset has been charged as expenditure to the relevant service in the Comprehensive Income and Expenditure Statement in the year. Where the Authority 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 Balance to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the level of council tax. Included here are private sector housing renewal loans. The authority does not recognise these as long term debtors in the accounts. Any repayments are reinvested into private sector renewal category. This treatment is also applied to capital expenditure on schools where the assets are vested within the control of the governors rather than LEA eg voluntary aided schools.
T VALUE ADDED TAX (VAT)
Income and expenditure excludes any amounts related to VAT, as all VAT collected is payable to HM Revenue and Customs and all VAT paid is recoverable from them.
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NOTES TO THE ACCOUNTS ______
2 CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
In applying the accounting policies set out in Note 1, the Authority 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:
a There is a degree of uncertainty about future levels of funding for local government. The authority is estimating and accommodating this as far as possible within its Medium Term Financial Planning process. The Authority has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Authority might be impaired as a result of a need to close facilities and reduce levels of service provision. b The Authority’s management of its housing stock is undertaken by Poole Housing Partnership Ltd (PHP), an arms length management company wholly owned by the Authority. The Authority retains ownership of the housing stock and has statutory responsibility for the Housing Revenue Account. The depreciation charge is calculated using components of HRA dwellings and an assessment of useful economic life. A judgement has been made that though PHP is a wholly owned subsidiary of the Council group accounts are not required. This is because transactions with this subsidiary company are already incorporated in the Authority’s accounts in the form of payments to and receipts from the company. Details of our relationship with PHP are contained within Note 34 to the Core Financial Statements. The accounts of the PHP Ltd have not been consolidated into the authority’s accounts on the basis that their consolidation would not materially affect the accounts. c Twin Sails Bridge Scheme
As disclosed in the policies the Twin Sails Bridge Scheme is being partly funded by a loan from the Home and Communities Agency that has not exceeded £9.96m. The Authority is using general cash flow to forward fund the repayments. Ultimately it is anticipated that the final financing will be from developer contributions. This has been delayed due to the economic climate. The risk of developer funding not coming forward was previously accommodated by the Authority making a minimum revenue provision payment of approximately £165k per annum. This has now been replaced and contributions are being received and used for final financing. There remains a risk that developer contributions may not fully fund the ultimate repayment of the borrowing. If this transpires then the medium term financial plan will need to re-accommodate a £165k per annum pressure.
There are also clauses within the agreement whereby the Authority may be able to reschedule the repayments back to the Government agency that mitigate against this risk.
The Authority has lending up to £2.5m for development of a Link Road associated with the Bridge. This money is being repaid in accordance with the agreed schedule. The value outstanding as at 31st March is £1.0m. There is a risk that this money will not be repaid which is mitigated by the agreement stating that a parcel of land will be given to the Authority should such an event occur.
d Accounting for Schools – Balance Sheet Recognition
The Authority recognises Schools in line with the provisions of the Code of Practice.
There are currently five types of schools within the borough - Community schools - Voluntary controlled (VC) schools - Voluntary aided (VA) schools - Foundation Trust Schools - Academies
Staff at Community schools are appointed by the Authority and the Authority sets the admission criteria. The Authority has ownership of the Assets. These Schools are, therefore, recognised on the Authority’s Balance Sheet.
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NOTES TO THE ACCOUNTS ______
VC and VA school land and buildings usually rests with a charity, normally a religious body such as a Diocese. The Diocese grants a licence to the school to use the land and buildings. Under this licence arrangement,the ownership of the land and buildings have not transferred to the school but are retained by the diocese and thus are not included on the authority’s balance sheet.
Foundation and Foundation Trust schools were created to give greater freedom to the Governing Body responsible for school staff appointments and who also set the admission criteria. For such schools within Poole, the school governing body has legal ownership of the land and buildings and if it were preparing its own balance sheet then these assets would appear. The application of IFRS 10 and Consolidated Financial Statements requires that these assets appear within our single entity statement.
Academies are not considered to be maintained schools in the authority’s control. Thus the land and building assets are not owned by the authority and not included on the authority balance sheet.
e The impact of schools transferring to Academy status
The accounting policy is set such that the disposal of a school asset to academy will be shown in the year in which it occurs rather than at the point that the new status is agreed. The value of the asset will be written out of the accounts as a loss on disposal against other operating income and expenditure rather than as an impairment charge against cost of services. This means that schools transferring on the 1st April in any given year will still be recognised on the Balance Sheet as at 31 March of the preceding year. In addition if such schools were due for revaluation (in line with the 5 year cycle) then that revaluation will not be undertaken. The assets are transferred to the Academies on the basis of 125 year leases and as such it is considered that the major part of the useful life of the assets have been transferred and therefore disposed.
The impact of schools transferring during the next accounting year are disclosed within Note 15. f Business Rate Appeals
Provision is made for the future settlement of appeals that have been lodged with the Valuation Office. The authority considers that the lodging of the appeal with the valuation office is the event that gives the legal or constructive obligation that will probably require financial settlement and further that a reliable estimate can be made based upon previous settled appeals.
A contingent liability is identified for unlodged appeals as though rates bills have been issued there has been no appeal received and the bills as presented to ratepayers are being paid. So there is the potential for an obligation but there is no reliable way to measure this. g Frequency of Valuations and Materiality for non current assets Land and building category All property is valued in accordance with RICS valuation standards. In determining the programme of valuation work for each year the authority ensures that all assets which would fall outside of the five year time frame are captured for revaluation. In addition the authority captures those assets where the valuations are based upon income particularly where it knows that the income may have been subject to fluctuations up or down. The valuers use their local knowledge of change - for example assets that would be impacted by residential market movements. At year end the valuers carry out an impairment review and at the same time ensure that there is no evidence that assets not valued within the class would have experienced material increases. The materiality level has been set at plus or minus 10%. Investment properties Investment properties reflect the market conditions at the end of the reporting period. A small number of investment properties are deminimus for valuation purposes and there is no expectation of any change in their value. Where this is the case the valuers will not carry out a formal valuation annually but will review every five years and formally revalue if circumstances have changed.
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NOTES TO THE ACCOUNTS ______
The valuations are carried out as at December with a formal confirmation at 31st March that these valuations still reflect market conditions.
3 ASSUMPTIONS 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 Authority about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The Authority does not have a history of having to make significant changes to its’ estimates. However estimation uncertainty occurs in the following potentially significant areas.
Pensions
Within the area of Pensions Fund accounting where the Authority is reliant upon the professional advice and estimation methods followed by the Actuaries. Sums contained within the actuarial calculations of the Pension Fund are very sensitive to small changes which can and does lead to large swings in the assets and the liabilities of the fund. The Actuary does at all times follow their professional guidance. Full details are contained within note 32 along with details of assumptions and sensitivity illustrations. In addition the authority is accounting for additional discretionary payments to teachers as a defined benefit pension. This means that the estimated liability is included within the pensions liability. There are no assets backing up this liability.
Business Rate Appeals
Arrangements regarding non domestic rates implemented by the government from 1st April 2013 are such that local authorities assume the liability for refunding ratepayers who have successfully appealed against the rateable value of their properties on the rating list.
This will include amounts that were paid over to Central Government in respect of 2012/13 and prior years. Previously, such amounts would not have been recognised as income by the authorities, but would have been transferred to DCLG.
All appeals are dealt with by the Valuation Office (VO). The Valuation Office have provided details of outstanding appeals and a history of previous successful appeals. This data has been used to calculate the provision for appeals. Whilst recognising that associating a relationship between previously settled appeals and appeals not yet settled will not give 100% accuracy it is considered that this will provide a materially accurate value.
No provision has been made for potential appeals not lodged with the VO. Instead this is referenced in the accounts as a contingent liability.
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NOTES TO THE ACCOUNTS
4 a ACCOUNTING STANDARDS THAT HAVE BEEN ISSUED BUT NOT ADOPTED
The Code of Practice on Local Authority Accounting in the UK (the Code) requires the disclosure of information relating to the expected impact of an accounting change that will be required by a new standard that has been issued but not yet adopted. This applies to the adoption of the following new or amended standards within the 2016/17 Code:
IAS 1 Presentation of Financial Statements. This standard provided guidance on the form of the financial statements. The 'Telling the Story' review of the presentation of local authority financial statements as well as the December 2014 changes to IAS1 under the International Accounting Standards Board (IASB) Disclosure Initiative will result in changes to the format of accounts in 2016/17. The format of the Comprehensive Income and Expenditure Statement and the Movement in Reserves Statement will change and introduce a new Expenditure and Funding Analysis.
Othe minor changes due to Annual Improvement to IFRSs cycles, IFRS11 Joint Arrangements, IAS16 Property, Plant, Equipment and IAS38 Intangible Assets and IAS19 Employee Benefits are minor and are not expected to have a material effect on the Council's Statement of Accounts.
The Code requires implementation from 1 April 2016 and there is therefore no impact on the 2015/16 Statement of Accounts.
4 b PRIOR PERIOD ADJUSTMENTS
A valuation of the land associated with a school asset was incorrectly calculated for inclusion within the 2013/14 accounts.This meant that the value in the accounts was understated by £6.593M. The fully restated 2013/14 and 2014/15 comparative figures for the Movement in Reserves Statement and on the Balance Sheet are shown on the relevant pages and summarised below.
Effects on Movement in Reserves Statement - Unusable Reserves 2013/14 and 2014/15 As Previously Correction As Restated 2013/14 31st March 2014 2013/14 31st March 2014 £'000 £'000 £'000
Revaluation Reserve (72,497) (6,593) (79,090) Total Unusable Reserves (281,385) (6,593) (287,978) Total Authority Reserves (346,271) (6,593) (352,864)
As Previously Correction As Restated 2014/15 31st March 2015 2014/15 31st March 2015 £'000 £'000 £'000
Revaluation Reserve (77,047) (6,593) (83,640) Total Unusable Reserves (227,009) (6,593) (233,602) Total Authority Reserves (292,915) (6,593) (299,508)
Effect on Balance Sheet 31st March 2014 As Previously Correction As Restated 31st March 2014 2013/14 31st March 2014 £'000 £'000 £'000 Other Land and Buildings 268,408 6,593 275,001 Property Plant and Equipment 582,055 6,593 588,648 Total Long Term Assets 612,983 6,593 619,576 Net Assets 346,271 6,593 352,864 Revaluation Reserve (72,497) (6,593) (79,090) Unusable Reserves (281,385) (6,593) (287,978) Total Net Worth (346,271) (6,593) (352,864)
Effect on Balance Sheet 31st March 2015 As Previously Correction As Restated 31st March 2015 2014/15 31st March 2015 £'000 £'000 £'000 Other Land and Buildings 250,885 6,593 257,478 Property Plant and Equipment 591,651 6,593 598,244 Total Long Term Assets 625,455 6,593 632,048 Net Assets 292,915 6,593 299,508 Revaluation Reserve (77,047) (6,593) (83,640) Unusable Reserves (227,009) (6,593) (233,602) Total Net Worth (292,915) (6,593) (299,508)
21 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
4b PRIOR PERIOD ADJUSTMENTS CONTINUED
There has also been an adjustment made in relation to a school bank account, the closing balance of which was not recognised within the accounts. There should have been a balance at bank along with an opposite entry under creditors in relation to a receipt in advance. The account is operated as a holding area for funds received in relation to items such as school trips. The Balance Sheet and Cash Flow Statement adjustments are as follows
Effect on Balance Sheet 31st March 2014 As Previously Correction As Restated 31st March 2014 2013/14 31st March 2014 £'000 £'000 £'000 Cash and Cash Equivalents 32,848 53 32,901 Creditors and Depositors (32,851) (53) (32,904)
Effect on Balance Sheet 31st March 2015 As Previously Correction As Restated 31st March 2015 2014/15 31st March 2015 £'000 £'000 £'000 Cash and Cash Equivalents 22,599 48 22,647 Creditors and Depositors (33,784) (48) (33,832)
Effect on Cash Flow 2014/15 As Previously Correction As Restated 2014/15 2014/15 31st March 2015 £'000 £'000 £'000 Adjust for non cash movements (33,588) 5 (33,583) Cash and cash equivalents at beginning of reporting period (32,848) (53) (32,901) Cash and cash equivalents at end of reporting period (22,599) (48) (22,647)
21a BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
5 Adjustments between accounting basis and funding basis under regulations
The note that follows on the next two pages details the adjustments that are made to the total comprehensive income and expenditure account recognised by the Authority in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Authority to meet future capital and revenue expenditure. In summary it is the adjustments required to alter the surplus/deficit back to the actual movement that has occurred on the general fund balance. The table below is included to assist the reader with the context of the following two pages and can be viewed alongside the 'movement in reserves' financial statement at page 1. The Income and Expenditure Account shows the Authority's actual financial performance for the year, measured in terms of the resources consumed and generated over the last twelve months. However, the authority is required to raise council tax on a different accounting basis, the main differences being:
* Capital expenditure is accounted for as it is financed, rather than when the non current assets are consumed; * The payment of a share of housing capital receipts to the Government scores as a loss in the Income and Expenditure Account, but is met from usable capital receipts balance rather than council tax; * Retirement benefits are charged as amounts become payable to pension funds and pensioners, rather than as future benefits are earned.
The General Fund Balance shows whether the Authority has over or under spent against the council tax that it raised for the year, taking into account the use of reserves built up in the past and contributions to reserves earmarked for future expenditure.
2014/15 2015/16 Net Net Expenditure Expenditure £000’s £000’s
6,178 Deficit for the year on the income and expenditure account 6,439
Adjustments between accounting basis and funding basis under regulations (4,510) to be debited or credited to the General Fund Balance for the year (5,558)
1,668 Decrease/(Increase) in General Fund Balance for the Year 881
(12,686) General Fund Balance brought forward (11,018)
(11,018) General Fund Balance carried forward (10,137)
Amount of General Fund Balance held by governors under schemes to (4,766) finance schools (3,885) (6,252) Amount of General Fund Balance generally available for new expenditure (6,252)
(11,018) (10,137)
22 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
5 Adjustments between accounting basis and funding basis under regulations (continued) 2015/16 Usable Reserves Unusable reserves General Housing Capital Major Capital Capital Collection Deferred Net Fund Revenue Receipts Repairs grants Adjustment Pensions fund Accumulated Capital Expenditure Balance Account Reserve Reserve unapplied Account reserve adjustment absences Receipts CAA account £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s
Amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the Movement on the General Fund Balance for the year Charges for depreciation, impairment and revaluation losses of non-current assets 7,666 (6,900) 14,566 (7,666) Amortisation of intangible assets (346) (346) 346 Reversal of Major Repairs Allowance credited to the HRA 4,523 4,523 (4,523) Use of the Major Repairs Reserve to finance new capital expenditure 6,039 (6,039) Application of grants & contributions to capital financing transferred to the CAA 9,193 9,193 0 (9,193) Grants and Contributions funding REFCUS 878 878 (878) Revenue expenditure funded from capital under statute (REFCUS) (1,631) (1,631) 1,631 Movements in the market value of Investment properties 516 516 (516) Amounts of non-current assets written off on disposal as part of gain/loss on disposal to the comprehensive income and expenditure statement (29,775) (27,596) (2,179) 29,775 Transfer of cash sale proceeds credited as part of the gain/loss on disposal to the comprehensive income and expenditure statement 3,770 1,591 2,179 (3,770) Net charges made for retirement benefits in accordance with IAS 19 (22,117) (22,117) 22,117 Officer remuneration accrued but not chargeable in the year 527 527 (527)
Amount by which Council Tax income adjustment is different from amount taken to general fund in accordance with regulation (27) (27) 27
Amount by which Non domestic rates income adjustment is different from amount taken to general fund in accordance with regulation 542 542 (542) (26,281) (45,370) 19,089 (3,770) 1,516 0 7,460 22,117 (515) (527) 0 Amounts not included in the Income and Expenditure Account but required by statute to be included when determining the Movement on the General Fund Balance for the year Statutory provision for the financing of capital investment 5,370 4,970 400 (5,370) Capital expenditure charged in year to the General Fund Balance 5,088 5,088 (5,088) Capital expenditure charged in year to the Housing Revenue Account 4,770 4,770 (4,770) Use of the Capital Receipts Reserve to finance new capital expenditure 2,682 (2,682) Contribution from the Capital Receipts Reserve to finance the payments to the Government capital receipts pool (444) (444) 444 Transfer from Deferred Capital Receipts Reserve upon receipt of cash (25) 25 Employer's contributions payable to the Dorset County Pension Fund and retirement benefits payable direct to pensioners 10,683 10,683 (10,683) 25,467 20,297 5,170 3,101 0 0 (17,910) (10,683) 0 0 25
Adjustments between accounting basis and funding basis under regulations (814) (25,073) 24,259 (669) 1,516 0 (10,450) 11,434 (515) (527) 25 Transfers to or from the General Fund Balance that are required to be taken into account when determining the Movement on the General Fund Balance for the year Housing Revenue Account balance 1 1 Net transfer to earmarked reserves held for revenue purpose (5,091) (5,091) Net transfer to earmarked reserves held for capital purpose 349 349 Net transfer to earmarked reserves capital grants unapplied (3) (3) 3 (4,744) (4,745) 1 0 0 3 0 0 0 0 0
Net additional amount to be credited to the General Fund balance for the year (5,558) (29,818) 24,260 (669) 1,516 3 (10,450) 11,434 (515) (527) 25
23 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
5 Adjustments between accounting basis and funding basis under regulations (continued) Comparative Figures previous year 2014/15 Usable Reserves Unusable reserves Net General Housing Capital Major Capital Capital Pensions Collection Accumulated Deferred Expenditure Fund Revenue Receipts Repairs grants Adjustment reserve fund absences Capital Balance Account Reserve Reserve unapplied Account adjustment Receipts CAA account £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s £000’s Amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the Movement on the General Fund Balance for the year Charges for depreciation, impairment and revaluation losses of non-current assets (15,284) (17,144) 1,860 15,284 Amortisation of intangible assets (387) (387) 387 Reversal of Major Repairs Allowance credited to the HRA 4,386 4,386 (4,386) Use of the Major Repairs Reserve to finance new capital expenditure 4,239 (4,239) Application of grants to capital financing transferred to the capital adjustment account 17,341 15,305 2,036 (17,341) Grants and Contributions funding REFCUS 3,675 3,675 (3,675) Revenue expenditure funded from capital under statute (REFCUS) (3,930) (3,930) 0 3,930 Capital grants unapplied with no return condition credited to CI&E transferred to reserve (427) (427) 427 Movements in the market value of Investment properties 2,113 2,113 (2,113) Amounts of non-current assets written off on disposal as part of gain/loss on disposal to the comprehensive income and expenditure statement (18,468) (16,977) (1,491) 18,468 Transfer of cash sale proceeds credited as part of the gain/loss on disposal to the comprehensive income and expenditure statement 2,183 692 1,491 (2,183) Net charges made for retirement benefits in accordance with IAS 19 (21,318) (21,318) 21,318 Officer remuneration accrued but not chargeable in the year 188 188 (188) Amount by which Council Tax income adjustment is different from amount taken to general fund in accordance with regulation (49) (49) 49 Amount by which Non domestic rates income adjustment is different from amount taken to general fund in accordance with regulation 1,012 1,012 (1,012) (28,965) (37,247) 8,282 (2,183) (147) 427 10,701 21,318 (963) (188) 0 Amounts not included in the Income and Expenditure Account but required by statute to be included when determining the Movement on the General Fund Balance for the year Statutory provision for the financing of capital investment 3,260 2,860 400 (3,260) Capital expenditure charged in year to the General Fund Balance 1,988 1,988 (1,988) Capital expenditure charged in year to the Housing Revenue Account 5,041 5,041 (5,041) Use of the Capital Receipts Reserve to finance new capital expenditure 2,240 (2,240) Contribution from the Capital Receipts Reserve to finance the payments to the Government capital receipts pool (388) (388) 388 Transfer from Deferred Capital Receipts Reserve upon receipt of cash (24) 24 Employer's contributions payable to the Dorset County Pension Fund and retirement benefits payable direct to pensioners 10,867 10,867 (10,867) 20,768 15,327 5,441 2,604 0 0 (12,529) (10,867) 0 0 24 Adjustments between accounting basis and funding basis under regulations (8,197) (21,920) 13,723 421 (147) 427 (1,828) 10,451 (963) (188) 24 Transfers to or from the General Fund Balance that are required to be taken into account when determining the Movement on the General Fund Balance for the year Housing Revenue Account balance (11) (11) Net transfer to earmarked reserves held for revenue purpose 3,606 3,606 Net transfer to earmarked reserves held for capital purpose 92 92 3,687 3,698 (11) 0 0 0 0 0 0 0 0
Net additional amount to be credited to the General Fund balance for the year (4,510) (18,222) 13,712 421 (147) 427 (1,828) 10,451 (963) (188) 24
24 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
6 DETAIL OF MOVEMENT ON RESERVES EARMARKED AND UNEARMARKED
Movements on Earmarked Reserves, and the Unearmarked Reserves of the General Fund and Housing Revenue Account This note sets out both General Fund and HRA Balances. It gives details of the unearmarked and the earmarked reserves. Earmarked reserves are to provide financing for future expenditure plans and the amounts set aside and posted back from earmarked reserves meeting General Fund and HRA expenditure are shown here.
GENERAL FUND Balance as Transfers Balance as Transfers Balance as at 1 April Out and (In) at 31 March Out and (In) at 31 March 2014 2014/15 2015 2015/16 2016 £000's £000's £000's £000's £000's
General Fund Unearmarked Balance General Fund Working Balances (5,752) (500) (6,252) 0 (6,252) Local Management of Schools (6,934) 2,168 (4,766) 881 (3,885) General Fund Unearmarked Balance (12,686) 1,668 (11,018) 881 (10,137)
General Fund Earmarked Reserves Reserves held to support partnership work with schools and other stakeholders - Schools Block (696) (861) (1,557) 45 (1,512) - Other Stakeholders (419) (61) (480) 224 (256) - National Health Service (2,558) 480 (2,078) 741 (1,337) Reserves held to support the council's medium term financial plan Reorganisation Fund (1,989) 722 (1,267) 333 (934) Financial Planning (4,952) (6,624) (11,576) 1,351 (10,225) Additional Reserves Supporting the Medium Term Financial Plan (1,354) 24 (1,330) 215 (1,115) Supporting Council Priorities and Programmes (3,699) 1,542 (2,157) 187 (1,970) Planning Related Reserves (600) 206 (394) (121) (515) Building Regulation Account (91) (17) (108) 25 (83) Grant related (1,043) (686) (1,729) 553 (1,176) Localisation of Business Rates (1,732) 194 (1,538) 1,538 0 Insurance and Risk Management (1,475) 1,475 0 0 0
Total Earmarked Reserves for revenue purposes (20,608) (3,606) (24,214) 5,091 (19,123)
Capital Fund (13,564) (372) (13,936) (403) (14,339) Capital Fund Schools (510) 280 (230) 54 (176)
Total Earmarked Reserves for capital purposes (14,074) (92) (14,166) (349) (14,515)
Capital Grants Unapplied (unconditional) (480) 427 (53) 3 (50)
Total Earmarked Reserves for revenue and capital purposes (35,162) (3,271) (38,433) 4,745 (33,688)
The reserves described as 'Local Management of Schools' and now totalling £3,885k (£4,766k 2014/15) are within the responsibility of school governors. In 2015/16 none of the schools had deficits (in 2014/15 one school had a small deficit).
HOUSING REVENUE ACCOUNT Balance as Transfers Balance as Transfers Balance as at 1 April Out and (In) at 31 March Out and (In) at 31 March 2014 2014/15 2015 2015/16 2,016 £000's £000's £000's £000's £000's
Housing Revenue Account Working Balances (590) 11 (579) (1) (580)
Earmarked Major Repairs Reserve for capital expenditure (11,614) (147) (11,761) 1,516 (10,245)
25 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
7 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 Authority's Cabinet on the basis of budget reports analysed across theme areas. These reports are prepared with as many of the statutory accounting adjustments as is possible to process in the time available. However, there are some transaction and adjustments made after the final budget report. These may include: * Adjustments relating to capital charges, depreciation, revaluations, revenue contributions made from services which are required to be accounted for as a central item in the statutory accounts, revenue expenditure funded by capital under statute * The impact of both the Housing Revenue Account and the Schools local balances * Compensated absences and the impact of IAS19 retirement benefits It should be noted that these items do not impact on the resource allocation decisions taken by the Authority but are for statutory accounting purposes. In practice the Budget Reports sent to Management Team and Members contain all information necessary for the monitoring of the total budget position. Ie that is comparison of actual expenditure against 'Budget Requirement' which is matched to total resources available from government and council tax payers. The detail provided is at a net level for all items.
The Comprehensive Income and Expenditure Account is on a different basis to this and also includes the final position of the Housing Revenue Account and schools outturn. The Code requires that the Statement of Accounts replicate the segmental reporting of portfolio/theme areas along with any subjective analysis that is used in internal reporting
There is no detailed subjective analysis produced. However, IAS1 requires that the accounts present information regarding the nature of expenses. Therefore a subjective analsysis of income and expenditure is presented below utilising the internal reporting segments.
Portfolio net totals analysed subjectively as at End of March final Council Budget Monitoring For the year ended 31 March 2016
People People Adult People Places Business Total Children Social Care Other Improvement £000s £000s £000s £000s £000s £000s Fees, charges & other service income (362) (9,468) (4,164) (11,744) (4,476) (30,214) Government grants (62,279) (1,676) (7,533) (502) (49,316) (121,306) Other Contributions (568) (5,893) (247) (547) (1,010) (8,265) Internal Recharges (3,279) (2,398) (935) (13,812) (14,056) (34,480)
Total Income (66,488) (19,435) (12,879) (26,605) (68,858) (194,265)
Employee expenses 15,175 13,596 5,965 16,445 13,708 64,889 Other operating expenses 18,795 39,455 11,630 20,960 9,609 100,449 Transfer Payments 53,641 3,147 82 4,292 47,311 108,473 Support Service and intradepartmental charges 6,119 3,860 2,950 9,048 4,345 26,322 Contributions to capital 0 25 150 921 0 1,096 Depreciation, amortisation and impairment 3,702 486 1,525 6,069 428 12,210
Total operating expenses 97,432 60,569 22,302 57,735 75,401 313,439
Net expenditure in theme analysis 30,944 41,134 9,423 31,130 6,543 119,174
26 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
7 AMOUNTS REPORTED FOR RESOURCE ALLOCATION DECISIONS (Continued)
Comparative data previous year Theme net totals analysed subjectively as at End of March Final Council Budget Monitoring For the year ended 31 March 2015
People People Adult People Places Business Total Children Social Care Other Improvement £000s £000s £000s £000s £000s £000s Fees, charges & other service income (406) (7,994) (3,386) (10,760) (3,759) (26,305) Government grants (68,659) (588) (6,959) (399) (51,001) (127,606) Other Contributions (741) (4,735) (157) (933) (383) (6,949) Internal Recharges (612) (2,381) (1,124) (13,810) (14,381) (32,308)
Total Income (70,418) (15,698) (11,626) (25,902) (69,524) (193,168)
Employee expenses 15,067 13,694 5,548 15,666 15,644 65,619 Other operating expenses 17,864 33,632 9,954 19,763 6,889 88,102 Transfer Payments 58,891 3,062 26 4,418 48,436 114,833 Support Service and intradepartmental charges 3,309 3,810 3,693 9,615 4,518 24,945 Contributions to capital 32 0 11 188 27 258 Depreciation, amortisation and impairment 4,876 347 2,081 5,052 739 13,095
Total operating expenses 100,039 54,545 21,313 54,702 76,253 306,852
Net expenditure in theme analysis 29,621 38,847 9,687 28,800 6,729 113,684
27 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
7 AMOUNTS REPORTED FOR RESOURCE ALLOCATION DECISIONS (Continued)
This reconciliation shows how the figures in the analysis of portfolio income and expenditure relate to the amounts included in the Comprehensive Income and Expenditure Statement at the level of Cost of Services. It illustrates the changes to net totals that have taken place between the final council budget monitoring report and the Statement of Accounts at cost of service level.
2014/15 2015/16 £000's £000's 113,684 Net expenditure in the Portfolio analysis 119,174 Adjust for items not included in the subjective portfolio analysis: 4,177 Technical accounting adjustments after final report *1 (3,287) (14,816) Housing Revenue Account consolidation impact (27,377) 1,121 Schools Year end Outturn (162) (622) Non distributed costs (4,210) 227 Payment to fisheries and coroners court 232
103,771 Cost of Services in Comprehensive Income and Expenditure Account 84,370
*1 these include moving of revenue contributions from services to central areas, support allocations, capital accounting adjustments, compensated absences and IAS 19 adjustments including share of Tricuro.
IAS 1 requires that the accounts present information that gives the nature of expenses. The Code suggests that a subjective analysis achieves this requirement. The subjective analysis should include all items of income and expenditure as reported in the Comprehensive Income and Expenditure Statement which comprise the 'surplus or deficit on the provision of services'. The starting point for this is the subjective analyis on the previous page, adjusted for the items above and then including items reported within the CI&E below the net cost of services.
It should also be noted that the presentation of information to managers is inclusive of the internal market (that is services charging each other for support and for direct activities).This means that when costs across service areas are added up gross expenditure and income are overstated by these circular charges. The statutory accounts require that costs only appear once. Therefore total recharges are taken to be the value of overstatement that is being reflected in the accounts and the value is eliminated from expenditure and income. This is achieved in the column titled 'net down double count internal market' which appears in the reconciliation to subjective analysis on the next page.
28 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
7 AMOUNTS REPORTED FOR RESOURCE ALLOCATION DECISIONS (Continued)
Subjective analysis of Surplus/Deficit 2015/16 Services not in analysis Reconciliation to Subjective Analysis Service Accounting Net down Schools Other HRA Net Cost of Corporate Total Analysis changes internal market Services Amounts £000s £000s £000s £000s £000s £000s £000s £000s £000s Fees, charges & other service income (30,214) 1,024 (4) (21,809) (51,003) (2,027) (53,030) Government grants (121,306) (150) (121,456) (19,684) (141,140) Income from localised business rates 0 (14,720) (14,720) Government grants and other contributions - capital 0 (11,728) (11,728) Other Contributions (8,265) 620 (1,284) (8,929) (8,929) Grants and contributions associated with REFCUS (878) (878) (878) Internal Recharges (34,480) 34,480 0 0 Interest and investment income 0 (439) (439) Income from council tax 0 (67,076) (67,076) Pensions expected return on assets 0 0 Disposal of Fixed Assets (1,608) (1,608)
Total Income (194,265) (878) 35,974 0 (4) (23,093) (182,266) (117,282) (299,548)
Employee expenses 64,889 4,431 (50) 37,638 (4,479) 102,429 102,429 Other operating expenses 100,449 (2,305) (9,333) 9,199 305 10,088 108,403 327 108,730 Transfer Payments 108,473 480 (47,446) 61,507 61,507 Support Service recharges 26,322 0 (27,071) 447 108 194 0 0 Contributions to capital 1,096 (1,096) 0 0 Depreciation, amortisation and impairment 12,210 (5,070) 92 (14,566) (7,334) 14 (7,320) Changes in the fair value of investment property 0 (516) (516) Revenue expenditure funded by capital under statute 1,631 1,631 1,631 Interest Payments 0 3,213 3,213 Pensions interest cost & administration 0 8,098 8,098 Precepts & Levies 0 193 193 Payments to Housing Capital Receipts Pool 0 444 444 Gain or Loss on Disposal of Fixed Assets 0 27,578 27,578 Total operating expenses 313,439 (2,409) (35,974) (162) (3,974) (4,284) 266,636 39,351 305,987
(Surplus)/deficit on the provision of services 119,174 (3,287) 0 (162) (3,978) (27,377) 84,370 (77,931) 6,439
29 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
7 AMOUNTS REPORTED FOR RESOURCE ALLOCATION DECISIONS (Continued)
Subjective analysis of Surplus/Deficit 2014/15 Services not in analysis Reconciliation to Subjective Analysis Service Accounting Net down Schools Other HRA Net Cost of Corporate Total Analysis changes internal market Services Amounts £000s £000s £000s £000s £000s £000s £000s £000s £000s Fees, charges & other service income (26,305) 544 (15) (21,209) (46,985) (1,961) (48,946) Government grants (127,606) (7) (127,613) (23,751) (151,364) Income from localised business rates 0 (14,886) (14,886) Government grants and other contributions - capital 0 (17,050) (17,050) Other Contributions (6,949) (24) (1,348) (8,321) (8,321) Grants and contributions associated with REFCUS (3,539) (3,539) (3,539) Internal Recharges (32,308) 32,308 0 0 Interest and investment income 0 (498) (498) Income from council tax 0 (65,920) (65,920) Pensions expected return on assets 0 (12,810) (12,810) Disposal of Fixed Assets 0 (729) (729)
Total Income (193,168) (3,539) 32,821 0 (15) (22,557) (186,458) (137,605) (324,063)
Employee expenses 65,619 (535) (11) 43,696 (818) 107,951 107,951 Other operating expenses 88,102 171 (7,322) 10,525 325 9,432 101,233 611 101,844 Transfer Payments 114,833 264 (53,650) 61,447 61,447 Support Service recharges 24,945 (25) (25,752) 550 113 169 0 0 Contributions to capital 258 (258) 0 0 Depreciation, amortisation and impairment 13,095 4,433 (1,860) 15,668 3 15,671 Changes in the fair value of investment property 0 (2,113) (2,113) Revenue expenditure funded by capital under statute 3,930 3,930 3,930 Interest Payments 0 3,224 3,224 Pensions interest cost and expected return on assets 0 20,733 20,733 Precepts & Levies 0 189 189 Payments to Housing Capital Receipts Pool 0 388 388 Gain or Loss on Disposal of Fixed Assets 0 16,977 16,977 Total operating expenses 306,852 7,716 (32,821) 1,121 (380) 7,741 290,229 40,012 330,241
(Surplus)/deficit on the provision of services 113,684 4,177 0 1,121 (395) (14,816) 103,771 (97,593) 6,178
30 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
8 MEMBERS' ALLOWANCES PAID IN YEAR
2014/15 2015/16 £000's £000's 396 Basic Allowance 403 144 Special Responsibility Allowance 142 4 Travel & Subsistence 2 544 Total Allowances Paid to Members 547
The basic allowance is a flat rate allowance paid at the same rate to all members.
The special responsibility allowance is additional to reflect significant responsibilities that a member may have e.g. Leader, Chairman, membership of Cabinet.
9 EXTERNAL AUDIT COSTS
2014/15 2015/16 £000's Fees payable to Grant Thornton in respect of : £000's 125 Code Audit (in relation to audit of the Statement of Accounts) 94 16 Grant claims and returns 11 0 Other services * 9 141 Total Audit Costs 114
* The fees for other services payable in 2015/16 related to Skills Funding arrangements review and CFO insights
10 RELATED PARTY TRANSACTIONS
The Authority is required to disclose material transactions with related parties - bodies or individuals that have the potential to control or influence the Authority or to be controlled or influenced by the Authority. Disclosure of these transactions allows readers to assess the extent to which the Authority 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 Authority.
Central Government
Central government has significant influence over the general operations of the Authority - it is responsible for providing the statutory framework within which the Authority operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Authority 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 7 on reporting resource allocation decisions. Grant receipts outstanding at 31 March 2016 are shown in Note 13
Members and Officers
Members of the Council have direct control over the Authority's financial and operating policies. The total of member's allowances paid in 2015/16 is shown in Note 8. All Members declare any interests within the Register of Member's Interests.
Similarly senior officers are required to make a declaration of interests in connection to their post. There are no specific disclosures for 2015/16 in respect for related party disclosures.
However Member and officer representation exists within the following organisations:
- Bournemouth Orchestras and South West Concerts Board (Grant £86k) (14/15 £91k) - Police Authority (note 1 Collection Fund £10,255k) (14/15 £10,092k) - Dorset Fire and Rescue Service (Collection Fund £3,719k) (14/15 £3,592k) - Poole Arts Trust Limited. The Authority granted £465k and also provides the Arts Centre at a peppercorn rent. (14/15 £490k) - Various voluntary bodies eg Poole Shopmobility, Poole Council for Voluntary and representation on Community Centres. Some voluntary organisations are in receipt of grants which are only made after proper consideration of declarations of interest. There were no outstanding balances with these organisations as at 31st March.
Other Public Bodies (subject to common control by central government)
The Authority has a Pooled Budget arrangement with other Public Bodies in the area for the provision of an Integrated Community Equipment Store. Pension Fund details of transactions with the Pension Fund is given in Note 32 to the Core Financial Statements. Other Public Bodies there were no exceptional transactions with other public bodies during the year. Note 1 to the Collection Fund details transactions with the Police and Fire Authorities who are both precepting bodies. The Authority has a joint arrangement with Bournemouth Borough Council and Dorset County Council for the delivery of Adult Learning Services. All authorities record their share of income and expenditure within their own accounts. It also has a joint arrangement with the Councils of North, Christchurch and East Dorset, for the delivery of services relating to housing and council tax benefit, and income collection including recovery.
31 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
11 EMPLOYEE REMUNERATION
The following table sets out the remuneration disclosures for Senior Officers whose salary is £50,000 or more per year. Senior Officers include the Chief Executive and Strategic Directors along with all Service Unit Heads as they are considered to have responsibility for the management at Poole and control activities involving the expenditure of money. The tables exclude consideration of head teachers as existing guidance from CIPFA suggests that they do not meet the criteria of having the power to direct or control the major activities of the body and do not therefore meet the functional test of being a senior employee. The columns shown below are the gross salary that would be earned in any given year subject to the post being occupied for a full year on a full time basis. Alongside this 'remuneration' which is salary including fees and allowances. In some cases posts may have been occupied for part of the year or part time which is why the total value is below the £50,000 limit. Employers pension contributions relate to the value paid into the pension fund by the employer in addition to the salary earned by the employee.
Senior Employees emoluments-salary between £50k and £150k :
Remuneration Expense Compensation Employers Total payments Salary Allowances for Loss Pension including (including of Office Contributions Pension supplements) Contributions 2015/16 2015/16 2015/16 2015/16 2015/16 £ £ £ £ £ Chief Executive 114,711 0 0 21,777 136,488 Strategic Director - People 110,764 0 0 20,939 131,703 Strategic Director - Place 95,769 0 0 18,121 113,889 Service Unit Head - Adult Social Services (Commissioning) 74,127 0 0 14,125 88,252 Service Unit Head - Children & Young People Integrated Services 81,382 0 0 15,381 96,763 Service Unit Head - Children & Young People Social Care 74,364 0 0 14,127 88,492 Service Unit Head - Children & Young People Strategy Quality & Improvement 80,382 0 0 15,192 95,574 Service Unit Head - Culture & Community Learning 65,998 0 0 12,497 78,495 Service Unit Head - Environmental Consumer Protection 73,802 0 0 13,970 87,773 Service Unit Head - Financial Services Note 1 83,871 0 0 15,891 99,762 Service Unit Head - Housing & Community Services 68,794 0 0 13,002 81,796 Service Unit Head - ICT Services 72,573 0 0 13,716 86,289 Service Unit Head - Legal & Democratic 82,644 0 0 15,620 98,264 Service Unit Head - Human Resources 67,349 0 0 12,815 80,164 Service Unit Head - Planning & Regeneration 69,028 0 0 13,066 82,094 Service Unit Head - Transportation Services 74,127 0 0 14,136 88,264
Totals 1,289,685 0 0 244,377 1,534,062
Note 1 Towards the end of the financial year the Service Unit Head - Financial Services has assumed the same role within Bournemouth Borough Council. Costs of this post will ultimately become part of a shared service.
BOROUGH OF POOLE 2015-16 32 NOTES TO THE ACCOUNTS
11 EMPLOYEE REMUNERATION (CONTINUED)
Senior Employees emoluments-salary between £50,000 and £150,000 :
Remuneration Expense Compensation Employers Total payments Salary Allowances for Loss Pension including (including of Office Contributions Pension supplements) Contributions 2014/15 2014/15 2014/15 2014/15 2014/15 £ £ £ £ £ Chief Executive Note 1 0 0 0 0 0 Strategic Director - People Note 1 111,488 0 0 21,122 132,610 Strategic Director - Place & Business Improvement Note 1 111,488 21 0 21,104 132,613 Strategic Director - Place Note 2 2,292 0 0 433 2,725 Service Unit Head - Adult Social Services (Commissioning) 76,493 0 0 14,600 91,093 Service Unit Head - Children & Young People Integrated Services 77,881 0 0 14,720 92,601 Service Unit Head - Children & Young People Social Care 73,043 0 0 13,805 86,848 Service Unit Head - Children & Young People Strategy Quality & Improvement 79,007 0 0 14,973 93,980 Service Unit Head - Culture & Community Learning Note 3 90,450 0 0 17,095 107,545 Service Unit Head - Environmental Consumer Protection 76,674 0 0 14,450 91,124 Service Unit Head - Financial Services 82,562 0 0 15,604 98,166 Service Unit Head - Housing & Community Services 67,683 0 0 12,792 80,475 Service Unit Head - ICT Services 69,913 0 0 13,214 83,127 Service Unit Head - Legal & Democratic 75,424 0 0 14,268 89,692 Service Unit Head - Human Resources 66,582 0 0 12,682 79,264 Service Unit Head - Planning & Regeneration 67,913 0 0 12,880 80,793 Service Unit Head - Transportation Services 72,982 0 0 13,915 86,897
Totals 1,201,875 21 0 227,657 1,429,553
Note 1 Interim arrangements for the Chief Executive role up to November 30 2015:
Strategic Director - Place & Business Improvement taken on role of acting Chief Executive and Head of Paid Service (ceased directorship of Place) Strategic Director - People has also taken on the role of Deputy Chief Executive.
Note 2 New Strategic Director - Place, joined the authority on the 23rd March 2015.
Note 3 Interim Strategic Director until 31st March 2015.
33 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
11 EMPLOYEE REMUNERATION (continued)
The number of employees whose remuneration, excluding employer's pension contributions, but including redundancies as £50k or more in bands of £5k were:
Number of employees Remuneration Band in £'s Number of employees Non Schools Schools Non Schools Schools 2014/15 2014/15 2015/16 2015/16
26 11 50,000 - 54,999 28 14 7 7 55,000 - 59,999 10 11 2 8 60,000 - 64,999 1 5 6 6 65,000 - 69,999 4 2 2 3 70,000 - 74,999 6 4 5 2 75,000 - 79,999 0 2 1 0 80,000 - 84,999 4 1 1 1 85,000 - 89,999 0 0 1 1 90,000 - 94,999 0 1 0 0 95,000 - 99,999 1 0 0 0 100,000 - 104,999 0 0 2 0 110,000 - 114,999 2 0 0 0 125,000 - 129,999 0 0 53 39 56 40
Please Note: In accordance with requirements the table above is inclusive of 'senior officers' posts which are shown in more detail on the previous pages.
12 DISCLOSURE OF DEPLOYMENT OF DEDICATED SCHOOLS GRANT
The authority's expenditure on schools is funded by grant monies provided by the Department for Education through the Dedicated Schools Grant (DSG). The DSG is ring-fenced and can only be applied to meet expenditure properly included in the Schools Budget. The Schools Budget includes elements for a restricted range of services provided on an authority-wide basis and for the Individual Schools Budget (ISB), which is divided into a budget share for each school. The Authority is able to supplement the Schools Budget from its own resource.
Details of the deployment of DSG receivable for 2015-16 are as follows: (shading indicates no requirement to split totals) Central Individual Total Expenditure Schools Budget £000's £000's £000's
DSG Budgeted for 2015-16 88,407 Academy figure recouped for 2015-16 34,157
Total DSG after academy recoupment for 2015-16 54,250 Plus : brought forward from 2014-15 1,425 Less :carried forward to 2016-17 agreed in advance (678) Agreed initial budgeted distribution in 2015-16 12,862 42,135 54,997 In year net reduction in early years DSG -93 (93) Final budgeted distribution in 2015-16 12,862 42,042 54,904 Less : actual central expenditure 12,290 Less : actual ISB deployed to schools and early years providers 41,912
Total carried forward to 2016-17 572 130 1,380
When schools convert to academy status the DSG and expenditure on individual schools budgets for the year reduce to take into account the period after conversion when the academy funding agreement is in place. At this point responsibility for funding passes to the Education Funding Agency, a unit within the Department for Education. Therefore, in the above table the final funding and expenditure for individual school budgets ls for maintained schools only, with only central expenditure including allocations for academies. £'000 School block reserve note 6 Total DSG carried forward as above 1,380 Pre DSG specific reserve 132 Total School block reserve 1,512
34 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
13 GRANTS AND OTHER CONTRIBUTIONS The Authority credited the following grants, and contributions to the Comprehensive Income and Expenditure Statement in 2015/16.
Credited to Taxation and Non Specific Grant Income 2014/15 2015/16 £000's £000's (19,337) General government grants (Revenue Support Grant) (14,840) (733) Council Tax Freeze Grant (752) (32) Local Services Support Grant (21) (347) Section 31 Grants (18) 0 Transitional council tax support scheme 0 0 Initially witheld formula grant redistributed 0 (1,314) NDR Compensation for government initiatives (1,464) (1,988) New Homes Bonus Grant (2,589) (23,751) Total General Government grants (non specific) (19,684)
(65,237) Precept demanded from Collection Fund (66,296) (732) Declared surplus/deficit 15 January purposes (807) 49 Actual surplus/deficit 27 (65,920) Total Income from Council Tax (67,076)
(28,607) Precept demanded from Collection Fund (29,004) 339 Declared surplus/deficit 15 January purposes 257 (1,012) Actual surplus/deficit (542) 14,256 Tariff payment to Central Government 14,528 138 Levy payable to Central Government 41 (14,886) Total Income and Expenditure from Localised Non Domestic Rates (14,720)
(196) Devolved Formula Capital Grant (147) (4,072) Targeted Capital Fund Grant for Oakdale and new junior school 0 (857) Additional places, maintenance and basic need (2,778) (171) Universal Infant Free School Meals 0 (4,699) Local Transport Plan,Maintenance,Sustainable Transport,Bus Fund (4,479) (2,228) Coastal Protection (135) (214) Adult Personal Social Services (340) (1,055) Weekly Waste Collection 0 (779) Developer contributions applied (3,528) (743) Other contributions (321) (1,342) Extra Care Scheme (Trinidad from Homes and Communities Agency) 0 (694) Leasholder contributions (ex HRA property) 0
(17,050) Total Capital Grants and contributions (11,728)
(121,607) Total Credited to Taxation and Non Specific Grant Income (113,208)
35 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
13 GRANTS AND OTHER CONTRIBUTIONS (continued)
Credited to Services 2014/15 2015/16 £000's £000's Directly (50,083) Housing benefits (48,876) (59,517) Dedicated Schools Grant, pupil premium (54,107) (3,411) Pupil Premium (2,853) (1,689) Education Services Grant (1,182) (2,165) Sixth Forms funding from Education Funding Agency (1,918) 0 Care Act - Adult Social Care (1,013) (579) Other grants related to adult social care (662) (781) Universal Free School Meals (950) (812) LSC grant for Adult Education (774) (879) Other grants related to supporting children services (758) (193) Other Highways related (240) (507) Troubled Families (298) (6,057) Public Health Transfer (6,889) (940) Other miscellaneous grants (936) (127,613) Grants Credited to Services directly (121,456)
(694) Other education and children social care (579) (4,735) Adult social care (5,893) (1,348) Housing revenue account related * (1,284) (777) Transportation including bus subsidy (198) (353) Culture, environment and planning (708) (239) Non domestic rates collection contribution (237) (175) Other miscellaneous contributions (30)
(8,321) Contributions Credited to Services directly (8,929)
Via revenue expenditure funded by capital under statute (3,127) School related grants (339) (394) Disabled facilities and private sector renewal (507) 0 Other capital grants (1) (18) Other contributions including developer (31) (3,539) Grants and contributions credited to Services as REFCUS (878)
* 2014/15 adjusted to ensure that contributions within housing revenue account services are shown in this consolidated note.
36 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
13 GRANTS AND OTHER CONTRIBUTIONS (continued)
The Authority has received a number of grants and contributions that have yet to be recognised as income as they have repayment conditions attached to them. The balances at each year end are as follows: As at Capital grants and contributions receipts in advance As at 31st March 31st March 2015 2016 £000's £000's
(1,191) Capital Maintenance, Basic Need and building schools for the future (3,013) (982) Other General fund grants (944) (533) LPSA Reward Grant (533)
(2,706) Total Capital Grants (4,490)
Capital Contributions (128) Third parties such as NHS and other local authorities (136) (1,534) Developer contributions transport & highways (1,346) (2,127) Developer contributions recreational (1,769) (2,234) Other developer contributions including community infrastructure levy (2,794)
(6,023) Other Contributions (6,045)
(8,729) Capital Grants and Contributions Receipts In Advance (10,535)
Values associated with revenue accounts receipts in advance: (619) Government Departments (366) (2,801) Other contributions (3,415) (800) Health Authorities (204) (127) Other local authorities (77)
(4,347) Other Grants and Contributions Receipts In Advance (4,062)
14 INVESTMENT PROPERTIES - Rental income and expenditure
The following items of income and expense have been accounted for in the Comprehensive Income and Expenditure Statement and identified as being relating to investment properties.
2014/15 2015/16 £000's £000's
(1,947) Rental income from investment property (2,012) (2,113) Fair Value changes (516) 297 Direct operating expenses arising from investment property 60
(3,763) Net (gain) /loss (2,468)
37 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
15 MOVEMENT OF PROPERTY, PLANT AND EQUIPMENT 2015/16 (PPE) Total Housing Other Land Surplus & Other Land Vehicles Community Infrastructure Assets Total Revenue & Buildings Vacant & Buildings Plant Assets Assets Under PPE Account Part Assets Equipment Construction £000's £000's £000's £000's £000's £000's £000's £000's £000's
Gross book value as at 31 March 2015 205,806 267,503 1,316 268,819 21,087 3,806 147,386 8,790 655,694 Accumulated depreciation as at 31 March 2015 (242) (11,341) 0 (11,341) (11,075) 0 (34,792) 0 (57,450)
Opening Net book value as at 1 April 2015 205,564 256,162 1,316 257,478 10,012 3,806 112,594 8,790 598,244
Gross book value as at 31 March 2015 205,806 267,503 1,316 268,819 21,087 3,806 147,386 8,790 655,694 Additions / enhancements 11,041 3,937 1,691 5,628 4,268 463 7,746 2,774 31,920 Derecognition - Disposals (2,179) (28,233) (210) (28,443) (366) (30,988) Derecognition - Other 0 (4,562) (521) (5,083) Reclassifications (190) 1,999 2,150 4,149 4 (1,673) 2,290 Revaluation increases/(decreases) recognised in the revaluation reserve 1,778 (3,540) 980 (2,560) (782) Revaluation increases/(decreases) recognised in surplus/deficit 14,800 4,400 (75) 4,325 19,125
Gross book value as at 31 March 2016 231,056 246,066 5,852 251,918 20,427 4,273 154,611 9,891 672,176
Accumulated depreciation as at 31 March 2015 (242) (11,341) 0 (11,341) (11,075) 0 (34,792) 0 (57,450) Charge for 2015/16 (4,523) (6,386) (23) (6,409) (2,387) 0 (3,326) (16,645) Derecognition - Disposals 0 2,129 19 2,148 323 2,471 Derecognition - Other 0 4,562 521 5,083 Reclassifications 74 (74) 0 0 Depreciation written out to the revaluation reserve 163 10,826 78 10,904 11,067 Depreciation recognised in surplus/deficit 4,289 897 0 897 5,186
Accumulated Depreciation as at 31 March 2016 (313) (3,801) 0 (3,801) (8,577) 0 (37,597) 0 (50,288)
Closing Net book value as at 31 March 2016 230,743 242,265 5,852 248,117 11,850 4,273 117,014 9,891 621,888
The Housing Revenue Account contains Council Dwellings and other assets of the Housing Revenue Account. These are detailed in Note 9 to that account.
Other Land and Buildings on the face of the balance sheet includes properties declared as Surplus and Vacant but do not meet the criteria as Held for Sale. Reclassifications are made both within PPE, to Assets Held for Sale, to intangibles and to investment property.
The value held as asset under construction mainly relates to the development of the Ocean Academy. Upon final completion this asset will be directly transferred to that Academy.
The large disposal value mainly relates to a further 5 schools transferred to Academy status. The transferred schools were Ad Astra First, Manorside Primary, Canford Heath Infant, Canford Heath Junior and Haymoor Junior. More schools are expected to transfer during 2016/17. Those confirmed have a combined net book value of £32m and are detailed on page 41. There may be others as yet unconfirmed.
38 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
15 MOVEMENT OF PROPERTY, PLANT AND EQUIPMENT 2014/15 (PPE) Restated Total Housing Other Land Surplus & Other Land Vehicles Community Infrastructure Assets Total Revenue & Buildings Vacant & Buildings Plant Assets Assets Under PPE Account Part Assets Equipment Construction £000's £000's £000's £000's £000's £000's £000's £000's £000's
Gross book value as at 31 March 2014 197,184 280,830 8,103 288,933 21,660 3,431 140,217 676 652,101 Accumulated depreciation as at 31 March 2014 (4,531) (13,932) 0 (13,932) (13,350) 0 (31,640) 0 (63,453)
Opening Net book value as at 1 April 2014 192,653 266,898 8,103 275,001 8,310 3,431 108,577 676 588,648
Gross book value as at 31 March 2014 197,184 280,830 8,103 288,933 21,660 3,431 140,217 676 652,101 Additions / enhancements 11,679 3,966 285 4,251 3,688 375 7,169 4,164 31,326 Derecognition - Disposals (1,491) (16,374) (1,513) (17,887) (36) (19,414) Derecognition - Other 0 (4,225) (4,225) Assets reclassified (to)/from Held For Sale 0 0 Reclassifications 0 (4,325) (4,325) 3,950 (375) Revaluation increases/(decreases) recognised in the revaluation reserve 562 3,700 (315) 3,385 0 0 0 0 3,947 Revaluation increases/(decreases) recognised in surplus/deficit (2,128) (4,619) (919) (5,538) 0 0 0 0 (7,666)
Gross book value as at 31 March 2015 205,806 267,503 1,316 268,819 21,087 3,806 147,386 8,790 655,694
Accumulated depreciation as at 31 March 2014 (4,531) (13,932) 0 (13,932) (13,350) 0 (31,640) 0 (63,453) Charge for 2014/15 (4,386) (8,106) 0 (8,106) (1,978) (3,152) 0 (17,622) Derecognition - Disposals 1,045 1,045 28 0 1,073 Derecognition - Other 0 4,225 0 0 0 4,225 Assets reclassified (to)/from Held For Sale 0 0 0 0 0 Reclassifications 0 0 0 0 0 0 Depreciation written out to the revaluation reserve 301 8,022 8,022 0 0 0 0 8,323 Depreciation recognised in surplus/deficit 8,374 1,630 0 1,630 0 0 0 0 10,004
Accumulated Depreciation as at 31 March 2015 (242) (11,341) 0 (11,341) (11,075) 0 (34,792) 0 (57,450)
Closing Net book value as at 31 March 2015 205,564 256,162 1,316 257,478 10,012 3,806 112,594 8,790 598,244
The Housing Revenue Account contains Council Dwellings and other assets of the Housing Revenue Account. These are detailed in Note 9 to that account.
Other Land and Buildings on the face of the balance sheet includes properties declared as Surplus and Vacant but do not meet the criteria as Held for Sale. Reclassifications are made both within PPE, to Assets Held for Sale, to intangibles and to investment property
39 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
15 PROPERTY, PLANT AND EQUIPMENT (continued) VALUATION INFORMATION
The following statement shows the progress of the authority's rolling programme for the revaluation of PPE assets. The valuations have been performed by Property Services, Borough of Poole, the District Valuer's Office, Jones Lang Lasalle and Dorset County Council. All valuations are carried out in accordance with the professional standards of the Royal Institute of Chartered Surveyors (RICS) as set out within the RICS 'red book'. Fair value is defined as "The amount for which an asset could be exchanged, between knowlegeable, willing parties, in an arms length transaction". From 2015/16 the authority has adopted a valuation date of 31st December 2015.
Under the Code, the application of Fair Value is subject to specific additional conditions, depending on the categorisation of the asset. The valuation of each property is on the bases of value and assumptions:
a) Owner occupied property: valued to Existing Use Value (EUV) assuming that the property would be sold as part of a continuing business; b) Investment property: valued to Market Value (MV) assuming that the property would be sold subject to any leases.
The land and building elements of property are valued in accordance with IAS 16 and are subclassified as:
Operational Non- specialised Fair value - Existing Use Value (EUV) Operational Specialised Fair value - Depreciated Replacement Cost (if not market evidence available) Surplus property Fair value - EUV in assets last use
Non current assets Held for Sale Fair value - Market value (less costs to sell)
The Valuer's opinion of Fair Value has been derived where possible from recent comparable market transactions on arms length terms or income capitalisation, where appropriate. Where a property is deemed 'specialised' ie 'real property that is, rarely if ever sold in the market, except by way of a sale of the business or entity of which it is part, due to the uniqueness arising from its specialised nature and design, its configuration, size, location or otherwise' , there will be no market-based evidence and therefore Fair Value has been estimated using a Depreciated Replacement Cost (DRC) approach. In determining Gross Replacement Cost (DRC) for DRC valuations the valuers have where possible obtained recent cost information from building and quantity surveyors and used BCIS quarterly review data.
The valuation of Council Housing Stock is Existing Use Value for Social Housing which for 2015/2016 is 31% of EUV.
Other Land Surplus & Community Infrastructure Council & Buildings vacant Assets Dwellings £000's £000's £000's £000's £000's
Valued at historical cost 4,273 117,014 1,179
Valued at current cost in: 2011/12 147 0 2012/13 14,904 0 2013/14 21,216 727 2014/15 56,957 2015/16 149,041 5,125 229,564
242,265 5,852 4,273 117,014 230,743
In complying with International Accounting Standard IAS16 Property, Plant and Equipment the Authority is required to ensure that where assets are re-valued (ie the carrying amount is based on fair value), revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using the fair value at the end of the reporting period.
This is essentially the same as for all balance sheet transactions that is that the measurement for any balance sheet transaction should be materially accurate.
IAS16 also comments on the revaluation frequency and states that "some items of property, plant and equipment experience significant and volatile changes in fair value, thus necessitating annual revaluation. Such frequent revaluations are unnecessary for items of PPE with only insignificant changes in fair value. Instead, it may be necessary to revalue the item only every three or five years."
40 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
15 PROPERTY, PLANT AND EQUIPMENT (continued) VALUATION INFORMATION
This authority revalues Council Dwellings as at 31st March. This is to ensure that any volatility within the housing market is captured as at the year end.
Other fair value PPE items are within a maximum five year rolling programme. It is considered that the items within this rolling programme tend to have insignificant changes in fair value to the extent that their revaluation more frequently wolud not result in materially different values on the Balance Sheet. The authority has though moved the valuation date to 31st December to ensure that the valuations done are as current as is possible. In considering materiality the authority is of a view that for the majority of non-current assets that are being used for service provision, that is those that are within the Land and Buildings category, that users of the accounts would be unlikely to make different decisions relating to the authority or come to different conclusions about the standards of stewardship if the assets were valued more frequently.
Nevertheless the authority recognises that IAS16 requires us to give consideration to ensuring that the carrying value of assets does not differ materially from the fair value . In performing this exercise it has split the land and building category into sub categories as follows:
£000's
Schools 125,920 Recreational buildings/facilities 45,012 Parking 18,726 Other 13,491 Museums and libraries 12,875 Care homes/day centres 9,922 Offices 8,578 Cemeteries and crematorium 1,823 Children & Youth Centres 3,853 Conveniences 2,065
Total 242,265
The review used indices to consider the impact and concluded that the fair value was not materially different from the carrying value at the balance sheet date, the indicative movement was approximately 0.4%.
Land and buildings to be transferred to academy status and foundation status
In viewing the Balance Sheet for 31 March 2016 it should be noted that the asset values are inclusive of eight schools where Academy status was agreed with transfer of the assets for six of the schools on 1st July and 2 on 1st September 2016. The schools are: Baden Powell & St Peters CE Junior Courthill Infant Lilliput CE VC Infant Longfleet CE VC Primary Oakdale Junior Old Town Infant School & Nursery Hamworthy Park Junior Twin Sails Infant School
The value on the balance sheet is approximately £32m
VALUATION INFORMATION SURPLUS ASSETS AND INVESTMENT PROPERTY
The authority has used observable and unobservable inputs within a valuation hierarchy to determine the values for surplus assets and for investment properties. Observable inputs : inputs that are developed using market data, such as publicly available information about actual events or transactions, and that reflect the assumptions that market participants would use when pricing the asset. Unobservable inputs : inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants wolud use when pricing the asset.
These inputs are categorised into three levels termed a fair value hierarchy as outlined in accounting policy I.
Valuation techniques used to determine level 2 fair values The fair value of investment and surplus property has been measured using the market approach, which takes into account transactional evidence for similar assets in active markets. Market conditions are such that comparable properties are actively purchased and sold and there are a good level of observable inputs which are able to be verified and the source identified. Valuation techniques used to determine level 3 fair values For the vast majority of assets assessed as level 3 the fair value has been measured using a market approach and transactional evidence has been identified. However, where we have deemed the evidence not directly comparable resulting in significant adjustments needing ot be made, or where the inputs are unobservable we have deemed these valuations to be a level 3.
Approximately 55% of such assets have been determined as level 2 , 45% level 3
41 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
16 INVESTMENT PROPERTY
The following table summarises the movement in fair value of investment properties over the year: 2014/15 2015/16 £000s £000s
26,460 Balance at start of the year 28,547 101 Additions / enhancements 4 (127) Disposals (883) 2,113 Net gains/(losses) from fair value adjustments 516 0 Transfers (to)/from other property,plant and equipment (2,290)
28,547 Balance at end of year 25,894
17 INTANGIBLE ASSETS
The Authority accounts for its software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. The intangible assets are all purchased licenses.
All software is given a finite useful life, based on assessments of the period that the software is expected to be of use to the Authority.
All software used by this Authority at present are deemed to have a useful life of 5 years.
The carrying amount of intangible assets is amortised on a straight-line basis. The amortisation charged to revenue was charged to specific services where the original purchases were directly attributable with the remainder charged to ICT services and then absorbed as an overhead across all the service headings in the Net Expenditure of Services. It is not possible to quantify exactly how much amortisation is attributable to each service heading.
The movement on Intangible Asset balances during the year is as follows:
2014/15 2015/16 £000s £000s
Balance at start of year: 3,079 Gross book value as at 31 March 2015 4,045 (2,173) Accumulated amortisation as at 31 March 2015 (2,560) 906 Net carrying amount at the start of year 1,485 3,079 Gross book value as at 31 March 2015 4,045 966 Additions / enhancements 654 0 Disposals Reclassifications 0 Adjustments/reclassifications (2,151) 0 Impairment IFRS Adjustments to Gross NBV 4,045 Gross book value as at 31 March 2016 2,548 (2,173) Accumulated amortisation as at 31 March 2015 (2,560) (387) Amortisation for the period (346) 0 Disposals 0 Reclassifications 0 Adjustments 2,151 0 Impairment (2,560) Accumulated Amortisation as at 31 March 2016 (755) 1,485 Net carrying amount at end of year 1,793
42 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
18 CAPITAL EXPENDITURE AND FINANCING
2014/15 2015/16 General Housing Total General Housing Total Fund Fund £000's £000's £000's £000's £000's £000's EXPENDITURE
866 866 Cultural and Related Services 2,698 2,698 3,174 3,174 Environmental and Regulatory Services 3,665 3,665 6,279 6,279 Highways & Transport 8,838 8,838 650 650 General Housing 668 668 10,213 10,213 Education 4,361 4,361 3,051 3,051 Other General Fund 2,315 2,315 11,679 11,679 Council Housing 0 11,041 11,041 411 411 Information Technology Investment 623 623 24,644 11,679 36,323 Capital Expenditure 23,168 11,041 34,209 (3,930) 0 (3,930) REFCUS* (1,631) (1,631) 20,714 11,679 32,393 Additions to Non Current Assets (see below) 21,537 11,041 32,578
FINANCING (15,305) (2,036) (17,341) Capital Grants and contributions (including grants reserve) (9,193) 0 (9,193) (3,675) (3,675) Grants and contributions direct to revenue accounts (878) (878) 0 0 Supported Capital Expenditure (SCE) 0 0 (1,799) (1,799) Prudential borrowing (5,559) (5,559) 0 0 Prudential borrowing for Poole Bridge 0 0 (1,877) (364) (2,241) Usable Capital Receipts (used) (2,450) (232) (2,682) (1,988) (9,279) (11,267) Financed from Reserves (5,088) (10,809) (15,897) (24,644) (11,679) (36,323) Total Financing (23,168) (11,041) (34,209)
* Revenue Expenditure Funded from Capital under Statute (REFCUS)
REFCUS is defined as revenue expenditure which qualifies as capital under statute for control purposes but does not result in the acquisition, creation or enhancement of a tangible fixed asset. Any direct funding is posted directly to the Income and Expenditure Account. However, any net amount still to be funded is allowed to be financed from capital sources. For the purposes of completeness the capital programme items that have been treated in this way are identified in the table above. They relate to grants paid to third parties for expenditure on assets not owned by the Authority eg improvement grants and expenditure on schools where the authority does not control the economic benefit.
For the purpose of clarity the figures for REFCUS are detailed below illustrating the value being funded via direct grants and contributions, and grants previously recognised as reserve with the balance being funded by Capital.
Capital grants 2014/15 Capital grants Expenditure Income Reserve Total REFCUS Expenditure Income Reserve £000's £000's £000's £000's £000's £000's £000's
650 (411) 0 239 General Housing 668 (510) 0 3,280 (3,128) (136) 16 Education 339 (339) 0 0 0 0 0 Other General fund 624 (29) 0 3,930 (3,539) (136) 255 Capital Expenditure 1,631 (878) 0
2014/15 2015/16 Total Additions to non current assets Total £000's £000's
31,326 Property,plant, equipment 31,920 966 Intangible assets 654 101 Investment Property 4 32,393 Additions via capital expenditure 32,578
43 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
19 CAPITAL FINANCING REQUIREMENT AND PROVISION FOR THE REPAYMENT OF DEBT
This is a statutory requirement to set aside a minimum revenue provision (MRP) for the repayment of external loans. The Prudential Code requires that the Authority calculates its 'Capital Financing Requirement' from as at the end of the previous financial year and follows the guidance within the code to set aside a minimum amount from the general fund revenue account for the repayment of debt. There is no such requirement for the Housing Revenue Account.
General HRA 2014/15 Capital Financing Requirement General HRA 2015/16 Fund Fund £000's £000's £000's £000's £000's £000's
46,194 97,625 143,819 Opening Balance 1st April 2015 45,134 96,927 142,061
24,644 11,679 36,323 Capital Expenditure financed in year 23,168 11,041 34,209 (1,877) (364) (2,241) Application of Capital Receipts (2,450) (232) (2,682) (20,968) (11,315) (32,283) Application of Capital Grants and contributions (15,159) (10,809) (25,968) (2,859) (400) (3,259) Less MRP including voluntary (see below) (4,970) (400) (5,370) 0 (298) (298) Capital receipts set aside on attributable debt 0 (420) (420) 0 0 0 Property transfer from the HRA to general fund 190 (190) 0 Total Capital Financing Requirement as at 45,134 96,927 142,061 31st March 2016 45,913 95,917 141,830
Explanation of movements in year 1,799 0 1,799 Increase in need for borrowing (in year) 5,559 0 5,559 0 0 0 Movement in borrowing need re property transfer 190 (190) 0 (298) (298) Movement re receipts set aside (420) (420) (2,859) (400) (3,259) Reduced by MRP including voluntary in year (4,970) (400) (5,370) Increase/(decrease) in Capital Financing (1,060) (698) (1,758) requirement 779 (1,010) (231)
Due to: Increase (reduction) in underlying need for (1,497) (298) (1,795) borrowing (Government Supported) (1,437) (420) (1,857) Increase (reduction) in underlying need for 437 (400) 37 borrowing (Unsupported) 2,216 (590) 1,626
20 SIGNIFICANT COMMITMENTS UNDER CAPITAL CONTRACTS
As at As at 31 March 31 March 2015 2016 £'000 £'000 3,966 Schools and Education Projects 0 1,485 Council Housing Improvements 1,056 0 Extra Care Housing project 4,438 0 Coast Protection 120 274 Renovation and disabled facilities grants 135 168 Refuse and Recycling vehicles 407 1,217 Corporate Properties 941 162 Transportation Projects 6,494 963 Beach Huts 0 8,235 Total Significant Capital Commitments 13,591
44 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
21 LONG TERM DEBTORS
These represent sums outstanding which will be repaid over a period of years and includes loan repayments transferred on reorganisation and loans to housing associations. The overall value outstanding from Hamworthy Developments is £1,506k of this total £502k is due for repayment in 2015/16 and has therefore been transferred to short term debtors. The loan to the Coastal Credit Union was provided to enable the organisation to develop an automated banking system to the benefit of the wider community. The balance owed by leaseholders represents their financial contribution towards the cost of capital works incurred. As this amount is payable over 36 months it has been shown as a long term debtor.
As at As at 31 March 31 March 2015 2016 £000's £000's 317 Loan Repayments transferred on Reorganisation 292 49 Housing/Community Associations 47 897 Residential Care Debt 1,339 694 Leaseholder works (ex HRA property) 246 1,004 Hamworthy Developments (Twin Sails Link Road) 502 250 Coastal Credit Union 250 (250) Bad debt provision for non repayments (250)
2,961 Total Long Term Debtors 2,426
22 DEBTORS
As at As at 31 March 31 March 2015 2016 £000's £000's Statutory Debts and other non financial instruments Collection Fund 2,369 - Council Tax 2,927 549 - NDR localised rates 547 (498) - Provision for Bad Debts (464) 2,420 Total Collection Fund Debtors 3,010 1,707 HM Revenue and Customs (VAT) 1,963 3,548 Payments in Advance 2,338 7,675 Statutory debts and other non financial instruments 7,311
Financial Instrument assets - Loans and Receivables 10,212 Sundry Debtors 9,255 926 Capital scheme related 886 268 Government Departments 385 2,480 Other Local Authorities 3,999 418 Health Bodies 1,241 452 Housing - Rents and rechargeables (General Fund and HRA) 370 502 Hamworthy Developments (Twin Sails Link Road) 502 41 Loans to Officers 19 (5,893) Impairment (Provision for Bad Debts) (6,265) 9,406 Financial Instrument assets - Loans and Receivables 10,392
17,081 Total Debtors 17,703
The debtors total is inclusive of an amount outstanding from PHP of £882k (£1,798k 2014/15).
45 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
23 CASH AND CASH EQUIVALENTS Restated As at As at 31 March 31 March 2015 2016 £000's £000's 62 Cash held by the authority 140 (3,568) Bank current accounts (3,685) 26,153 Instant Access Accounts 15,040 22,647 Total Cash and Cash Equivalents 11,495
24 INVESTMENTS - SHORT TERM AND LONG TERM
As at As at 31 March 31 March 2015 2016 £000's £000's Analysis of Investments by type 12,500 Fixed Deposits 22,544 96 Interest due but not received as at 31 March 81
12,596 Total outstanding 22,625
Analysis of Investments by date of maturity 96 Interest 81 12,500 1 Year 10,030 12,596 Total Short Term Investments 10,111
0 Between 1 and 3 years 12,514 0 Total Long Term Investments 12,514
12,596 Total Investments - Short term and long term 22,625
46 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
25 CREDITORS AND DEPOSITORS Restated As at As at 31 March 31 March 2015 2016 £000's £000's Statutory Creditors and other non financial instruments Related to Collection Fund Agency Arrangement (1,298) - Council Tax (1,287) (520) - Non Domestic Rates (NDR) (344) (1,412) - Owed to Preceptors (3,059) (864) NDR Localisation (transitional protection and levy central government) (147) (1,543) HM Revenue and Customs (Payroll deductions) (1,448) (4,395) Receipts in Advance (4,126) (10,032) Statutory creditors and other non financial instruments (10,411) (10,977) Sundry Revenue Creditors (10,073) (1,873) Accumulated absences staff (1,346) (1,591) Government Departments (2,237) (1,289) Other Local Authorities (2,155) (296) Health Bodies (148) (4,875) Creditors relating to Capital Schemes (5,579) (2,899) Depositors (2,819) (23,800) Financial Instrument liabilities - creditors and depositors (24,357) (33,832) Total Creditors and depositors (34,768)
The creditors total is inclusive of an amount outstanding to PHP of £193k.
26 SHORT TERM BORROWING AND LONG TERM BORROWING
Short term Long term Short term Long term As at As at As at As at 31 March 31 March 31 March 31 March 2015 2015 2016 2016 £000's £000's £000's £000's Analysis of loans by type (417) (82,033) Public Works Loans Board (PWLB) (417) (81,616) (3,077) (4,426) Home and Communities Agency (3,390) (1,037) 0 0 Salix Finance Ltd (245) (1,715) (106) 0 Interest due but not paid as at 31 March (98) 0 (3,600) (86,459) Total outstanding (4,150) (84,368)
Analysis of loans by maturity (106) Interest due but not paid as at 31 March (98) 0 (3,494) Within the next year (4,052) 0 (3,806) Between 1 and 2 years 0 (1,943) (2,287) Between 2 and 5 years 0 (12,892) (11,458) Between 5 and 10 years 0 (625) (20,000) Between 10 and 20 years 0 (20,000) (5,000) Between 20 and 30 years 0 (5,000) (43,908) Greater than 40 years 0 (43,908) (3,600) (86,459) Total long term loans and related interest (4,150) (84,368)
47 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
27 FINANCIAL INSTRUMENTS
The borrowings and investments disclosed in the Balance Sheet are made up of the following categories of financial instruments as summarised from the preceding notes
Long Term Short Term As at As at As at As at 31 March 31 March 31 March 31 March 2016 2015 2016 2015 £000's £000's £000's £000's
Investments Investments (Note 24) 12,514 0 10,111 12,596 Debtors Debtors (Note 22) 10,392 9,406 Long term debtors (Note 21) 2,426 2,961 Cash and Cash Equivalents (Note 23) 11,495 22,647
Total Financial Assets - Loans and receivables 14,940 2,961 31,998 44,649
Borrowings Long term borrowing (Note 26) (84,368) (86,459) 0 0 Short term borrowing (Note 26) 0 0 (4,150) (3,600) Creditors Creditors and depositors (Note 25) (24,357) (23,800) Developers' contributions (Note 28) (6,045) (6,023) Total Financial Liabilities amortised cost (90,413) (92,482) (28,507) (27,400)
In these numbers it is only the amount of Interest on Long Term Borrowing of £98k (2014/15: £106k), shown here as current, which affects the Comprehensive Income and Expenditure Statement.
Fair value of assets and liabilities carried at amortised cost
The only asset or liability with a fair value that is materially different from its carrying value is the Council's loan with the PWLB. The Council is required to disclose (but not adjust for) the fair value of this loan at 31 March 2016. 31st March 2016 31st March 2015 Carrying Fair Carrying Fair Amount Value Amount Value £000's £000's £000's £000's
PWLB loan (82,033) (96,093) (82,450) (98,675)
The 'fair value' of the PWLB loan has been calculated in accordance with IFRS13. As in prior year, the loan falls within 'Level 2 hierarchy' of fair value measurements. Its fair value has been estimated by calculating the net present value of remaining loan repayments at 31 March 2016. Loan repayments are discounted over the whole life of the loan (at the appropriate market rate for local authority loans) to estimate the loan's net present value.
Were the loan to be refinanced at the PWLB's new borrowing rates, its fair value would increase to £113,233k. The increase in liability is because interest savings from refinancing at new (lower) PWLB borrowing rates are more than offset by the required payment of early redemption penalty charges.
The fair value of trade and other receivables (short term debtors) and of payables (creditors) has been taken to be the same as the invoiced or billed amount.
Loans and receivables includes deferred payments for services granted under The Health and Social Care Act. These items are required to be classed as 'soft loans' by the authority, the write down arising from valuing loans at fair value to the income and expenditure account. This amount can then be reversed out to the Financial Instruments Adjustment Account through the Movement in Reserves Fund Balances. The Code allows authorities to apply deminimus levels in assessing whether there is a need to action the adjustments. The adjustment required would be less than £20k and has not been applied to the accounts.
31st March 2016 31st March 2015 Carrying Fair Carrying Fair Amount Value Amount Value £000's £000's £000's £000's Financial liabilities (including PWLB loan) (118,920) (132,980) (119,882) (136,007)
Loans and receivables 46,938 46,938 47,610 47,610
48 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
27 FINANCIAL INSTRUMENTS (CONTINUED)
Financial Liabilities
A Financial Liability is an obligation to transfer economic benefits controlled by the Authority 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 Authority. The fair value is greater than the carrying amount because the Authority's portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the prevailing rates at the Balance Sheet date. This commitment to pay interest above current market rates increases the amount the Council will have to pay if the lender requested or agreed the early repayment of loans. The Authority's loan portfolio at year end consisted of PWLB and an interest free loan from the Home and Communities Agency.
Financial Assets - Loans and receivables A Financial Asset is a right to future economic benefits controlled by the Authority that is represented by cash or other instruments or a contractual right to receive cash or another financial asset.
The three classifications under the Code of Practice are: Loans and Receivables, Available for Sale and Fair Value through Profit or Loss. The Authority currently only has financial assets within the definition of Loans and Receivables. The Authorty's portfolio of investments consists of fixed term deposits and call/notice accounts and are measured at amortised cost. This form of measurement does not change the amount of cash received under the terms of the investment. Trade Receivables (ie Debtors) are also classified as Loans and Receivables, they are measured at cost on the Balance Sheet. Balances in call accounts is shown under cash and cash equivalents as they represent highly liquid investments that are readily convertible to known amounts of cash, with an insignificant risk of changes in value.
Disclosure of nature and extent of risks arising from financial instruments
The authority'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 authority Liquidity risk - the possibility that the authority might not have funds available to meet its commitments to make payments Market risk - the possibility that financial loss might arise for the authority as a result of changes in such measures as interest rates and stock market movements. The authority'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 a central treasury team, under policies approved by Council in the annual treasury management strategy. The Authority 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 Exposure
Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the authority's customers. The Authority manages credit risk by ensuring that investments are placed with the Debt Management Office, other local authorities, and Banks and Building Societies of sufficiently high credit quality as set out in the Treasury Management Strategy. A limit of £10m/25% of the total portfolio is placed on the amount of money that can be invested with a single counterparty with the exception of investments with the Debt Management Office. The Authority also sets a group investment limit for institutions that are part of the same banking group. No more than £10m can be invested for a period of longer than one year. The Authority uses many sources of information when selecting appropriate counterparties for its investments. One method is the use of credit ratings which are taken from all three rating agencies, Fitch, Standard and Poor's, and Moody's, the lowest rating from the three is used when arriving at the minimum acceptable credit risk.
49 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
27 FINANCIAL INSTRUMENTS (CONTINUED)
Credit Risk Exposure (continued)
The following analysis summarises the authority's potential maximum exposure to credit risk, based on experience of default and un-collectability over the last five years, adjusted to reflect current market conditions.
Amount at Historical Estimated 31 March Experience maximum 2016 of default default exposure * Deposits with banks & financial institutions (grouped by LT credit rating): £'000 % £'000 Government Debt Management Office - AAA rated - - - Banks/Building Societies with Fitch rating AA+ to AA- - - Banks/Building Societies with Fitch rating A+ to A- - -
Total deposits with banks & financial institutions - - -
Customers (Trade Debtors) 16,657 6,265
* Estimated maximum exposure to default and un-collectability. Customers are assessed, taking into account their financial position, past experience and other factors, with individual credit limits being set in accordance with internal ratings set by the Council.
Liquidity Risk Exposure
The authority has a comprehensive cash flow management system that seeks to ensure that cash is available when needed. If unexpected movements happen, the authority has ready access to borrowings from Public Works Loans Board (PWLB), therefore there is no significant risk that it will be unable to raise finance to meet it's commitments under financial instruments. Instead, the risk is that the authority will be bound to replenish a significant proportion of it's borrowings at a time of unfavourable interest rates. In order to manage the risk of a significant proportion of its borrowings maturing at the same time the Council is seeking to ensure that borrowings are spread across years. The maturity analysis of long term financial liabilities is shown in note 26 'Long Term Borrowings'.
Market Risk - Interest Rate Risk Exposure
The Authority is exposed to risk in terms of its exposure to interest rate movements on its investments. For example a rise in interest rates would have the following effects:
Investment at variable rates - the interest credited to the income and expenditure account will rise Investment at fixed rates- the fair value will fall. Where fixed rate investments have short maturities, the effect will be similar to that for variable investments, as the replacement investments will generate more income.
The Authority monitors interest rate movements on a daily basis.
At 31 March 2016, if interest rates had been 1% higher with all other variables held constant, the financial effect would be: £000's Increase in interest payable on borrowings 986 Increase in interest receivable on variable rate investments (675) Impact on Comprehensive Income and Expenditure Account 311 Share of overall impact debited to the HRA 862
50 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
28 CAPITAL GRANTS AND OTHER CONTRIBUTIONS RECEIPTS IN ADVANCE
These are sums of money received from the government, developers and third parties towards schemes and projects. The note shows that value received during the year the value applied to schemes and the balance remaining at year end. In addition to assist with the readers understanding movements on values received where there is no return condition and which are held in the usable reserve 'capital grants unapplied' are shown as an information item.
As at Received in Applied Applied As at 31st March Year to capital to revenue 31st March 2015 2016 £000's £000's £000's £000's £000's
(1,191) Schools Related (5,170) 2,925 423 (3,013) (1,516) Miscellaneous (5,488) 4,954 573 (1,477) (6,023) Developer funding and other contributions (4,202) 3,849 331 (6,045) (8,730) Capital grants and other contributions (14,860) 11,728 1,327 (10,535)
Memo - Information item : Value now held in usable reserve (53) Usable Reserve - Capital grants unapplied 0 0 3 (50) (no right of return condition applies) (8,783) (14,860) 11,728 1,330 (10,585)
Note : Prudential repayment of previous capital expenditure 2,535 Applied to in year expenditure 9,193
29 PROVISIONS
Balance at Contribution Applied Balance at 31 March (From) / to in Year 31 March 2015 GF / HRA 2016 £000's £000's £000's £000's Redundancies & Early Retirements (13) 0 7 (6) Insurance Provision (695) 0 0 (695) Crown Building dilapidations (61) 41 (20) Ordinary Residence Liability (315) 92 4 (219) Care Uk Dementia contract (8) 8 0 Day Centre dilapidations (240) (8) (248) Contract termination 0 (524) (524) Car park management fee dispute (29) 0 (29) Land Charges (194) 0 30 (164) Non Domestic Rating appeals (1,483) (1,866) 587 (2,762) Housing Providers handback (56) 0 (56) Enefco House (8) 0 8 0 Strategic Asset Management (447) 49 (398)
Total Provisions (3,549) (2,249) 677 (5,121)
Provisions for redundancies and early retirements are triggered when the authority is demonstrably committed to actioning such terminations. Timings and amounts of eventual payments can vary depending on individual circumstances but it will normally be within the next financial year. This insurance provision relates to historic liabilities arising from the council's interest in Municipal Mutual Insurance (MMI). The Authority is a participant of a 'Scheme of Arrangement' and it's potential liability is assessed every six months. In November 2012 the Council received a letter from Municipal Mutual which has triggered the scheme of arrangement. The final liability of the Council is yet to be determined thought it is expected that the provision made will be sufficient. Crown Building dilapidations - relating to potential liability connected to vacating the building. £41k was applied during 2015/16 for costs relating to the vacation of floors 3 & 4.
51 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
29 PROVISIONS (Continued)
Ordinary residence liability - Ordinary residence is the mechanism that local authorities use to decide which local authority should fund an individual’s care. This liability relates to ongoing ordinary residence disputes with other local authorities where social care for a number of clients has been funded by another local authority who are claiming that the clients’ funding should be the responsibility of the Borough of Poole. This provision allows for reimbursement to be made to other local authorities if such responsibility is established.
Day Centre dilapidations - vacating leased property dilapidation costs currently being negotiated. Car park management fee dispute - relates to dispute over the validity of charging a management fee.
Contract termination - Claim from termination of a social care provider contract.
Land charges - Relates to the cost of repaying Personal Search Fees and associated legal costs as a result of a change in the interpretation of government legislation. £30k of the provision was used during the course of the year. Non domestic rating appeals - relates to the Authority share of estimated liability in relation to appeals lodged with the valuation office, which, if successful may result in a refunds to individual local businesses.
Housing Providers handback - required to ensure that the Authority has funds to cover its liability in relation to covering the costs of handing back property used for temporary accommodation to owners/landlords in the condition in which it was received.
Enefco House - applied to dilapidations during the course of the year.
Strategic Management - £398k. £281K: Lessee overpaid lease charges in respect of the Dolphin Centre. The provision relates to the potential liability for payback. £166k: Obligation to pay landlord maintenance costs in respect of small holdings on the Upton Farm site. (£70K): Released re-over provision for the Dolphin Centre based on latest data from L&G
52 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
30 DETAIL OF MOVEMENT ON UNUSABLE RESERVES AND USABLE WHERE MORE DETAIL REQUIRED
a REVALUATION RESERVE
The Revaluation Reserve contains the gains made by the Authority 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 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 The Reserve contains only unrealised revaluation gains arising (since 1st April 2007) from holding assets. Accumulated gains arising before that date are consolidated into the balance on the capital adjustment account.
Restated 2014/15 2015/16 General HRA Total General HRA Total Fund Fund £000's £000's £000's £000's £000's £000's (78,295) (795) (79,090) Balance as at 1 April (82,377) (1,263) (83,640)
(11,407) (519) (11,926) Revaluations upwards and downwards (8,344) (1,941) (10,285) (343) (343) Revaluation increases on disposal 0 0
(11,407) (862) (12,269) (Surplus) or deficit on revaluation of non-current (8,344) (1,941) (10,285) assets not posted to the surplus or deficit on the provision of services
2,746 51 2,797 Depreciation as a result of increased valuations 2,055 0 2,055 4,579 343 4,922 Write out revaluation gains on disposed assets 8,874 705 9,579 7,325 394 7,719 Amount written off to the capital adjustment account 10,929 705 11,634
(82,377) (1,263) (83,640) Balance as at 31 March (79,792) (2,499) (82,291)
b CAPITAL ADJUSTMENT ACCOUNT
The Capital Adjustment Account comprises balances from both the former Capital Financing Account and the Fixed Asset Restatement Account. It contains the amounts which are required by statute to be set aside from Capital Receipts for the repayment of external loans and the amount of capital expenditure financed from revenue and capital receipts.
It also contains the difference between amounts provided for depreciation and the Minimum Revenue Provision required to be charged to revenue to repay the principal element of external loans. Restated 2014/15 2015/16 General HRA Total General HRA Total Fund Fund £000's £000's £000's £000's £000's £000's (337,666) (56,250) (393,916) Balances as at 1 April (334,371) (69,390) (403,761) Capital Financing (1,877) (363) (2,240) Capital Receipts - usable (2,450) (232) (2,682) (1,988) (5,041) (7,029) Revenue Contribution Applied (via capital funds) (5,088) (4,770) (9,858) (4,239) (4,239) Major Repairs Reserve HRA - funding capital expenditure (6,039) (6,039) (3,865) (9,643) (13,508) Financing of assets (7,538) (11,041) (18,579)
17,531 17,531 Depreciation and impairment charges General Fund 7,246 7,246 (2,113) (2,113) Movements in the market value of investments properties (516) (516) (1,498) (1,498) Minimum Revenue Provision General Fund (1,437) (1,437) (1,362) (400) (1,762) Provision for repayment of prudential borrowing (3,533) (400) (3,933) 3,930 3,930 Revenue expenditure funded from capital under statute 1,631 1,631 (3,675) (3,675) Application of grants and contributions funding REFCUS (878) (878) (15,305) (2,036) (17,341) Government Grants and Other used for in year financing (9,193) 0 (9,193) (2,492) (2,436) (4,928) Items contra'd by STMGFB (6,680) (400) (7,080)
(2,746) (51) (2,797) Current value depreciation in excess of historic cost (2,055) 0 (2,055) (4,579) (343) (4,922) Write out revaluation gains on disposed assets (8,874) (705) (9,579) (298) (298) HRA receipts associated debt set aside (420) (420) 4,386 4,386 Depreciation charges Housing Revenue Account 4,523 4,523 (6,246) (6,246) Impairment HRA in excess of previous revaluation gains (19,089) (19,089) 16,977 1,491 18,468 Disposal of fixed assets (carrying amount) 27,596 2,179 29,775
(334,371) (69,390) (403,761) Balances as at 31 March (331,922) (94,343) (426,265)
53 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
30 DETAIL OF MOVEMENT ON RESERVES (CONTINUED)
c DEFERRED CAPITAL RECEIPTS
These are amounts receivable in respect of the sale of assets where the monies due will be received in instalments over an agreed period of time. It relates to a proportion of outstanding principal on loans made to Dorset Police by Dorset County Council prior to reorganisation.
2015/16 2014/15 £000's £000's Balance B/fwd as at 1 April (317) (341) Receipts released to capital receipts reserve upon receipt 25 24 Total Deferred Capital Receipts (292) (317)
d MOVEMENTS IN SPECIFIC REVENUE RESERVES HELD FOR CAPITAL PURPOSES
Capital Capital Major Fund Fund Repairs Schools Reserve
£'000 £'000 £'000 Movements in specific capital reserves Amounts receivable in 2015/16 (4,523) Transfers during the year (from) to revenue (4,394) (1,043) Debit / credit direct to reserve / transactions with other reserves 0 Amounts applied to finance new capital investment in 2015/16 3,991 1,097 6,039 Total increase / (decrease) in realised capital resources (403) 54 1,516 Balance brought forward at 1st April 2015 (13,936) (230) (11,761) Balance carried forward at 31 March 2016 (14,339) (176) (10,245)
e USABLE CAPITAL RECEIPTS
Any balance at the end of the year on the Usable Capital Receipts Reserve represents the Capital Receipts available to finance expenditure in future years.
2015/16 2014/15 £000's £000's Balance B/fwd as at 1 April (4,115) (4,834) Total in year Capital Receipts from asset sales (3,754) (2,171) Receipts from assets held for sale 0 0 Previously deferred receipts now usable (25) (24) Capital receipts from fully depreciated sold vehicles (16) (12) Paid to CLG under Pooling arrangements 444 388 HRA receipts associated debt set aside to Capital Adjustment Account 420 298 Capital Receipts Used for Financing Capital Schemes 2,682 2,240 Balance C/fwd as at 31 March (4,364) (4,115)
54 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
31 TERMINATION BENEFITS AND EXIT PACKAGES
The Authority terminated the contracts of a number of employees in 2015/16, incurring liabilities of £265k (2014/15:£419k) including any payments in lieu of notice. This payment was in respect of 12 officers and school staff including those who were made redundant as part of the Authority's continued rationalisation of services. (2014/15 26) Number of Exit Packages Total 2014/15 Non School staff School Staff Total 2015/16 No. Amount Band No. Amount No. Amount No. Amount 20 £175,153 £0 - £19,999 6 £51,811 1 £1,381 7 £53,192 3 £75,830 £20,000 - £39,999 4 £120,352 0 £0 4 £120,352 3 £144,214 £40,000 - £59,999 0 £0 0 £0 0 £0 0 £0 £60,000 - £79,999 1 £70,513 0 £0 1 £70,513 0 £0 £80,000 - £99,999 0 £0 0 £0 0 £0 0 £0 £100,000 - £149,999 0 £0 0 £0 0 £0
26 £395,197 11 £242,676 1 £1,381 12 £244,057
The £265k total for 2015/16 includes £21k in respect of of adjustments where the actual cost of previous exit packages was higher than previously estimated. The £419k total for 2014/15 includes £24k in respect of of adjustments where the actual cost of previous exit packages was higher than previously estimated.
6 of the employees who received exit packages were regarded as compulsory redundancy departures (11 in 2014/15)
The Authority is the employing body for two joint services Adult Learning Services and Stour Valley Partnership, included with the 15/16 values £242,676 for non school staff, are exit packages for 2 member of staff ( 5 in 14/15) totalling £63,887 (14/15 £113,760) for these joint services. The actual cost to the authority of these exit packages was £8,977 (14/15 £53,267).
32 RETIREMENT BENEFITS
Participation in pension schemes
As part of the terms and conditions of employment the authority offers retirement benefits. Although these benefits will not actually be payable until the employees retire, the authority has a commitment to make the payments and these are required to be disclosed at the time that employees earn their future entitlement.
The authority participates in two pension schemes:
The Local Government Pension Scheme (LGPS) administered by Dorset County Council. It is a funded defined benefit final salary scheme, meaning that the authority and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets.
The Teachers' Pensions Scheme (TPS) administered by the Department for Education (DFE). It provides teachers with defined benefits upon their retirement, and the authority contributes towards costs by making contributions based on a percentage of members' pensionable salaries. It is a defined benefit scheme however it is not possible for the authority to identify a share of the underlying liabilities in the scheme attributable to its own employees. Therefore, for the purposes of this Statement of Accounts, it is accounted for as a defined contribution scheme.
The scheme is nationally funded and from 1 April 1997 the council has contributed to the scheme. In 2015/16 the contributions paid by the council were £3,138k, The employers rate was 14.1% up to and including 31/08/15 and was 16.48% from 01/09/15 onwards. (2014/15 : 14.1%)
The Authority is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the teachers' scheme. These costs are accounted for on a defined benefit basis and are detailed on the following pages. They are an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. There are no plan assets built up to meet these pension liabilities.
55 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
32 RETIREMENT BENEFITS (CONTINUED)
Local Government Pension Scheme (LGPS) Transactions Relating to Post-employment Benefits
The cost of retirement benefits is recognised in the Net Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge the Authority is required to make against council tax is based on the cash payable in the year, so the real cost of retirement benefits is reversed out of the General Fund Balance via the Movement in Reserves Statement.
The requirements of IAS 19 require the exclusion of accrued sums and therefore payments are now made on account to ensure that any year end adjustment is of a minimal sum.
The following transactions have been made in the Comprehensive Income and Expenditure Statement. Comprehensive Income and Expenditure Account
LGPS Teachers LGPS Teachers additional additional 2014/15 2014/15 2015/16 2015/16 £'000 £'000 £'000 £'000 Cost of Services 14,213 0 Current Service Cost 16,735 0 204 0 Past Service Costs 54 0 (1,022) 0 Settlements / Curtailments (2,770) 0 13,395 0 Service Cost 14,019 0
219 0 Administration expenses 221 0
Financing and Investment Income and Expenditure 20,514 0 Interest cost 18,132 0 (12,810) 0 Interest on assets (10,255) 0 7,704 0 Net interest on the defined benefit liability (asset) 7,877 0
21,318 0 Net Charge/(credit) to surplus/deficit on provision of services 22,117 0
Other post employment benefit charged to the CI&ES 59,035 412 Remeasurements (net (gain) / loss) (27,586) 265
80,353 412 Total post employment benefit charged to the CI&ES (5,469) 265
The net charge to the surplus/deficit on the provision of services is not the final cost to the general fund for pensions. This is achieved by the reversing the net impact of the changes made in accordance with IAS19, these entries are shown in note 5
21,318 0 Net Charge/(credit) to surplus/deficit on provision of services as above 22,117 0 (10,798) 347 Reversals as detailed in note 5 (11,777) 342 10,520 347 Charge against the general fund balance employer contributions 10,340 342
Movement in Reserves Statement (MIRS) - included the following: Restated Restated LGPS Teachers LGPS Teachers additional additional 2014/15 2014/15 2015/16 2015/16 £'000 £'000 £'000 £'000 10,798 (347) Reversals as detailed in note 5 11,777 (342) 59,035 412 Actuarial remeasurements (gain)/loss in CI&ES (27,586) 265
69,833 65 Unusable Reserves Movement (pensions fund) (15,809) (77) 10,520 347 General Fund Balance Movement 10,341 342 80,353 412 Total within the MIRS Statement (5,468) 265
Remeasurements and Other Comprehensive Income Since incorporating this accounting standard the cumulative amount of actuarial gains and losses recognised in total has been an overall loss of £92,225k.The last two years movements are shown below. Restated Restated LGPS Teachers LGPS Teachers additional additional 2014/15 2014/15 2015/16 2015/16 £'000 £'000 £'000 £'000 (16,422) Return on plan assets in excess of interest 13,218 54 Other actuarial (gains)/losses on assets (9) 75,254 412 Change in financial assumptions (40,771) 265 0 Change in demographic assumptions 0 149 Experience (gain) loss on defined benefit obligation (24)
59,035 412 Remeasurements recognised in CI&E (27,586) 265
56 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
32 RETIREMENT BENEFITS (CONTINUED)
Assets and Liabilities in relation to Post Employment Benefits (retirement benefits)
Reconciliation of opening and closing balances of the fair value of the scheme assets: LGPS LGPS 2014/15 2015/16 £'000 £'000 284,296 Opening fair value of Scheme Assets 313,305 12,810 Interest on assets 10,255 16,422 Return on assets less interest (13,218) (54) Other actuarial gains/(losses) 11 (219) Administration expenses (221) 10,520 Contributions by employer 10,342 3,413 Contributions by Scheme participants 3,716 (13,481) Estimated benefits paid (net of transfers in) (15,001) (402) Settlement prices received / (paid) (2,117) 313,305 Closing Scheme Assets 307,072 3,700 Contributions by employer - prepayment 1,850 317,005 Closing Scheme Assets with pre-payment 308,922
The actual return on scheme assets in the year was loss of £2,963k (2014/15 gain £29,232k) A pre-payment has been made to the Pensions Administrator to take advantage of a discount for early payment. This is chargeable to the general fund when it is due but the payment is shown as an asset of the pension fund for the accounts rather than as a general pre-payment within debtors on the balance sheet.
Reconciliation of opening and closing balances of the present value of the scheme defined benefit obligation:
LGPS Teachers Teachers additional additional 2014/15 2014/15 2015/16 2015/16 £'000 £'000 £'000 £'000 461,104 6,173 Opening Defined Benefit Obligation 559,946 6,238 14,213 Current Service Cost 16,736 20,514 Interest Cost 18,132 75,254 412 Change in financial assumptions (40,771) 265 0 Change in demographic asssumptions 0 148 Experience loss/(gain) on defined benefit obligation (24) (1,424) Liabilities extinguished on settlements (4,885) (12,876) Estimated benefits paid (net of transfers in) (14,406) 204 Past Service Cost 54 3,414 Contributions by Scheme participants 3,716 (605) (347) Unfunded pension payments (595) (342) 559,946 6,238 Closing Scheme Liabilities 537,903 6,161
Liabilities have been valued on an actuarial basis using the projected unit method which assesses the future liabilities of the fund discounted to their present value. It is an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels etc which are detailed below. The independent actuary to the fund is Barnett Waddingham.
Scheme History
The following disclosure note is required for the current year and for the previous four accounting periods:
2011/12 2012/13 2013/14 2014/15 2015/16
£'000 £'000 £'000 £'000
Fair Value of Scheme 227,398 263,469 284,296 313,305 Assets (bid value) 307,072 0 0 0 3,700 Local prepayment 1,850 Present Value of Scheme (417,467) (459,860) (461,104) (559,946) Liabilities (537,903) (6,070) (6,173) (6,238) Unfunded teachers (6,161)
(190,069) (202,461) (182,981) (249,179) Net Pensions Liability (235,142)
The liabilities show the underlying commitments that the authority has in the long run to pay retirement benefits. The total liability of £235,142k has a substantial impact on the net worth of the authority as recorded in the Balance Sheet, though the balance remains positive at £330,675k However statutory arrangements for funding the deficit mean that the financial position of the authority remains healthy and it is not anticipated that there will be any impact on the Authority's reserves. The deficit will be made good by increased contributions over the remaining working life of employees, as assessed by the scheme actuary. The total contributions the Actuary expects to be made to the scheme by the council in the year to March 2017 are £9,728K
57 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
32 RETIREMENT BENEFITS (CONTINUED)
The return on the Fund (on a bid value to bid value basis) for the year to 31 March 2016 is estimated to be -1.0% The actual return on Fund assets over the year may be different.
The estimated allocation of the Authority's share of the fund which is approximately 14.2% is as follows: 31st March 2016 31st March 2015 £000's % £000's % Equities 173,009 56 179,606 57 Gilts 29,901 10 37,027 12 Other Bonds 38,612 13 38,886 12 Absolute Return Portfolio n/a n/a n/a n/a Diversified Growth Fund 14,641 5 15,277 5 Property 33,876 11 29,846 10 Infrastructure 4,024 1 3,428 1 Hedge Fund 265 0 1,206 0 Cash 12,747 4 8,029 3 307,075 100 313,305 100
Employer asset share - bid value (at 29th February 2016) % Quoted % Unquoted Fixed Interest Government Securities UK 9.7 - Corporate Bonds UK 12.6 - Equities UK 22.8 3.1 Equities Overseas 27.3 Property All - 11.0 Others : Hedge fund - 0.1 Private Equity - 3.1 Infrastructure - 1.3 Diversified Growth Fund - 4.8 Cash/Temporary investments - 4.4 Net current assets Debtors 0.6 Creditors -0.8 72.2 27.8
The principal assumptions used by the actuary have been:
Assumed life expectancies: 31st March 2016 31st March 2015 31st March 2014 Longevity at 65 for current pensioners Males 22.9 22.8 22.7 Females 25.3 25.2 25.1 Longevity at 65 for future pensioners retiring in 20 years Males 25.2 25.1 24.9 Females 27.7 27.6 27.4 Other assumptions: Rate of inflation - RPI increases 3.3% 3.2% 3.6% Rate of inflation - CPI increases 2.4% 2.4% 2.8% Rate of increase in salaries 3.9% 3.9% 4.3% Rate of increase in pensions 2.4% 2.4% 2.8% Rate for discounting scheme liabilities 3.7% 3.3% 4.5% Real Rate for discounting scheme liabilities 0.4% 0.1% 0.9% Take-up of option to convert annual pension to lump sum 50.0% 50.0% 50.0% 10% of active members will take up the option under the new LGPS to pay 50% of contributions for 50% of benefits.
Expected Return on Assets - for years beginning on or after 1st January 2013, the expected return and the interest cost has been replaced with a single net interest cost, which effectively sets the expected return equal to the discount rate.
The estimation of defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analyses below based on reasonably possible changes to 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. The assumptions in longevity, for example, assume that life expectancy increases or decreases for men and women. 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.
Sensitivity Analysis £000's £000's £000's
Adjustment to discount rate +0.1% 0.0% -0.1% Present Value of Total Obligation 528,224 537,907 547,777 Projected Service Cost 14,698 15,035 15,379
Adjustment to long term salary increase +0.1% 0.0% -0.1% Present Value of Total Obligation 539,130 537,907 536,691 Projected Service Cost 15,042 15,035 15,027
Adjustment to pension incraeses and deferred revaluation +0.1% 0.0% -0.1% Present Value of Total Obligation 546,670 537,907 529,308 Projected Service Cost 15,376 15,035 14,701
Adjustment to mortality age rating assumption +1 Year None -1 Year Present Value of Total Obligation 554,023 537,907 522,274 Projected Service Cost 15,418 15,035 14,660
58 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
33 NOTES RELATED TO CASHFLOW
a RECONCILIATION OF (SURPLUS) /DEFICIT TO NET CASH (INFLOW) / OUTFLOW FROM OPERATING ACTIVITIES Restated 2014/15 2015/16 £' 000 £' 000 6,178 Net (Surplus)/Deficit on the provision of Services 6,439
Adjust net surplus/deficit on the provision of services for non-cash movement (15,284) Depreciation and Impairment 7,666 (387) Amortisation (346) 2,113 Movements in the market value of investment properties 516 (10,451) Pension fund adjustments (11,434) 92 (Increase)/Decrease in interest creditors (8) 896 (Increase)/Decrease in other creditors 1,431 4,093 Increase/(Decrease) in other debtors (1,209) (3) Increase/(Decrease) in inventories 13 3,816 Contributions (from) to provisions (1,572) (18,468) Carrying amount of non current assets sold (29,775)
(33,583) Total adjustment for non-cash movements (34,718)
Adjustment for items that are investing or financing activities 3,675 Capital grants credited to services (REFCUS) * 878 17,341 Capital Grants applied to the financing of capital expenditure 9,193 (427) Capital Grants unapplied recognised in CI&E then to reserve 0 2,183 Proceeds from sale of property, plant, equipment, and investment properties 3,770
22,772 Total adjustment for items that are investing or financing activities 13,841
(4,633) Net Cash Flow from Operating Activities (Inflow) outflow (14,438)
* Grants funding revenue expenditure funded from capital under statute
b OPERATING ACTIVITIES
The cash flow for operating activities include the following items:
2014/15 2015/16 £' 000 £' 000
(406) Interest Received (454)
3,225 Interest paid 3,221
59 BOROUGH OF POOLE 2015-16 NOTES TO THE ACCOUNTS
34 INTEREST IN RELATED COMPANY AND GUARANTEES
Poole Housing partnership (PHP) is a company limited by guarantee without share capital and is managed by a Board, with day-to-day management undertaken by the executive officers. PHP is a subsidiary of the Borough of Poole. The Company's principal activity is to manage and maintain the housing stock on behalf of the council. Turnover and operating profit arise solely from the housing management activities with the Borough of Poole. Accounts for the Company are stating a retained profit of £48k (2014/15:loss £381k as restated) with adjusted totals of a profit £884k (2014/15:loss £1,918k) after recognising actuarial gains/loss relating to the pension scheme. Net assets for the company excluding pension total £1,852k (2014/15:£1,280k). The backfunding element of the pensions fund deficit relating to staff that transferred to PHP remains the direct responsibility of the Housing Revenue Account and does not form part of the management fee paid to the Company. It is included within the Boroughs IAS19 totals.
Tricuro is a group of two companies which commenced trading on 1st July 2015. Established by Dorset County Council, Bournemouth Borough Council and Poole Borough Council with a respective sharing agreement of 70%, 25% and 5%. The company is principally engaged in the provision of social care provider services for vulnerable adults.
The accounts for Poole show the expenditure the borough has incurred in relation to the delivery of these services. Poole recognises its share of the pensions assets and liabilities within note 32 retirement benefits.
35 ACCOUNTING FOR SCHOOLS
Within the area of the Borough there are 5 types of school : community, voluntary aided, voluntary controlled, foundation and academy. Land and buildings are only recognised in the Authority balance sheet for community and foundation schools. Capital expenditure is added to the balance sheet for the assets owned by the Authority. Capital spend on all other assets is treated as revenue expenditure and written off each year to the comprehensive income and expenditure statement within Children's and Education Services. No income, expenditure or balances are recognised within the Authority accounts for Academy Schools.
36 AUTHORISATION OF ACCOUNTS FOR ISSUE AND EVENTS AFTER BALANCE SHEET DATE
Events may occur between the balance sheet date and the date the accounts are authorised for issue which might have a bearing upon the financial results of the past year.
For Poole, this date is taken to be the date that the Head of Financial Services signs a paper copy of the final version of the Statement of Accounts.
Date of authorisation to issue is 30th June 2016.
37 CONTINGENT LIABILITIES
The Authority has made a provision for NNDR Appeals based upon its best estimates of the actual liability as at the year end for known appeals. It is not possible to quantify appeals that have not yet been lodged with the Valuation Office so there is a risk to the Authority that national and local appeals may have a future impact on the accounts.
60 BOROUGH OF POOLE 2015-16 HOUSING REVENUE ACCOUNT
Housing Revenue Account Income and Expenditure Account
2014/15 2015/16 £000's Note £000's Income (19,767) Dwelling Rents (gross) 3 (20,159) (358) Non-Dwelling Rents (gross) (373) (1,084) Charges for Services and facilities (1,277) (1,348) Contributions towards expenditure (1,284) (2,036) Capital Grants and Contributions 0 (24,593) Total Income (23,093)
Expenditure 5,016 Repairs and Maintenance 5,521 3,981 Supervision and Management 4,230 123 Rents, rates, taxes and other charges 160 223 Movement in the allowance for Bad Debts 85 (1,860) Depreciation net revaluation adjustments of Non-Current Assets 6 (14,567) 89 Debt Management Costs 93
7,572 Total Expenditure (4,478)
Net Expenditure or Income of HRA Services as included in the whole authority Comprehensive (17,021) Income and Expenditure Account (27,571)
169 HRA services share of Corporate and Democratic Core 194
(16,852) Net Expenditure of HRA Services (27,377)
HRA share of operating income and expenditure included in the whole authority Income and Expenditure Account
3,224 Interest payable and similar charges 3,213 (84) Interest and Investment Income (97)
(13,712) (Surplus) or Deficit for the year on HRA services (24,261)
Statement of Movement on the Housing Revenue Account
This reconciliation statement summarises the differences between the outturn on the Income and Expenditure Account and the Housing Revenue Account Balance.
2014/15 2015/16 Net Net Expenditure Expenditure £000’s £000’s
(590) Balance on the HRA at the end of the previous year (579)
(13,712) (Surplus) Deficit for the year on the income and expenditure account (24,261) 5,041 Capital expenditure funded by the Housing Revenue Account 4,770 2,036 Capital expenditure funded by Capital Grants and Contributions 0 0 Transfer to/from Major Repairs Reserve 0 6,246 Reversal of Net revaluation (increases) / decreases recognised in Surplus/Deficit 19,090 400 Repayment of photovoltaic panels 400
11 Net (Increase) or Decrease before transfers to or from Reserves (1)
(579) Balance on the HRA at the end of the Current Year (580)
61 BOROUGH OF POOLE 2015-16 HOUSING REVENUE ACCOUNT
1 HOUSING REVENUE ACCOUNT
The Housing Revenue Account reflects a statutory obligation to account separately for Local Authority housing provision, as defined in particular in Schedule 4 of the Local Government and Housing Act 1989. It shows the major elements of housing revenue expenditure - maintenance, administration, government subsidy payable and capital financing costs, and how they are met by rents and other income.
2 ARMS LENGTH MANAGEMENT ORGANISATION (ALMO)
From the 1st April 2004 the Authority has established an arm's length management organisation (ALMO) with responsibility for managing its housing stock. The almo (company name -Poole Housing Partnership Ltd) is a company limited by guarantee, wholly owned by the Borough of Poole. The establishment of an almo has not involved any change in the ownership of the housing stock and the property managed by the almo remains within the Housing Revenue Account (HRA). The Housing Revenue Account includes £8,447k management fee paid to Poole Housing Partnership Ltd. This is made up of £2,773k in supervision and management, £5,173k in repairs and maintenance, and £501k in capitalised expenditure.
3 RENT INCOME (FROM DWELLINGS)
2014/15 2015/16 £000's £000's Rent Income from Dwellings 19,905 - Rental Income 20,289 (203) - Less void dwellings (201) 19,702 Rental Income 20,088
Rental Income analysed above excludes £71k rental income from hostel beds (2014/15 : £65k). £ £ 84.54 Average Rent-52 week basis (Based on 31st March Stock Numbers) 85.81 93.25 Houses and Bungalows 95.33 74.82 Sheltered Housing 76.53 86.56 Maisonettes 88.22 93.02 Non Traditional Houses 95.04 81.79 High Rise Flats 83.58 79.33 Low Rise Flats 81.17
On the first April 2002 the Authority implemented the Government's rent restructuring policy. This policy introduced a new approach to rent setting with the aim that social rents remain fair, affordable, and closely linked to the qualities tenants value in properties. The approach is being phased in over a period which would see most rents reach their Target or Formula rent by 2015/16.
62 BOROUGH OF POOLE 2015-16 HOUSING REVENUE ACCOUNT
4 HOUSING STOCK
The Authority was responsible for managing an average stock of 4,563 dwellings during 2015/2016. (4,578 in 2014/15 restated). The changes in stock are summarised as follows;-
Restated 2014/15 2015/16 4,547 Stock at beginning of Year 4,539 8 New Building and Acquisitions 1 (16) Sales etc. (38) 4,539 Stock at End of Year 4,502 43 Hostels (in terms of bed spaces) 43 4,582 Stock + Hostels at End of Year 4,545
Analysis of Housing stock at year end : Flats 1,495 One bedroom 1,493 744 Two bedroom 741 121 Three bedroom 119 Houses and Bungalows 229 One bedroom 213 586 Two bedroom 581 1,191 Three bedroom 1,185 173 Four bedroom + 170 43 Hostels (bed spaces) 43 4,582 Stock + Hostels at End of Year 4,545
The restatement has arisen as 2014/15 incorrectly excluded demolished properties which have now been correctly excluded from 2015/16.
5 RENT ARREARS
2014/15 2015/16 £000's £000's 378 Gross arrears as at Balance Sheet date 338 (current and former tenant arrears considered recoverable) 71 Dwelling rents written off during the year 53 300 Provision for bad debts as at 31 March 252 1.44% Current Tenant rent arrears expressed as a % of gross rent income 1.66%
6 DEPRECIATION AND REVALUATION ADJUSTMENTS Depreciation reflects the consumption of HRA fixed assets over their useful life and should provide a clear picture on the need for expenditure to maintain the value of the stock. An assessment has been made of components within the suite of assets held within the HRA and their useful economic life to calculate the depreciation charge. Land is not depreciated due to having an infinite life. Impairment/Revaluations downwards are charged to the Income and Expenditure Account and represent general price falls which are in excess of previous revaluation gains.Where a revaluation upwards occurs for the same general reasons as a previous downward valuation then this is credited to the Income and expenditure account up to the value of previous downward charges.When this value is exceeded, the gain goes to the revaluation reserve. Charges and credits to the Income and expenditure account in relation to depreciation and revaluations are reversed in the SMHRAB so that these items are not charged to tenants.
For 2015/16 there is a net revaluation upwards credited to the accounts of £19,089k (which represents a 9.5% increase in asset value) offset by depreciation charge of £4,523k.
The government issue a % value of the market value to be used for inclusion within the accounts. In 2015/16 the percentage used is 31% which is the same as was used in 2014/15.
63 BOROUGH OF POOLE 2015-16 HOUSING REVENUE ACCOUNT
7 CAPITAL RECEIPTS
Capital receipts in respect of the HRA received during the year are as follows:
2014/15 2015/16 Council Other Total Dwellings Land & Total Buildings £000's Type of Receipt £000's £000's £000's
1,491 Sale Proceeds 2,179 0 2,179 (21) Less administration costs (27) 0 (27)
1,470 Net proceeds 2,152 0 2,152 0 Mortgage principal repaid 0 0 1,470 Total Net Receipts 2,152 0 2,152
In 2012/13 revised arrangements were put in place by National Government under section 11(6) of the Local Government Act 2003 for local councils to retain surplus Right to Buy receipts (ie receipts arising from increased sales resulting from greater discounts) for investment in new affordable homes. The ratio of retention was set at 1:2.398 after the HM Treasury had taken into account the number of sales estimated that it estimated it would receive had the discount not been increased. This means that, for every £1 retained for any capital purpose from 2012/13 (ie after transaction costs and debt adjustments) just under £2.40 was surrendered to HM Treasury. This retained funding must be committed to replacement housing stock within three years of the disposal of the asset.
8 SUMMARY OF CAPITAL EXPENDITURE AND FINANCING
Details of capital expenditure within the HRA and the financing of that expenditure are set out below.
2014/15 2015/16 Council Other Non Plant Total Dwellings Land & Operational & Total Buildings Assets Equipment £000's £000's £000's £000's £000's £000's
11,679 Total Capital Expenditure 10,487 177 0 377 11,041
Financing 1,342 Capital Grants 0 0 0 0 0 363 Capital Receipts 232 0 0 0 232 694 Leaseholder Contributions 0 0 0 0 0 4,239 Major Repairs Reserve 6,039 0 0 0 6,039 5,041 Revenue Contributions 4,216 177 0 377 4,770
11,679 Total Financing 10,487 177 0 377 11,041
64 BOROUGH OF POOLE 2015-16 HOUSING REVENUE ACCOUNT
9 MOVEMENT OF HOUSING REVENUE ACCOUNT FIXED ASSETS
2014/15 2015/16 Council Other Assets Non Plant Total Dwellings Land & Under Operational & Total Buildings Construction Assets Equipment £000's £000's £000's £000's £000's £000's £000's
192,653 Net Book Value as at 1st April 2015 200,507 3,938 0 1,015 104 205,564
863 Revaluations and Adjustments 757 168 1,016 0 0 1,941 6,246 Revaluations up/down to surplus/deficit 18,271 733 0 85 0 19,089 11,679 Additions 6,415 45 4,122 79 380 11,041 (1,491) Disposals (2,179) 0 0 0 0 (2,179) 0 Reclassification 0 0 0 (190) 0 (190)
209,950 223,771 4,884 5,138 989 484 235,266
(4,385) Depreciation for the Year (4,289) (209) 0 0 (25) (4,523) 205,565 Net Book Value as at 31st March 2016 219,482 4,675 5,138 989 459 230,743
The date of valuation for HRA assets is 31 March of every year. This is in line with the Council's financial year end and ensures asset values reported in financial statements reflect their fair value.
The vacant possession value of dwellings within the HRA as at 31 March 2016 was £708,005k (31 March 2015 : £643,888k).
The Government guidance on stock re-valuation requires local authority housing stock to be valued on the basis of existing use value - social housing (EUV-SH). This requires us to assume that the property is a letting property and will continue to be made available for letting if vacated rather than sold with vacant possession. To allow for this the Government guidance suggests that the open market value of the properties is discounted to 31% of the value in the South West of England (31% 2014/15). This discount has therefore been applied to the housing assets but, in accordance with the guidance, no discount is applied to hostels and non housing assets.
The difference between the vacant possession value and the value per the balance sheet illustrates the economic cost to government of providing council housing at less than open market rents.
10 MAJOR REPAIRS RESERVE
Authorities are required under regulation 6 (4a) of the Accounts and Audit Regulations 1996 to set up a Major Repairs Reserve, and to transfer into it a sum not less than the Major Repairs Allowance received as part of the HRA subsidy. These funds are then used to meet capital expenditure on HRA assets.
2014/15 2015/16 Total Total £000's £000's
(11,614) Balance as at 1st April (11,761)
Income
(4,386) Transfer of equivalent amount to Depreciation charge from Capital Financing Reserve (4,523)
(4,386) (4,523)
Expenditure
4,239 Capital expenditure funded from Major Repairs Reserve 6,039
4,239 6,039
(11,761) Balance as at 31st March (10,245)
11 CONTRIBUTIONS TOWARDS EXPENDITURE
In specific circumstances contributions from the Authority's General Fund to the Housing Revenue Account are permissible, including when amenities are shared by the wider community. This includes grounds maintenance on Housing Revenue Account land from which the wider community will derive benefit. In line with good practice this contribution is based on the total number of right to buy sales.
65 BOROUGH OF POOLE 2015-16 THE COLLECTION FUND
The Collection Fund Income and Expenditure Account
Business Council Total Business Council Total Rates Tax Rates Tax 2014/15 2015/16 £000's £000's £000's Note £000's £000's £000's Income (79,908) (79,908) Council Tax Receivable (81,326) (81,326) (60,617) (60,617) Business Ratepayers (62,920) (62,920)
(60,617) (79,908) (140,525) Total Income (62,920) (81,326) (144,246)
Expenditure Precepts, Demands and Shares 1 29,191 29,191 - Central Government 29,596 29,596 28,607 65,237 93,844 - Borough of Poole 29,005 66,296 95,301 0 10,092 10,092 - Dorset Police and Crime Commissioner 0 10,255 10,255 584 3,592 4,176 - Dorset Fire Authority 592 3,719 4,311 58,382 78,921 137,303 59,193 80,270 139,463
Payment of prior years apportioned surplus/receipt of deficit 3 (346) (346) - Central Government (262) (262) (338) 732 394 - General Fund (257) 807 550 0 111 111 - Dorset Police and Crime Commissioner 0 125 125 (7) 39 32 - Dorset Fire Authority (5) 44 39 (691) 882 191 (524) 976 452 Charges to the Collection Fund (158) 0 (158) - Provision for Appeals (reduction) 2,611 0 2,611 635 635 - Transitional protection payment due to central government 93 93 (317) (317) Deferrals (one off item central government) 0 0 Bad and Doubtful Debts 4 (378) (102) (480) - Provision for amounts written off (257) (123) (380) 378 102 480 - Written Off during the Year 257 123 380 461 164 625 - Adjustment to Provision for Non-Payment 204 114 318 239 0 239 -Cost of Collection Allowance 237 0 237 860 164 1,024 3,145 114 3,259
58,551 79,967 138,518 Total Expenditure 61,814 81,360 143,174
(2,066) 59 (2,007) MOVEMENT IN YEAR (1,106) 34 (1,072)
Movement of Collection Fund Balance
2014/15 2015/16 £000's £000's £000's £000's £000's £000's 2,829 (1,282) 1,547 Balance (Surplus) as at 1 April 763 (1,223) (460) (2,066) 59 (2,007) Movement in Year (1,106) 34 (1,072) 763 (1,223) (460) (Surplus) / Deficit as at 31 March (343) (1,189) (1,532)
66 BOROUGH OF POOLE 2015-16 NOTES TO THE COLLECTION FUND
THE COLLECTION FUND
The Collection Fund is an agent's statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority in relation to the collection from taxpayers and distribution to local authorities and the Government of council tax and non-domestic rates.
COUNCIL TAX BASE
The council tax base is the mechanism by which the council tax liability is distributed amongst those eligible to pay. The calculation of the council tax base takes place before the start of the financial year.
The council tax base, i.e. the number of chargeable dwellings in each valuation band (adjusted for dwellings where discounts apply) converted to an equivalent number of Band D dwellings, was calculated as follows:
BAND A B C D E F G H TOTAL
1) Number of dwellings on 4,815 11,978 22,583 12,140 8,064 3,928 3,119 957 67,584 valuation list @ 30 /11/2014 LESS 2) Estimated deletions to list 0 0 2 1 2 0 1 0 6 3) Exempt Properties 139 165 397 206 95 56 30 14 1,102 4) Chargeable Dwellings 4,676 11,813 22,184 11,933 7,967 3,872 3,088 943 66,476 LESS 5) Number of Discounts etc 2,190 3,812 4,275 1,565 706 274 174 64 13,060 6) Net Dwellings 2,486 8,001 17,909 10,368 7,261 3,598 2,914 879 53,416 7) Ratio to Band D 6/9 7/9 8/9 9/9 11/9 13/9 15/9 18/9 8) No of band D equivalents 1,657 6,223 15,919 10,368 8,875 5,197 4,857 1,758 54,854 9) Ministry of Defence properties 160 160 10) Estimated additions 12 63 80 26 25 38 36 12 292 12) BAND D EQUIVALENT 1,669 6,286 15,999 10,554 8,900 5,235 4,893 1,770 55,306
Allowance for non-collection (0.9%) -498
Council Tax Base 2015/16 54,808
The tax base varies during the year due to factors such as the number of properties eligible for discounts, and changes to the number of properties on the valuation list.
The council tax outturn of £81,326k indicates a Band D tax base of 55,529. (Band D Council tax for 2015/16 £1,464.57)
67 BOROUGH OF POOLE 2015-16 NOTES TO THE COLLECTION FUND
1 COUNCIL TAX CALCULATION
The council tax "Band D" calculation derives a comparable, average council tax figure.
£000's Borough of Poole Demand 66,296 Dorset Police and Crime Commissioner Precept 10,255 Dorset Fire Authority Precept 3,719 Amount to be funded from council tax 80,270
Divided by Council Tax Base (number of Band D equivalent properties) 54,808
BAND D COUNCIL TAX £1,464.57
The council tax for each band for the year was as follows :-
A B C D E F G H £ 976.38 £ 1,139.11 £ 1,301.84 £ 1,464.57 1,790.03£ 2,115.49£ £ 2,440.95 £ 2,929.14
2 INCOME FROM BUSINESS RATEPAYERS
Under the arrangements for Uniform Business Rates, the Authority collects Non-Domestic Rates for its area which are based on local rateable values multiplied by a uniform rate. The total amount, less certain relief and other deductions, is shared according to a government formula between central government, the Dorset Fire Authority and the Borough of Poole.
£000's
Gross collectable non domestic properties during 2015-16 71,713 Less allowances and other adjustments (11,701) Total from Business Ratepayers 60,012 Reduced by Cost of Collection Allowance (237) Value to be shared 59,775
From Collection Fund Total Income 62,920 Charges to Collection fund (3,145) Value to be shared 59,775
2014/15 2015/16 £152,518,479 Non domestic rateable value in the Borough at year end 31 March 2016 £152,582,774
National non domestic multipliers for the year : 48.2p Standard 49.3p 47.1p Small businesses 48.0p
68 BOROUGH OF POOLE 2015-16 NOTES TO THE COLLECTION FUND
3 PAYMENT OF COLLECTION FUND SURPLUS/SHARES OF DEFICITS
Council Tax
A Council Tax surplus or deficit is distributed between the Borough of Poole, Dorset Police Authority and Dorset Fire Authority. * Council Tax Surplus - there was a distribution of £976k during 2015/16 shown on the face of the Collection Fund. There is a planned distribution for 2016/17 of £714k as illustrated below.
This distribution will be as follows : £000's To the General Fund of Poole 590 To Dorset Police and Crime Commissioner 91 To Dorset Fire Authority 33
* The Council Tax Surplus - accumulated at year end was £1,189k. Of this total £714k is being distributed during 2016/17 as above, the balance of £475k will be factored into the surplus or deficit distribution calculation for 2017/18.
Business Rates
A Business Rates surplus or deficit is distributed between the Borough of Poole, Dorset Fire Authority and Central Government. * Business Rates Deficit - there was a deficit distribution for 2015/16 of £524k as shown on the face of the Collection Fund. There is no planned distribution for 2016/17.
* The Business Rates Surplus - accumulated at year end was £343k. This balance will be factored into the surplus or deficit distribution calculation for 2017/18 and beyond.
4 ADJUSTMENTS TO PROVISION FOR NON-PAYMENT OF COUNCIL TAX
£000's Provision for bad debts @ 1 April 2015 (314) Council Tax written off during the year 123 Adjustment to provision for bad debts (114) Provision for bad debts @ 31 March 2016 (305)
5 ADJUSTMENTS TO PROVISION FOR NON-PAYMENT OF NON-DOMESTIC RATES
£000's Provision for bad debts @ 1 April 2015 (486) NDR written off during the year 257 Adjustment to provision for bad debts (204) Provision for bad debts @ 31 March 2016 (433)
69 BOROUGH OF POOLE 2015-16 NOTES TO THE COLLECTION FUND
PRECEPTS AND DEMANDS ON THE COLLECTION FUND
The preceding pages have provided the accounts for the Collection Fund in accordance with how they are prescribed within legislation. As described earlier within the accounts the Code requires that the year end surplus or deficit on the council tax element of the Collection Fund is notionally reflected within the accounts of all preceptors. For both the billing authority and the major preceptors, the difference between the income included in the Income and Expenditure Account and the amount required by regulation to be credited to the General Fund shall be taken to the Collection Fund Adjustment Account and included as a reconciling item. Council Tax The table below illustrates this for Council Tax
Share of Share of Precepts and 31-Mar-15 Precepts and 31-Mar-16 Demands Deficit 2014/15 Demands Deficit 2015/16 £'000 £'000 £'000 £'000 £'000 £'000 65,237 (49) 65,188 Borough of Poole 66,296 (27) 66,269 Dorset Police and Crime 10,092 (8) 10,084 Commissioner 10,255 (6) 10,249 3,592 (2) 3,590 Dorset Fire Authority 3,719 (1) 3,718
78,921 (59) 78,862 80,270 (34) 80,236
Business Rates
The table below illustrates this for Business Rates. Share of Share of Precepts and 31-Mar-15 Precepts and 31-Mar-16 Demands Surplus 2014/15 Demands Surplus 2015/16 £'000 £'000 £'000 £'000 £'000 £'000 29,191 1,033 30,224 Central Government 29,596 553 30,149 28,607 1,012 29,619 Borough of Poole 29,005 542 29,547 584 21 605 Dorset Fire Authority 592 11 603
58,382 2,066 60,448 59,193 1,106 60,299
COLLECTION FUND - BALANCE SHEET IMPLICATIONS Whilst there is no requirement to produce a Collection Fund Balance Sheet the billing authority is required to maintain balance sheet data and is now required to distribute the balances amongst the preceptors. To assist with understanding of how the Collection Fund Balance is reflected in the accounts the cumulative results of this distribution are replicated below:
Collection Council Tax element Fund Poole Police Fire £'000 £'000 £'000 £'000 Arrears 3,532 2,927 444 161 Allowance for doubtful debts (305) (253) (38) (14) Overpayments & prepayments (1,552) (1,286) (195) (71) Collection Fund Surplus (1,189) (983) (151) (55) Cash (486) (405) (60) (21) Debtors - cash owed from preceptors 81
Collection Central Business Rates element Fund Poole Government Fire £'000 £'000 £'000 £'000 Arrears 1,117 548 558 11 Allowance for doubtful debts (433) (213) (215) (5) Provision for Appeals (5,637) (2,762) (2,819) (56) Overpayments & prepayments (702) (344) (351) (7) Collection Fund Surplus (343) (168) (172) (3) Transitional Protection (92) 0 (92) Cash 6,090 2,939 3,091 60 Creditors - cash owed to preceptors 3,059 Creditors - relating to transitional protection 92
70 BOROUGH OF POOLE 2015-16 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BOROUGH OF POOLE
We have audited the financial statements of Borough of Poole (the "Authority") for the year ended 31 March 2016 under the Local Audit and Accountability Act 2014 (the "Act"). The financial statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement, the Housing Revenue Account (HRA), the Statement of Movement on the Housing Revenue Account, the Collection Fund and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/ LAASAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16.
This report is made solely to the members of the Authority, as a body, in accordance with Part 5 of the Act and as set out in paragraph 43 of the Statement of Responsibilities of Auditors and Audited Bodies published by Public Sector Audit Appointments Limited. Our audit work has been undertaken so that we might state to the members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Authority and the Authority's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the Chief Financial Officer and auditor
As explained more fully in the Statement of the Chief Financial Officer's Responsibilities, the Chief Financial 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 2015/16, which 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 Director of Finance Responsibilities; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Narrative Report and the Annual Governance Statement 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.
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Opinion on financial statements
In our opinion the financial statements: • present a true and fair view of the financial position of the Authority as at 31 March 2016 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 2015/16 and applicable law.
Opinion on other matters
In our opinion, the other information published together with the audited financial statements in the Narrative Report by the Head of Financial Services and the Annual Governance Statement are consistent with the audited financial statements.
Matters on which we are required to report by exception
We are required to report to you if: • in our opinion the Annual Governance Statement does not comply with the guidance included in ‘Delivering Good Governance in Local Government: a Framework’ published by CIPFA/SOLACE in June 2007; or • we issue a report in the public interest under section 24 of the Act; or • we make a written recommendation to the Authority under section 24 of the Act; or • we exercise any other special powers of the auditor under the Act.
We have nothing to report in these respects.
Conclusion on the Authority’s arrangements to secure value for money through economic, efficient and effective use of its 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 20(1)(c) of the Act to be satisfied that the Authority has made 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 the Authority's arrangements to secure value for money through economic, efficient and effective use of its resources
We have undertaken our review in accordance with the Code of Audit Practice prepared by the Comptroller and Auditor General as required by the Act (the "Code"), having regard to the guidance on the specified criteria issued by the Comptroller and Auditor General in November 2015, as to whether the Authority had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people. The Comptroller and Auditor General determined these criteria as those necessary for us
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to consider under the Code in satisfying ourselves whether the Authority put in place proper arrangements to secure value for money through the economic, efficient and effective use of its resources for the year ended 31 March 2016.
We planned our work in accordance with the Code. 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 has put in place proper arrangements to secure value for money through economic, efficient and effective use of its resources.
Conclusion
On the basis of our work, having regard to the guidance on the specified criteria issued by the Comptroller and Auditor General in November 2015, we are satisfied that in all significant respects the Authority has put in place proper arrangements to secure value for money through economic, efficient and effective use of its resources for the year ended 31 March 2016.
Certificate
We certify that we have completed the audit of the accounts of the Authority in accordance with the requirements of the Act and the Code.
Paul Dossett
Paul Dossett for and on behalf of Grant Thornton UK LLP, Appointed Auditor
Grant Thornton House Melton Street Euston Square LONDON NW1 2EP
16 September 2016
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SUMMARY ACCOUNTS - DRAFT
Poole Housing Partnership (PHP) Ltd is a local authority controlled company of the Borough of Poole. It is a not for profit organisation with no share capital and limited by guarantee. From April 2004, the Authority has transferred responsibility for management and maintenance of the Authority's residential stock to PHP Ltd.
The accounts were prepared in accordance with the Companies Act 2006 and are audited by Grant Thornton . A complete copy of the accounts may be obtained from PHP Ltd, Beech House, 28-30 Wimborne Road, Poole, Dorset, BH15 2BU. The following summarised accounts cover the period to 31 March 2016. These accounts have not been subject to audit by the Authority's independent auditor and are excluded from the auditor's report.
PROFIT AND LOSS ACCOUNT
2014/15 2014/15 2015/16 Restated £ £ £
8,632,984 8,644,213 Turnover 8,916,224 (8,899,940) (8,911,169) Operating Cost (8,728,969) (266,956) (266,956) Operating (Loss)/Profit 187,255 13,546 13,546 Interest received 13,107 62,000 (125,000) Other finance income / charges (150,000) (191,410) (378,410) (Loss)/Profit on ordinary activities before taxation 50,362 (2,709) (2,709) Tax charge on ordinary activities (1,987) (194,119) (381,119) Retained (Loss)/Profit for the period 48,375
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2014/15 2014/15 2015/16 Restated £ £ £
(194,119) (381,119) (Loss)/Profit for the financial year 48,375
(1,724,000) (1,537,000) Actuarial (Loss)/Gain relating to the pension scheme 836,000 (1,918,119) (1,918,119) Total recognised (Loss)/Profit for the year 884,375 (1,918,119) (1,918,119) Total recognised (Losses)/Gains since the last report 884,375
BALANCE SHEET
2014/15 2014/15 2015/16 Restated £ £ £ 172,562 420,444 Tangible Fixed Assets 411,429
2,922,510 2,922,510 Current Assets 3,378,126 (1,814,999) (2,062,881) Current Liabilities (1,937,107) 1,107,511 859,629 Net Current Assets 1,441,019 1,280,073 1,280,073 Net Assets excluding Pension Liability/Asset 1,852,448 (4,377,000) (4,377,000) Pension (Liability)/Asset (4,065,000) (3,096,927) (3,096,927) Net (Liabilities)/Assets including Pension Liability (2,212,552)
Capital and Reserves 1,280,073 1,280,073 Retained Profit / (Loss) 1,652,448 0 0 Response Repairs Reserve 200,000 (4,377,000) (4,377,000) Pension Reserve / (Deficit) (4,065,000) (3,096,927) (3,096,927) Capital and Reserves - (Loss)/ Profit (2,212,552)
74 BOROUGH OF POOLE 2015-16 SUMMARY ACCOUNTS DRAFT - TRICURO GROUP INCORPORATING TRICURO SUPPORT LIMITED (the 'Company') On 1 July 2015 Dorset County Council, Bournemouth Borough Council and the Borough of Poole launched Tricuro. Tricuro is a group of two companies establisehed under local authority trading company principles to take the transfer of the three authorities' supply-side Adult Social Services business, with staff transferring from each of the three authorities in order to provide care services. Each authority owns one ordinary share in Tricuro Support Ltd, which in turn owns 100% of the equity of Tricuro Ltd. A full year turnover is expected to be in the region of £40m. A shareholder agreement regulates the way in which the three councils manage Tricuro, including a profit / cost sharing agreement. The shares are Dorset County Council 70%, Bournemouth Borough Council 25% and Poole 5%.
A complete copy of the accounts may be obtained from Tricuro, Beech House, 28-30 Wimborne Road, Poole, Dorset, BH15 2BU. The following summarised accounts cover the period to 31 March 2016. These accounts have not been subject to audit by the Authority's independent auditor and are excluded from the auditor's report. For information, the whole totals are shown on the left hand side with Poole share shown on the right.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 5% as at 31 March 2016 POOLE - 5 % Share Group Company Group Company
£ £ £ £ 0 0 Tangible Fixed Assets 0 0
4,938,754 4,151,902 Current Assets 246,938 207,595 (4,936,758) (4,149,906) Current Liabilities (246,838) (207,495) 1,996 1,996 Net Current Assets 100 100 1,996 1,996 Net (Liabilities)/Assets 100 100
Capital and Reserves 3 3 Share Capital 1 1 1,993 1,993 Retained Earnings 100 100 1,996 1,996 Shareholders Funds 101 101
CONSOLIDATED PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME for the 9 months ended 31 March 2016 POOLE - 5 % Share Group Company Group Company
£ £ £ £
33,596,606 30,945,014 Turnover 1,679,830 1,547,251 (26,293,333) (24,084,713) Operating Cost (1,314,667) (1,204,236) 7,303,273 6,860,301 Gross profit / (loss) 365,164 343,015 (7,314,042) (6,867,174) Other operating expenses (365,702) (343,359) 0 Other operating income 0 0 (10,769) (6,873) Operating profit / (loss) (538) (344) 14,953 11,057 Interest receivable 748 553 0 0 Interest payable and similar charges 0 0 4,184 4,184 Profit / (Loss) on ordinary activities before taxation 209 209 (2,191) (2,191) Tax charge on ordinary activities (110) (110) 1,993 1,993 Profit / (Loss) for the financial year 100 100
0 0 Other Comprehensive Income 0 0 1,993 1,993 Total comprehensive income for the year 100 100
75 BOROUGH OF POOLE 2015-16
ANNUAL GOVERNANCE STATEMENT (AGS) 2015/16
1 SCOPE OF RESPONSIBILITY
1.1 The Borough of Poole 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 Borough also has a duty under the Local Government Act 1999 (as amended) 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 effectiveness.
1.2 In discharging these overall responsibilities, the Borough of Poole is responsible for putting in place proper arrangements for the governance of its affairs, and facilitating the effective exercise of its functions, including arrangements for the management of risk.
1.3 The Borough of Poole has adopted a Local Code of Governance, which summarises the Council’s governance framework consistent with the principles of the CIPFA/SOLACE Framework ‘Delivering Good Governance in Local Government’. A copy of this Code is available on the Council’s website at www.poole.gov.uk.
1.4 This statement explains how the Borough of Poole has complied with the Code and meets the requirements of regulation 6 (1 & 2) and 10 (1) of the Accounts and Audit Regulations 2015 in relation to the preparation, approval and publication of an annual governance statement.
2 THE PURPOSE OF THE GOVERNANCE FRAMEWORK
2.1 The governance framework comprises the systems and processes, and culture and values, by which the Borough is directed and controlled, and by which it accounts to, engages with and leads the community. It includes arrangements to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost-effective services.
2.2 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 and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the Borough’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.
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2.3 The Local Code of Governance is reviewed and revised annually as part of the production of this AGS process. No significant changes were considered necessary for the production of this statement, although appropriate updates have been made, for example, changes to Overview and Scrutiny Committee arrangements.
2.4 The governance framework has been in place at the Borough of Poole for the year ended 31 March 2016 and up to the date of the approval of the Statement of Accounts.
3 REVIEW OF EFFECTIVENESS OF THE GOVERNANCE FRAMEWORK
The Borough of Poole has responsibility for conducting, at least annually, a review of the effectiveness of its governance framework including the system of internal control.
The review considers both in-year arrangements (3.1) and year end review processes (3.2) that have taken place to review the effectiveness of the Borough’s Governance Framework.
3.1 IN-YEAR OPERATIONAL EFFECTIVENESS
The following aspects describe the in-year, continuous elements of the governance framework that help to ensure the on-going robustness of governance arrangements in the Council. a. Decisions are taken, by both Members and Officers, in line with the Constitution and schemes of delegation. b. The Cabinet and its Portfolio Holders are experienced Councillors who are responsible for considering overall financial and performance management and receive comprehensive reports on a regular basis. Members are also committed to upholding good governance through their role as the heart of the day-to-day decision-making process. c. New arrangements in respect of Overview and Scrutiny Committee arrangements were approved during the year, developed on the Council’s themes of People, Place and Business Improvement. d. The Standards Committee met during the year to consider and review issues relating to the conduct of Members including referrals from the Standards Board. A rolling register is maintained and reported to the Standards Committee on complaints against Members. e. The Audit Committee met throughout the year to provide independent assurance to the Council in relation to the effectiveness of the Council’s governance arrangements, risk management framework and internal control environment. In accordance with Part 2 (6) of the Accounts and Audit (England) Regulations 2015, the Audit Committee also reviews the effectiveness of the Borough’s system of internal audit. The Audit
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Committee has delegated approval to approve the Authority’s Statement of Accounts. f. The Audit Committee considered a variety of governance related reports during the year, including a breaches, waivers and exemptions report, whistleblowing, and counter fraud and corruption arrangements. Additionally, the Audit Committee reviews and approves the internal audit annual risk based audit plan, internal audit performance reports, risk management updates, and the reports from the external auditor, including the Annual Audit Letter. The Chief Auditor attends all Audit Committee meetings. g. As the officers with overall responsibility for governance across the organisation, the Chief Executive (Head of Paid Service), Head of Legal and Democratic Services (Monitoring Officer) and Head of Financial Services (Chief Financial Officer) meet approximately every two months as the Statutory Officers Group.
• The Chief Executive – is designated Head of Paid Service and functions include: o Overall strategic and corporate management and operational responsibility (including overall management responsibility for all officers); o Provision of professional advice to all parties in the decision making process; o Together with the Monitoring Officer responsibility for a system of record keeping for all the Council’s decisions; and o Representing the Council on partnership and external bodies (as required by statute or the Council). • The Monitoring Officer – functions include: o Maintaining the Constitution; o Ensuring lawfulness and fairness of decision-making; o Supporting the Standards Committee; o Dealing with Complaints; o Proper officer for access to information; o Advising whether Cabinet decisions are within the Budget and Policy Framework; o Providing advice; and o Contributing to corporate Management. • The Head of Financial Services – functions include: o Ensuring lawfulness and financial prudence of decision making; o Administration of financial affairs; o Contributing to corporate management; o Providing advice; and o Giving financial information.
• The Council’s Constitution contains a statement on ‘The Role and Function of the Chief Finance Officer’. This explains the role of the Chief Financial Officer (CFO) in terms of non-statutory codified professional practice, legislative and statutory responsibilities, and corporate governance requirements.
• The Council’s financial management arrangements conform to the governance requirements of the CIPFA Statement of the Role of the Chief Financial Officer in Local Government (2010). The CFO, and Monitoring Officer, are formal co-opted members of the Council’s Management Team.
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h. Management Team meet weekly and are responsible for: • Managerial leadership vision and strategic direction of the Council; • Formally responding to Cabinet policy direction to fulfil the Council’s corporate strategy; • Council wide policy and initiatives for Cabinet consideration; • Defining corporate culture and core values; • Ensuring the Council meets its statutory obligations; • Exercising sound corporate governance and effective corporate resource management; and • Ensuring the performance of the Council is managed effectively.
Management Team, together with the Head of ICT & Customer Support, Head of HR and the Programme Manager, meet monthly as the Corporate Change Board. They are responsible for the coordination of the Council’s major change programmes. i. The officer Property Steering Group supports the organisation with delivery of the Corporate Property Strategy (including estate management, property maintenance and accommodation). j. The Workforce Strategy Group, chaired by the Head of HR reports to Management Team and supports the maintains strategic oversight of issues affecting the capacity and capability of the Council’s workforce. k. The Council’s Internal Audit service: • Operates to the standards set out in the United Kingdom Public Sector Internal Audit Standards (PSIAS). • Has a terms of reference and strategy for delivering the internal audit plan agreed annually by Audit Committee. • Works to a risk-based Internal Audit Plan that is approved by the Section 151 Officer, following consultation with Service Unit Heads. The Annual Audit Plan and progress is reported throughout the year to the Audit Committee. The plan is developed to enable an opinion to be given on the Assurance Framework approved by the Audit Committee and takes into account the high risk issues, corporately and at service unit level, fraud risks, and key financial systems controls. • Undertakes fraud investigation and proactive fraud detection work, as detailed in the Counter Theft, Fraud and Corruption Policy, which includes reviewing the control environment in areas where fraud or irregularity has occurred. Significant weaknesses in the control environment identified by Internal Audit are reported to management and the Audit Committee. l. The review and monitoring of the Council’s risk profile is fully embedded facilitated by a corporate risk system that records all risks across the Council. Quarterly meetings are held with Service Unit Heads and Strategic Directors to review and update individual risk registers which fed into the Corporate Risk Register, which Management Team agree on a quarterly basis. The outcome is reported to the Audit Committee on a quarterly basis.
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m. Partnerships - governance arrangements for key partnerships are in place. A governance checklist exists to apply to new partnerships on set up. n. The Complaints process and Data Protection Breach reporting are designed to identify and address any weaknesses which may arise. o. External reviews and inspections are carried out throughout the year and the results are reported appropriately and action taken where necessary (see 3.2e). These include Grant Thornton’s Audit Findings Report which are considered by Management Team and the Audit Committee on behalf of the Council. p. The Council continues to proactively develop and update governance arrangements, for example, in response to the Ofsted Inspection of Local Authority Arrangements for Supporting School Improvement. q. Service Units use a range of measures to monitor and report performance to Strategic Directors and Portfolio Holders on delivering their business plans. Mid- and end-of-year performance reports are prepared for Management Team and Cabinet in line with the Performance management framework. r. Financial management reports are received regularly by Cabinet.
3.2 END-OF-YEAR REVIEW OF EFFECTIVENESS
The following aspects describe the year end review of the governance arrangements and the control environment which is mainly structured around the areas set out in the Councils’ Assurance Framework shown in the table below.
ASSURANCE SOURCE
Internal Audit Procurement Risk Management Financial Management Business Planning & Performance Management
Information Governance Counter Fraud Human Resources Health & Safety Business Continuity Value for Money Project & Programme Management ICT Asset Management HEAD OF INTERNAL AUDIT OFHEAD INTERNAL AUDIT ANNUAL OPINION REVIEW OF EFFECTIVENESS OF Management Assurance Statements
- External Assurances Governance Disclosure Statement AGS GOVERNANCE FRAMEWORK
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a. Internal Audit. A review of Internal Audit Report findings and recommendations, particularly in relation to those carried out for the assurance areas listed above. Note: As an Internal Audit review is conducted on a risk based sampling process and does not involve a review of every Council activity, transaction or project, the Chief Internal Auditor is unable to provide absolute assurance that the internal control environment is operating adequately and effectively. b. The Chief Auditor’s Annual Report 2015/16 is reported to the Audit Committee. This stated that it is the opinion of the Chief Internal Auditor that arrangements are in place to ensure an adequate and effective internal control environment exists for those areas set out in the Councils’ Assurance Framework. The systems and Internal Control arrangements continue to be effective and agreed policies and regulations are complied with. Managers are aware of the importance of maintaining internal controls and accept recommendations made by Internal Audit to improve controls. Adequate arrangements are in place to deter and detect fraud. c. Annual Management Assurance Statements (MAS) are produced and signed off by Service Unit Heads in respect of governance and internal control issues. d. The statutory officers (Chief Executive, Head of Legal and Democratic Services and Head of Financial Services) and Strategic Directors declare any areas of significant governance weakness they are aware of. Management Team has considered the significant governance issues to be included on the Annual Governance Statement. e. There were no significant governance issues arising from the following external audit reports received during the year:
Grant Thornton: • Audit Findings Report • Annual Audit Letter • Certification Report f. Other external inspections, including peer reviews and OFSTED reports, included:
Ofsted Inspection of Local Authority Arrangements for Supporting School Improvement (July 2015) – this was a concerning report which has led to a comprehensive strategy and action plan to address the findings and recommendations and has also led to the issue being included in the AGS for 2015/16 (see detail in Table 1 of this report)
Review of the Local Authority Arrangements for Supporting School Improvement in Poole (June 2015) – made a number of recommendations to improve school improvement in Poole.
LGA Peer Review of Children’s Services (May 2016) – a number of suggestions for improvement in the service were made. 6
Planning Advisory Service (PAS) – Resource Review (June/July 2015)
Ofsted review of Skills & Learning: Bournemouth, Dorset and Poole (June 2015) – assessed as ‘good’ for overall effectiveness, outcomes for learners, quality of teaching, learning and assessment and effectiveness of leadership and management.
Housing Peer Review/Gold Standard Inspection (April 2015)
ICT – Internal & External Security Assessment (October 2015)
Zurich Information Governance Health Check Report (Feb 2016) g. A review of fraud and special investigations carried out by Internal Audit during the year and the annual report on Counter Fraud work (received annually by Audit Committee in September). h. The Council has reached a good level of performance against the ‘CIPFA Code of Practice on Managing the Risk of Fraud and Corruption’. This means the organisation has put in place effective arrangements across many aspects of the counter-fraud code and is taking positive action to manage its risks. An action plan has been produced to further improve arrangements; no significant weaknesses were identified. i. Review of Financial Regulations Breaches, Waivers and Exemptions (received annually by Audit Committee in June). j. Review of the Corporate Risk Register (received quarterly by Audit Committee). k. Follow up of 2014/15 AGS Action Plan (received half yearly by Audit Committee). l. Review of year-end Corporate Change Board minutes
Additional areas of review included: m. Consideration of potential governance issues raised by Borough of Poole Members in the annual consultation. n. Review of summary of Schools Financial Value Standard (SFVS) returns. o. Assurance received from Poole Housing Partnership on the efficacy of their governance arrangements. p. Review and update of the Council’s Local Code of Governance.
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4. EVALUATION, CONCLUSION AND SIGNIFICANT GOVERNANCE ISSUES
4.1 Following review of effectiveness of governance arrangements, the Council considers that, for the year ended 31st March 2016 and to the date of the publication of the Statement of Accounts*, it has effective, fit-for-purpose governance arrangements in place which: • support delivery of its purpose, priorities, values and service objectives; • are in accordance with the Borough’s of Poole Local Code of Governance; and • support the principles of the CIPFA/SOLACE Framework ‘Delivering Good Governance in Local Government’.
* Any additional governance weaknesses identified between the approval of the AGS and the publication of the Statement of Accounts is taken to the Audit committee on an exception basis.
4.2 However, while overall governance arrangements are considered sound, the review (based on the criteria below), identified four significant governance issues which the Council feels could be strengthened.
1 The governance issue may, or has, seriously prejudice/d or prevent/ed achievement of a principal Council objective or priority; 2 The governance issue may, or has, result/ed in a need to seek additional funding to allow it to be resolved, or may, or has, result/ed in a significant diversion of resources from another service area; 3 The governance issue may, or has, led to a material impact on the accounts; 4 The impact of the governance issue may, or has, attract/ed significant public interest or seriously damage/ed the reputation of the Council; 5 The governance issue may, or has, be/en publicly reported by a third party (e.g. external audit, Information Commissioner’s Office) as a significant governance issue; 6 The governance issue has resulted in formal action being taken by the Chief Financial Officer and/or the Monitoring Officer.
4.3 The table below summarises those governance issues identified during the review for 2015/16, including comparison to the 2014/15 results.
Significant Governance Issue 2014/15 2015/16 Business Continuity Removed Information Governance Safeguarding Senior Officer Leadership – Capacity & Resilience (inc increased Complex Partnerships joint working arrangements) Democratic Governance Removed Local Authority Responsibility in - Supporting School Improvement
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4.4 In 2014/15 six significant governance issues were identified as indicated by the ticks above.
4.5 Two of these governance issues, Business Continuity and Democratic Governance, have been removed as a ‘significant governance issue’ for the following reasons: • Business Continuity – Business Resilience Strategy in place since May 2015 and resulting action plan is materially complete. • Democratic Governance – Democratic structures reviewed and revised Overview and Scrutiny arrangements in place.
4.6 A further two of these governance issues, Information Governance and Safeguarding have been retained on the 2015/16 AGS. Although enhancements to governance arrangements, as outlined in the 2014/15 action plan, have been implemented there remain improvements to make and to embed these improvements across all services. Some governance elements related to Information Governance and Safeguarding remain inherent, consequently there is a strong possibility these two governance issues may remain on the AGS for some time to come.
4.7 Following improvements and developments during the year, two governance issues from 2014/15 (Senior Officer Leadership – Capacity & Resilience, and Complex Partnerships), have been merged in order to better describe the governance issues facing the Council in 2015/16. This governance issue is now represented as Complex Partnerships (including increased collaboration and joint working) and Senior Officer Capacity.
4.8 One new significant governance issue, Local Authority Responsibility in Supporting School Improvement, was identified and the reasons for inclusion in the 2015/16 AGS are described below in Table 1, below.
4.9 Therefore, a total of four significant governance issues have been included in the 2015/16 AGS. Fuller explanations and an action plan including target dates to address each issue are shown in Table 1, below.
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Table 1 - ‘Significant Governance Issues’ for 2015/16 are shown below, along with actions and target dates
1 Information Governance The Council has continued to raise awareness of the importance of information governance and continued to review and develop a range of policy and
guidance. Information security still remains a high risk corporately, and as such, is included on the Corporate Risk Register. A 6 monthly update on information management is taken to Management Team.
What needs to be improved: 1a.The Council does not yet fully comply with the Government’s Transparency Code, although there has been continued progress through the year.
1b.The Council does not have a Record Management Policy but work is almost complete on a draft.
1c.Ensuring that Privacy Impact Assessments are routinely considered as part of Project Management arrangements.
1d.Training and awareness regarding data protections continues, however, data breaches are still occurring which are most commonly caused by human error.
1e.The November 2015 information governance update to Management Team showed only 46% of Subject Access Requests were answered within the statutory 40 days although this had improved from the previous year.
1f.Ensuring that a review of information sharing is considered as part of increased partnership and joint working arrangements.
Action: Target Date: 1.1 The Communications, Information and Marketing Team have identified the following next steps to continue to improve March 2017 Information Governance:
• To continue to work with Service Units to update information to comply with the Transparency Code as required; • To finalise the review of the Records Management policy; • To ensure Privacy Impact Assessments are recognised as a key component of the Council’s project management
process; • To continue with internal Information Governance campaigns to promote and raise awareness of new and emerging data protection issues; and • To support the development and launch of a new information sharing protocol across Dorset - the Dorset Information Sharing Protocol.
1.2 In addition, the Team will continue to monitor the SAR completion dates following implementation of the new reminder March 2017 system and considers whether any further action is required.
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2 Safeguarding
The Council believes that it has generally sound safeguarding governance arrangements in place. The May 2014 Peer Review of Adult Social Care Safeguarding and April 2014 Test of Assurance provided assurance over aspects of our arrangements. However, it recognises that a failure in its safeguarding arrangements, however small, could have devastating consequences, and that constant changes and emerging issues can lead to gaps in the governance framework. This is reflected in the Corporate Risk Register.
Following the June 2014 Ofsted report which concluded “The effectiveness of the Local Safeguarding Children Board (LSCB) requires improvement…(it) is not yet demonstrating the characteristics of good”, the Borough of Poole and partners have integrated outstanding actions from the Ofsted Action Plan into its on-going action planning for improvement in the Board’s outcomes.
A new framework for data collection and analysis of relevant performance and quality assurance data from all partners will be implemented in Spring 2016. The Interim Chair of the LSCB chaired a Governance review of the LSCBs in Bournemouth and Poole and Dorset from March to May in 2016. The review process was constructed so that shared learning can be implemented in the Safeguarding Adults Boards.
In response to the Child Sexual Exploitation scandal at Rotherham Council, the Council and LSCB continue to implement the LSCB’s strategy in relation to preventing and tackling Child Sexual Exploitation (CSE). A Cabinet Working party has been established to examine the Council and its partner’s responses to CSE and to ensure that all relevant areas of the Council are taking effective action. The Council has agreed a Safeguarding Strategy which is inclusive of CSE and this is being implemented across the Council.
What needs to be improved:
2a.The effectiveness of the LSCB and the arrangements to monitor outcomes.
Action: Target Date: 2.1 The Strategic Director ensures that any recommended improvements resulting from the Governance review of the March 2017 LSCBs in Bournemouth and Poole and Dorset are implemented and learning shared with the Safeguarding Adults Boards.
2.2 The Strategic Director continues to ensure that all relevant areas of the Council are taking effective action in response March 2017 to CSE and the Cabinet Working party is working effectively.
2.3 The Strategic Director ensures that the Council’s Safeguarding Strategy has been effectively implemented across the March 2017 Council, for example, that mandatory training is undertaken.
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3 Complex Partnerships (including increased collaboration and joint working) and Senior Officer Capacity In order to deliver objectives and maximise resource, the Council is engaging in an increasing number of partnership and other collaborative arrangements. This includes increasing joint working arrangements with Bournemouth, such as appointment of a shared ‘Executive Director – Corporate Services for Poole and Bournemouth’, and joint S151 Officer and Head of Financial Services arrangements.
Many new and proposed partnerships have increasingly complex governance arrangements in place, which reflect the significance of the partnership in terms of resource, service delivery, targets and resilience. The management arrangements, such as partnership boards and the strategic monitoring, are often required to be supported by Senior Officers.
The Council’s Financial Regulations includes requirements to ensure that partnership arrangements are sound, and during the year, Management Team introduced a ‘Significant Partnerships Governance Checklist’ to be considered when entering a partnership.
What needs to be improved: 3a.Clarity over definition of ‘significant’ partnership
3b.Ensuring that all new significant partnerships entered into have robust governance arrangements.
3c.Ensuring that all existing significant partnerships continue to have robust governance arrangements.
3d.Ensuring that potential conflicts of interest or unintentional impacts, when collaborating or joint working with Bournemouth and other partners, are identified and mitigated.
3e.Ensuring that risks associated with capacity and resilience of senior officers to attend and service partnerships boards etc are recognised and addressed. Action: Target Date: 3.1 Management Team agree a definition for ‘significant’’ partnerships and subsequently use this definition to identify March 2017 significant partnerships across the Council.
3.2 Service Unit Heads ensure that the ‘Significant Partnerships Governance Checklist’ is used to evaluate the March 2017 governance arrangements when entering new partnerships.
3.3 The Head of Audit & Management Assurance arranges for existing significant partnerships, as identified using the March 2017 Management team definition at 3.1, to be reviewed using the ‘Significant Partnerships Governance Checklist’.
3.4 Management Team considers whether there are any potential conflicts of interest or impact on resources with the March 2017 increasing joint arrangements with Bournemouth.
3.5 The Chief Executive considers whether there are any resource and capacity issues for senior management. March 2017
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4 Local Authority Responsibility in Supporting School Improvement An Ofsted inspection of local authority arrangements for supporting school improvement (July 2015) together with poor outcomes at Key Stage 2 and for disadvantaged pupils have resulted in the Council introducing a number of governance improvements during 2015/16. The Council established a new Educational Standards in Schools Governance Board, attended by the Leader and the Portfolio Holder and a ‘Raising Educational Standards Working Party’ to specifically scrutinise plans to improve education standards. External training has also been provided to scrutiny Members.
What needs to be improved: 4a.The outcomes for Key Stage 2 pupils and for disadvantaged pupils. Action Target Date 4.1 The Strategic Director ensures that the changes to the local authority’s arrangements for supporting school Summer 2016 improvement are evaluated following the 2016 Key Stage 2 results and periodically thereafter any further changes.
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This statement explains how the Borough of Poole has complied with the requirements of the code and also meets the requirements of regulation 6 (1 & 2) and 10 (1) of the Accounts and Audit Regulations 2015.
We have been advised on the implications of the results of the review of the effectiveness of the governance framework by the Audit Committee, and a plan to address weaknesses and ensure continuous improvement of the system is in place.
We propose over the coming year to take steps to address the above matters to further enhance our governance arrangements. 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.
Signed ______Date ______
A Flockhart Chief Executive
Signed ______Date ______
Cllr Janet Walton Leading Member of the Council
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APPENDIX B1
GLOSSARY
Accounting Period
The period of time covered by the accounts, normally a period of twelve months commencing on 1 April. The end of the accounting period is the balance sheet date, 31 March.
Accruals
Sums included in the final accounts to cover income or expenditure, whether revenue or capital in nature, attributable to the accounting period but for which payment has not been made/ received at the balance sheet date.
Asset
Something of worth which is measurable in monetary terms. These are normally divided into current assets and fixed assets.
Balance Sheet
A statement of the recorded assets, liabilities and other balances of the Authority at the end of the accounting period.
Capital Charge
A charge to the service revenue accounts to reflect the cost of utilising fixed assets in the provision of services.
Capital Expenditure
Expenditure on the acquisition of fixed assets which will be of use or benefit to the Authority in providing its services beyond the year of account or expenditure which adds to an existing fixed asset.
Capital Financing
The method by which money is raised to pay for capital expenditure. There are various methods of financing capital expenditure including borrowing, leasing, direct revenue financing , usable capital receipts, capital grants, capital contributions, revenue reserves and earmarked reserves.
Capital Programme
The capital schemes the Council intends to carry out over a specified time period.
Capital Receipt
Money received from the sale of non current assets, or other money received towards capital expenditure.
Cash Flow Statement
A statement summarising the inflows and outflows of cash arising from transactions between the Authority and third parties for revenue and capital purposes.
Charging Authority
The Authority responsible for administering the Collection Fund, including raising bills for and collecting the appropriate council tax and national non-domestic rates (NDR).
Collection Fund
A fund administered by the Charging Authorities into which is paid council tax and NDR income and outstanding community charge income. Precepts are paid from the fund to Precepting Authorities, including the Charging Authority, and the NDR collected is shared in accordance with the localisation of business rate scheme. APPENDIX B2
GLOSSARY
Community Assets
Assets that the Authority intends to hold in perpetuity that have no determinable useful life, or that may have restrictions on their disposal. Examples of such items are parks and cemeteries.
Council Tax
A charge on the residential property within the Authority's area to finance a proportion of the Authority's expenditure.
Creditors
Amounts owed by the Authority for work done, goods received or services rendered within the accounting period but for which payment was not made at the balance sheet date.
Current Assets
Assets which can be expected to be consumed or realised (ceases to have material value) during the next accounting period.
Current Liabilities
Amounts which will become due or could be called upon during the next accounting period.
Debtors
Amounts due to the Authority for goods or services provided within the accounting period but not received at the balance sheet date.
Deferred Capital Receipts
Amounts due to the Authority from the sale of fixed assets which are not receivable immediately on sale.
Depreciation
The theoretical loss in value of an asset due to age, wear and tear, deterioration or obsolescence.
General Fund
The main account of the Authority which records the cost of service provision and movement on general fund.
Government Grants
Payments by central government towards the cost of Local Authority services either specifically (e.g. improvement grants) or generally (e.g. revenue support grant).
Housing Revenue Account
A separate account to the General Fund recording all the transactions relating to the provision of council houses.
Inventories
Items of raw materials and stores purchased by the Authority to use on a continuing basis and which has not been used. The value of those items not used at the balance sheet date are included as assets of the Authority.
Leasing
A method of financing capital expenditure where a rental charge is paid for the asset over a specified period of time. APPENDIX B3
GLOSSARY
Non-Domestic Rates (NDR)
An NDR poundage is set annually by central government and collected by Charging Authorities. The proceeds are shared between the Government, Local Authorities and Fire Service under the Business Rates Localisation scheme.
Non Current Assets
Assets which can be expected to be of use or benefit to the Authority in providing its service for more than one accounting period.
Precept
The amount which a Precepting Authority requires from a Charging Authority to meet its expenditure requirements.
Precepting Authority
Local Authorities, including parish councils and police authorities, which cannot levy a council tax directly on the public but have the power to precept Charging Authorities (District Councils).
Provisions
Amounts set aside in the accounts for future liabilities which cannot accurately be quantified.
Public Works Loan Board (PWLB)
A government agency which lends money to public bodies for capital purposes. At present nearly all borrowers are local authorities. Monies drawn from the National Loans Fund and rates of interest are determined by the Treasury. The amount each local authority can borrow in any one year is determined by an annual maximum quota based on capital expenditure, outstanding debt and amounts set aside as provision to meet credit liabilities.
Reserves
Amounts set aside in the accounts for the purpose of defraying future expenditure. A distinction is drawn between reserves and provisions which are set up to meet known liabilities.
Revenue Account
An account which records the Authority's day to day expenditure and income on such items as salaries and wages, running costs of service provision and the financing of capital expenditure.
Revenue Expenditure Funded by Capital Under Statute (REFCUS)
Expenditure which may be properly capitalised, but which does not result in, or remain matched with, tangible fixed assets.
Revenue Support Grant (RSG)
A general central government grant paid to the Income and Expenditure Account in support of the Charging Authority's revenue expenditure.
Support Services
The cost of departments which provide professional and administrative assistance to services.
Temporary Borrowing/ Investment
Money borrowed or invested for an initial period of less than one year. APPENDIX C
INDEX
PAGE PAGE
A L
Accounting basis and funding regulations 22 Long - Term Debtors 45 Accounting policies 5 Long - Term Borrowing 47 Audit costs 31
B M
Balance Sheet 3 Major Repairs Reserve 65 Members' Allowances 31 Minimum Revenue Provision 44 C N Non Current Assets 39 Capital Adjustment Account 53 Narrative Statement (i) - (vi) Capital Expenditure and Financing 43 Cash Flow Statement 4 P Cash and Cash equivalents 46 Current Assets Held For Sale 46 Payments in Advance 45 Collection Fund - Income and 66 Poole Housing Partnership 74 Expenditure Account Property Plant and Equipment 39 Comprehensive Income and Expenditure Account 2 Provision for Bad/ Doubtful Debts 45 Creditors 47 Provisions 51 Capital Financing Requirement 44 R D REFCUS 43 Debtors 45 Retirement Benefits 55 Dedicated Schools Grant 34 Related Party Transactions 31 Deferred Capital Receipts 54 Revaluation Reserve 53 Revenue Reserves 25 E S Employee Remuneration 32 Segmental Reporting 26 F Service Expenditure Analysis 2 Significant commitments capital contracts 44 Financial Instruments 48 T
G Termination Benefits and Exit Packages 55
Glossary App B Government Grants and other 51 U
H Usable Capital Receipts 54
Housing Revenue Account 61 Housing Stock 63
I
Investments 46 Investment Property 42 Intangible Assets 42