Water Authority Lught-reill Ushtey Ellan Vannin Allan Brown

Annual Report and Accounts Imraa as Coontaghyn Bleeaney 2009/2010 2 la MEMBERS OF THE BOARD

Back row: M R Coleman (Board Member), C H Coole (Board Member), H M McCallion (Board Member) Front row: J A Smith (Chief Executive), T Crookall MHK (Chairman), Mrs C Christian MLC (Vice Chairman)

Tim Crookall MHK Before being elected Member of the for Peel in 2006 was a postman, a builder and a Department of Health and Social Security Care Worker and served as a Peel Commissioner from 1991 – 2006. Since 2006 he has been a Member for the Department of Home Affairs, the Department of Transport and was Vice Chairman of the Office of Fair Trading. During 2009/10 he served as a Member for the Department of Local Government and the Environment. Additionally, he is presently a member of seven Tynwald and Keys Committees and was appointed Chairman of the Water Authority in May 2009.

Clare Christian BSc MLC Before returning to the Island Clare Christian was a research chemist for Cadbury. As a member of Tynwald for over 20 years, Mrs Christian has served in both the House of Keys and the Legislative Council having been the Minister for the Department of Health and Social Security for many years and a Member of several other departments including Treasury,Transport, Local Government and the Environment and the Department of Trade and Industry. During 2009/10 she served as a member of the Department of Trade and Industry. She has also chaired the Insurance and Pensions Authority and the Planning Committee and is Chairman of the Standing Committee of Tynwald on Public Accounts. Additionally, she has participated in the work of a wide variety of Select and Standing Committees of Tynwald. She was appointed Vice Chairman of the Water Authority in May 2009. 3

Michael R. Coleman LLB(Hons)(Open), CEng, FBCS CITP, FIMIS Michael Coleman has been resident on the Isle of Man since August 1988 when he transferred from the Bahamas for what is now Coutts & Co. He is a Chartered Engineer, Chartered Fellow of the British Computer Society (BCS) and is Chairman of the Isle of Man International Section. Michael has considerable executive management experience having held numerous Directorships within Coutts & Co and other organisations. He also served as Joint Deputy Chairman of Coutts Bahamas and Coutts Cayman. He has had considerable experience of the water industry, having been responsible for information technology for a company specialising in the design and construction of water infrastructures based around major desalination plants located in the Middle East. This role also included responsibility for the process control systems that controlled the water production facilities. Michael has been a Member of the Board of the Water Authority since January 2002, being reappointed to the Board in February 2007. He is Chairman of the Investments, Wayleaves & Easements and Water Act Committees and serves as a member of the Audit Committee.

Charles H. Coole Eur Ing, C Eng, MICE, FCIWEM Charles Coole was educated locally before being taken on as a trainee engineer with Douglas Corporation Water Department. After four years (with part-time study) he joined Manchester Corporation Water Works as an assistant engineer where he stayed for six years, continuing part-time study. A further move took him to the North West Worcestershire Board as a design engineer for four years, later joining Ward Ashcroft & Parkman (now Mouchel Parkman Consultants), initially working in Eastern Nigeria on refurbishment of water supplies damaged during the Biafran War. Charles spent eight years working for Parkman in Nigeria, gaining the position of Associate Partner and joining a World Bank mission to Eastern Nigeria appraising urban water supplies. Returning to the Isle of Man in 1979 Charles joined Rogers Consultants as a Company Secretary/Engineer, responsible for the day-to-day management of the company. Since 1984 he has worked as a consultant on a variety of projects, mainly large water supply schemes in Nigeria and Ethiopia, where his work included planning reports, detailed design work, construction administration and site supervision. Charles has been a Member of the Board of the Water Authority since January 2002, being reappointed to the Board in February 2007. He is Chairman of the Capital Projects Steering Group and Chairman of the Authority’s Health and Safety Committee.

Hugh M. McCallion FISE, M.Inst.M. Hugh McCallion was born in Belfast but spent the majority of his career in England. He started as a design engineer with De Havilland Propellers working on such projects as Blue Streak and Blue Steel Missiles before moving into sales and marketing and then management, eventually being appointed Managing Director of a company manufacturing metal components using a chemical machining process. During this period, in 1978, he was the first European to be invited to join the Photo Chemical Machining Institute, which has its head office in Cape Cod, Massachusetts, USA. PCMI was then a USA organisation but is now an international one. Hugh was the first non-American to join the Board and become President and is still an active past President Board Member. He is currently Chairman of a pump and filtration company in California and Shanghai and brings with him a wealth of commercial experience as well as knowledge of engineering and water treatment. Hugh has been a Member of the Board of the Water Authority from October 2004 to January 2007 and was reappointed a Member of the Board in February 2007. He is Chairman of the Authority’s Audit Committee and serves as a member of the Investments Committee and the Capital Projects Steering Group. 4 16; CONTENTS

Foreword Page 5

Chairman’s Statement Page 6

Statement of Internal Control Pages 7 - 8

Chief Executive’s Report Pages 9 - 17

Statement of the Board Page 18

Officers and Professional Advisors Page 18

Report of the Independent Auditors Pages 19 - 20

Income and Expenditure Account Page 21

Balance Sheet Page 22

Cash Flow Statement Page 23

Notes to the Accounts Pages 24 - 30

Meetings and Sites/Works Visits Page 31 5 FOREWORD TO THE ANNUAL REPORT AND ACCOUNTS 2009/10

The purpose of this foreword is to offer an overview of the issues that the Board of the Isle of Man Water Authority (the Authority) consider to be the most significant financial matters reported within the 2009/10 accounts. This foreword also confirms the overall sustainability of the Authority and thereby gives comfort to customers that the quality of water supplied and the future availability of water resources will be maintained and monitored to industry standards.The Authority will continue to operate prudent and regularly reviewed financial controls that will ensure value for money. 1. The Authority is wholly owned by the . 2. The Authority is funded through the water rates with its capital expenditure supported by a Treasury bond with a value of £75 million taken out by Government in 2000.This Bond is repayable in full in March 2030 and a sinking fund is in place which is funded to meet this obligation. 3. The current financial position shown within these accounts is that the Water Authority has net assets of £44.9m and a positive cash flow in 2009/10 from revenue activities of £6m.The Accounts for 2009/10 show a surplus of £4.439 million, which is an essential part of both the financing of capital schemes between now and 2021 and the building up suitable interim reserves to be able to repay in full the £75m Treasury Bond in 2030. 4. The Asset Management Plan (AMP) spend to March 2009 totals almost £75m including £40m for the two new Water Treatment Works at Sulby (Opened Nov 2005) and Douglas (Opened May 2008). A further £34m at 2010 prices is scheduled to be spent between April 2010 and March 2021.This will then conclude the 20-year AMP programme set out on 1999 and revised 2002. 5. The Authority runs a detailed financial model each year to continually review the long-term sustainability of the Authority and confirm its ability to meet the commitments made to Tynwald in 1999. 6. The Authority continues to manage its funds prudently with a return on investments during 2009/10 which contributed £1.6m to the overall annual surplus. 7. The Authority completes a Statement of Internal Control which is approved by the Board and issued to Treasury in January of each year. A full annual Statement of Internal Control from January 2010 is included in this year’s Report and Accounts. 8. It is worth noting in the current climate that the Water Authority has no direct Pensions liabilities but does pay in full all annual Treasury demands for Employers superannuation contributions. 9. The Authority has a policy of reporting all exceptional items to Board,Treasury and within the body of the Report and Accounts when of material importance. 10. The Authority is obliged to comply with all changes of regulations and standards as set by industry or regulatory powers.Any material changes within the year are disclosed within the Report and Accounts. 11. As of April 1st 2010, the Water Authority was merged with the Sewerage Authority to form the Isle of Man Water and Sewerage Authority a wholly-owned Statutory Board of the Isle of Man Government.The Report and Accounts in future will be for the merged Authority. 12. Asset valuations for non-working assets were re-valued under SORP 2007 regulations and resulted in an increased property valuation in the sinking fund from £0.3 to £1.7m. 6

CHAIRMAN’S STATEMENT

In this annual review of the performance of the Isle of Man Water Authority I must also reflect on the changes implemented by the organisation over the last 10 years. I am pleased to be able to report that whilst there are still significant works which will be required in future years, it is now evident that the essential improvements which were identified in the Strategic Business Plan presented to Tynwald in 1999 are, for the most part, being delivered reliably by the Authority.The significant capital works programme has been delivered by a team of committed and competent staff who have built an organisation which is meeting its service standards, is financially sound and is in a fine position to continue to meet the commitments made to Tynwald and to its customers with regard to the quality and the cost of the service delivered. The 2008/9 Annual Report and Accounts made reference to the unusual financial situation that had been experienced within the world’s markets and the impact that had been experienced by the Authority. It is pleasing to be able to report that the events of October 2008 have now stabilised and the Authority has once again achieved an increase in the value of its total investments which ensures that the repayment of the £75 million bond remains on track. The standards of service received by the Authority’s customers have been the foundations upon which the capital works programme has been built. Many will recall times when water was discoloured or burst mains resulted in frequent interruptions to supply. It is with real pleasure that I can now report on water quality which generally exceeds the average experienced in the United Kingdom. In addition to this the Authority is supplementing the mainlaying programme being undertaken on our behalf by contractors with works carried out by our own dedicated mainlaying team.The mainlaying works that have been carried out over the last 10 years have now replaced many of those mains that were failing too frequently which resulted in inevitable but unacceptable failures of service. The Water Authority will become the Water and Sewerage Authority from 1st April 2010. It is therefore appropriate that I offer my most sincere thanks to those who have allowed the significant milestones referred to above to be achieved. The current Board and all the staff are to be congratulated on the work that they have done in the last year and I would extend that to include all the members of the Board who have driven the essential strategic changes over the last 10 years. Also to all of those staff who have in that same period delivered the best service that they could whilst building an organisation which has improved in so many key areas. It should not be thought that this is the end of the journey.There is still much to achieve, but it will be the Isle of Man Water and Sewerage Authority which will be required to deliver the next phase. It is a real pleasure to be Chairman of this new organisation which merges the Water Authority and the Drainage Division from the Department of Transport. I welcome all those who are now included in the Water and Sewerage Authority and I am confident that together we can achieve further significant improvements to the services received by the population of the Island.

T. Crookall MHK, Chairman 7 STATEMENT OF INTERNAL CONTROL YEAR ENDED 31 MARCH 2010

The Isle of Man Water Authority (“the Authority”) is constituted as a Statutory Board of Tynwald under the Water Act 1991. This report is made by the Authority to the Chief Financial officer of the Isle of Man Government Treasury in accordance with the requirements of the Isle of Man Government’s Corporate Governance Principles and Code of Conduct (“the Code”). Responsibilities of the Board and the Accounting Officer The Board controls strategy, policy and key financial and operational matters within the Authority. In addition it is the Board’s responsibility to ensure that the work of the Accounting Officer and other senior officers supports the strategy and policy approved by the Board. As Accounting Officer, the Chief Executive of the Authority is responsible for implementing and maintaining systems of internal control and corporate governance which: • ensure compliance with legislation and other regulations; • safeguard public money, ensure that it is properly accounted for and that it is used economically, efficiently and effectively; and • support the achievement of the strategy, policies, aims and objectives approved by the Board. In discharging this responsibility, the Chief Executive works with senior officers to put in place arrangements for the governance of affairs of the Authority and the stewardship of resources in accordance with the Code. Corporate Governance The Authority has developed a single corporate governance framework which documents its performance in the key areas of community focus, performance management, structures and processes, standards of conduct and risk management. The review that has been carried out by the Accounting Officer for the financial year shows that the Authority has implemented improved policies and procedures which have resulted in the overall performance of the organisation improving in each of these areas. Those improvements have been achieved as a result of a risk management process which identifies areas where underperformance can affect the health of the organisation and subsequently monitors the effectiveness of the measures taken to reduce such risks. Risk Management The Authority has continued to develop its approach to managing the key risks that would prevent the organisation from meeting its obligations as defined in the Water Act 1991 or fulfilling the requirements of the Isle of Man Government’s Corporate Governance Principles and Code of Conduct. Those key risks may be categorised as Business Risks, Economic Risks or Operational Risks.The Authority maintains a live risk register within which a comprehensive list of all risks is maintained and the progress which is being made on minimising those risks is captured. Business Risks are those which any organisation must manage and will generally relate to the failure of systems or procedures which are required to ensure the delivery of a service which the Authority is obliged to provide in a timely manner and to the required standard. Similarly, the loss of the services of key staff may lead to an interruption to the service offered or the quality of that service. The Authority has sought to minimise this area of risk by introducing ISO procedures in key areas across the organisation which are audited by both internal and external auditors. The Authority will continue with the ISO procedures project until all key business areas are covered. The Authority is keenly aware that the skills and knowledge of its existing staff is a major asset and the Board is supporting a succession management plan designed to ensure that a career path may be seen by staff within the Authority and the opportunity is provided within its structure for knowledge to be shared and thus reduce the reliance on individuals. Economic Risks are those which are related to the impact of wider economic issues on the financial stability of the Authority. The Isle of Man Water Authority is entirely self-financing and receives its income directly from its customers. In order to deliver its substantial capital programme, it has issued, through Treasury, a £75 million bond which must be repaid in the year 2030.This has resulted in the Authority having an investment portfolio which is affected by the changes in the wider economy. The Authority, through its Investment Committee, prudently manages its income and its investments to ensure that its commitments with respect to capital expenditure are affordable and that the repayment of the bond in 2030 is assured. 8 STATEMENT OF INTERNAL CONTROL – continued YEAR ENDED 31 MARCH 2010

Operational Risks are those which would generally lead to a failure in the service delivered due to, for example, the failure of a major asset. The Authority has many years of experience in monitoring the performance of its assets and ensuring that maintenance is undertaken in a timely manner. The increasing complexity of the assets and the systems which control those assets provides benefits in terms of the quality of the service delivered but may result in significant disruptions to supply if those systems fail. The Authority is committed to increasing its stockholding of essential apparatus and developing strong relationships with suppliers of key goods and services in order to minimise the risk of prolonged failures. Review of Internal Control and Corporate Governance Environment The Authority’s systems of internal control, risk management and corporate governance have been developed through an ongoing process designed to identify the principal risks, to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. Further evidence as to the effectiveness of internal controls and corporate governance arrangements is provided by reports issued during the year by the Treasury, Internal Audit, the External Auditors and other external reviewers. Report on Internal Control and Corporate Governance Environment Attention is drawn to the fact that systems of internal control and corporate governance are designed to manage, rather than eliminate, the risk of failure to achieve objectives. They can therefore only provide reasonable and not absolute assurance. Accordingly, reasonable assurance is given that the Authority’s internal control and corporate governance arrangements are adequate and operated effectively during the year ended 31 March 2010. The Authority is committed to a process of continuous development and improvement. It is recognised there is always room for improvements to be made in the areas of internal control and corporate governance. While a number of planned business improvements have been identified during the assessment, there are no significant control weaknesses or issues to report. joi,„

John Smith, Chief Executive 9

CHIEF EXECUTIVE’S REPORT

INTRODUCTION The Isle of Man Water Authority is an organisation which provides a service central to the health and well- being of the whole community.The Authority must provide a service which consistently meets the community’s needs and the achievement of that objective, coupled with its delivery in a cost-effective manner, has been at the heart of the organisation for the last 10 years.The Authority sets its objective within the Strategic Business Plan in 1999 to deliver a valued service and the subsequent Asset Management Plans have developed those capital schemes which would permit the achievement of that objective.The Asset Management Plan is now 75% completed and the organisation is changing from one delivering a relatively small number of major schemes to one that is developing a capital maintenance programme which will consist of the many smaller schemes required to maintain or improve the serviceability of its asset base. In the last year the new asset infrastructure has been tested and found to be robust.The quality of the water produced by Douglas and Sulby Water Treatment Works has been consistently high irrespective of the incoming raw water quality and the ability to meet periods of exceptional demand was demonstrated during early January when the very cold weather caused many bursts on both the Authority’s network and private supplies. The Authority continues to monitor and report the number of burst mains that occur each year. In the last year the total of bursts rose, however, the number of customers whose supplies were interrupted for an extended period was lower than most UK Water Companies and it is a tribute to those undertaking the maintenance and repair of the system that they respond so quickly and effectively 24 hours a day, 365 days a year. The performance of the organisation as a whole is monitored by a series of published key performance indicators and it is encouraging that most of the targets set in the 2009 Service Delivery Plan have been achieved and even more challenging targets have been set, where appropriate, for the coming year. When discussing performance, year-on-year improvments can only be achieved if staff are committed to delivering these continuous improvements. It is clear that the staff employed by the Authority are a capable and committed team who understand the contribution that they make to the overall success shown in all aspects of the Authority’s service delivery. 10

CHIEF EXECUTIVE’S REPORT – continued

WATER RESOURCES The Authority continues to operate the impounding reservoirs at Sulby, West Baldwin, Kerrowdhoo, Clypse and Block Eary for the purpose of public water supply and two other reservoirs at Cringle and Ballure which are now solely used as public amenities. All of the structures are covered by the Reservoirs Safety Act and are monitored annually by the Authority’s Supervising Engineer and a periodic inspection is also completed by an All Reservoirs Panel Engineer. The level of raw water available in the reservoirs is monitored and if, during extended dry periods, the level of water in the 3 reservoirs supplying Douglas Water Treatment Works drops to unacceptable levels, steps can be taken to pump water from Sulby to West Baldwin.This is an expensive operation but provides the security of raw water supplies which is necessary to avoid water restrictions in all but the driest of summers.The level of West Baldwin Reservoir remained over 80% full throughout the year and there was no need to supplement stocks by using the Sulby pumps.

WATER TREATMENT The customer judges the service received from the Water Authority on the quality and the reliability of supplies received. In the past, the level of service has been less than desired but the Authority is now operating new Water Treatment Works and this has made significant improvements to the quality of water produced and that improvement is experienced by customers when they use the water supplied. The Water Authority compares its performance with that published in the UK for all Water Companies. In the last financial year the Authority’s performance for overall drinking water quality exceeded that provided on average by the UK Water Companies in 2009/10 2008/9 (the last published statistics) and similarly exceeded the average attained in the UK for both measures of the effectiveness of the Water Treatment processes. A source of concern expressed in previous Annual Reports has been with respect to the presence of lead in the drinking water, which would have been dissolved from the lead supply pipes feeding perhaps 11,000 properties on the Island.The improved plumbosolvency control which is offered in the treatment processes has reduced the tendency of lead to dissolve into water supplies and during 2009/10 the Authority identified no water samples which failed the current lead standard of less than 25 mg/l, nor did it have any samples which failed the standard which is to be introduced in 2013 of less than 10 mg/l. This is a most significant success and reduces the likelihood that the Authority will need to undertake a comprehensive lead replacement programme, the cost of which could have reached £3 – 4 million.

Percentage Lead Failures 25

ures 20 il 15

10

ercentage Fa ercentage 5 P 0 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year I I % Lead Failures at 25µg/l II % Lead Failures at 10µg/l

A further benefit from the introduction of the new Treatment Works is the 100% compliance that is being achieved with the standard for trihalomethanes (THMs) as a result of the effective removal of organic matter during the treatment process when chlorination promotes the formation of these compounds.The 3-stage process is effective and delivering the benefits that the Authority set down in the standards published as part of its Strategic Business Plan.

11

WATER DISTRIBUTION The Authority endeavours to offer a service which is available to its customers 24 hours a day. Interruptions to that service as a result of a failure within the water supply network are always treated as an emergency and the Authority’s performance currently shows that only 0.3% of the properties served suffered an interruption to supply for an extended period.This represents half the rate experienced on average within the UK. The number of burst mains experienced in the last year rose by 10% on the previous year.The overall level is considerably lower than experienced in the past and this is due to the programme of replacing mains which are failing too frequently and this area of capital maintenance will continue each year to ensure that service standards do not deteriorate due to the increasing age and unreliability of assets. A similar programme for the refurbishment of the Authority’s pumping stations has been in progress for some years and is now drawing to a close with the introduction of new, efficient pumps and control systems which ensure that supplies are more reliable and any failure is immediately alarmed to the Authority’s Operations Room at Tromode. The Authority continues to concentrate on managing the level of leakage from its mains at the economic level established by the Water Research Centre. An overall level of leakage in the year of 7.1 litres per property per hour was achieved against a target of 6.6 to 7.0 litres per property per hour.The levels of leakage from the system rose dramatically in January 2010 as a result of the extremely cold weather experienced at the start of the year but the acceptable level was recovered during subsequent months. It is worth noting that demand at that time would have exceeded the capability of the Treatment Works available just 5 years ago. The introduction of the new works Treatment Works and the additional capacity that they provided meant that the short-term increase was managed without any resultant impact on levels of service. It is also a tribute to those managing this area of the business that leakage levels were brought back down to more normal levels within a short time. The reliability of supplies is increased as a result of the water stored in covered service reservoirs around the Island. The construction of a replacement for Ballagawne service reservoir was started during the year and a new service reservoir to supply Ramsey will commence in 2010.

Leakage Control 14

12

10

8

O. L 6

4

2

0 r r r r r r er r er 6 41.r 6er 6 6 6 is 6er 6 er er 6ter 6 4te4 6ter 6te ter te te te I ter te te 6ter I 6ter 6 6te 6 6ter I 6ter a at a at a a a at a ater a ater a at a ater a at a ater a at ater et qu etIqu ".• ua ".• c?qu .4' 1116 14' 1 1 1 1 1.4'qu 1 d qu qu qu qu qu qu 4- 4. 4, 4. 4. 4. 4, 4- 4. 3rd qu 4.. 4, 4. 4' 4' 1st qua4' 1st q 3rd qu 4' 1st qu 3rd qu 4' 7 1st qu 7 3rd 8 1st qu 8 3rd 9 9 3r 0 0 1 1st 1 3rd qu 2 1st qu 2 3rd 3 1st 3 3rd qu 4 1st 4 3rd qu 5 1st qu 5 3rd qu 6 1st 6 7 1st 7 3rd qu 8 8 9 1st qua 9 3rd 0 1st qua 9 9 9b oo,t9 9 9, 8e0 0 0 0 0 0 0 0 dddddd0 0 0 0 0 O^0 0 O^0 0 dddd0 0 0 1 12 ir CHIEF EXECUTIVE’S REPORT – continued la Mir WATER QUALITY The Authority completes over 45,000 water quality tests each year in order to monitor the water that is supplied. These tests are essential to demonstrate levels of compliance with the standards used in the UK and provide the assurance to customers that the water delivered meets the very highest standards. The Authority has invested heavily in the provision of assets which will treat the raw water from the impounding reservoirs. It is now developing Water Safety Plans which will help to manage water supplies from the rainfall on the upland catchments to the customer’s tap. Each stage of the water cycle offers the opportunity to minimise the presence of unwanted contaminants and optimise the processes employed which will result in even better supplies of treated water and the risks which may be associated with that process being better understood and therefore better managed.The preparation of Water Safety Plans has now been in progress for over a year and the support that the Authority is receiving from other bodies, both public and private, is extremely encouraging.

Manx Tap Water

Isle of Man Water Authority Figures UK Industry Average 2005-06 2006-07 2007-08 2008-09 2009-10 2009-10 Overall Drinking Water Quality 99.15% 99.31% 99.18% 99.84% 99.99% 99.95% Water Treatment Process Control Index 97.01% 97.73% 99.63% 99.86% 99.95% 99.97% Disinfection Index 99.89% 99.97% 99.82% 99.93% 100.00% 99.94% Distribution Systems Distribution Maintenance Index 98.88% 98.91% 99.04% 98.93% 100% 99.86% Reservoir Integrity Index 99.88% 99.49% 99.73% 99.55% 99.61% 99.96% Building Water Systems Parameters influenced by 99.65% 98.43% 99.44% 99.81% 99.76% 99.87% Domestic Water Systems

13

Overall Drinking Water Quality

100 ■ 98

96 ■ 94 ■ 92 90 Li H 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Industry Average Year

The Distribution System consists of 2 Indices:The Distribution Maintenance Index and The Reservoir Integrity Index

Distribution Maintenance Index 100

99

98

97

96

95

94

93

92

91

90 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Industry Average

Year

Distribution Maintenance Index I I Reservoir Integrity Index

14

CHIEF EXECUTIVE’S REPORT – continued

CUSTOMER SERVICES The Water Authority has developed its Customer Services section over the last few years to ensure that any customers who deal with the Authority are given the kind of service that they would expect from a professional organisation.The Authority’s intention is that any issue or complaint which is received will be dealt with effectively and the Customer Services section acts as that individual’s representative within the Authority and ensures that the matter is dealt with as quickly as possible. It is proposed that in the coming year a new form of customer survey will be introduced in order to assess how well the Authority’s performance is regarded by our customers and this will become a key performance indicator in future years.

Customer Service Complaints

2000

ts

in I la 1500 mp P §

f Co 1000 o

ber 500 m Nu 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year

Others No Water Water Quality

FINANCE The Finance section of the Water Authority is an essential part of the overall team that delivers the service to our customers.The Authority is an entirely self-funded organisation which does not receive any contributions from Treasury for either its revenue or capital expenditure. Over the last 10 years the delivery of the major improvements discussed earlier in this report have relied on a successful partnership between the Engineering side of the business, which was committed to delivering those schemes that improve the service offered, and the Finance section which has ensured that the capital programme remained affordable and that any funds available were managed effectively to deliver the best outcome. At the end of 2009/10 it is pleasing to report that an operating surplus of some £4.4 million was achieved.This surplus is an essential part of the Authority’s future funding in that the £30 million of capital investment will utilise any surplus in each year to allow the programme to proceed without the need for further borrowing, and to ensure that the sinking fund which will repay the £75 million bond remains in a healthy condition. The Authority manages its finances and prepares its accounts to the highest standard, i.e following the UK Generally Accepted Accounting Practices.As a result of the high standards adopted, the Authority’s overall financial position is set out in the attached Annual Accounts and shows that, despite the market fluctuations which have had a significant impact on investment income over the last two years, the prudent management of the finances has allowed the operation of the organisation to continue in line with its long-term plans.This means that the capital programme remains affordable and the sinking fund is growing in line with the original projections agreed with Treasury. 15

Capital Amp Spend 1999 - 2020

140,000,000

120,000,000

100,000,000

80,000,000

60,000,000

40,000,000

20,000,000

0 g 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20

II Cumulative AMP costs to Mar 2010 II Projected costs inc 3% inflation 16 la CHIEF EXECUTIVE’S REPORT – continued CORPORATE SERVICES The Corporate Services Section provides the back office support to the remainder of the Authority, ensuring that a culture of continuous improvement is embedded in the business. The Authority has developed its own approach to identifying and managing the risks which, if they were to materialise, would seriously impact on its ability to operate effectively.Those risks might be operational or financial, internal or external but they must all be managed and that may sometimes require changes to the way in which the business operates to either reduce or eliminate those which pose the greatest threat to the health of the Authority.The Corporate Services Section, under the watchful eye of the Audit Committee, ensures that each manager owns the risks for which he or she is responsible and that the Authority can demonstrate a proactive approach to mitigating the most significant of those risks. Many of the most serious risks for which he or she is responsible, whether operational or financial, can be eliminated by the introduction of a standard approach to managing a situation. In order to make sure that a consistent approach is adopted throughout the Authority’s operations, there has been a programme to introduce ISO procedures throughout the business.This programme has been successful and will continue, not only to ensure that all areas of the business are covered by appropriate procedures, but also to ensure that the operation of the business is under continuous review and from that review process there will be improvements identified and implemented.The Authority’s ISO procedures are audited annually and the audit carried out in 2009/10 once again confirmed that they are suitable and being properly applied. The Authority is absolutely committed to ensuring the health and safety of its staff and any others who may be affected by our works. In the last year this commitment has been demonstrated by an extensive exercise being completed which reviewed the policy, the procedures and the systems which support health and safety throughout the business. In the latest reporting period a team has been formed to develop and build upon the existing health and safety systems within the Authority.The objective was to create a full management system, fully auditable against the requirements of ISO. To do this the team created a suite of documentation which included a revised policy, statements of intent and clear duties and responsibilities.The team developed a second tier set of documentation, available to all in electronic format, which describes the management of key activities in respect of health and safety.The implementation of the system has re-emphasised the need to communicate the health and safety message to all and to raise its profile throughout the organisation.To support this initiative, the Board has established a Health and Safety Council which is chaired by a member of the Board and reports periodically to the Board. 17 al STAFF Any success that the Authority has enjoyed in recent years must be largely attributed to the hard work shown by its staff.The workforce have managed an ageing system whilst introducing strategic changes to the operation of the business.The quality of service that customers experience from any part of the organisation is important to all members of staff and they will continue to look for new opportunities to deliver a better service more effectively.The Board and the Senior Management Team recognise and applaud the commitment shown by all staff.

ISLE OF MAN WATER AND SEWERAGE AUTHORITY On 1st April 2010 the Isle of Man Water Authority merged with the Department of Transport’s Drainage Division to become the Isle of Man Water and Sewerage Authority.The formation of the new Authority is a logical step in that it combines two organisations which share a common understanding of the engineering required to provide a valued public service.The Board and the Senior Management Team are committed to building a single organisation that provides one of the most important services to the population of the Island and to ensure that the strategy required to move this new organisation forward is developed and implemented in the coming years.

L 1 ,,11-., _--

John Smith, Chief Executive

West Baldwin Reservoir 18 STATEMENT OF THE BOARD OF THE ISLE OF MAN WATER AUTHORITY’S RESPONSIBILITIES

The Isle of Man Water Authority is constituted under the Water Act 1991 as a Statutory Board of Tynwald. The Board is responsible for preparing the Chairman’s Statement, the Chief Executive’s Report and the accounts in accordance with applicable law and regulations. The Audit Act 2006 requires the Board to prepare accounts for each financial year,which meet the requirements of the Accounts and Audit Regulations 2007 to 2008 and the Audit Directions 2008, made under the Audit Act 2006. The regulations require the Board to prepare the accounts in accordance with UK Accounting Standards, as modified by the Audit Directions 2008. The Accounts are required by law to give a true and fair view of the financial affairs of the Isle of Man Water Authority for that period. In preparing these Accounts, the Board is required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable UK Accounting Standards have been followed, as modified by the Audit Directions 2008, subject to any material departures disclosed and explained in the accounts; and • prepare the Accounts on the going concern basis unless it is inappropriate to presume that the Isle of Man Water Authority will continue in operation. The Board is responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial affairs of the Isle of Man Water Authority and to enable it to ensure that the Accounts comply with the Accounts and Audit Regulations 2007 to 2008 and the Audit Directions 2008, made under the Audit Act 2006. The Board has general responsibility for taking such steps as are reasonably open to it to safeguard the assets of the Isle of Man Water Authority and to prevent and detect fraud and other irregularities. ra; OFFICERS AND PROFESSIONAL ADVISORS Headquarters Tromode Road Douglas Isle of Man IM2 5PA Board Members T Crookall MHK Mrs C Christian BSc MLC M R Coleman LLB (Hons)(Open), CEng, FBCS CITP,FIMIS C H Coole Eur Ing, C Eng, MICE, FCIWEM H M McCallion FISE, M. Inst.M. Chief Executive J A Smith BSc, CEng, MICE, MBA Bankers Isle of Man Bank Royal Bank House 2 Victoria Street Douglas Isle of Man IM99 1NJ Auditors KPMG Audit LLC Heritage Court 41 Athol Street Douglas Isle of Man IM99 1HN Advocates Callin Wild (incorporating Hyde and Hanson) Number 50 Athol Street Douglas IM1 1JB Investment Managers Thomas Miller Investment (Isle of Man) Limited 16-17 Mount Havelock Douglas Isle of Man IM1 2QG 19 REPORT OF THE INDEPENDENT AUDITORS, KPMG AUDIT LLC, TO THE ISLE OF MAN WATER AUTHORITY

We have audited the accounts of the Isle of Man Water Authority for the year ended 31 March 2010 which comprise the Income and Expenditure Account, the Balance Sheet, the Cash Flow Statement, and the related notes. These Accounts have been prepared under the accounting policies set out therein. This report is made solely to the Isle of Man Water Authority, as a body, in accordance with Section 4 of the Audit Act 2006. Our audit work has been undertaken so that we might state to the Authority 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, for our audit work, for this report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF THE BOARD OF THE ISLE OF MAN WATER AUTHORITY AND AUDITORS The Board’s responsibilities for preparing the Accounts in accordance with applicable laws and regulations and UK Accounting Standards, as modified by the Audit Directions 2008, are set out in the Statement of Responsibilities of the Board on page 18. The Audit Directions 2008 modify UK Generally Accepted Accounting Practice by: • defining who is a related party, which transactions require disclosure and which transactions are exempt from disclosure requirements, and removing the requirement to comply with FRS 8 (Related Party Disclosures). Our responsibility is to audit the Accounts in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the accounts give a true and fair view and are properly prepared in accordance with the Accounts and Audit Regulations 2007 to 2008 and the Audit Directions 2008, made under the Audit Act 2006. In addition we report to you if, in our opinion, the Authority has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding related party transactions with the Authority is not disclosed. We read the Chief Executive’s Report and any other information accompanying the Accounts and consider the implications for our report if we become aware of any apparent misstatements or inconsistencies within it. Our responsibilities do not extend to any other information. 20

RESPECTIVE RESPONSIBILITIES OF THE BOARD OF THE ISLE OF MAN WATER AUTHORITY AND AUDITORS (CONTINUED) We review whether the Statement of Internal Control prepared by the Authority reflects compliance with the Accounts and Audit Regulations 2007 to 2008 and the Audit Directions 2008, made under the Audit Act 2006. We report if the statement is misleading or inconsistent with other information we are aware of from our audit of the accounts. We are not required to consider, nor have we considered, whether the Statement on Internal Controls covers all risks and controls.

BASIS OF OPINION We conducted our audit in accordance with the Accounts and Audit Regulations 2007 to 2008 and the Audit Directions 2008, made under the Audit Act 2006 and International Standards on Auditing (UK and Ireland) issued by the UK Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgments made by the Board in the preparation of the accounts, and of whether the accounting policies are appropriate to the Authority’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts.

OPINION In our opinion: • the Accounts give a true and fair view, in accordance with UK Accounting Standards as modified by the Audit Directions 2008, of the Isle of Man Water Authority’s affairs as at 31 March 2010 and of its surplus for year then ended; and • the Accounts have been properly prepared in accordance with the Accounts and Audit Regulations 2007 to 2008 and the Audit Directions 2008, made under the Audit Act 2006.

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KPMG Audit LLC, Chartered Accountants, Heritage Court, 41 Athol Street, Douglas, Isle of Man, IM99 1HN

Ai, .a o to 2. qzgli.L, 21 INCOME AND EXPENDITURE ACCOUNT YEAR ENDED 31 MARCH 2010

Notes 2010 2010 2009 2009 ££££

Charges for water 2 16,678,535 15,418,851 Less: Cost of water

Supply 3 4,198,545 4,039,415

Distribution 4 2,922,904 2,921,244

(7,121,449) (6,960,659)

9,557,086 8,458,192

Other income 5 235,706 204,109

9,792,792 8,662,301

Less: Indirect expenses

Management and general expenses 6 (2,060,528) (2,170,507)

7,732,264 6,491,794

Less: Financial expenditure less income

Financial expenses Interest paid on loans from Government 4,218,750 4,218,750 Discounts/collection charges 7 678,646 646,335 Other financial charges 7 12,857 250,306 4,910,253 5,115,391

Financial income Bank interest 50,718 382,406 Portfolio interest 1,558,968 397,330 1,609,686 779,736

Net financial expenses (3,300,567) (4,335,655)

Operating surplus 4,431,697 2,156,139

Profit on sale of fixed assets 7,454 9,001

Surplus for year 4,439,151 2,165,140

In both current and preceding financial periods, there were no recognised gains or losses other than those dealt with in the Income and Expenditure Account. The Board consider that all results derive from continuing activities. The notes on pages 24 – 30 form part of these Accounts.

22 BALANCE SHEET 31 MARCH 2010

Notes 2010 2010 2009 2009 ££££

Fixed assets 9 82,042,571 83,045,635 Capital works in progress 10 861,563 605,202

Current assets Stocks 332,980 305,127 Debtors 11 1,534,167 1,351,435 Cash at bank and in hand 14,570,483 6,760,382 Investment portfolio 12 6,585,409 13,342,079 Sinking fund 12/13 16,603,822 11,597,517

39,626,861 33,356,540

Creditors: Amounts falling due within one year 14 (2,009,563) (2,303,285)

Net current assets 37,617,298 31,053,255

Creditors: Amounts falling due after more than one year Trade creditors (10,509) (20,349) Borrowings outstanding 15 (75,000,000) (75,000,000) Provisions for liabilities and charges 16 (568,077) (609,403)

Net assets 44,942,846 39,074,340

Capital reserves Capital and retained reserves 17 44,942,846 39,074,340

The notes on pages 24 – 30 form part of these Accounts.

These financial statements were approved by the Board and signed on 2 September 2010 on their behalf by

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T Crookall MHK Mrs C Christian MLC M R Coleman Chairman Vice Chairman Board Member

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C H Coole H M McCallion Board Member Board Member 23 CASH FLOW STATEMENT – YEAR ENDED 31 MARCH 2010

Notes 2010 2010 2009 2009 ££££

Net cash inflow from operating activities 18 10,702,127 8,453,413

Returns on investment and servicing of finance Interest received 18 1,630,730 825,315 Interest paid 18 (4,218,750) (4,218,750) 8,114,107 5,059,978 Capital expenditure Purchase of fixed assets (1,792,286) (136,797) Capital works in progress (433,794) (3,190,724) AMP Retentions 177,433 127,450

(2,048,647) (3,200,071)

Increase in cash 19/20 6,065,460 1,859,907

The notes on pages 24 – 30 form part of these Accounts. 24 NOTES TO THE ACCOUNTS – 16; YEAR ENDED 31 MARCH 2010 1. ACCOUNTING POLICIES Basis of accounting The financial statements are prepared under the historical cost convention, and in accordance with United Kingdom accounting standards, as modified by the Audit Directions 2008. They have been prepared in accordance with the Accounts and Audit Regulations 2007 to 2008 and the Audit Directions 2008, made under the Audit Act 2006. They have also been prepared in accordance with the Isle of Man Statement of Recommended Practice 2007 on accounting for entities subject to the Audit Act 2006 (“the SORP”), to the extent applicable to the Authority. The principle accounting policies used in preparing the financial statements are described below: Fixed assets Expenditure on fixed assets is depreciated using a straight-line method over the estimated operating lives of the assets, that are principally as follows: Raw water mains 30-60 years Pump station improvements 25 years Distribution assets (service reservoirs and treated water mains) 30-60 years Freehold property and improvements 25-50 years Other assets (vehicles, telemetry and IT equipment, computers, plant) 3-10 years New Water Treatment Works improvements 60 years buildings, 20 years installation work, 10-20 years mechanical assets, 5-15 years electrical and telemetry assets Expenditure on assets in the course of construction is included in capital works in progress. Assets in the course of construction are not depreciated until they are commissioned. Commissioning is deemed to occur when a new works/construction is formally taken over from the contractor and is put into operational use. Treated water mains are renewed/replaced as an ongoing process and depreciation commences once laid. A full year’s depreciation is applied in the year in which the asset is either purchased or put into operational use. No depreciation is charged in the year of disposal or shutdown. No depreciation is charged on the value of land or impounding reservoirs. There is a £3,000 minimum on all plant and assets, purchases below that value are taken to the revenue account in the year of purchase. Non-working assets All non-working assets with a Market Valuation in excess of £5,000 are valued in the accounts at current Market Values as per SORP 2007. Stocks Stocks are valued on a First In First Out (FIFO) basis and provision made for obsolete, deteriorated or unusable stocks that are valued at the lower of written down value and net realisable value. Bad debts The bad debt provision against un-metered charges is calculated by applying recovery rates to an aged-debt profile. The bad debt provision for all other debts is obtained by considering the recoverability of individual debts. Customer capital contributions Customer capital contributions received are deducted from the costs of the related fixed assets. Finance costs Finance costs incurred when the bond was issued are amortised on a straight-line basis through the Revenue Account over the life of the bond. The deferred finance charge on the balance sheet is subject to additional amortisation where profits on the sale of investments are realised in the accounting period. The amount of additional amortisation is equal to the realised profits on the investments sold. Investments Investments which are intended to be held to maturity are valued at amortised cost. Equities are re-valued to market value at the balance sheet date and any gains or losses on revaluation are taken through the Income and Expenditure Account. Turnover Turnover principally comprises income from charges for water supply and distribution, and is accounted for on an accruals basis. 25 NOTES TO THE ACCOUNTS – YEAR ENDED 31 MARCH 2010 - CONTINUED

2010 2009 ££ 2. CHARGES FOR WATER Unmeasured 14,887,474 13,626,753 Metered 1,791,061 1,792,098

16,678,535 15,418,851 The total rateable value of properties charged under unmeasured water usage was £6.5 million (2009: £6.5 million). The annual water rate was 248.07p in the £ (2009: 229.7p in the £) with commercial and selected other properties at half rates.

3. SUPPLY Filtration and treatment 1,126,788 1,129,690 Maintenance and reservoirs 1,371,404 1,222,854 Depreciation charge in year 1,700,353 1,686,871

4,198,545 4,039,415

4. DISTRIBUTION Mains and general distribution 2,301,354 2,435,060 Depreciation charge in year 621,550 486,184

2,922,904 2,921,244

5. OTHER INCOME Net profit on chargeable work 137,139 109,289 Rents and miscellaneous 98,567 94,820 Profit on sale of investments - -

235,706 204,109

Net profit on chargeable work relates to income of £262,438 (2009: £200,503). 6. MANAGEMENT AND GENERAL EXPENSES Administration and general 1,587,082 1,755,932 Depreciation charge in year 473,446 414,575

2,060,528 2,170,507

7. FINANCIAL EXPENSES Discount/Collection Charges Discounts allowed 620,136 590,820 Collection charges 58,510 55,515

678,646 646,335

Other Financial Charges Bank charges 1,802 2,169 Audit fees 83 1,967 Investment management fees 33,437 35,833 Increase in provision for bad debts - 100,900 Bond (release)/costs (22,465) 109,437

12,857 250,306 26 NOTES TO THE ACCOUNTS – 16; YEAR ENDED 31 MARCH 2010 - CONTINUED 8. REMUNERATION OF BOARD MEMBERS AND SENIOR MANAGEMENT The remuneration of the Board Members and Senior Management who served during the year is set out below: Salary £ Mr M R Coleman Board Member 6,335 Mr C H Coole Board Member 6,335 Mr H McCallion Board Member 6,335 19,005 The political Members of the Board are paid directly from central government. Amounts shown above are the payments made by the Water Authority in 2009/10 to Board Members.

Mr J A Smith Chief Executive 82,275 There were 4 senior managers paid between £50,000 and £55,999 (2009 – 4 - £50,000 - £55,000).

9. FIXED ASSETS Supply Treatment Distribution Property Other Total £ £ £ £ £ £ At cost 01 April 2009 25,865,097 42,189,825 26,287,462 1,572,226 4,259,005 100,173,615 Additions 48,610 709,192 957,639 (241,295) 318,140 1,792,286 Disposals ------

31 March 2010 25,913,707 42,899,017 27,245,101 1,330,931 4,577,145 101,965,901

Certain none working assets due for future disposal have been transferred to a property reserve inside the Sinking Fund (please refer to note 13). Amounts provided to write down fixed assets 01 April 2009 1,703,084 6,490,610 4,859,560 424,736 3,649,990 17,127,980 Charge for period 222,728 1,409,989 621,550 67,637 473,446 2,795,350

31 March 2010 1,925,812 7,900,599 5,481,110 492,373 4,123,436 19,923,330

Net Book Value 31 March 2010 23,987,895 34,998,418 21,763,991 838,558 453,709 82,042,571

31 March 2009 24,162,013 35,699,215 21,427,902 1,147,490 609,015 83,045,635

Fixed assets includes land with a value of £525,848 which has not been subject to depreciation. In the current period there were no recognised gains or losses other than those dealt with in the revenue account 27 NOTES TO THE ACCOUNTS – YEAR ENDED 31 MARCH 2010 - CONTINUED

2010 2009 ££

10. CAPITAL WORKS IN PROGRESS Distribution fixed assets works in progress 376,250 40,768 Treatment fixed assets works in progress 485,313 564,434 861,563 605,202 11. DEBTORS Accrued interest receivable 167,457 161,733 Accrued meter income 840,000 840,000 Debtors 912,611 693,819 Amounts due from Isle of Man Government (426,642) (404,892) VAT recoverable 40,741 60,775 1,534,167 1,351,435

Debtors are stated net of provision for doubtful debts of £800,000 (2009: £800,000). 12. INVESTMENT PORTFOLIO

Balance brought forward 24,939,596 24,755,536 Withdrawals (5,000,000) (110,778) Property Portfolio 1,712,000 - Investment returns 1,537,635 294,838 Value of investment portfolio at end of year 23,189,231 24,939,596 Made up as follows: Fixed interest securities 13,626,249 12,081,154 Equities 2,343,087 1,557,485 Property Portfolio 1,712,000 - Cash balances 5,507,895 11,300,957

23,189,231 24,939,596

The Sinking Fund includes certain none working assets due for future disposal – these have been re-valued (refer to note 13). Represented in the Balance Sheet as Investment portfolio 6,585,409 13,342,079 Sinking Fund 16,603,822 11,597,517 23,189,231 24,939,596

As at 31 March 2010 the Authority’s Board was of the belief that all investments that were transferred from SFIM to the Authority’s new investment manager in October 2008 were in appropriately designated accounts and as such no provisions have been made in these Accounts in relation to the liquidation of KSF(IOM) in May 2009. A subsequent court ruling on 30 June 2010 confirmed that the investments were correctly designated. 28 NOTES TO THE ACCOUNTS – 16; YEAR ENDED 31 MARCH 2010 - CONTINUED 2010 2009 ££

13. SINKING FUND The sinking fund will be used to repay the Authority's borrowing in 2030.The sinking fund is segregated from the other cash balances and investments of the Authority and at the year end was invested in fixed interest securities, equities, cash and non-working property and land assets owned by the Authority. Equities may not form greater than 15% of the Sinking Fund.

The Authority identified on completion of the new Water Treatment Works a small selection of property and land assets that are no longer an essential or integral part of the water supply system.These properties and land holdings had a brought forward asset valuation on 1 April 2009 of £282,645. As non-contributing assets they were transferred during the year into the Bond Repayment Sinking Fund Reserve and re-valued at current market value in line with SORP 2007 Best Practices.This has resulted in an asset revaluation reserve of £1,429,355 being created within these accounts. All property and land assets in the Sinking Fund Reserve will be sold before the repayment date of the £75 million Government Bond in 2030. All property and land assets within this reserve account are designated as non-working assets and will be regularly re-valued accordingly.

14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Payments on account 1,321,130 1,181,751 Trade creditors 278,975 534,492 Accruals and deferred income 409,458 587,042 2,009,563 2,303,285 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Trade Creditors 10,509 20,349

15. BORROWINGS OUTSTANDING Government advances Balance brought forward and carried forward 75,000,000 75,000,000 £75,000,000 relates to a bond issue undertaken by Government on behalf of the Authority. Interest is payable annually at 5.625% and the bonds are repayable in 2030. The Authority has guaranteed that it will meet all costs in relation to the bonds.

16. PROVISIONS FOR LIABILITIES AND CHARGES At 1 April 609,403 583,796 Released to Revenue Account in year (41,326) (74,393) Charged to Revenue Account in year - 100,000 At 31 March 568,077 609,403 The provison at the year end represents a proportional estimate of the decommissioning costs which the Authority expects to incurr when the existing water treatment works are closed. It is anticipated that this reserve will be utilised 2010-11 in the decommissioning of 5 old works. 29 NOTES TO THE ACCOUNTS – YEAR ENDED 31 MARCH 2010 - CONTINUED

2010 2009 ££

17. CAPITAL AND RETAINED RESERVES Balance brought and carried forward 39,074,340 36,909,201 Property revaluation reserve 1,429,355 - Surplus for the year 4,439,151 2,165,140

Balance carried forward 44,942,846 39,074,341

None working assets held in the Sinking Fund have been re-valued as per note 13.

18. RECONCILIATION OF SURPLUS FOR THE YEAR TO NET CASH INFLOW FROM OPERATING ACTIVITIES Surplus for year 4,439,151 2,165,140 Depreciation charges 2,795,350 2,587,630 Increase in stocks (27,853) (39,496) Increase in debtors (167,361) (76,842) (Decrease)/Increase in creditors (167,570) 32,045 Increase in provisions for liabilities and charges (228,750) (101,911) Decrease in Govt debtors 41,785 493,412 Interest received (1,630,730) (825,315) Interest paid 4,218,750 4,218,750 Sorp asset revluation - non cash expenditure 1,429,355 - Net cash inflow from operating activities 10,702,127 8,453,413

19. RECONCILIATION OF NET DEBT Increase in cash 6,042,995 1,969,344 Release of bond purchase costs 22,465 (109,437) Increase cash/bond purchase costs 6,065,460 1,859,907 Net debt brought forward (43,138,288) (44,998,195) Net debt carried forward (37,072,828) (43,138,288)

20. ANALYSIS OF CHANGES IN NET DEBT 01/04/09 Cash Flow Other 31/03/10 Statement ££££ Cash at bank and in hand 6,760,382 7,810,101 - 14,570,483 Investment portfolio 13,503,813 (6,773,411) 22,465 6,752,867 (including portfolio interest) Sinking fund 11,597,517 5,006,305 16,603,822 31,861,712 6,042,995 22,465 37,927,172 Government loan (75,000,000) - - (75,000,000) (43,138,288) 6,042,995 22,465 (37,072,828) 30 NOTES TO THE ACCOUNTS – 16; YEAR ENDED 31 MARCH 2010 - CONTINUED 21. CAPITAL COMMITMENTS There are now no current Capital comitments with the exception of retentions being held totalling £387,002 as at 31 March 2010 (£565,434 at 31 March 2009). 22. STAFF PENSION SCHEME The Isle of Man Government operates final salary pension schemes for both Civil Servants and Whitley Council Staff who work at the Authority. Under the terms of this arrangement, the Authority only has a liability to pay a fixed contribution to the Government in relation to its employees.All liabilities relating to pension arrangements have therefore been included in the financial statements. Under the provisions of the Civil Service Scheme, as of April 2007 the Authority contributes 22% of the employee's pensionable pay and the employee contributes 1.5% (unless he or she has opted to buy additional years of service up to a maximum of 40 years by paying a higher contribution). Under the provisions of the Whitley Council Scheme, as of April 2007 the Authority contributes 18% of the employee's pensionable pay and the employee contributes 5%, with similar options for purchasing additional years of service. 23. RELATED PARTY DISCLOSURE The Audit Directions 2008 modify UK Generally Accepted Accounting Principles by defining who is a related party, which transactions require disclosure and which transactions are exempt from disclosure requirements, and removing the requirement to comply with FRS 8 (Related party disclosures). With the exception of the Treasury Bond loan already disclosed and monthly payroll and revenue transactions between the Authority and Isle of Man Treasury, there were no sums due to or from any related parties as at 31 March 2009.

Clypse and Kerrowdhoo reservoirs Photographs by Allan Brown and Dave Cain, Isle of Man Water Authority where not acknowledged individually. 31 MEETINGS AND VISITS TO WATER TREATMENT WORKS AND SITES AND STAFF BRIEFINGS 1ST APRIL 2009 – 31ST MARCH 2010

April and Board Audit Investment Capital Finance Visits to Sites Staff May 2009 Meetings Committee Committee Programme /Other and Water Briefing Meetings Meetings Steering Group Meetings Treatment Meetings Meetings Works

Number of Meetings 2- - - 2 - - 1st April 2009 – 1st June 2009

Chairman (Chairman) Mr David Cannan 2 + 4 meetings - - - 1 - - MHK with Chief Executive

Vice Chairman (Vice Mrs Brenda Cannell Chairman) ------MHK 0

Mr Coleman 2- - - 1 - -

Mr Coole 2- - - 1 - -

Mr McCallion 2------

June 2009 to Board Audit Investment Capital Finance Visits to Sites Staff 31st March 2010 Meetings Committee Committee Programme /Other and Water Briefing Meetings Meetings Steering Group Meetings Treatment Meetings Meetings Works

Number of Meetings 11 4 4 3 7 2 11 1st June 2009 – 31st March 2010

Chairman 10 + 20 Mr Tim Crookall meetings - - - - 2 11 MHK with Chief Executive

Vice Chairman 11 + 1 Mrs Clare Christian meetings - - - - 2 - MLC with Chief Executive

Mr Coleman 10 4 4 - 7 2 -

Mr Coole 10 - - 3 - 1 -

Mr McCallion 94 4 - 2 2 - Isle of Man Water Authority Lught-reill Ushtey Ellan Vannin

The information in this report can be provided in large print on request

Isle of Man Water Authority Tromode Road Douglas Isle of Man IM2 5PA Telephone 01624 695949 Fax 01624 695956 Email [email protected] or [email protected] Website www.gov.im/water

Isle of Man r.nvernment

Reiltys El Ian Vannin

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