Further Information The Financial Statements are available on the Council’s website at: www.southtyneside.gov.uk/article/13968/Financial-statements Hard copies can be requested by writing to: Head of Finance Town Hall and Civic Offices Westoe Road South Shields NE33 2RL If you know someone who would like this information in a different format, please contact the Communications Unit on 0191 427 1717. We are committed to improving the information that we provide to you and would be grateful for any suggestions or comments you may wish to make about our published Financial Statements. Please let us have your views by contacting us at the above address. 2 Contents Page Financial Statements Section 1 Narrative Statement by the Head of Finance 5 Section 2 Statement of Responsibilities for the Accounts 17 Statement of Accounts Section 3 Independent Auditors’ Report 18 Section 4 Core Financial Statements Movement in Reserves Statement 19 Comprehensive Income and Expenditure Statement 20 Balance Sheet 21 Cash Flow Statement 22 Notes to the Core Financial Statements 23 Section 5 Supplementary Financial Statements Housing Revenue Account Income and Expenditure Statement 95 Collection Fund Statement 101 Section 6 Group Financial Statements Group Introduction 103 Group Movement in Reserves Statement 106 Group Comprehensive Income and Expenditure Statement 107 Group Balance Sheet 108 Group Cash Flow Statement 109 Notes to the Group Financial Statements 110 Section 7 Tyne and Wear Pension Fund Statements 120 Glossary Section 8 Glossary of Financial Terms 160 Annual Governance Statement Section 9 Annual Governance Statement 169 3 Notes to the Core Financial Statements Note Statement Page No. 1 Critical Judgements in Applying Accounting Policies 23 2 Assumptions made about the Future and Other Sources of Estimation 24 3 Adjustments between Accounting Basis and Funding Basis under Regulations 26 4 Transfers to or from Earmarked Reserves 27 5 Events after the Reporting Period 28 6 Other Operating Expenditure 29 7 Financing and Investment Income and Expenditure 29 8 Taxation and Non-specific Grant Income 29 9 Property, Plant and Equipment 29 10 Intangible Assets 32 11 Financial Instruments 32 12 Short Term Debtors 37 13 Cash and Cash Equivalents 38 14 Assets Held for Sale or Disposal 38 15 Short Term Creditors 39 16 Long and Short Term Provisions 39 17 PFI and Other Long Term Contracts 40 18 Usable Reserves 43 19 Unusable Reserves 44 20 Operating Activities 46 21 Investing Activities 47 22 Financing Activities 47 23 Amounts Reported for Resource Allocation Decisions 47 24 Trading Operations 50 25 Pooled Budgets 51 26 Members’ Allowances 51 27 Officers’ Remuneration 52 28 External Audit Costs 54 29 Dedicated Schools Grant 54 30 Government Grant Income 56 31 Capital Expenditure and Capital Financing 57 32 Leases 58 33 Related Parties 59 34 Impairment Losses 62 35 Contingent Liabilities 62 36 Contingent Assets 62 37 Financial Instruments Risks 63 38 Trust Funds 67 39 Pension Schemes Accounted for as Defined Contribution 68 40 Defined Benefit Pension Schemes 69 41 Accounting Policies 75 4 Section 1 – Narrative Statement by the Head of Finance 1. Introduction These accounts set out the results of the Council’s financial activities for the year ended 31st March 2016 and outline our financial position at that date. The narrative statement provides: A review of the Council’s financial results and financial standing for 2015/16. Information about the activities and significant matters that took place during 2015/16 that had an impact on Council finances. An explanation of the principal financial statements. An assessment of the future financial prospects of the Council. South Tyneside Council seeks to make the best possible use of resources available with regard to economy, efficiency and effectiveness. This is a responsibility shared by Members and officers of the Council with the Council’s Chief Financial Officer, the Head of Finance, having a specific role in ensuring the adequacy of resources and proper financial administration. Our Medium Term Financial Plan (MTFP) sets out how we will do this over a future five-year horizon. The Statement of Accounts look back at our results over the past financial year. 2. Revenue Financial Summary 2015/16 Revenue expenditure relates to the day-to-day running costs of providing Council services, including pay costs, property running costs and supplies and services. These costs are largely funded by a combination of grants from central Government and local taxation (council tax and non-domestic rates). The table on the next page summarises our in-year revenue spending position including schools expenditure. The Council overspent on its budget by £0.027m in 2015/16 after taking into account transfers to and from reserves. The overall change in reserves shown in the table can be seen in more detail in note 4 to the core Financial Statements. 5 Section 1 – Narrative Statement by the Head of Finance Original Actual (Underspend) / 2015/16 Revenue financial summary budget outturn overspend £m £m £m Note 2 Revenue spending Children, Adults and Health Group 75.659 87.864 12.205 Business and Resources Group 33.602 18.798 (14.804) Economic Regeneration Group 26.547 26.863 0.316 Net cost of services and operating expenditure 135.808 133.525 (2.283) Funding sources General Government grants (41.886) (41.883) 0.003 Non-domestic rates retained and top up grant (44.572) (44.422) 0.150 Contribution from Collection Fund (0.800) (0.800) - Council tax payers (48.050) (48.050) - Contribution from General Fund balance (0.500) (0.500) - Note 1 Contribution to earmarked reserves - 2.157 2.157 Note 2 Total revenue funding (135.808) (133.498) 2.310 Additional contribution from General Fund balance for - 0.027 0.027 the year Changes required in the restatement of management accounts to financial accounts Note 1 : Use of unallocated balances is estimated as part of our strategic planning process. An amount of £0.500m was included within the 2015/16 Medium Term Financial Plan budget of £135.808m. Note 2 : Reported under and overspending is before transfers to and from earmarked reserves. Children, Adults and Health Group The major services provided by the Children, Adults and Health Group include public health, social care for elderly and vulnerable adults, protection of children at risk from abuse or neglect, support to children and adults with disabilities, as well as a range of educational and support services for young people from early years through school age to youth provision and further learning. The revenue spending highlights during the year were as follows: The adult social care service incurred additional costs of £9.4m as demand exceeded the levels assumed in the budget particularly in the area of commissioned care. Our assessment and targeted investment in supporting the well-being of clients continues to ensure the most relevant packages of care are identified. The Council continues to work closely with health partners in delivering integrated preventative services which reduce demand on more costly health and social care interventions and recognises that greater more transformational change is necessary to effectively manage rising service demand. The cost of looked after children through foster placements, social work staffing levels and out of borough placements is a cost pressure for the Council with this service overspending by £1.0m in 2015/16. The Council continues to manage cost pressures in this area through robust gate keeping processes, taking a multi- agency approach and aligning expenditure more closely to meet need. The cost of pupil transport exceeded budget by £0.5m. This is due to service demand for this statutory service. 6 Section 1 – Narrative Statement by the Head of Finance Business and Resources Group The major services provided by the Business and Resources Group include leisure and libraries and a range of support services to ensure the proper functioning of the Council. The revenue spending highlights during the year were as follows: Re-profiling of the capital investment programme, debt set aside payments and lower interest rates than forecast resulted in improved cash flow and lower debt charges. This delivered a saving of £12.6m. Additional income of £1.5m was received from a variety of sources. These included Government funding to compensate the Council for changes in the national business rate system and for bringing empty dwellings back into use as well as improved recovery of benefit overpayments and release of unused contingency budgets. The Council maintained an effective income collection performance. During 2015/16, 96% of council tax income due was collected (96% in 2014/15). The majority of the amounts outstanding will also be received after the year-end. The comparative figure for business rates collection was 99% (98% in 2014/15). Economic Regeneration Group The major services provided by the Economic Regeneration Group include waste collection and disposal, street cleaning, maintenance of open spaces, cultural services, encouraging the creation of new jobs through supporting new and existing business, enhancing the skills of local people and management of the Council’s land and buildings. The revenue spending highlights during the year were as follows: An overspend of £0.6m was incurred in relation to services covering waste collection and disposal, parking and utilities and bereavement. This arose primarily due to a shortfall in anticipated income across these areas. The Council continued to re-model its building estate to ensure it is fit for purpose and cost effective. This involved a complex reorganisation of the building portfolio. A cost pressure of £0.3m arose due to changes in the timing of that reorganisation. Savings of £0.4m were achieved in relation to business employment and skills activity. A range of support was still provided during the year such as the youth apprenticeship scheme and grant funding to businesses to support both the creation and retention of jobs.