Statement of Accounts 2016 – 17 Contents Page Narrative Report 1 Core Financial Statements Comprehensive Income and Expenditure Statement 19 Movement in Reserves Statement 21 Balance Sheet 23 Cash Flow Statement 25 Notes to the Financial Statements 26 Supplementary Financial Statements Housing Revenue Account (HRA) Income and Expenditure Statement 153 Movement on the Housing Revenue Account Statement 154 Notes to the HRA Income and Expenditure Statement 155 Collection Fund Account 161 Notes to the Collection Fund Account 163 Group Accounts Explanatory Foreword 167 Group Financial Statements Group Movement in Reserves Statement 171 Group Comprehensive Income and Expenditure Statement 173 Group Balance Sheet 175 Group Cash Flow Statement 177 Notes to the Group Financial Statements 178 Pension Fund Accounts 204 Northumberland County Council Pension Fund 205 Fund Account 206 Net Assets Statement 207 Notes to the Pension Fund Financial Statements 208 Pension Fund Performance 229 Statement of the Actuary 231 Independent Auditor’s Report on the Pension Fund 233 The Firefighters’ Pension Fund 235 Fund Account 235 Net Assets Statement 235 Notes to the Financial Statements 236 Statement of Responsibilities for the Statement of Accounts 238 Annual Governance Statement 239 Independent Auditor’s Report to the Members of Northumberland County Council 250 Appendices 1. Glossary of terms 254 2. Whole of Pension Fund Disclosures under IAS 26 263 Narrative Report 1. Introduction Northumberland is the northernmost county in England, bordering Cumbria to the west, County Durham and Tyne and Wear to the south and Scotland to the north. The county is home to 315,300 people and covers an area of 5,013 km2, of which 96.7% is classed as rural. The county is sparsely populated with 63 people per km² compared with 411 people per km² throughout England. 49.0% of the population live in rural areas, compared to a national figure of 18.9%, with the remaining 51.0% of the population living in the 3.3% of urban land based mainly in the south east of the county. Population The 315,300 people living in Northumberland make it the second largest population by local authority in the North East. The proportion of the total population aged 16-64 is 60.4% compared with 63.3% throughout England. Northumberland has a higher proportion of 65+ year olds than England and a smaller proportion of those aged 0-15 years. The age profile of Northumberland compared to England is shown in the chart below. Age Northumberland England No. % No. % All Ages 315,263 54,786,327 0-15 years 52,064 16.5 10,405,114 19.0 16-64 years 190,478 60.4 34,669,641 63.3 65 years + 72,721 23.1 9,711,572 17.7 Northumberland has an ageing population with the percentage of older residents increasing year on year, as demonstrated by the graph below. T h e n u m b e r o f The number of Northumberland residents aged 0-15 was 57,800 in 2001 compared to 52,100 in 2015. Looking at older residents, there were 54,100 aged 65 and over in 2001 and this has risen to 72,700 in 2015. This ageing population has led to an increased demand for Council services, and, reflects the ongoing pressures within the Adult Services budget. It is expected that this trend will continue. 2016-17 Statement of Accounts Page 1 Narrative Report Economy The weekly average (median) wage in the county is £487 which is lower than the national average of £545. The unemployment rate for Northumberland is 5.2% which is broadly in line with the England average, and the employment rate in Northumberland is 72.2% compared to the national average of 74%. 13.2% of the population of Northumberland live in one of the 10% most deprived areas of England, with one in five (20.8%) of the population classed as income deprived, and, one in four (25.4%) employment deprived. There are 151,190 dwellings in Northumberland with an average (mean) house price of £188,084; which is substantially lower than the average England figure of £284,823. Gross Value Added (GVA) is much lower in Northumberland at £15,950 per head compared to £26,159 per head for England. Political Structure Northumberland County Council is made up of 67 elected members, each representing constituents within an area of Northumberland. The political structure of the Council as at the 31 March 2017 is shown below: Conservative 20 Independent 2 Labour 32 Liberal Democrat 10 Non-aligned 3 Following local elections on 4 May 2017 the revised political structure of the Council is shown below. Further details are included within Note 8 Events after the Reporting Period: Conservative 33 Independent 5 Labour 24 Liberal Democrat 3 Non-aligned 2 2016-17 Statement of Accounts Page 2 Narrative Report Management Structure The management structure of the Council for the financial year 2016-17 is shown below: Deputy Chief Executive Service Director - Head of Children's Director of Adult & Safeguarding and Director of Director of Public Head of Finance, Safeguarding, Family Community Care Strategic Education & Skills Health IT & Estates Support and Social Services Commissioning Care Services Note – The posts shown in purple are shared management posts part funded by the NHS. Council Employees The Council currently employs over nine thousand staff in full and part-time contracts (excluding casual employees) with five thousand of these being based in schools. Financial Picture The Council has faced significant cuts in its funding in recent years resulting in revenue budget reductions of £203.40 million between 2009-10 and 2016-17. A further £6.01 million reduction has been approved for 2017-18 with an additional £30.00 million reduction required to balance the budget up to 2019-20. Increasing financial cutbacks nationally are leading to severe pressures locally but despite that, the Council is determined to deliver the best services and opportunities for everyone in the area – be that in health, education, affordable housing or benefiting from clean streets and good roads. 2016-17 Statement of Accounts Page 3 Narrative Report 2. Income and Expenditure Where the money comes from The Council relies in the main on service income, Dedicated Schools Grant (DSG), local taxation and Retained Business Rates to fund service provision. These sources of funding accounted for 73.3% of all income during the year with the remaining income being derived from other government grants and interest earned. 2.3% 24.4% Government Grants Retained Business Rates 35.6% DSG 4.1% Council Tax Service Income Interest and Investment Income 16.9% 16.7% What the money was spent on A large proportion of the Council’s expenditure (32.6%) is staff-related, 29.6% relates to transfer payments and third party payments, with capital charges for the use of assets (depreciation and minimum revenue provision) accounting for a further 13.4%. The balance is mainly related to the purchase of supplies and services and central costs. 13.4% Employees 1.9% 32.6% Premises-related expenditure Transport-related expenditure 10.5% Supplies and Services Third Party Payments Transfer Payments 19.1% 3.6% Support Services 5.8% Capital Financing Costs 13.1% 2016-17 Statement of Accounts Page 4 Narrative Report What services were provided? A percentage breakdown of gross expenditure on the services provided by the Council is shown below. The service with the highest gross expenditure is the Education and Skills Service, most of which is financed by the Dedicated Schools Grant. Adult Services has the second highest gross expenditure and the highest net expenditure. Corporate Resources has the third highest gross expenditure. Adult Services 3.0% Children's Social Care 2.6% Education and Skills 12.5% 22.5% Public Health 1.9% Corporate Resources 1.8% 0.4% Human Resources 6.0% Leisure Services 16.3% Planning and Economy Local Services and Housing Fire and Rescue 2.2% 30.8% Local Authority Housing (HRA) The Comprehensive Income and Expenditure Statement (page 19) and the Notes to the Financial Statements (pages 26 - 152) provide more detail regarding the charts above. 2016-17 Statement of Accounts Page 5 Narrative Report 3. Outturn Against Budget for 2016-17 – Revenue Revenue Budget 2016-17 The Council approved a net revenue budget of £261.69 million for 2016-17 after taking account of Dedicated Schools Grant of £162.34 million, New Homes Bonus Grant of £6.99 million, Education Services Grant of £3.03 million and Rural Services Delivery Grant of £2.33 million. Efficiencies and other savings totalling £11.93 million were needed in order to arrive at a balanced position after assessing what was required in terms of spending capacity to maintain service provision and respond to essential growth pressures, and the consequent impact upon the increase in Council Tax levels. The budget was funded through: £’000 Revenue Support Grant 41,459 Council Tax 154,882 Retained Business Rates 65,429 Contribution to General Fund (78) 261,692 Medium Term Financial Plan and Future Financial Prospects The Council approved the Medium Term Financial Plan for 2017-18 to 2019-20 in February 2017, with the main aims of protecting frontline services and promoting growth in the county whilst implementing efficiency savings of £36.00 million over the same period. To give some degree of clarity and facilitate financial planning, the Government has provided the Council with a four year funding offer which in theory is fixed up to and including 2019-20. To facilitate this offer the Council has produced and published on its web-site an efficiency plan. The Council’s efficiency plan can be accessed at: http://www.northumberland.gov.uk/NorthumberlandCountyCouncil/media/About-the- Council/Northumberland-County-Council-Efficiency-Strategy-Plan-2016-2020.pdf Core funding from Government by 2020 is expected to be cut by 75.2% with the expectation that the Council will raise more money locally through increasing Council Tax, new homes being built and from Business Rates.