Preface Statement of Accounts For the year ended 31 March 2014 I hope that this document proves to be both informative and of interest to readers. The Council is keen to try to improve both the quality and suitability of information provided. On that basis your feedback would be welcome. If you have suggestions or comments on either the format of the report or its content, or you would like any further information or further copies of this document, please contact: Corporate Director Resources Durham County Council County Hall Durham DH1 5UE e-mail: [email protected] Telephone: 03000 260000 Don McLure C.P.F.A. Corporate Director Resources Page 1 of 243 Contents Durham County Council Page Preface ................................................................................................................................ 1 Explanatory Foreword .......................................................................................................... 3 Statement of Responsibilities for the Statement of Accounts ............................................. 58 Independent Auditor's Report to Durham County Council ................................................. 60 Durham County Council Core Financial Statements .......................................................... 64 Movement in Reserves Statement .................................................................................. 64 Comprehensive Income and Expenditure Statement ...................................................... 66 Balance Sheet ................................................................................................................ 67 Cash Flow Statement ...................................................................................................... 68 Notes to the Accounts ........................................................................................................ 69 The Housing Revenue Account ....................................................................................... 163 Collection Fund ................................................................................................................ 168 Durham County Council Pension Fund Accounts ............................................................ 176 Notes to Durham County Council Pension Fund Accounts ........................................... 178 Annual Governance Statement ........................................................................................ 211 Glossary of Terms used in the Accounts ......................................................................... 228 Page 2 of 243 Explanatory Foreword 1. Message from Don McLure CPFA – Corporate Director Resources In the face of an unprecedented reduction in government funding, Durham County Council remains committed to the delivery of its vision and priorities which are developed in consultation with the public, all of our partners and stakeholders. Our plan over the coming three years continues to be influenced and shaped by the Government’s ongoing financial austerity programme and fundamental central policy changes which continue to dominate and challenge the Council, local government, and the public sector generally. It is the Council’s view that the financial landscape for all local authorities will remain challenging until at least 2018/19 and at this time it is forecast that the Council will need to save an estimated further £110m of savings over the three year period 2014/15 to 2016/17. That said, the Council continued to deliver a high standard of services during 2013/14 while successfully delivering all of our challenging savings targets in very difficult circumstances, in line with the Medium Term Financial Plan. This document presents the published accounts for Durham County Council for the year ended 31 March 2014 – the ‘Statement of Accounts’. The Council continues to have a robust financial standing with sound and continuously improving financial management procedures and processes in place. I aim to give the readers of these accounts and all interested parties, including electors, local residents, Council Members, partners and other stakeholders information about the money that the Council has received and spent, that it has been accounted for properly, that the financial standing of the Council continues to be safe and secure and services are being delivered using value for money principles at all times. The Statement of Accounts begins with this explanatory foreword and the presentation of the Accounts have been designed to help readers to understand and interpret the financial statements which follow accounting standards and regulation and are by their very nature complex in some areas. The style and format of the Statement of Accounts is very similar to that used in 2012/13. I hope that this document proves to be both informative and of interest to readers. The Council is keen to try to improve both the quality and suitability of information provided and your feedback would be welcome. Don McLure CPFA Corporate Director Resources Page 3 of 243 Explanatory Foreword 2. Introduction The purpose of the Statement of Accounts is to give electors, those subject to locally levied taxes and charges, members of the Council, employees and other interested parties clear information about the Council’s finances. It is a very important element in demonstrating the Council’s stewardship of public money. It shows the resources available and how they have been used to deliver services in County Durham. The purpose of the Explanatory Foreword is to provide an understandable guide of the most significant aspects of the Council’s financial performance, year-end financial position and cash flows. The Explanatory Foreword focuses on the matters that are of relevance to the principal users of the Statement of Accounts. As well as complementing and supplementing the information provided in the Accounts, it also provides a forward look at the issues that have affected the Council’s development, performance and position during 2013/14 and are likely to impact in the future. This foreword covers: 1 Message from the Corporate Director Resources 2 Introduction 3 Statement of Accounts 4 Related Parties – Members Interests and Directorships 5 Information and Financial Statements 6 County Durham 7 Key Achievements in 2013/14 8 A Review of 2013/14 9 Material Assets Acquired, Liabilities Incurred 10 Sources of Funds to meet Capital Expenditure and Other Plans 11 Borrowing 12 Pensions Liability 13 Material or Unusual Items 14 Significant Changes in Accounting Policies 15 Significant Provisions, Contingencies and Material Write-offs 16 Changes in Statutory Functions 17 Subsequent Events 18 Future Plans 19 Housing Revenue Account 20 Durham County Council Pension Fund 21 Going Concern 3. Statement of Accounts The Statement of Accounts for the financial year 2013/14 is prepared in accordance with the ’Accounts and Audit Regulations 2003’, as amended by the ‘Accounts and Audit (Amendment) (England) Regulations 2006 and 2009, the ‘Accounts and Audit (England) Regulations 2011’ and the ‘Code of Practice on Local Authority Accounting 2013/14’ (the Page 4 of 243 Explanatory Foreword Code) as published by the Chartered Institute of Public Finance and Accountancy (CIPFA). The Code specifies the principles and practices required to give a ‘true and fair’ view of the financial position and transactions of a local authority. It sets out the accounting concepts and accounting principles which underpin the Statement of Accounts. The Code is based on approved accounting standards and reflects specific statutory requirements. The Code is based on European Union adopted International Financial Reporting Standards (IFRS) (with the exception of IFRS 13 ‘Fair Value Measurement’) which were primarily drafted for the commercial sector and are not designed to address all the issues relevant to local government in the UK. Therefore, where appropriate, the Code adapts IFRS’s and sets out the required accounting treatment based on the approach in the Memorandum of Understanding (MoU) between the Relevant Authorities. In the unusual event that a local authority enters into a transaction for which the accounting treatment and disclosure required is not covered by the Code, it prescribes a hierarchy of alternative standards on which accounting treatment should be based. These include accounting standards issued by the International Accounting Standards Board (IASB) and interpretations of the International Financial Reporting Interpretations Committee (IFRIC), except where these are inconsistent with specific statutory requirements. The Code also draws on approved accounting standards issued by the International Public Sector Accounting Standards Board (IPSAS) and UK Generally Accepted Accounting Practice (GAAP) where these provide additional guidance. In England and Wales, the local authority Code constitutes ‘proper accounting practice’ under the terms of section 21(2) of the Local Government Act 2003. The Council is therefore legally required to follow this Code of Practice. Explanatory notes are included to assist in the interpretation of the accounts, which are unfortunately, unavoidably technical and complex. The key document for Local Authorities in England is the Accounts and Audit (England) Regulations 2011. These regulations provide the overall legal requirements for the Statement of Accounts and have been incorporated into the Code. The key changes in the Code necessitated by changes in accounting practices and accounting