Statement of Accounts 2015/16 Birmingham City Council Accounts for the Year Ended 31 March 2016 Index Contents Page Notes to the Core Financial Statements Narrative Report 5 Core Financial Statements Movement in Reserves Statement 17 Comprehensive Income and Expenditure Statement 18 Balance Sheet 19 Cash Flow Statement 20 Notes to the Core Financial Statements 21 Supplementary Financial Statements Housing Revenue Account - Income and Expenditure Statement 129 Movement on the Housing Revenue Account Statement 130 Notes to the Housing Revenue Account 131 Collection Fund Income and Expenditure Account Notes to the Collection Fund 135 Group Accounts Narrative Report 139 Group Movement in Reserves Statement 143 Group Comprehensive Income and Expenditure Statement 144 Group Balance Sheet 145 Group Cash Flow Statement 146 Notes to the Group Accounts 147 Annual Governance Statement 2015/16 184 Statement of Responsibilities 201 Glossary 202 Auditor's Report 208 2 Birmingham City Council Accounts for the Year Ended 31 March 2016 Note Note Page Setting the Accounts Framework Accounting Policies 1 21 Accounting Standards That Have Been Issued but Have Not Yet Been Adopted 2 44 Critical Judgements in Applying Accounting Policies 3 44 Assumptions Made About the Future and Other Major Sources of Estimation 4 47 Uncertainty Events After the Reporting Period 5 50 Items relating to the Movement in Reserves Statement Adjustments Between Accounting Basis and Funding Basis Under Regulations 6 51 Transfers To/(From) Earmarked Reserves 7 54 Usable Reserves 8 54 Unusable Reserves 9 57 Pension Schemes Accounted for as Defined Contribution Schemes 10 64 Defined Benefit Pension Schemes 11 65 Items relating to the Comprehensive Income and Expenditure Statement Material Items of Income and Expense and Acquired Operations 12 71 Other Operating Expenditure 13 72 Financing and Investment Income and Expenditure 14 72 Taxation and Non Specific Grant Income and Expenditure 15 73 Trading Operations 16 73 Grant Income 17 76 Dedicated Schools Grant 18 78 Amounts Reported for Resource Allocation Decisions (Segmental Analysis) 19 79 Items relating to the Balance Sheet Property, Plant, and Equipment 20 81 Investment Property 21 85 Heritage Assets 22 86 Intangible Assets 23 88 Long Term Investments 24 89 Long Term Debtors 25 90 Short Term Investments 26 90 Assets Held for Sale 27 91 Short Term Debtors 28 92 Cash and Cash Equivalents 29 92 Short Term Creditors 30 92 Long Term Creditors 31 93 Provisions 32 93 Contingent Liabilities and Contingent Assets 33 95 Council Borrowing 34 97 Items relating to the Cash Flow statement Cash Flow Statement - Operating Activities 35 98 Cash Flow Statement - Investing Activities 36 98 Cash Flow Statement - Financing Activities 37 98 Cash Flow Statement - Other Adjustments 38 99 3 Birmingham City Council Accounts for the Year Ended 31 March 2016 Disclosures providing additional supporting information Financial Instruments 39 100 Nature and Extent of Risks Arising from Financial Instruments 40 104 Capital Expenditure and Capital Financing 41 108 Leases 42 109 Service Concession Arrangements 43 112 Members' Allowances 44 113 Officers' Remuneration 45 114 Exit Packages 46 116 Auditor Remuneration 47 117 Related Parties 48 117 The Council Acting as Agent 49 124 Trust Funds 50 126 4 Birmingham City Council Accounts for the Year Ended 31 March 2016 Narrative Report 1 Introduction 1.1 This document presents the statutory financial statements for Birmingham City Council for the period from 1 April 2015 to 31 March 2016. The financial statements have been prepared in accordance with the 2015/16 Code of Practice on Local Authority Accounting (The Code) published by the Chartered Institute of Public Finance and Accountancy (CIPFA). 1.2 This narrative report provides a summary of the Council’s financial position and details of material items that have impacted on the accounts during the year. 1.3 The financial statements contain a number of technical accounting terms and concepts. A glossary of the major accounting terms has been provided at the end of the financial statements to help the reader’s understanding. 2 Background to 2015/16 2.1 Councillor Sir Albert Bore announced in October 2015 that he would be stepping down from his role as Leader of the Council. Sir Albert had been Leader of the Council from 2012 to 2015 and previously for the period 1999 to 2004. Councillor John Clancy was subsequently elected as the new Leader of the Council. 2.2 The Birmingham Independent Improvement Panel, appointed following the publication of the report on the governance and organisational capabilities of the Council by Lord Kerslake, has provided a number of progress reports to the Secretary of State. In its latest report the improvement panel has recommended to the Secretary of State that it should stand back for a period so that the political and managerial leadership of the Council can be given the chance to work together and demonstrate the Council’s ability to deliver the change and improvement needed. The panel will return in the autumn to undertake a further review of progress. 2.3 The Council, in response to the challenges faced through the changing role of local government, the impact of public expenditure constraint and the recommendations from external review, has initiated and developed its Future Council Programme. The Future Council Programme will review and, where necessary, redesign all aspects of the Council, including: How the Council operates in order to deliver its vision and outcomes through: the future services offered; the people, technology and information available; the best processes and structures used for delivery; The aptitudes and abilities that will be required of staff employed and the working culture; How members operate in their local areas and become local leaders in their communities; How the Council approaches working with partner organisations and local communities; How the Council provides the right support services in order to ensure those at the front line are able to deliver services successfully. 5 Birmingham City Council Accounts for the Year Ended 31 March 2016 2.4 The Council has a vision for how the City will look in 2020 which is based on the fundamental ideals of prosperity, fairness and democracy and within those ideals to have: A strong economy; Safety and opportunity for all children; A great future for young people; Thriving local communities; A healthy and happy City; and A modern Council. 2.5 The Council has continued to face extraordinary financial pressures with savings required for 2015/16 of £105m giving an accumulated total savings of £560m to date. Further savings are required in 2016/17 of nearly £90m with an additional savings projection of around £160m by 2020. These savings are in addition to the pressures on services arising from demographic changes and increasing and changing needs. 3 Major Developments 3.1 Despite the financial pressures faced and the demands placed on it as a result of the continued requirement to deliver high quality services whilst undertaking a major review of its operations, the Council has continued to take on new responsibilities and manage large redevelopments of the City. Details of the major activities are set out below. Better Care Fund 3.2 The Better Care Fund (BCF) was a policy initiative announced by government in June 2013 aimed at driving the transformation of local services to ensure that people receive better and more integrated care and support. 3.3 The Council endorsed the principles of a BCF joint pooled budget for Older Adult Social Care and Health integrated provision between the Council and local Clinical Commissioning Groups (CCGs) and plans were developed through 2014/15 for implementation from 1 April 2015. The Council was identified as the host for the local BCF. 3.4 Whilst no new money was made available as a result of the introduction of the BCF, there was an opportunity to reallocate resources within the local care and health sectors to make better and more effective use of them. Funding was allocated by the Department of Health through money made available to CCGs and funding made available to the Council through the Disabled Facilities and Community Capital Grants were also included in the BCF. The total resource for the pooled fund for 2015/16 was £95.7m. Public Health Transfer 3.5 From 1 October 2015, the Council took over responsibility from NHS England for planning and paying for public health services for babies and children up to 5 years old. These services include health visiting and the Family Nurse Partnership Programme. In 2015/16, the Council received additional grant of £11.2m from the Department of Health in respect of these services. 6 Birmingham City Council Accounts for the Year Ended 31 March 2016 Paradise Redevelopment 3.6 The Council has entered into a partnership arrangement with BriTel Fund Trustees Limited to develop Paradise Circus in the centre of the city through the provision of a mix of offices, shops, leisure and cultural facilities together with civic amenities, a hotel and new public realm. 3.7 The Council and BriTel Funds Trustees Limited have formed a joint company to manage the redevelopment of the area. The company has been accounted for as an associate in the Council’s Group Accounts. 4 Asset Disposals 4.1 During 2015/16, the Council completed the sale of two major developments, the National Exhibition Centre Group (NEC Group) and the Grand Central shopping centre. National Exhibition Centre Group 4.2 In March 2014, the Council announced its intention to seek offers for the NEC Group, which incorporates five exhibition and convention centres and arenas; namely NEC (National Exhibition Centre), The Vox Conference Centre within Resorts World Birmingham, Genting Arena, ICC (International Convention Centre) and Barclaycard Arena. Whilst generating a capital receipt for the Council, the sale would allow the business to take advantage of growth opportunities and reach the next stage of development under private ownership.