2 Page Introduction to the Statement of Accounts 1) Narrative Report 3 A brief introduction to the Statement of Accounts highlighting significant financial events and background to the 2016/2017 financial year. 2) Statement of Responsibilities for the Statement of Accounts 11 The principal financial responsibilities for approval and certification of the Statement of Accounts. Core Financial Statements 3) Expenditure and Funding Analysis (EFA) 12 The Expenditure and Funding Analysis demonstrates how the funding available to the authority for the year has been used in providing services in comparison with those resources consumed or earned in accordance with generally accepted accounting practices. 4) Comprehensive Income and Expenditure Statement (CIES) 13 A summarised statement of the accounting income and expenditure for the provision of services during the 2016/2017 financial year in accordance with International Financial Reporting Standards (IFRS), as opposed to the amount to be funded by Council Tax. 5) Movement in Reserves Statement (MIRS) 14 The Movement in Reserves Statement illustrates the overall position of the Council in terms of reserves held and the movement during the 2016/2017 financial year. 6) Balance Sheet 15 An abbreviated statement of the Council’s assets, liabilities and reserves at the beginning and the end of the 2016/2017 financial year. 7) Cash Flow Statement 16 An abbreviated statement of the inflows and outflows of cash and cash equivalents during the 2016/2017 financial year categorised into operating, financing and investing activities. 8) Accounting Policies 17 Bedford Borough Council’s accounting policies employed in the production of the 2016/2017 Statement of Accounts. 9) Disclosure Notes to the Core Financial Statements 32 A group of detailed notes produced to provide clarity and to support the summarised amounts included in the core financial statements. Supplementary Statements 10) Collection Fund Statement 84 An overall summary of the collection performance of Council Tax and National Non-Domestic Rates (NNDR), including supporting disclosure notes. 11) Bedfordshire Pension Fund Statements (administered by Bedford Borough Council) 87 The Pension Fund Statement of Accounts for 2016/2017, including supporting disclosure notes. 12) Annual Governance Statement 114 A statement of the governance responsibilities and controls in place within the Council Other Documents 13) Glossary of Terms 127 14) Independent Auditor’s Reports 132 These are audit reports produced by the appointed auditors for the Council and Pension Fund. Bedford Borough Council 2016/2017 Statement of Accounts 3 1) Narrative Report (a) Introduction 2016/2017 has been another challenging year for Bedford Borough Council with increasing demand for services at the same time as budgets being constrained. As in previous years the Council has carefully managed its financial affairs with robust financial controls ensuring that services were delivered within the resources allocated. This has, in turn, contributed towards the delivery of £5.192 million in budgeted savings within the last financial year. The Council is in good financial health in terms of its financial performance and has strong financial management arrangements in place which enabled the Council to take investment decisions during the year, and deliver an underspend on the revenue budget. Risks in the medium term as austerity measures continue, and the Council will need to make further efficiencies to meet the financial challenge ahead. (b) Revenue Outturn Position The revenue outturn for 2016/2017 for Bedford Borough Council shows an overall net underspend of £1.803 million. The outturn reflects all expenditure incurred and income due and relevant year end accounting entries, including transfers to and from reserves. The table below sets out the revenue outturn position for each Directorate, as reported to Executive on 14 June 2017. This compares to a net revenue underspend in 2015/2016 of £3.088 million. Revenue 2016/2017 Outturn Net Net Net Budget Outturn Variance Directorate £million £million £million Children’s and Adult’s Services 78.235 79.974 1.739 Chief Executive’s 18.410 17.963 (0.447) Environment & Sustainable Communities 25.872 25.670 (0.202) Operational Net Cost 122.517 123.607 1.090 Capital Financing 6.445 4.174 (2.271) Contingency 1.371 (0.000) (1.371) Corporate Budgets (0.092) 0.657 0.749 Total Revenue Outturn 130.241 128.438 (1.803) Financing (130.241) (130.241) (0.000) Total Net Revenue Outturn 0 (1.803) (1.803) % of Total Net Budget 1.4% The net operational costs of the Council accounts for £122.5 million, representing 94% of the Council’s overall net budget. These budgets are primarily the day to day spending / service areas of the Council. The provisional outturn for operational services areas is £123.6million representing an overspend of £1.1million with Children’s and Adults Services exceeding budget. Non Operational budgets were underspent by £2.893 million, principally due to the Balance on the Contingency, the revised MRP Policy and additional business rates resulting in the overall underspend of £1.803 million. It is proposed this balance will be allocated as follows: £1.000 million for Improvements to Footpaths and Highways resurfacing and repair being a priority for this Council (EP1 – we manage and maintain the local environment well); £0.367 million to continue the Members Ward Fund to 2019/2020; £0.436 million to the General Fund Balance to manage future financial risk (subject to further adjustments that may arise following the completion of the financial statements closure and audit process); The final budget for 2016/2017 was funded through Council Tax (including Council Tax surplus) of £76.686 million, retained business rates of £32.136 million, Revenue Support Grant of £21.419 million and other grants of £0.715 million. In determining the 2016/2017 revenue budget, the Council ensured regard to its ongoing sustainability and the observance of a number of overarching principles. This involved: (i) An overall commitment to endeavour to increase annual income sources and reduce annual expenditure without materially reducing front line services provided by the Council; (ii) A preparedness to consult service users and providers to ensure that services can be remodelled and tailored within acceptable tolerances; Bedford Borough Council 2016/2017 Statement of Accounts 4 (iii) A comprehensive review of the base budget to provide greater assurance for the future. The review has been based upon regular established monitoring processes, and has incorporated a review of the alignment between the original budget and service activity; (iv) The identification, as a result of (c) above, of service pressures (such as Adult Social Care, and the National Living Wage) and endeavours to make adequate provision in the 2016/2017 base budget; (v) The continued review and control of the capital programme given the impact of borrowing. When the Council considers each revenue service and function budget, endeavours are made to identify potential risks. Inevitably, during the year, some of these risks will occur and impact on the budget by either requiring further expenditure or by reducing the Council’s budgeted income. The budget process identified a number of service specific risks relating to the range of Borough Services and related budgets. The monitoring procedures are predominantly guided by the risk based approach that also incorporates performance and demand led analysis to complement and provide additional context to the financial monitoring position. The Executive has also been kept informed of the budgetary position for both Revenue and Capital budgets through the regular Tends Reports. The Council reports the budget monitoring to its Executive on a quarterly basis throughout the year. In order to deliver the necessary assurance and challenge of the 2016/2017 revenue budget monitoring position the Council undertook regular monthly monitoring meetings with Directors and Portfolio Holders. The objective being to ensure timely action has been taken to avoid potential overspends where possible. (c) General Fund Position It is best practice to ascertain, on an annual basis, a risk assessed level of the General Fund. The Risk Assessment methodology has been reviewed to ensure that the recommended level of the General Fund Balance is appropriate and reflects the key issues facing the Council. The methodology adopted by the authority takes into account past experience of budget pressures, demographic pressures, legislative impacts and the extent to which some services are reliant on external funding and the potential impact that these areas could have on the budget. The Risk Assessment undertaken by the authority consequently determined that the optimum General Fund balance for Bedford Borough Council as being within the range of £10.370 million to £14.030 million. As at 31 March 2017, the General Fund balance stood at £12.058 million after allowing for an allocation of £0.436 million from the outturn underspend. The planned draw down of £1 million from the General Fund Balance to fund one-off backdated Business Rates appeals was not required to balance the budget. A further review will need to be undertaken during 2017/2018 to consider whether a future balance of £12.058 million is sufficient to manage the financial risks going forward given the significant changes to local government funding and the proposed introduction of 100% business rates