Lincolnshire County Council Statement of Accounts 2014-15 Note Contents: Page Explanatory Foreword Introduction to the Accounts 3 Review of 2014-15 5 Statement of Responsibilities for the Statement of Accounts 11 Financial Statements Movement in Reserves Statement 12 Comprehensive Income and Expenditure Statement 14 Balance Sheet 15 Cash Flow Statement 16 Notes to the Financial Statements Note 1 Statement of Accounting Policies 17 Note 2 Accounting Standards that have been issued but have not yet been adopted 37 Note 3 Critical Judgements in Applying Accounting Policies 37 Note 4 Assumptions Made about the Future and Other Major Sources of Estimation and Uncertainty 39 Note 5 Exceptional Items 40 Note 6 Material Items of Income and Expenditure 40 Note 7 Events After the Balance Sheet Date 41 Note 8 Adjustments between Accounting Basis and Funding Basis under Regulations 41 Note 9 Transfers to/from Earmarked Reserves 45 Note 10 Other Operating Expenditure 47 Note 11 Financing and Investment Income and Expenditure 47 Note 12 Taxation and Non-Specific Grant Income 47 Note 13 Property, Plant and Equipment 48 Note 14 Heritage Assets 52 Note 15 Investment Properties 54 Note 16 Intangible Assets 56 Note 17 Financial Instruments and Nature and Extent of Risks Arising from Financial Instruments 58 Note 18 Inventories 65 Note 19 Debtors 65 Note 20 Assets Held for Sale 66 Note 21 Creditors 67 Note 22 Provisions 68 Note 23 Other Long Term Liabilities 70 Note 24 Usable Reserves 70 Note 25 Unusable Reserves 71 Note 26 Operating Activities 76 Note 27 Investing Activities 77 Note 28 Financing Activities 77 Note 29 Amounts Reported for Resource Allocation Decisions (Segmental Reporting) 78 Note 30 Acquired and Discontinued Operations 85 Note 31 Agency Services 85 Note 32 Pooled Budgets 86 Note 33 Members’ Allowances 88 Note 34 Officers’ Remuneration 88 Note 35 Exit Packages 90 Note 36 Termination Benefits 90 Note 37 External Audit Costs 90 Note 38 Dedicated Schools Grant 91 Note 39 Grant Income 92 Note 40 Related Parties 94 Note 41 Capital Expenditure and Capital Financing 96 Note 42 Leases 97 Note 43 Private Finance Initiatives (PFI) and Similar Contracts 100 Note 44 Pension Schemes Accounted for as Defined Contribution Schemes 103 Note 45 Defined Benefit Pension Schemes 104 Note 46 Contingent Liabilities 115 Note 47 Contingent Assets 117 Note 48 Prior Period Adjustment 118 Lincolnshire County Council Pension Fund 120 (including the Pension fund account, net assets statement (balance sheet) and notes). Lincolnshire Fire and Rescue Pension Fund 152 (including the Pension fund account, net assets statement (balance sheet) and notes). Audit Opinion 155 Annual Governance Statement 156 Appendix A - Officer Remuneration split between staff employed in schools and all other parts of the 157 Council. Glossary of Terms 159 Statement of Accounts 2014-15 Explanatory Foreword Introduction to the Accounts The Statement of Accounts for the year 2014-15 is set out on pages 12 to 16. The purpose of the published Statement of Accounts is to give electors, local tax payers and service users, elected members, employees and other interested parties clear information about the Council’s finances. It should answer such questions as: What did the Council’s services cost in the year of account? Where did the money come from? What were the Council’s assets and liabilities at the year-end? Content The Explanatory Foreword This provides a general introduction to the Accounts, focusing on explaining the more significant features of the Council’s financial activities during the period 1 April 2014 to 31 March 2015. It is based on the information contained in the Statement of Accounts and the Council's Financial Performance Report for 2014-15. Movement in Reserves Statement for the period 1 April 2014 to 31 March 2015 This statement shows the movement in the year on the different reserves held by the Authority, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The (Surplus) or Deficit on the Provision of Services line shows the true economic cost of providing the Authority’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance for Council Tax setting purposes. The Net Increase/Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council. Comprehensive Income and Expenditure Statement for the period 1 April 2014 to 31 March 2015 This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement. Balance Sheet as at 31 March 2015 The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Authority. The net assets of the Authority (assets less liabilities) are matched by the reserves held by the Authority. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Authority may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves are those that the Authority is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’. Cash Flow Statement for the period 1 April 2014 to 31 March 2015 The Cash Flow Statement shows the changes in cash and cash equivalents of the Authority during the reporting period. The Statement shows how the Authority generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Authority are funded by way of taxation and grant income or from the recipients of services provided by the Authority. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Authority’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Authority. Notes to the Accounts These comprise of a summary of significant accounting policies, further information and detail of entries in the prime Statements above and other explanatory information. The Statement of Responsibilities for the Statement of Accounts This details the financial responsibilities of the Council, the Chairman of the Council and the Executive Director - Finance & Public Protection. The Governance Statement This identifies the systems that the Council has in place to ensure that its business is conducted in accordance with the law and proper standards and that public money is safeguarded and properly accounted for. Audit Opinion This contains the External Auditor’s report and opinion on the Accounts. The Lincolnshire Pension Fund Account This shows the operation of the Lincolnshire Pension Fund run by the Council for its own employees and employees of the seven District, City and Borough Councils in Lincolnshire along with other scheduled and admitted bodies. The Lincolnshire Fire and Rescue Pension Fund Account This shows the operation of the Lincolnshire Fire and Rescue Pension Fund run by the Council for its own Fire-fighter employees. A review of financial performance in 2014-15 by the Executive Director - Finance and Public Protection Review of the Year The County Council set its spending plans for 2014-15 against a backdrop of considerable national economic uncertainty, significantly reduced Government grant funding and rising demand for some services (such as adult care). In setting the budget for 2014-15 the Council's aim was to set a balanced and deliverable budget that would effectively address reduced levels of funding, protect frontline services wherever possible, and continue to freeze Council Tax to the people of Lincolnshire for the fourth year running. Annual Revenue Spending The Council spent £924.23m on 2014-15 in providing public services – £1,248.68 for every person in Lincolnshire. The Council's annual spending on providing public services are set out in the charts below and show how this was used both by type of service provided and by type of expenditure. Other Services includes: Other budgets, Economy and Culture, Community Safety and Support Services (including: Finance, ICT and HR). The distribution of expenditure by type differs significantly between different services. For example, salaries and wages comprises 63.5% of expenditure for schools. For services other than schools, salaries and wages comprises 27.0% of expenditure and contract payments comprises 48.7% of total expenditure. These differences reflect how Council services are provided. Note 29 Amounts Reported for Resource Allocation Decisions provides further details on spending and the services which are provided to the public (page 78). Annual income The Council’s revenue spending was funded by: The Council's main sources of general funding come from Revenue Support Grant (RSG) and Business Rates (part of which is retained from business rates collected in Lincolnshire and part from central government as a 'top up' to the element collected locally).