democratic.lincoln.gov.ukdemocratic.lincoln.gov.uk/Data/Executive/20120924/Agenda/Executive... · 1 S T A T E M E N T O F A C C O U N T S 2 0 1 1 / 1 2 CONTENTS PAGE Explanatory Foreword

STATEMENT OF ACCOUNTS

FOR THE

YEAR ENDED 31 MARCH 2012

APPENDIX A

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S T A T E M E N T O F A C C O U N T S

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CONTENTS

P A G E

Explanatory Foreword 1

Council Approval 1 5

Statement of Responsibilities for the Statement of Accounts 1 6

Movement in Reserves Statement 1 7

Comprehensive Income and Expenditure Statement 2 0

Balance Sheet 2 1

Cash Flow Statement 2 3

Notes to the Accounts 2 4

Housing Revenue Account Income and Expenditure Statement 1 1 1

Movement on the Housing Revenue Account Statement 1 1 3

Notes to the Housing Revenue Account 1 1 4

Collection Fund 1 2 3

Notes to the Collection Fund 1 2 4

Independent Audit Opinion and Certificate 1 2 7

Glossary 1 3 0

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E X P LA N A T O R Y F O R E W O R D

The Statement of Accounts

The purpose of the Accounts, which follow, 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. The Accounts

show the financial performance for 2011/12 and the financial position at 31 March

2012. The Accounts present expenditure and income incurred by the Council in the

financial year 2011/12 and highlight changes in the financial position of the Council

over the course of the year.

The financial statements have been prepared in accordance with the Code of

Practice on Local Authority Accounting in the UK (the code) published by the

Chartered Institute of Public Finance and Accountancy (CIPFA).

The Statement of Accounts consist of various sections and statements, which are

briefly explained below:

An Explanatory Foreword – this provides information on the format of this Statement

of Accounts as well as a review of the financial position of the Council for the

financial year.

The Statement of Responsibilities – this details the responsibilities of the Council and

the S151 Officer concerning the Council’s financial affairs and the actual Statement

of Accounts.

The Audit Opinion and Certificate – this is provided by the Audit Commission

following the completion of the annual audit.

The Accounting Policies – this statement explains the basis for the recognition,

measurement and disclosure of transactions and other events in the accounts.

The Core Financial Statements, comprising:

The Movements in Reserves Statement – this statement shows the movement

in year on the different reserves held by the Council, analysed into ‘usable’

(i.e. those that can be applied to fund expenditure or reduce local taxation)

and other unusable reserves.

The Comprehensive Income and Expenditure Statement – this statement

shows the accounting cost in the year of providing services in accordance

with generally accepted accounting practices, rather than the amount

funded from taxation. The Council raises taxation to cover the cost of

expenditure in accordance with regulations; this may be different from the

accounting cost. The taxation position is shown in the Movement in Reserves

Statement.

The Balance Sheet – the Balance Sheet shows the value as at the Balance

Sheet date of the assets and liabilities recognised by the Council. The net

assets of the Council are (assets less liabilities) matched by the reserves held

by the Council.

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The Cash Flow Statement – this statement shows the changes in cash and

cash equivalents of the Council during the year. It shows how the Council

generates and uses cash and cash equivalents by classifying cash flows as

operating, investing and financing activities.

The Supplementary Statements, comprising:

The Housing Revenue Income and Expenditure Statement - this statement

shows the economic cost in the year of providing housing services in

accordance with generally accepted accounting practices, rather than the

amount to be funded from rents and government grants. The Council

charges rents to cover expenditure in accordance with regulations, this may

be different from the accounting cost. The increase or decrease in the year,

on the basis of which rents are raised, is shown in the Movement on the HRA

Statement

The Movement on the HRA Statement – this statement takes the outturn on the

HRA Income and Expenditure Statement and reconciles it to the surplus or

deficit for the year on the HRA Balance, calculated in accordance with the

requirements of the Local Government and Housing Act 1989.

The Collection Fund Statement- this statement is an agent’s statement that

reflects the statutory obligation for billing authorities (such as the City of

Lincoln Council) to maintain a separate Collection Fund. The statement shows

the transactions of the Council in relation to the collection from council tax

and business rate payers and distribution to Lincolnshire County Council,

Lincolnshire Police Authority and Government of council tax and national

non-domestic rates.

The Notes to the Financial Statements – these provide supporting and explanatory

information on the Financial Statements. Financial Summary 2011/12

2011/12 has been another challenging year financially as the economic climate

remained largely unchanged from the previous and so continued to present difficult

circumstances with regards to the financial management of the Council. Despite

some initial encouraging signs in the UK economy during 2011, the overall recovery

remains weak and continues to be affected by the financial difficulties being

experienced by the Eurozone countries. The threat of a dip back into recession

remains during 2012 and there have been no significant improvements to the

performance of the financial and property markets. Hence, the most challenging

areas continued to be treasury management, asset values and the use of, and

demand for, Council services, coupled with a real terms decrease in Central

Government funding.

The continued difficult condition in the economy gave rise to a number of specific

issues for the Council, as follows;

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The Bank of England’s policy of continuing to maintain low interest rates to

combat the liquidity crisis has had a significant effect on the Council’s

income from investments. In addition, the ongoing financial instability in the

Eurozone has meant that the Council has limited the placing of investments

to mainly short term deposits in 2011/12 to reduce risk but thereby reducing

investment returns.

Investment counterparty risk remains high. As a result there continues to be a

very limited range of counterparties available to the Council for investment

purposes.

Although the property market has continued to show poor performance in

2011/12, the overall market value of the Council’s property holdings

increased by £1.76m. This was mainly due to revaluations of previously

unrecognised land holdings which have been brought into use, either for

rental or for development purposes. There were also net downwards

revaluations and impairments of £1.657m in 2011/12 charged to the

Comprehensive Income and Expenditure Statement.

The poor performance of the property market has also reduced the Council’s

ability to generate capital receipts affecting the affordability of the General

Fund Investment Programme with the financing of schemes being heavily

reliant on the sales of Council assets.

Demand for services such as Council tax and Housing Benefits has continued

to increase, with currently 12,171 household (28%) in the City in receipt of

Housing and/or Council Tax Benefit. Services including Council Housing and

Customer Services are also continuing to experience high levels of demand.

Income has continued to remain at historically low levels in a number of areas

e.g. planning regulation fees, local land charges and car parking.

In spite of the challenges the Council has faced it has maintained sound financial

management and has delivered spending within budget in both the General Fund

and the Housing Revenue Account, whilst over achieving its target for the delivery of

revenue savings; and has delivered over £35.9m of capital investment, of which

£24.931m relates a payment to Central Government to buy out of the Housing

Revenue Account subsidy system and to become a ‘self financed’ Housing

Authority from 1 April 2012.

Revenue Income and Expenditure General Fund

The General Fund account covers all net spending by the Council on services other

than those accounted for in the Housing Revenue Account. General Fund services

are partly paid for by Government Grants and contributions from Business Rates, with

the balance being funded from Council Tax.

For 2011/12, the approved net expenditure budget for General Fund

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services was £14.264m. After allowing for planned contributions of £0.262m to non-

earmarked general reserves the total Net General Fund Budget for 2011/12 was

£14.526m.

The Net General Fund Budget of £14.526m assumed the achievement of a £0.750m

savings target to be delivered as part of the Council’s Next Steps Programme, which

was launched in 2010/11. The Programme has been successful in delivering the

required savings with £0.912m secured in 2011/12, an overachievement of the target

of £0.162m. The Next Steps target for savings increases to £1.5m in 2012/13, of which

£1.070m has already been secured (this includes the £0.162m over achievement in

2011/12), the remaining £0.430m will be achieved by the implementation of the

remaining programmed reviews.

The table below provides a summary of the final outturn position for the General

Fund, against the net budget.

This has been prepared after applying International Financial Reporting Standards

(IFRS). The impact of IFRS is that there are a number of adjustments of a technical

nature (e.g. depreciation and asset valuations) which have resulted in significant

variances in individual service lines. These adjustments are however, in line with

statute, reversed out so that there is a nil impact on the Council tax payer.

ACTUAL

2011/12

£’000

BUDGET

2011/12

£’000

VARIANCE

2011/12

£’000

Chief Executive & Town Clerk 212 238 (26)

Directorate of Development &

Environmental Sustainability

4,249 3,823 426

Directorate of Resources 1,590 1,544 46

Directorate of Housing 9,527 9,870 (343)

Corporate 1,985 2,594 (609)

Net Operational Expenditure 17,563 18,069 (506)

IAS 19 Pension & Compensated

Absences

404 0 404

Capital Financing (1,560) (1,984) 424

Specific Grants (1,775) (1,377) (398)

Contingencies 0 285 (285)

Savings Target 0 162 (162)

Earmarked Reserves (468) (891) 423

CMS Repatriation 9 0 9

Total Expenditure 14,173 14,264 (91)

Contribution to general reserves 353 262 91

Total Net Budget 14,526 14,526 0

Council Tax Payer 6,274 6,274 0

Council Tax Surplus 32 32 0

RSG & NNDR 8,220 8,220 0

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Total Resources 14,526 14,526 0

The outturn position for the General Fund is better than expected due to a

combination of management actions to control potential overspends in addition to

the overachievement of the Next Steps Programme savings target. Actual service

costs for the financial year 2011/12 were £14.173m compared to the equivalent

approved budget of £14.526m, resulting in an under spend of £0.091m, or 0.6%.

This overall under spend of £0.091m for the year includes the following major

variances:

£’000

Increased Income

Investment Interest (31)

Lincoln Properties (67)

Municipal Elections (35)

Industrial Promotions (40)

Crematorium (59)

Housing Benefit Overpayments and transitional funding (249)

Reduced Income

Town Planning 162

Building Regulations 175

Think Tank (managed workspace) 72

Car Parking 116

Reduced Expenditure

Democratic Support (30)

Industrial Promotions (60)

CCTV (27)

Development Control (43)

Community Leadership (33)

The Terrace (40)

Staff Advertising (37)

Capital Financing Costs relating to City Hall essential works (125)

Savings Target overachievement (40)

Pay Inflation (60)

Increased Expenditure

The Lawn 26

Car Parking 39

Bad debt provision 112

As at 31 March 2012, the Council held £8.006m General Fund revenue reserves,

comprising £5.869m earmarked reserves (to cover specific or potential financial risks

and liabilities) and £2.137m non-earmarked general reserves. This latter balance

represents 15.7% of the 2012/13 annual net service budget and provides an

adequate level of reserves to cover for unforeseen financial risks.

Housing Revenue Account

The Housing Revenue Account, which has to be kept as a separate account for all

the expenditure and income relating to the landlord functions associated with the

provision, management and maintenance of Council owned dwellings.

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For 2011/12, the approved net operating deficit for the Housing Revenue Account

was £0.001m. Actual net expenditure for 2011/12 showed a surplus of £0.089m, a

variance of £0.090m.

The table below provides a summary of the final outturn position for the Housing

Revenue Account, against the net budget.

ACTUAL

2011/12

£’000

BUDGET

2011/12

£’000

VARIANCE

2011/12

£’000

Operational Expenditure

Repairs & Maintenance 7,349 7,435 (86)

Supervision & Management 7,360 8,544 (1,184)

Provisions (including Bad Debt) 197 200 (3)

Capital Financing 30,757 4,341 26,416

Sub Total 45,663 20,520 25,143

Add:

Subsidy Limitation Transfer 446 393 53

CMS Repatriation (IAS19 & Insurance Fund) 82 0 82

Interest Payable & Similar Charges 1,448 1,448 0

Amortisation of Premiums & Discounts 205 205 0

Total Expenditure 47,844 22,566 25,278

Income

Rents & Service Charges (25,550) (25,415) (135)

Interest (71) (51) (20)

Capital Grants and contributions (209) 0 (209)

Net Expenditure 22,014 (2,900) 24,914

Less:

Direct Revenue Financing 1,377 2,069 (692)

Capital Accounting Adjustment (26,103) 22 (26,125)

Appropriation to/(from) Major Repairs

Reserves

680 686 (6)

Appropriation to/(from) Pension Fund Liability 384 0 384

Appropriations to/(from) Earmarked Reserves 1,559 124 1,435

Net HRA (Surplus)/Deficit (89) 1 (90)

The overall under spend of £0.090m for the year includes the following major

variances:

£’000

Increased Income

Dwelling Rents (111)

Other Rents (45)

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Investment Interest (20)

Reduced Expenditure

Repairs & Maintenance (86)

Increased Expenditure

Subsidy limitation transfer 53

Debt Management expenses 24

As at 31 March 2012, the Council held £7.728m HRA revenue reserves, comprising

£6.456m earmarked reserves (to cover identified specific, potential financial risks

and liabilities) and £1.272m non-earmarked general reserves.

Capital Expenditure

Capital expenditure on the provision of new or enhanced assets is largely met from

capital receipts, government grants, contributions from third parties and revenue

contributions.

The Council’s capital spending in the year was £35.949m compared to the revised

programme budget of £36.645m, representing a net variance of £0.696m against

the profiled budget. The reasons for the variance in 2011/12 were mainly due to

underspends on the Decent Homes programme and contingency schemes in the

HRA and renovation grants in the General Fund Investment Programmes. The

2011/12 capital spending and funding position is summarised as follows:

ACTUAL

2011/12

£’000

BUDGET

2011/12

£’000

VARIANCE

2011/12

£’000

Capital Expenditure

General Fund (GIP) 4,351 4,501 (150)

Housing Revenue (HIP) 31,598 32,144 (546)

Total Expenditure 35,949 36,645 (696)

Financed by:

Unsupported Borrowing 25,128 25,273 (145)

Capital receipts 1,759 1,969 (210)

Capital Grants and

Contributions 2,337 2,048 289

Major Repairs Reserve 5,053 5,053 0

Revenue Contributions 1,672 2,302 (630)

Total Financing 35,949 36,645 (696)

Major Capital works carried out during 2011/12 are set out in the following table:

£’000

Housing

Decent Homes improvements to Council dwellings 5,130

Other major works to housing stock 1,537

HRA self financing settlement 24,931

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£’000

General Fund

Pathways Centre 1,087

Health & Safety and asbestos removal 212

Lucy Tower St Car Park Works 368

The Terrace 323

Improvement & Renovation Grants 958

Mercury Abatement scheme at the crematorium 132

Revenues & Benefits ICT system 209

Other Schemes 1,062

Total 35,949

In 2012 the Council paid £24.931m to Central Government to buy out of the Housing


Authority from 1 April 2012. This transaction has been treated as capital expenditure

in 2011/12 in line with accounting guidance. Capital Financing

The Council’s capital programme is funded by a number of sources including the

application of capital receipts, capital grants, contributions from the revenue

account and long term borrowing. A summary of significant transitions in capital

funding in 2011/12 is provided below:

Capital Receipts

The Council received a significant capital receipt of £3.550m following the sale of

land and buildings to the Lincolnshire Co-operative. The sale will facilitate a scheme

of comprehensive redevelopment of the Lindongate area in Lincoln. The capital

receipt has been used to support delivery of the General Fund Investment

Programme.

Long Term Borrowing

The Council undertakes long term borrowing, for periods in excess of one year, in

order to finance capital expenditure. An assessment of the use of borrowing to

fund capital expenditure is made through the application of the CIPFA Prudential

Code in the Council’s annual Treasury Management Strategy. This approach

provides a framework for decision making highlighting the level of capital

expenditure, the impact on borrowing and investment levels and the overall

controls in place to ensure activity remains affordable, prudent and sustainable.

The Council satisfies its long term borrowing requirement by securing external loans.

From 2011/12 the Council ceased to receive a supported borrowing allocation from

Central Government (supported borrowing allocations were accompanied by a

grant from Government to cover the costs of borrowing). As a result all borrowing

undertaken by the Council is now unsupported, the costs of which must be funded

by the Council itself.

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Although the Council requires long term borrowing in order to finance capital

expenditure, it is able to temporarily defer the need to borrow externally by using

the cash it has set aside for longer term purposes (in line with its Treasury

Management Strategy); this practice means that there is no immediate link

between the need to borrow to pay for capital spend and the level of external

borrowing. The effect of using the cash set aside for longer term purposes to

temporarily defer external borrowing is to reduce the level of cash that the Council

has available for investment.

The Council’s level of total debt outstanding, as at 31 March 2012 increased by

£24.978m to £75.435m compared to 31 March 2011, which was due to Public Works

Loans Board (PWLB) borrowing of £24.931m in respect of the HRA self financing

transaction and interest-free loans from Salix (an independent company funded by

the Carbon Trust to help improve energy efficiency in public sector buildings).

Total Outstanding

Source of loan

31/03/12

£’000

31/03/11

£’000

PWLB - Maturity 58,793 33,862

Money Market 16,000 16,000

Other 642 595

Total 75,435 50,457

In March 2012 the Council took £24.931m worth of long-term loans from the PWLB to

finance the settlement payment to Central Government to buy out of the Housing


Authority from 1 April 2012.

No other long-term borrowing was undertaken during 2011/12 and the Council

remains under borrowed by £4.714m i.e. the Council’s actual borrowing is £4.714m

less than the Capital Financing Requirement (CFR) at 31 March 2012. Additional

long-term borrowing will be taken in 2012/13 or future years to bring levels up to the

Capital Financing Requirement, subject to liquidity requirements, if preferential

interest rates are available. Pension Costs

The Council accounts for retirement benefits when it is committed to give them,

even if the actual giving will be many years into the future. This means that:

The financial statements reflect the liabilities arising from the Council’s

retirement obligations.

The costs of providing retirement benefits to employees are recognised in the

accounting period in which the benefits are earned by employees, and the

related finance costs and any other changes in value of assets and

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liabilities are recognised in the accounting periods in which they arise.

The financial statements disclose the cost of providing retirement benefits

and related gains, losses, assets and liabilities

As a consequence of the Council’s collaborative arrangement with North Kesteven

District Council to provide a shared Revenues and Benefits Service, on 31 May 2011

37 pensionable employees left North Kesteven District Council employment and

joined City of Lincoln District Council on 1 June on a fully funded basis. The impact of

this on the pension fund is shown in note 43, under the headings “Liabilities Assumed

in a Business Combination” and “Assets Acquired in a Business Combination”.

The Balance Sheet presents an increase in the estimated Pension Fund Reserve net

liability over the 2010/11 year of £10.894m, up from £39.327m at 1 April 2011 to

£50.221m at 31 March 2012. This increase in the Pension Fund deficit resulted from

the impact of a change in the assumptions the actuary has used in assessing the

liabilities for retirement benefits. This is recognised as an actuarial loss on pension

liabilities, which is shown in other comprehensive income and expenditure within the


The statutory arrangements for funding the remaining liability of £50.221m means

that this deficit will be made good by the increased level of annual employer

contributions payable to the Pension Fund over the remaining estimated average

working life of our employees in the Pension Scheme. The latest triennial review of

the Pension Fund was completed as at 31 March 2010 and although the results

identified that there had been a deterioration in the funding position from a 83%

funding level to 72%, this review did not indicate that any immediate changes in the

annual contributions were required. The next triennial review is due as at 31 March

2013, when a stabilisation approach will be implemented so that in any three year

period rates will only be increased or decreased by a maximum of 1%, thus avoiding

any unaffordable increases in employer contributions. Any changes identified as a

result of the next triennial review will be effective from 1 April 2014.

Future Plans

General Fund

The Council, along with all other public sector bodies, will continue to face an

unprecedented, and extremely challenging short and medium term financial

environment as it responds to; the Coalition Government’s Spending Review,

announced in October 2010; existing financial pressures, principally the current

economic climate; and the publication of a large number of Government White

Papers, consultation documents and statutory instruments including:

The Local Government Resource Review proposals for business rate retention

by Councils.

Council Tax Benefit Reform containing proposals for Councils to take

responsibility for their own schemes.

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Proposals to radically overhaul national welfare services, in particular to take

housing benefit services away from local government.

The Localism Act and its implications for governance, housing and planning

arrangements within local government.

The Open Public Services White Paper that considers, amongst other ideas,

the concept that public services should not necessarily be delivered by the

public sector.

As a result of significant grant reductions imposed by the Coalition Government (the

Council’s grant funding was reduced by 24.4% over the period 2011/12 to 2012/13)

the Council faces a significant challenge if it is to continue to deliver services to the

public and remain within a severely reduced funding envelope. The Council’s

Medium Term Financial Strategy for 2012-17 is based on a reduction of annual

revenue spending of £1.500m in 2012/13, increasing annually to £2.750m by 2015/16.

This challenge is not new to the Council and it has in recent years already become

accustomed to working within tight budgets and has demonstrated excellent

progress in the delivery of its Service Review and Next Steps Programmes, already

securing £3.3m annual savings to the revenue budget.

The Council’s Next Steps Programme continues to be the most fundamental

element of the Council’s response to the financial and policy environment. The

programme brings together into a co-ordinated programme a single unified

approach focusing on four core strands:

Lean Systems Interventions

Collaborative Working

Income Generation

Cost Reductions

It will remain important to maintain the pace and extent of changes that can be

delivered from the programme as the Council moves into the completion of phase

one and delivery of phase two. The scale of external changes facing the Council

means that further radical change will be required for the foreseeable future. In

response the Council will seek to continue to make changes across the whole range

of activity including how it delivers its services, the organisational structures of these

services, relationships with key partners and its human resources policies. It will aim

to ensure that the services the Council provides are ‘lean and fit’, achieving the

standards agreed with customers and delivering the best possible value for money

to the taxpayer.

Housing Revenue Account (HRA)

With effect from 1 April 2012 the Council’s Housing Revenue Account (HRA) is self

financing following its ‘buy out’ of the former housing subsidy system. Under the old

system the Council had been paying over £2m per year to the Government in

negative subsidy, to be redistributed nationally.

The new self financing regime will give the Council as landlord the resources,

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incentives and flexibility needed to manage its housing stock for the long-term and

to drive up quality and efficiency. The regime allows greater certainty about future

income as the Council will no longer be subject to annual funding decisions by

Central Government. This will support the development of long-term plans and

reinvestment of income in the Council’s housing stock. The Council will have greater

flexibility to manage its stock in the way that best suits local need and will provide

more opportunity for tenants to have a real say in setting priorities looking to the

longer term.

However, self financing also transfers significant risks from Central Government to

local authorities. The Council will bear the responsibility for the long term security

and viability of council housing in Lincoln. The Council will have to fund all activity

related to council housing from the income generated from rents through long term

business planning. The Council will be more exposed to changes in interest rates,

high inflation and the financial impact of falling stock numbers and it will also need

to factor in the impact of changes in government policy e.g. the impacts of the

forthcoming welfare reform on income recovery.

In order to optimise its resources for council housing over the short, medium and long

term the Council has developed a 30 year HRA business plan. A robust business

minded approach is being taken to ensure that the Council is in a position to

optimise the benefits of its new responsibilities and to minimise the impact of the

additional risks that self financing brings. Ultimately the business plan aims to ensure

that the Council is in a position to continue to enhance the housing stock, and

provide quality, affordable services to tenants.

Capital Expenditure

The Council’s capital programmes will deliver projects to the value of £75.7m over

the next five years, with £17.7m estimated to be spent in 2012/13. This includes

significant investment and improvement to Council dwellings, and Council buildings,

housing assistance grant aid, a mortgage indemnity scheme to support first time

buyers and the provision of a new burial site.

Capital resources for the next five years include capital receipts, government grants,

contributions from third parties and revenue contributions.

The General Fund element of the programme is heavily reliant upon capital receipts

with a target of £10.375m over the period, 74% of the overall programme. The

continued poor performance of property markets increases the risk to the Council of

not generating the required level of capital receipts. In response to this the

Council’s Asset Management Plan includes a major review programme of assets to

identify potential disposals. Additionally, ongoing capital commitments will be

reviewed regularly to ensure that the capital programme remains affordable. This

will require strong integration of the Council’s Capital Strategy, Asset Management

Plan, Treasury Management Strategy and balancing the impact of any changes on

the revenue position.

The Housing element of the capital programme is predominantly reliant upon

revenue contributions from the Housing Revenue Account (HRA). This places

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enormous pressure on the revenue budget and is a fundamental consideration in

the development of the 30 year HRA business plan. In the first 10 years of the

Housing Business Plan the majority of revenue resources will be fully committed to

support the capital investment required in the existing stock. Given the level of

revenue support required, and increased dependency on this as the primary source

of capital funding, it is recognised that it is critical that there is robust budget

management of the HRA and that opportunities to achieve efficiencies and

maintain/maximise income streams are actively pursued. Summary

Despite the challenging financial environment the Council has continued to

maintain sound, prudent financial management and remains in a good financial

position, balances remain at prudent levels and the necessary provisions have been

set aside for future liabilities or losses. However due to the level of uncertainty and

risks facing the Council, particularly the significant reductions in Central Government

funding, it needs to continue to respond positively to these challenges and continue

to manage its affairs in such a way as to ensure the economic, efficient and

effective use of its resources, and to safeguard its assets for the future. The Council is

committed to its vision to improve the quality of life for its residents and that will be

paramount to every decision it makes.

Group Accounts

The increasing scope and scale of local authorities moving away from traditional

ways of providing services makes it increasingly difficult for the Council’s own

financial statements to present fairly all the aspects of control over service provision

and accountability for all resources and exposure to risks that the Council has taken

on. A consolidated set of group accounts can make a vital contribution towards

giving users a full picture of the Council’s sphere of control and influence.

The Council has identified that the interest that it holds in Investors in Lincoln Ltd

meets the test of ‘joint control’ and as such should be accounted for as a Joint

Venture. However, after assessing the criteria for materiality, has concluded that the

amounts are not material to the fair presentation of the financial position and

transactions of the Council and to the understanding of the Statement of Accounts

by a reader. Investors in Lincoln Ltd has therefore not been consolidated into the

Council’s accounts. Details of transactions and relevant balances with Investors in

Lincoln Ltd can be found in note 37 (related parties).

The Council has a collaborative arrangement with North Kesteven and West Lindsey

District Councils to provide the Central Lincolnshire Joint Planning Unit. This

arrangement is hosted by North Kesteven District Council. The Council also has a

collaborative arrangement with North Kesteven to provide a shared Revenues and

Benefits Service. This shared service is hosted by the City of Lincoln Council. Both of

these arrangements are governed through a Joint Committee representing each of

the partner authorities. These arrangements are considered as Jointly Controlled

Operations, where ventures use their own resources to undertake an activity subject

to joint control, and as such do not require consolidation into the Council’s

accounts. The Council’s proportion of activity is accounted for separately within

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the Core Financial Statements.

Changes in Accounting Policies

In 2011/12 the code introduced a change to the accounting treatment for heritage

assets held by the Council. Heritage assets are now required to be carried in the

Council’s Balance Sheet at valuation. Previously these assets had been recorded

as community assets in property, plant and equipment at historic (usually de-minimis)

cost .

The net effect of the change in accounting policy in 2011/12 has been that heritage

assets are recognised at £4.667m in the Balance Sheet resulting in an increase to

the Revaluation Reserve of £4.652m. These assets had not been previously

recognised in the Balance Sheet.

Further details on the effect of the new accounting policy can be found in note 48

(Heritage Assets: Change in Accounting Policy Required by the code).

Prior Period Adjustment

The financial statements for the previous year were the first to be prepared under

International Financial Reporting Standards (IFRS). This included classifying all

property assets held by the Council as either Investment Properties (IP) or Property,

Plant & Equipment (PPE), according to strict criteria set out in the code.

In preparing the financial statements for 2011/12, a review of this classification was

undertaken in the light of additional information available. The result of this review is

that property and land to the value of £13.797m, which was classified as investment

property in the previous year’s financial statements, do not fully meet the criteria

and should therefore, have been classified under property, plant and equipment. A

prior period adjustment has been made to the financial statements to correct the

original misclassification. The Balance Sheet at 1 April 2010 and 31 March 2011 has

been restated to reflect the required changes.

Further Information

Further information about the accounts is available on request from the Directorate

of Resources, City Hall, Beaumont Fee Lincoln LN1 1DB. In addition, local electors

have a statutory right to inspect the accounts before the audit is completed. The

availability of the accounts for inspection is advertised in the local press and on the

Council’s website.

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C O U N C I L A P P R O V A L The Statement of Accounts for the year 1 April 2011 to 31 March 2012 has been

prepared and I confirm that these Accounts were approved by the City of Lincoln

Council, at the meeting held on 25 September 2012.

Karen Lee

Councillor Karen Lee

Chairman of Council

Date: 25 September 2012

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E M E N T O F R E S P O N S I B I L I T I E S F O R T H E S T A T E M E N T O F A C C O U N T S

The Authority’s Responsibilities

The Authority is required:

to make arrangements for the proper administration of its financial affairs and to

ensure that one of its officers has the responsibility for the administration of those

affairs. In this Authority, that officer is the Director of Resources;

to manage its affairs to ensure economic, efficient and effective use of resources

and safeguard its assets;

to approve the Statement of Accounts.

The Director of Resources Responsibilities

The Director of Resources is responsible for the preparation of the Authority’s

Statement of Accounts in accordance with proper practices as set out in the Code

of Practice on Local Authority Accounting in the UK (‘the code ’).

In preparing this Statement of Accounts, the Director of Resources has:

selected suitable accounting policies and then applied them consistently;

made judgements and estimates that were reasonable and prudent;

complied with the Code of Practice.

The Director of Resources has also:

kept proper accounting records which were up to date;

taken reasonable steps for the prevention and detection of fraud and other

irregularities.

The Accounts present a true and fair view of the financial position of the Authority at

31 March 2012 and its income and expenditure for the year ended on that date.

ANGELA ANDREWS

A ANDREWS, CPFA,

Director of Resources

DATE: 25 September 2012

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M O V E M E N T I N R E S E R V E S S T A T E M E N T

General Earmarked Housing CMS Major Capital Capital Total Unusable Total

Fund Revenue Repair Receipts Grants Usable Reserves Council

Balance Account Reserve Reserve Unapplied Reserves Reserves

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Balance at 31 March 2010 1,739 10,967 1,000 (262) 0 6,636 595 20,675 200,787 221,462

Restatement of opening

balance at 1 April 2010 –

recognition of heritage assets

0 0 0 0 0 0 0 0 4,667 4,667

1,739 10,967 1,000 (262) 0 6,636 595 20,675 205,454 226,129

Movement in reserves during

2010/11

Surplus or (deficit) on provision of

services 8,363 0 (79,805) 0 0 0 (71,442) 0 (71,442)

Other Comprehensive Income

and Expenditure 0 0 0 0 0 0 0 25,172 25,172

Total Comprehensive

Expenditure and Income 8,363 0 (79,805) 0 0 0 0 (71,442) 25,172 (46,270)

Adjustments between

accounting basis & funding basis

under regulations (Note 7)

(9,596) 0 81,587 0 0 (3,237) 823 69,577 (69,586) (9)

Other adjustments 0 0 0 0 0 0 0 0 9 9

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£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Net Increase/Decrease before

Transfers to Earmarked Reserves (1,233) 0 1,782 0 0 (3,237) 823 (1,865) (44,405) (46,270)

Transfers to/from Earmarked

Reserves 1,279 266 (1,599) 55 0 0 0 0 0 0

Increase/Decrease (movement)

in 2010/11 46 266 183 55 0 (3,237) 823 (1,864) (44,405) (46,270)

Balance at 31 March 2011

carried forward 1,785 11,233 1,183 (207) 0 3,399 1,418 18,811 161,049 179,860

Movement in reserves during

2011/12

Surplus or (deficit) on provision of

services (1,520) 0 (21,861) 0 0 0 (23,381) 0 (23,381)

Other Comprehensive

Expenditure and Income 0 0 0 0 0 0 0 (6,957) (6,957)

Total Comprehensive

Expenditure and Income (1,520) 0 (21,861) 0 0 0 0 (23,381) (6,957) (30,338)

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£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Adjustments between

accounting basis & funding basis

under regulations

1,542 0 23,509 0 2,283 (1,219) 26,115 (26,115) 0

Net Increase/Decrease before

Transfers to Earmarked Reserves 22 0 1,648 0 0 2,283 (1,219) 2,735 (33,072) (30,337)

Transfers to/from Earmarked

Reserves 330 1,092 (1,559) 138 0 0 0 0 0 0

Increase/Decrease in Year 352 1,092 89 138 0 2,283 (1,219) 2,735 (33,072) (30,337)

Balance at 31 March 2012

carried forward 2,137 12,325 1,272 (69) 0 5,682 199 21,546 127,977 149,523

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C O M P R E H E N S I V E I N C O M E A N D E X P E N D I T U R E S T A T E M E N T 2 0 1 1 / 1 2

Restated

31 March 2011 Note 31 March 2012

Gross Gross Net Gross Gross Net

Expenditure Income Expenditure Expenditure Income Expenditure

£'000 £'000 £'000 £'000 £'000 £'000

9,645 (8,714) 931 Central services to the public 9,828 (8,814) 1,014

7,383 (1,536) 5,846 Cultural and Related Services 6,757 (2,206) 4,551

7,676 (1,440) 6,235

Environmental and Regulatory

Services

7,389 (1,540) 5,849

5,213 (1,766) 3,447 Planning Services 4,524 (1,869) 2,655

4,566 (5,225) (658) Highways and transport services 2,508 (4,358) (1,850)

24,996 (23,533) 1,463 Local authority housing (HRA) 20,732 (25,103) (4,371)

79,476 0 79,476

Local authority housing -

exceptional item, decrease in

Social Housing discount factor

applied to asset valuations

0 0 0

0 0 0

Local authority housing -

exceptional item, Self Financing

settlement payment to the

Secretary of State

5 24,931 0 24,931

34,411 (30,101) 4,310 Other housing services 35,606 (32,373) 3,233

1,740 0 1,740 Corporate and democratic core 1,605 0 1,605

43 0 43 Non distributed costs 43 51 0 51

(14,331) 0 (14,331)

Non distributed costs -

exceptional item, negative

pension past service cost

0 0 0

*160,817 (72,315) *88,502 Cost Of Services 113,931 (76,263) 37,668

773 Other Operating Expenditure 9 (573)

4,574

Financing and Investment

Income and Expenditure

10 3,048

(541) Surplus/deficit on trading

accounts (not applicable to a

service)

31 (257)

*(21,866)

Taxation and Non-Specific Grant

Income 11,36

(16,505)

71,442

(Surplus) or Deficit on Provision of

Services

23,381

1,362 Surplus or deficit on revaluation

of non current assets

(3,877)

(26,534) Actuarial gains / losses on

pension assets / liabilities

43 10,834

(25,172) Other Comprehensive Income

and Expenditure

6,957

46,270 Total Comprehensive Income

and Expenditure

30,338

2010/11 comparator figures have been restated to reflect the CIPFA SeRCOP recommended standard subjective

service analysis and to reflect re-analysis within CIES categories *in addition to an amendment to correct the

treatment of HRA capital grants in line with the CIPFA Code.

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B A LA N C E S H E E T A S A T 3 1 M A R C H 2 0 1 2

Restated

1 April

2010

31 March

2011

Notes

31 March

2012

£'000 £'000 £'000

320,224 237,495 Property, Plant & Equipment 4,12,38,40 241,760

4,667 4,667 Heritage Assets 13,47,48 4,667

15,235 15,479 Investment Property 12,38 12,754

536 451 Intangible Assets 12,38 546

311 65 Assets held for sale (> 1yr) 12 0

1,449 449 Long Term Investments 16,46 449

165 156 Long Term Debtors 153

342,587 258,762 Long Term Assets 260,329

15,744 15,579 Short Term Investments 16,46 20,723

183 140 Inventories 17 141

9,916 7,191 Short Term Debtors 16,18,46 8,723

0 396 Cash and Cash Equivalents 19 0

25,843 23,306 Current Assets 29,587

(978) 0 Cash and Cash Equivalents 19 (3)

(868) (965) Short Term Borrowing 16 (993)

(9,466) (9,582) Short Term Creditors 16,21 (11,907)

(11,312) (10,547) Current Liabilities (12,903)

(1,376) (1,342) Long Term Creditors (807)

(476) (545) Provisions 22 (1,053)

(50,423) (50,447) Long Term Borrowing 5,16 (75,409)

(78,714) (39,327) Other Long Term Liabilities 4,43 (50,221)

(130,989) (91,661) Long Term Liabilities (127,490)

226,129 179,860 Net Assets 149,523

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B A LA N C E S H E E T A S A T 3 1 M A R C H 2 0 1 2

Restated

1 April

2010

31 March

2011

Notes

31 March

2012

£'000 £'000 £'000

20,675 18,811 Usable reserves 21,546

1,739 1,785 General Fund MIRS 2,137

8,878 9,289 Earmarked reserves 8 10,111

1,000 1,183 Housing Revenue Account MIRS 1,272

(262) (207) CMS MIRS (69)

0 0 Major Repairs Reserve MIRS 0

6,636 3,399 Capital Receipts Reserve MIRS 5,682

595 1,418 Capital Grants Unapplied MIRS 199

2,089 1,944 Insurance Fund 8 2,214

205,454 161,049 Unusable Reserves 127,977

18,376 16,733 Revaluation Reserve 24 20,157

(78,277) (39,327) Pensions Reserve 24,43 (50,221)

265,715 183,870 Capital Adjustment Account 24 158,080

66 57 Deferred Capital Receipts 24 57

(739) (505) Financial Instruments Adjustment Account 24 (298)

430 430 Available-for-Sale Financial Instruments Reserve 24 430

86 65 Collection Fund Adjustment Account 24 76

(203) (274) Accumulated Absences Account 24 (304)

226,129 179,860 Total Reserves 149,523

Note: the Balance Sheet at 1 April 2010 and 31 March 2011 have been restated to reflect the following changes:-

1. the change to accounting policy in respect of Heritage Assets applied retrospectively in 2011/12,

2. Prior period adjustment to correct the classification of assets on transition to IFRS.

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C A S H F LO W S T A T E M E N T

31 March

2011 Notes

31 March

2012

£'000 £'000

71,442 Net (surplus) or deficit on the provision of services 23,381

(90,301) Adjustments to net surplus or deficit on the provision of

services for non-cash movements 26 (12,717)

5,028

Adjustments for items included in the net surplus or deficit

on the provision of services that are investing and

financing activities

27 10,475

(13,831) Net cash flows from Operating Activities 25 21,139

11,974 Investing Activities 28 3,700

483 Financing Activities 29 (24,440)

(1,374) Net (increase) or decrease in cash and cash equivalents 399

(978) Cash and cash equivalents at the beginning of the

reporting period 396

396 Cash and cash equivalents at the end of the reporting

period 19 (3)

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N O T E S T O T H E A C C O U N T S

Note 1 – Accounting Policies 1. General Principles

The Statement of Accounts summarises the Council’s transactions for the 2011/12

financial year and its position at the year-end of 31 March 2012. The Statement of

Accounts has been prepared in accordance with proper accounting practices.

These practices primarily comprise the Code of Practice on Local Authority

Accounting in the United Kingdom 2011/12 (the Code) and the CIPFA Service

Reporting Code of Practice 2011/12 (SeRCOP), supported by International Financial

Reporting Standards (IFRS) and statutory guidance issued under section 7 of the

Accounts and Audit Regulations 2011.

The accounting convention adopted in the Statement of Accounts is historic cost,

modified by the revaluation of certain categories of non-current assets and financial

instruments.

The accounts are prepared on a going concern basis which assumes that the

functions of the Council will continue in operational existence for the foreseeable

future. 2. Accruals of Income and Expenditure

The revenue accounts of the Council are maintained on an accruals basis meaning

that activity is accounted for in the year that it takes place, not simply when cash

payments are made or received. In particular:

Revenue from the sale of assets is recognised when the Council transfers the

significant risks and rewards of ownership to the purchaser and it is probable

that economic benefits or service potential associated with the transaction

will flow to the Council.

Revenue from the provision of services is recognised when the Council can

measure reliably the percentage of completion of the transaction and it is

probable that economic benefits or service potential associated with the

transaction will flow to the Council.

Supplies are recorded as expenditure when they are consumed – where

there is a gap between the date supplies are received and their

consumption they are carried as inventories on the Balance Sheet.

Expenses in relation to services received (including services provided by

employees) are recorded as expenditure when the services are received

rather than when payments are made.

Interest receivable on investments and payable on borrowings is accounted

for respectively as income and expenditure on the basis of the

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effective interest rate for the relevant financial instrument rather than the

cash flows fixed or determined by the contract.

Where revenue and expenditure have been recognised but cash has not

been received or paid, a debtor or creditor for the relevant amount is

recorded in the Balance Sheet. Where debts may not be settled, the balance

of debtors is written down and a charge made to revenue for the income

that might not be collected.

3. Cash and Cash Equivalents

Cash is represented by cash in hand and deposits with financial institutions

repayable without penalty on notice of not more than 24 hours. Cash equivalents

are investments that mature within three months or less from the date of acquisition

and that are readily convertible to known amounts of cash with insignificant risk of

change in value.

In the Cash Flow Statement, cash and cash equivalents are shown net of bank

overdrafts that are repayable on demand and form an integral part of the Council’s

cash management.

4. Exceptional Items

When items of income and expense are material, their nature and amount is

disclosed separately, either on the face of the Comprehensive Income and

Expenditure Statement or in the notes to the accounts, depending on how

significant the items are to an understanding of the Council’s financial performance. 5. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors

Prior period adjustments may arise as a result of a change in accounting policies or

to correct a material error. Changes in accounting estimates are accounted for

prospectively i.e. in the current and future years affected by the change and do not

give rise to prior period adjustment.

Changes in accounting policies are only made when required by proper

accounting practices or the change provides more reliable or relevant information

about the effect of transactions, other events and conditions on the Council’s

financial position or financial performance. Where a change is made, it is applied

retrospectively (unless stated otherwise) by adjusting opening balances and

comparative amounts for the prior period as if the new policy had always been

applied.

Material errors discovered in prior period figures are corrected retrospectively by

amending opening balances and comparative amounts for the prior period. 6. Charges to Revenue for Non-Current Assets

Service revenue accounts, central support services and trading accounts are

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charged with the following amounts to reflect the cost of holding fixed assets during

the year:

depreciation of the assets used by the service

revaluation and impairment losses on assets used by the service where there

are no accumulated gains in the Revaluation Reserve against which losses

can be written off

amortisation of intangible fixed assets used by the service.

The Council is not required to raise Council Tax to fund depreciation, revaluation

and impairment losses or amortisation. However, it is required to make an annual

contribution from revenue towards the reduction in its overall borrowing requirement

equal to an amount calculated on a prudent basis determined by the Council in

accordance with statutory guidance. This is referred to as the Minimum Revenue

Provision (MRP) and Voluntary Revenue Provision (VRP). The Council’s policy on MRP

is:

For capital expenditure incurred before 1 April 2009, or which from 1 April 2009

is supported borrowing, the MRP is based on 4% of the opening capital

financing requirement (with adjustments allowed for in DCLG Regulations).

For all unsupported borrowing from 1 April 2009, the MRP is based on the

estimated life of the asset which the borrowing has been used to fund.

VRP will be charged if considered prudent for individual asset financing.

Depreciation, revaluation and impairment losses and amortisation are replaced by

the MRP and VRP, by way of an adjusting transaction between the Capital

Adjustment Account and the General Fund Balance in the Movement in Reserves

Statement, for the differences between the two. 7. Employee Benefits Benefits payable during employment

Short-term employee benefits are those due to be settled within 12 months of the

year-end. They include such benefits as wages and salaries, paid annual leave and

paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current

employees and are recognised as an expense for services in the year in which

employees render service to the Council. An accrual is made for the cost of holiday

entitlements or time off in lieu, earned by employees but not taken before the year-

end, which employees can carry forward into the next financial year. The accrual is

made at the wage and salary rates applicable in the following accounting year,

being the period in which employee take the benefit. The accrual is charged to

Surplus or Deficit on the Provision of Services, but then reversed out through the

Movement in Reserves Statement so that holiday benefits are charged to revenue in

the financial year in which the holiday absence occurs.

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Termination benefits

Termination benefits are amounts payable as a result of a decision by the Council to

terminate an officer’s employment before the normal retirement date or an officer’s

decision to accept voluntary redundancy and are charged on an accruals basis to

the appropriate service line in the Comprehensive Income and Expenditure

Statement when the Council is demonstrably committed to the termination of the

employment of an officer or group of officers or making an offer to encourage

voluntary redundancy.

Where termination benefits involve the enhancement of pensions, statutory

provisions require the General Fund balance to be charged with the amount

payable by the Council to the pension fund or pensioner in the year, not the amount

calculated according to relevant accounting standards. In the Movement in

Reserves Statement, transfers are required to and from the Pensions Reserve to

remove notional debits and credits for pension enhancement termination benefits

and replace them with debits for the cash paid to the pension fund and pensioners

and any such amounts payable but unpaid at the year-end.

Post Employment Benefits

Employees of the Council are members of the Local Government Pension Scheme,

administered by Lincolnshire County Council. This scheme provides defined benefits

to members (retirement lump sums and pensions), earned as employees worked for

the Council.

The Local Government Pension Scheme

The Local Government Scheme is accounted for as a defined benefits scheme:

The liabilities of the Lincolnshire County Council pension fund attributable to the

Council are included in the Balance Sheet on an actuarial basis using the protected

unit method – i.e. an assessment of the future payments that will be made in relation

to retirement benefits earned to date by employees, based on assumptions about

mortality rates, employee turnover rates, etc, and forecasts of projected earnings for

current employees.

Liabilities are discounted to their value at current prices, using a discount rate of

4.7% (provisional) (based on the indicative rate of return on high quality corporate

bond (iBoxx Sterling Corporates AA over 15 year Index).

The assets of the Lincolnshire County Council pension fund attributable to the

Council are included in the Balance Sheet at their fair value:

Quoted securities – current bid price

Unquoted securities – professional estimate

Unitised securities – current bid price

Property – market value.

The change in the net pensions liability is analysed into seven components:

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Current service cost – the increase in liabilities as a result of years of service

earned this year – allocated in the Comprehensive Income and Expenditure

Statement to the services for which the employees worked

Past service cost – the increase in liabilities arising from current year decisions

whose effect relates to years of service earned in earlier years – debited to

the Surplus or Deficit on the Provision of Services in the Comprehensive

Income and Expenditure Statement as part of Non Distributed Costs

Interest cost – the expected increase in the present value of liabilities during

the year as they move one year closer to being paid – debited to the

Financing and Investment Income and Expenditure line in the

Comprehensive Income and Expenditure Statement

Expected return on assets – the annual investment return on the fund assets

attributable to the Council, based on an average of the expected long-term

return – credited to the Financing and Investment Income and Expenditure

line in the Comprehensive Income and Expenditure Statement

Gains or losses on settlements and curtailments – the result of actions to

relieve the Council of liabilities or events that reduce the expected future

service or accrual of benefits of employees – debited or credited to the

Surplus or Deficit on the Provision of Services in the Comprehensive Income

and Expenditure Statement as part of Non Distributed Costs

Actuarial gains and losses – changes in the net pensions liability that arise

because events have not coincided with assumptions made at the last

actuarial valuation or because the actuaries have updated their assumptions

– debited to the Pensions Reserve

Contributions paid to the Lincolnshire County Council pension fund – cash

paid as employer’s contributions to the pension fund in settlement of liabilities;

not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the General Fund

balance to be charged with the amount payable by the Council to the pension

fund or directly to pensioners in the year, not the amount calculated according to

the relevant accounting standards. In the Movement in Reserves Statement, this

means that there are transfers to and from the Pensions Reserve to remove the

notional debits and credits for retirement benefits and replace them with debits for

the cash paid to the pension fund and pensioners and any such amounts payable

but unpaid at the year-end. The negative balance that arises on the Pension

Reserve thereby measures the beneficial impact to the General Fund of being

required to account for retirement benefits on the basis of cash flows rather than as

benefits are earned by employees.

Discretionary Benefits

The Council also has restricted powers to make discretionary awards of retirement

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benefits in the event of early retirements. Any liabilities estimated to arise as a result

of an award to any member of staff are accrued in the year of decision to make the

award and accounted for using the same policies as are applied to the Local

Government Pension Scheme. 8. Events After the Balance Sheet Date

Events after the Balance Sheet date are those events, both favourable and

unfavourable, that occur between the end of the reporting period and the date

when the Statement of Accounts is authorised for issue. Two types of events can be

identified:

Those that provide evidence of conditions that existed at the end of the

reporting period – the Statement of Accounts is adjusted to reflect such

events

Those that are indicative of conditions that arose after the reporting period –

the Statement of Accounts is not adjusted to reflect such events, but where

category of events would have a material effect, disclosure is made in the

notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation for issue are not reflected in the

Statement of Accounts. 9. Financial Instruments Financial Liabilities

Financial liabilities are recognised on the Balance Sheet when the Council becomes

a party to the contractual provisions of a financial instrument. They are initially

measured at fair value and carried at their amortised cost. Annual charges for

interest payable are shown in the Financing and Investment Income and

Expenditure line in the Comprehensive Income and Expenditure Statement, and are

based on the carrying amount of the liability, multiplied by the effective rate of

interest for the instrument. The effective interest rate is the rate that exactly discounts

estimated future cash payments over the life of the instrument to the amount at

which it was originally recognised.

For most of the borrowings that the Council has, this means that the amount

presented in the Balance Sheet is the outstanding principal repayable, with

accrued interest due within one year shown under short term borrowings; and

interest charged to the Comprehensive Income and Expenditure Statement is the

amount payable for the year according to the loan agreement.

Gains and losses on the repurchase or early settlement of borrowing are credited

and debited to the Financing and Investment Income and Expenditure line in the

Comprehensive Income and Expenditure Statement in the year of

repurchase/settlement. However, where repurchase has taken place as part of a

restructuring of the loan portfolio that involves the modification or exchange of

existing instruments, any premium or discount is respectively deducted from or

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added to the amortised cost of the new or modified loan and the write-down to the

Comprehensive Income and Expenditure Statement is spread over the life of the

loan by an adjustment to the effective interest rate.

Where premiums and discounts have been charged to the Comprehensive Income

and Expenditure Statement, regulations allow the impact on the General Fund

Balance to be spread over future years. The Council has a policy of spreading the

gain or loss over the unexpired life of the original loan. The reconciliation of amounts

charged to the Comprehensive Income and Expenditure Statement to the net

charge required against the General Fund Balance is managed by a transfer to or

from the Financial Instruments Adjustment Account in the Movement in Reserves

Statement.

Financial Assets

Financial assets are classified into two types:

Loans and receivables – assets that have fixed or determinable payments but

are not quoted in an active market

Available for sale assets – assets that have a quoted market price and/or do

not have fixed or determinable payments. Loans and receivables

Loans and receivables are recognised on the Balance Sheet when the Council

becomes a party to the contractual provisions of a financial instrument. They are

initially measured at fair value and carried at their amortised cost. Annual credits to

the Financing and Investment and Expenditure line in the Comprehensive Income

and Expenditure Statement for interest receivable are based on the carrying

amount of the asset multiplied by the effective rate of interest for the instrument. For

most of the loans that the Council has made, this means that the amount presented

in the Balance Sheet is the outstanding principal receivable, with interest receivable

within one year shown under short term investments and interest credited to the

Comprehensive Income and Expenditure Statement is the amount receivable for

the year in the loan agreement.

However, occasionally the Council may make loans to other parties (e.g. voluntary

organisations) at less than market rates (soft loans). When soft loans are made, a loss

is recorded in the Comprehensive Income and Expenditure Statement for the

present value of the interest that will be foregone over the life of the instrument,

resulting in a lower amortised cost than the outstanding principal. Interest is credited

to the Financing and Investment Income and Expenditure line in the Comprehensive

Income and Expenditure Statement at a marginally higher effective rate of interest

than the rate receivable, with the difference serving to increase the amortised cost

of the loan in the Balance Sheet. Statutory provisions require that the impact of soft

loans on the General Fund Balance is the interest receivable for the financial year –

the reconciliation of amounts debited and credited to the Comprehensive Income

and Expenditure Statement to the net gain required against the General Fund

Balance as managed by a transfer to or from the Financial Instruments Adjustment

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Account in the Movement in the Reserves Statement.

Where assets are identified as impaired because of a likelihood arising from a past

event that payments due under the contract will not be made, the asset is written

down and a charge made to the Financing and Investment Income and

Expenditure line in the Comprehensive Income and Expenditure Statement. The

impairment loss is measured as the difference between the carrying amount and

the present value of the revised future cash flows discounted at the asset’s original

effective interest rate.

Any gains and losses that arise on the de-recognition of an asset are credited or

debited to the Financial and Investment Income Expenditure line in the


Available-for-Sale Assets

Available-for-sale assets are recognised on the Balance Sheet when the Council

becomes a party to the contractual provisions of a financial instrument and are

initially measured and carried at fair value. Where the asset has fixed or

determinable payments, annual credits to the Financing and Investment Income

and Expenditure line in the Comprehensive Income and Expenditure Statement for

interest receivable are based on the amortised cost of the asset multiplied by the

effective rate of interest for the instrument. Where there are no fixed or determinable

payments, income (e.g. dividends) is credited to the Comprehensive Income and

Expenditure Statement when it becomes receivable by the Council.

Assets are maintained in the Balance Sheet at fair value. Values are based on the

following principles:

Instruments with quoted market prices – the market price

Other instruments with fixed and determinable payments – discounted cash

flow analysis

Equity shares with no quoted market prices – independent appraisal of

company valuation or most recent price at which the shares changed hands.

Changes in fair value are balanced by an entry in the Available-for-Sale Reserve

and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available

for Sale Financial Assets. The exception is where impairment losses have been

incurred – these are debited to the Financial and Investment Income and

Expenditure line in the Comprehensive Income and Expenditure Statement, along

with any net gain or loss for the asset accumulated in the Available-for-Sale Reserve.

Where assets are identified as impaired because of a likelihood arising from a past

event that payments due under the contract will not be made (fixed or

determinable payments) or fair value falls below cost, the asset is written down and

a charge made to the Financing and Investment Income and Expenditure line in the

Comprehensive Income and Expenditure Statement. If the asset has fixed

or determinable payments, the impairment loss is measured as the

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difference between the carrying amount and the present value of the revised future

cash flows discounted at the asset’s original effective interest rate. Otherwise, the

impairment loss is measured as any shortfall of fair value against the acquisition cost

of the instrument (net of any principal repayment and amortisation).

Any gains and losses that arise on de-recognition of the asset are credited or

debited to the Financing and Investment Income and Expenditure line in the

Comprehensive Income and Expenditure Statement, along with any accumulated

gains or losses previously recognised in the Available-for-Sale Reserve.

Where fair value cannot be measured reliably, the instrument is carried at cost (less

any impairment losses).

10. Foreign Currency Translation

Where the Council has entered into a transaction denominated in a foreign

currency, the transaction is converted into sterling at the exchange rate applicable

on the date the transaction was effective. Where material amounts in foreign

currency are outstanding at the year-end, they are reconverted at the spot

exchange rate at 31 March. Resulting gains or losses, if material, are recognised in

the Financing and Investment Income and Expenditure line in the Comprehensive

Income and Expenditure Statement. 11. Government Grants and Contributions

Whether paid on account, by instalments or in arrears, government grants and the

third party contributions and donations are recognised as due to the Council when

there is reasonable assurance that:

The Council will comply with the conditions attached to the payments and

The grants or contributions will be received.

Amounts recognised as due to the Council are not credited to the Comprehensive

Income and Expenditure Statement until conditions attached to the grant or

contribution have been satisfied. Conditions are stipulations that specify that the

future economic benefits or service potential embodied in the asset acquired using

the grant or contribution are required to be consumed by the recipient as specified,

or future economic benefits or service potential must be returned to the transferor.

Monies advanced as grants and contributions for which conditions have not been

satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied,

the grant or contribution is credited to the relevant service line (attributable revenue

grants and contributions) or Taxation and Non-Specific Grant Income (non ring-

fenced revenue grants and all capital grants) in the Comprehensive Income and

Expenditure Statement.

Where capital grants are credited to the Comprehensive Income and Expenditure

Statement, they are reversed out of the General Fund Balance in the Movement in

Reserves Statement. Where the grant has yet to be used to finance capital

expenditure, it is posted to the Capital Grants Unapplied reserve. Where it has

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been applied, it is posted to the Capital Adjustment Account. Amounts in the

Capital Grants Unapplied reserve are transferred to the Capital Adjustment Account

once they have been applied to fund capital expenditure.

Area Based Grant

Area Based Grant (ABG) is a general grant allocated by central government directly

to local authorities as additional revenue funding. ABG is non-ringfenced and is

credited to Taxation and Non-Specific Grant Income in the Comprehensive Income

and Expenditure Statement.

Business Improvement Districts

A Business Improvement District (BID) scheme applies across the whole of the

Council. The scheme is funded by BID levy paid by non-domestic ratepayers. The

Council acts as a principal under the scheme, and accounts for income received

and expenditure incurred (including contributions to the BID project) within the

relevant services within the Comprehensive Income and Expenditure Statement. 12. Intangible Assets

Intangible assets are assets that do not have physical substance but are identifiable

and controlled by the Council (e.g. software licences). Expenditure on intangible

assets is capitalised when it is expected that future economic benefits or service

potential will flow from the intangible asset to the Council for a period of more than

one year.

Internally generated intangible assets are capitalised where it is demonstrable that

the project is technically feasible and is intended to be completed and the Council

will be able to generate future economic benefits or deliver service potential by

being able to sell or use the asset. Expenditure is capitalised where it can be

measured reliably as attributable to the asset and is restricted to that incurred during

the development phase (research expenditure cannot be capitalised).

Expenditure on the development of the Council’s website is not capitalised as the

website is primarily intended to promote or advertise the Council’s services.

Intangible assets are measured initially at cost. Amounts are only re-valued where

the fair value of the assets can be determined by reference to an active market. In

practice, no intangible asset held by the Council meets this criterion, and they are

therefore carried at amortised cost.

Intangible assets are amortised over their useful life and charged to the relevant

service lines in the Comprehensive Income and Expenditure Statement and are

subject to impairment reviews. Any gain or loss arising on the disposal or

abandonment of an intangible asset is posted to the Other Operating Expenditure

line in the Comprehensive Income and Expenditure Statement.

Where expenditure on intangible assets qualifies as capital expenditure for

statutory purposes, amortisation, impairment losses and disposal gains and

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losses are not permitted to have an impact on the General Fund Balance. The gains

and losses are therefore reversed out of the General Fund Balance in the Movement

in Reserves Statement and posted to the Capital Adjustment Account and (for any

sale proceeds greater than £10,000) the Capital Receipts Reserve. 13. Interests in Companies and other Entities

Councils are required to produce Group Accounts to include services offered to

Council Tax payers by organisations other than the Council itself but in which the

Council has an interest. There are a number of criteria set out by which the Council

must determine whether the value of the company and the Council’s interest is

significant enough for Group Accounts to be produced. The Council has complied

with the Code of Practice on Local Authority Accounting, and while it has identified

a company over which it has joint control, it has concluded that the company does

not meet the criteria that would require consolidation into the Council’s accounts. 14. Inventories and Long Term Contracts

Inventories are included in the Balance Sheet at the lower of cost and net realisable

value. The cost of inventories is assigned using either the FIFO or weighted average

costing formula.

Long term contracts are accounted for on the basis of charging the Surplus and

Deficit on the Provision of Services with the value of works and services received

under the contract during the financial year. 15. Investment Property

Investment properties are those that are used solely to earn rentals and/or for

capital appreciation. The definition is not met if the property is used in any way to

facilitate the delivery of services or is held for sale.

Investment properties are measured initially at cost and subsequently at fair value,

based on the amount at which the asset could be exchanged between

knowledgeable parties at arm’s-length. Properties are not depreciated but are re-

valued annually according to market conditions at year-end. Gains and losses on

revaluation are posted to the Financing and Investment Income and Expenditure

line in the Comprehensive Income and Expenditure Statement. The same treatment

is applied to gains and losses on disposal.

Rentals received in relation to investment properties are credited to the Financing

and Investment Income line and result in a gain for the General Fund Balance.

However, revaluation and disposal gains and losses are not permitted by statutory

arrangements to have an impact on the General Fund Balance. The gains and

losses are therefore reversed out of the General Fund Balance in the Movement in

Reserves Statement and posted to the Capital Adjustment Account and (for any

sale proceeds greater than £10,000) the Capital Receipts Reserve.

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16. Jointly Controlled Operations and Jointly Controlled Assets

Jointly controlled operations are activities undertaken by the Council in conjunction

with other ventures that involve the use of the assets and resources of the ventures

rather than the establishment of a separate entity. If and when these exist the

Council recognises on its Balance Sheet the assets that it controls and the liabilities

that it incurs and debits and credits the Comprehensive Income and Expenditure

Statement with the expenditure it incurs and the share of income it earns from the

activity of the operation.

Jointly controlled assets are items of property, plant or equipment that are jointly

controlled by the Council and other ventures, with the assets being used to obtain

benefits for the ventures. The joint venture does not involve the establishment of a

separate entity. The Council accounts for only its share of the jointly controlled

assets, the liabilities and expenses that it incurs on its own behalf or jointly with others

in respect of its interest in the joint venture and income that it earns from the

venture. 17. Leases

Leases are classified as finance leases where the terms of the lease transfer

substantially all the risks and rewards incidental to ownership of the property, plant or

equipment from the lessor to the lessee. All other leases are classified as operating

leases.

Where a lease covers both land and buildings, the land and buildings elements are

considered separately for classification.

Arrangements that do not have the legal status of a lease but convey a right to use

an asset in return for payment are accounted for under this policy where fulfilment

of the arrangement is dependant on the use of specific assets.

The Council as Lessee Finance Leases

Property, plant and equipment held under finance leases is recognised on the

Balance Sheet at the commencement of the lease at its fair value measured at the

lease’s inception (or the present value of the minimum lease payments, if lower). The

asset recognised is matched by a liability for the obligation to pay the lessor. Initial

direct costs of the Council are added to the carrying amount of the asset. Premiums

paid on entry into a lease are applied to writing down the lease liability. Contingent

rents are charged as expenses in the periods in which they are incurred.

Lease payments are apportioned between:

A charge for the acquisition of the interest in the property, plant or equipment

– applied to write down the lease liability, and

A financing charge (debited to the Financing and Investment

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Income and Expenditure line in the Comprehensive Income and Expenditure

Statement).

Property, Plant and Equipment recognised under finance leases is accounted for

using the policies applied generally to such assets, subject to depreciation being

charged over the lease term if this is shorter than the asset’s estimated useful life

(where ownership of the asset does not transfer to the Council at the end of the

lease period).

The Council is not required to raise council tax to cover depreciation or revaluation

and impairment losses arising on leased assets. Instead, a prudent annual

contribution (Voluntary Revenue Provision - VRP) is made from revenue funds

towards the deemed capital investment in accordance with statutory requirements.

Depreciation and revaluation and impairment losses are therefore substituted by the

VRP in the General Fund Balance, by way of an adjusting transaction with the

Capital Adjustment Account in the Movement in Reserves Statement for the

difference between the two.

Operating Leases

Rentals paid under operating leases are charged to the Comprehensive Income

and Expenditure Statement as an expense of the service benefiting from use of the

leased asset. Charges are made on a straight-line basis over the term of the lease. The Council as Lessor Finance Leases

Where the Council grants a finance lease over a property or an item of plant or

equipment, the relevant asset is written out of the Balance Sheet as a disposal. At

the commencement of the lease, the carrying amount of the asset in the Balance

Sheet is written off to the Other Operating Expenditure line in the Comprehensive

Income and Expenditure Statement as part of the gain and loss on disposal. A gain,

representing the Council’s net investment in the lease, is credited to the same line in

the Comprehensive Income and Expenditure Statement also as part of the gain or

loss on disposal (i.e. netted off against the carrying value of the asset at the time of

disposal), matched by a long-term lease debtor in the Balance Sheet.

Lease rentals receivable are apportioned between:

A charge for the acquisition of the interest in the property – applied to write

down the lease debtor (together with any premiums received), and

Finance income (credited to the Financing and Investment Income and

Expenditure line in the Comprehensive Income and Expenditure Statement).

The gain credited to the Comprehensive Income and Expenditure Statement on

disposal is not permitted by statute to increase the General Fund Balance and is

required to be treated as a capital receipt. Where a premium has been

received, this is posted out of the General Fund Balance to the Capital

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Receipt Reserve in the Movement in Reserves Statement. Where the amount due in

relation to the leased asset is to be settled by the payment of rentals in future

financial years, this is posted out of the General Fund Balance to the Deferred

Capital Receipts Reserve in the Movement in Reserves Statement. When the future

rentals are received, the element for the capital receipt for the disposal of the asset

is used to write down the lease debtor. At this point, the deferred capital receipts

are transferred to the Capital Receipts Reserve.

The written-off value of disposals is not a charge against council tax, as the cost of

fixed assets is fully provided for under separate arrangements for capital financing.

Amounts are therefore appropriated to the Capital Adjustment Account from the

General Fund Balance in the Movement in Reserve Statement.

Operating Leases

Where the Council grants an operating lease over a property or an item of plant or

equipment, the asset is retained in the Balance Sheet. Rental income is credited to

the Other Operating Expenditure line in the Comprehensive Income and

Expenditure Statement. Credits are made on a straight-line basis over the life of the

lease. Initially direct costs incurred in negotiating and arranging the lease are

added to the carrying amount of the relevant asset and charged as an expense

over the lease term on the same basis as rental income.

18. Overheads and Support Services

The costs of overheads support services are charged to those services that benefit

from the supply or service in accordance with the costing principles of the CIPFA

Service Reporting Code of Practice 2011/12 (SeRCOP). The total absorption costing

principle is used – the full cost of overheads and support services are shared

between users in proportion to the benefits received, with the exception of:

Corporate and Democratic Core – costs relating to the Council’s status as a

multi-functional, democratic organisation.

Non Distributed Costs – the cost of discretionary benefits awarded to

employees retiring early and impairment losses chargeable on Assets Held for

Sale.

These two cost categories are defined in SeRCOP and accounted for as separate

headings in the Comprehensive Income and Expenditure Statement, as part of Net

Expenditure on Continuing Services. 19. Non-Current Assets - Property, Plant and Equipment

Assets that have physical substance and are held for use in the supply of services,

for rental to others, or for administrative purposes and that are expected to be used

during more than one financial year are classified as Property, Plant and Equipment.

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Recognition

Expenditure on the acquisition, creation or enhancement of Property, Plant or

Equipment is capitalised on an accruals basis, provided that it is probable that the

future economic benefits or service potential associated with the item will flow to

the Council and the cost of the item can be measured reliably. Expenditure that

maintains but does not add to an asset’s potential to deliver future economic

benefits or service potential (i.e. Repairs and maintenance) is charged as an

expense when it is incurred.

Measurement

Assets are initially measured at cost, comprising:

The purchase price

Any costs attributable to bringing the asset to the location and condition

necessary for it to be capable of operating in the manner intended by

management

The initial estimate of the costs of dismantling and removing the item and

restoring the site on which it is located.

The Council does not capitalise borrowing costs incurred whilst assets are under

construction.

The cost of assets acquired other than by purchase is deemed to be its fair value,

unless the acquisition does not have commercial substance (i.e. it will not lead to a

variation in the cash flows of the Council). In the latter case, where an asset is

acquired via an exchange, the cost of the acquisition is the carrying amount of the

asset given up by the Council.

Donated assets are measured initially at fair value. The difference between fair

value and any consideration paid is credited to the Taxation and Non-Specific

Grant Income line of the Comprehensive Income and Expenditure Statement, unless

the donation has been made conditionally. Until conditions are satisfied, the gain is

held in the Donated Assets Account. Where gains are credited to the

Comprehensive Income and Expenditure Statement, they are reversed out of the

General Fund Balance to the Capital Adjustment Account in the Movement in

Reserves Statement.

Assets are then carried in the Balance Sheet using the following measurement bases:

Infrastructure, community assets and assets under construction – depreciated

historical cost

Dwellings – fair value, determined using the basis of existing use value for

social housing (EUV-SH)

All other assets – fair value, determined as the amount that

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would be paid for the asset in its existing use (existing use value – EUV).

Where there is no market-based evidence of fair value because of the specialist

nature of an asset, depreciated replacement cost (DRC) is used as an estimate of

fair value.

For non-property assets that have short useful lives or low values (or both),

depreciated historical cost basis is used as a proxy for fair value.

Assets included in the Balance Sheet at fair value are re-valued sufficiently regularly

to ensure that their carrying amount is not materially different from their fair value at

the year-end, but as a minimum every five years. Increases in valuations are

matched by credits to the Revaluation Reserve to recognise unrealised gains.

However, in exceptional circumstances, gains may be credited to the

Comprehensive Income and Expenditure Statement where they arise from the

reversal of a loss previously charged to services.

When decreases in value are identified, they are accounted for as follows:

Where there is a balance of revaluation gains for the asset in the Revaluation

Reserve, the carrying amount of the asset is written down against that

balance, up to the amount of the accumulated gains.

Where there is no balance in the Revaluation Reserve or an insufficient

balance, the carrying amount of the asset is written down against the

relevant service lines in the Comprehensive Income and Expenditure

Statement.

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007

only, the date of its formal implementation. Gains arising before that date have

been consolidated into the Capital Adjustment Account.

Impairment

Assets are reviewed at each year-end for evidence of reductions in value i.e.

impairment. Where impairment is identified, the recoverable amount of the asset is

estimated and, where this is less than the carrying amount of the asset, an

impairment loss is recognised for the shortfall.

When impairment losses are identified, they are accounted for as follows:

Where there is a balance in the revaluation gains for the asset in the

Revaluation Reserve, the carrying amount of the asset is written down against

that balance, up to the amount of the accumulated gains.

Where there is no balance in the Revaluation Reserve or an insufficient

balance, the carrying amount of the asset is written down against the

relevant service line(s) in the Comprehensive Income and Expenditure

Statement.

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Where an impairment loss is reversed subsequently, the reversal is credited to the

relevant service line in the Comprehensive Income and Expenditure Statement, up

to the amount of the original loss, adjusted for depreciation that would have been

charged if the loss had not been recognised.

Depreciation

Depreciation is provided for on all Property, Plant and Equipment assets by the

systematic allocation of their depreciable amounts over their useful lives. An

exception is made for assets without a determinable finite useful life (i.e. freehold

land and certain Community Assets) and assets that are not yet available for use

(i.e. assets under construction).

Depreciation is calculated on the following bases:

Dwellings and other buildings – straight-line allocation over the useful life of

the property as estimated by the Valuer

Vehicles, plant, furniture and equipment – straight-line allocation over the

useful life of each class of asset, as advised by a suitably qualified officer

Where an item of Property, Plant or Equipment asset has major components whose

cost is significant in relation to the total cost of the item, the components are

depreciated separately. A major component is defined as comprising at least 20%

of the value and having a useful life of 50% or less of that of the parent asset.

Revaluation gains are also depreciated, with an amount equal to the difference

between the current value depreciation charge on assets and the depreciation

that would have been charged based on their historical cost, being transferred

each year from the Revaluation Reserve to the Capital Adjustment Account.

20. Heritage Assets

The Council holds a number of Heritage Assets, which can be grouped into the

following categories:

Civic Insignia

Art and Sculptures

Musical Instruments

Vehicles

Ancient Monuments and War Memorials

Miscellaneous

These are not held in a single collection but in a number of appropriate locations,

where they are considered to contribute to increasing the knowledge,

understanding and appreciation of the Council’s history and local area.

Heritage Assets are recognised and measured (including the treatment of

revaluation gains and losses) in accordance with the Council’s accounting policies

on Property, Plant and Equipment. However, some of the measurement rules

are relaxed in relation to heritage assets as detailed below.

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Civic Insignia

The collection of civic insignia includes the Mayor’s and Sheriff’s badges and

chains of office, mace and ceremonial sword. These items are reported in the

Balance Sheet at insurance valuation which is based on market values. These

insurance valuations are updated on an annual basis with periodic reviews by a

specialist valuer. The civic insignia are deemed to have indeterminate lives and

a high residual value; hence the Council does not consider it appropriate to

charge depreciation.

Art and Sculptures

This category includes paintings and a number of public art works such as statues

and sculptures. Where a valuation is available e.g. an insurance valuation, the

asset is reported in the balance sheet at this valuation. However, for a number of

public art sculptures and statues, no cost or valuation information is available

and consequently, these assets are not recognised in the balance sheet.

Where artworks are recognised, they are deemed to have indeterminate lives

and the Council does not consider it appropriate to charge depreciation.

Musical Instruments

The Council holds a Steinway grand piano at the Drill Hall and a Stradivarius

violin, which is on loan to the Halle orchestra. These items are reported in the

Balance Sheet at insurance valuation which is based on market values. These

insurance valuations are updated on an annual basis with periodic reviews by a

specialist valuer. The instruments are deemed to have indeterminate lives and a

high residual value; hence the Council does not consider it appropriate to

charge depreciation.

Vehicles

The Council holds a number of vehicles as heritage assets; these are a vintage

Leyland bus, a World War I tank and a steam locomotive. These items are

reported in the Balance Sheet at insurance valuation which is based on market

values. These insurance valuations are updated on an annual basis with periodic

reviews by a specialist valuer. The vehicles are deemed to have indeterminate

lives as they are not in operation but are on display; hence the Council does not

consider it appropriate to charge depreciation.

Ancient Monuments and War Memorials

This category includes various roman ruins and ancient structures and four war

memorials. The Council does not consider that reliable cost or valuation

information can be obtained for the items in this category. This is because of the

nature of the assets held and the lack of market values. Consequently, these

assets are not recognised in the balance sheet.

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Miscellaneous

This category includes any other assets which are being held for their

contribution to knowledge and culture but do not readily fall into the above

categories. One example is the collection of Books of Remembrance held at the

City crematorium. These items are reported in the Balance Sheet at either cost

or insurance valuation where material. No depreciation is charged on these

assets.

Heritage Assets – General

The carrying amounts of heritage assets are reviewed where there is evidence of

impairment e.g. where an item has suffered physical deterioration or breakage or

where doubts arise as to its authenticity. Any impairment is recognised and

measured in accordance with the Council’s accounting policies on impairment. The

Council may occasionally dispose of heritage assets which are unsuitable for public

display or to an appropriate body which will ensure the asset is maintained and

displayed within a suitable collection e.g. to a museum or historical trust. The

proceeds of such items are accounted for in accordance with the Council’s

accounting policy on disposal of Property, Plant and Equipment. Disposal proceeds

are disclosed separately in the notes to the financial statements and are accounted

for in accordance with statutory accounting requirements relating to capital

expenditure and capital receipts. 21. Disposals and Non-current Assets Held for Sale

When it becomes probable that the carrying amount of an asset will be recovered

principally through a sale transaction rather than through its continuing use, it is

reclassified as an Asset Held for Sale. The asset is re-valued immediately before

reclassification and then carried at the lower of this amount and fair value less costs

to sell. Where there is subsequent decrease to fair value less costs to sell, the loss is

posted to the Other Operating Expenditure line in the Comprehensive Income and

Expenditure Statement. Gains in fair value are recognised only up to the amount of

any previously recognised losses in the Surplus and Deficit on Provision of Services.

Depreciation is not charged on Assets Held for Sale.

If assets no longer meet the criteria to be classified as Assets Held for Sale, they are

reclassified back to non-current assets and valued at the lower of their carrying

amount before they were classified as held for sale; adjusted for depreciation,

amortisation or revaluations that would have been recognised had they not been

classified as Held for Sale, and their recoverable amount at the date of the decision

not to sell.

When an asset is disposed of or decommissioned, the carrying amount of the asset

in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale)

is written off to the Other Operating Expenditure line in the Comprehensive Income

and Expenditure Statement as part of the gain or loss on disposal. Receipts from the

disposal (if any) are credited to the same line in the Comprehensive Income

and Expenditure Statement also as part of the gain or loss on disposal (i.e.

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netted off against the carrying value of the asset at the time of disposal). Any

revaluation gains accumulated for the asset in the Revaluation Reserve are

transferred to the Capital Adjustment Account.

Amounts received for a disposal in excess of £10,000 are categorised as capital

receipts. A proportion of receipts relating to housing disposals (75% for dwellings, 50%

for land and other assets, net of statutory deductions and allowances) is payable to

the Government. The balance of receipts is required to be credited to the Capital

Receipts Reserve, and can then only be used for new capital investment or set aside

to reduce the Council’s underlying need to borrow. Receipts are transferred to the

Reserve from the General Fund Balance in the Movement in Reserves Statement.

The written-off value of disposals is not a charge against council tax, as the cost of

fixed assets is fully provided under separate arrangements for capital financing.

Amounts are transferred to the Capital Adjustment Account in the General Fund

Balance in the Movement in Reserves Statement. 22. Provisions, Contingent Liabilities and Contingent Assets Provisions

Provisions are made where an event has taken place that gives the Council a legal

or constructive obligation that probably requires settlement by a transfer of

economic benefits, and reliable estimate can be made of the amount of the

obligation. For instance, the Council may be involved in a court case that could

eventually result in the making of a settlement or the payment of compensation.

Provisions are charged as an expense to the appropriate service line in the

Comprehensive Income and Expenditure Statement in the year that the Council

becomes aware of the obligation, and are measured at the best estimate at the

balance sheet date of the expenditure required to settle the obligation, taking into

account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in

the Balance Sheet. Estimated settlements are reviewed at the end of each financial

year – where it becomes less than probable that a transfer of economic benefits will

not now be required (or a lower settlement than anticipated is made), the provision

is reversed and credited back to the relevant service.

Where some or all of the payment required to settle a provision is expected to be

recovered from another party (e.g. from an insurance claim), this is only recognised

as income for the relevant service if it is virtually certain that the reimbursement will

be received if the Council settles the obligation.

Contingent Liabilities

A contingent liability arises where an event has taken place that gives the Council a

possible obligation whose existence will only be confirmed by the occurrence or

otherwise of uncertain future events not wholly within the control of the Council.

Contingent liabilities also arise in circumstances where a provision would

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otherwise be made but either it is not probable that an outflow of resources will be

required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note

to the accounts.

Contingent Assets

A contingent asset arises where an event has taken place that gives the Council a

possible asset whose existence will only be confirmed by the occurrence or

otherwise of uncertain future events not wholly within the control of the Council.

Contingent assets are not recognised in the Balance Sheet but disclosed in a note

to the accounts where it is probable that there will be an inflow of economic

benefits. 23. Reserves

The Council sets aside specific amounts as reserves for future policy purposes or to

cover contingencies. Reserves are created by transferring amounts out of the

General Fund Balance in the Movement in Reserves Statement. When expenditure

to be financed from a reserve is incurred, it is charged to the appropriate service in

that year to score against the Surplus or Deficit on the Provision of Services in the

Comprehensive Income and Expenditure Statement. The reserve is then

appropriated back into the General Fund Balance in the Movement in Reserves

Statement so that there is no net charge against council tax for the expenditure.

Certain reserves are kept to manage the accounting processes for non-current

assets, financial instruments, and retirement and employee benefits and do not

represent usable resources for the Council – these reserves are explained in the

relevant policies. 24. Revenue Expenditure Funded from Capital under Statute

Expenditure incurred during the year that may be capitalised under statutory

provisions but that does not result in the creation of a non-current asset has been

charged as expenditure to the relevant service in the Comprehensive Income and

Expenditure Statement in the year. Where the Council has determined to meet the

cost of this expenditure from existing capital resources or by borrowing, a transfer in

the Movement in Reserves Statement from the General Fund Balance to the Capital

Adjustment Account then reverses out the amounts charged so that there is no

impact on the level of council tax. 25. VAT

VAT payable is included as an expense only to the extent that it is not recoverable

from HM Revenue and Customs. VAT receivable is excluded from income.

Note 2 – Accounting Standards Issued, Not Adopted

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The Council will be required to adopt the amendments to IFRS7 Financial

Instruments: Disclosures (transfer of financial assets) in the 2012/13 financial

statements. The accounting changes are included within the code and relate to

additional disclosure requirements in respect of transfers of financial assets. This will

result in a change of accounting policy; however, it is not expected to have a

material impact upon the Council’s financial statements. Note 3 – Critical Judgements in Applying Accounting Policies

In applying the accounting policies in Note 1, the Council has had to make certain

judgements about complex transactions or those involving uncertainty about future

events.

The critical judgements made in the Statement of Accounts are:

There is a high degree of uncertainty about the future levels of funding for

local government. However, the Council has determined that this uncertainty

is not yet sufficient to provide an indication that the assets of the Council

might be impaired as a result of a need to close facilities or reduce levels of

service provision.

The Council has a collaborative arrangement with North Kesteven and West

Lindsey District Councils to provide the Central Lincolnshire Joint Planning Unit.

This arrangement is hosted by North Kesteven District Council. The Council

also has a collaborative arrangement with North Kesteven to provide a

shared Revenues and Benefits Service. This shared service is hosted by the

City of Lincoln Council. Both of these arrangements are governed through a

Joint Committee representing each of the partner authorities. These

arrangements are considered as a Jointly Controlled Operations, where

ventures use their own resources to undertake an activity subject to joint

control, and as such do not require consolidation into the Council’s accounts.

The Council’s proportion of activity is accounted for separately within the

Core Financial Statements.

Investment in banks and other financial institutions are secure and will not

suffer impairments.

Note 4 – Assumptions Made about the Future and Other Major Sources of Estimation Uncertainty

The Statement of Accounts contains estimated figures that are based on

assumptions made by the Council about the future or that are otherwise uncertain.

Estimates are made taking into account historical experience, current trends and

other relevant factors. However, because balances cannot be determined with

certainty, actual results could be materially different from the assumptions and

estimates.

The items in the Council’s Balance Sheet as at 31 March 2012 for which there is

a significant risk of material adjustment in the forthcoming financial year are as

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follows:

Item Uncertainties Effect if Actual Results Differ

from Assumptions

Property, Plant and

Equipment

Assets are depreciated over

useful lives that are

dependent on assumptions

about the levels of repairs

and maintenance that will

be incurred in relation to

individual assets. The current

economic climate makes it

uncertain that the Council

will be able to sustain its

current spending on repairs

and maintenance, bringing

into doubt the useful lives

assigned to the assets.

If the useful lives of the assets

reduce, depreciation

increases and the carrying

amount of the assets falls. It is

estimated that the annual

depreciation charge for

buildings would increase by

£0.700m for every year that

the useful lives had to be

reduced.

Assets held for sale and

investment properties

Assets classified as Held for

Sale or as Investment

Property are carried at fair

value based on a recently

observed market price. In the

current economic climate,

market prices can fluctuate

considerably due to global

events. The value of these

assets was current at the

balance sheet date, but it

cannot be determined for

how long this value will be

correct.

A 1% reduction in the value

of investment properties

would result in a charge to

the CIES of £0.128m; a 1%

increase in value would result

in the recognition of a gain

of £0.128m in the CIES.

Arrears As at 31 March 2012, the

Council had a balance on

sundry debtors of £2.817m. A

review of significant

balances suggested that an

impairment of doubtful debts

of £1.343m was required.

If collection rates were to

deteriorate by 5% the

amount of the impairment of

doubtful debts would require

an additional £0.141m to be

set aside as an allowance.

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Item Uncertainties Effect if Actual Results Differ

from Assumptions

Pension Liability Estimation of the net liability

to pay pensions depends on

a number of complex

judgements relating to the

discount rate used, the rate

at which salaries are

projected to increase,

changes in retirement ages,

mortality rates and the

expected return on pension

fund assets. A firm of

consulting actuaries (Hymans

Robertson LLP) is engaged to

provide the Council with

expert advice about the

assumptions to be applied.

For more information on the

Defined Benefit Pension

Scheme please refer to note

43.

The effects on the net

pensions liability of changes

in individual assumptions can

be measured. For instance, a

0.5% increase in the discount

rate assumption would result

in a decrease in the pension

liability of £13.384m

A 1 year increase in member

life expectancy would result

in an increased liability of

£4.241m

Investments At 31 March 2012, the

Council held £20.645m of

short term investments,

£14.645m of which were in

AAA-rated instant access

Money Market Funds. Of the

remaining £6m, £3m has

matured since the Balance

Sheet date and has been

reinvested in the short term in

part-Government owned

banks.

As all the investments are

either in AAA-rated MMF’s or

short term deposits in part-

Government owned

institutions, the risk of

impairment is considered to

be minimal.

Note 5 – Material Items of Income and Expense

The following items of income and expense within the Comprehensive Income and

Expenditure Statement that require separate disclosure are set out in the following

table:

Item

Value £’000

Housing Revenue Account (HRA) Self Financing Payment to the Secretary of

State of £24.931m. This represents the Council’s one off payment in order to

exit from the central government HRA subsidy system, which was payable

on the 28 March 2012.

24,931

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Note 6 – Events after the Balance Sheet Date

The Statement of Accounts was authorised for issue by the Director of Resources on

25th September 2012. Events taking place after this date are not reflected in the

financial statements or notes. Where events taking place before this date provided

information about conditions existing at 31st March 2012, the figures in the financial

statements and notes have been adjusted in all material respects to reflect the

impact of this information.

Note 7 – Adjustment between Accounting Basis and Funding Basis under Regulations

This note details the adjustments that are made to the total comprehensive income

and expenditure recognised by the Council in year in accordance with proper

accounting practice to the resources that are specified by statutory provisions as

being available to the Council to meet future capital and revenue expenditure.

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2011/12 Usable Reserves Unusable

Reserves

General Housing CMS Major Capital Capital Total Total

Fund Revenue Repair Receipts Grants

Balance Account Reserve Reserve Unapplied

£000 £000 £000 £000 £000 £000 £000 £000

Reversal of items debited or credited to the Comprehensive Income and

Expenditure Statement

Depreciation (excl HRA depreciation) 1,876 0 0 0 0 0 1,876 (1,876)

Amortisation of Intangible Assets (excl HRA) 152 152 (152)

HRA Depreciation 0 0 0 4,502 0 0 4,502 (4,502)

HRA amortisation of intangible assets 41 41 (41)

Impairment/revaluation losses (charged to I&E) 108 1,362 0 0 0 0 1,470 (1,470)

Revenue Expenditure Funded from Capital under Statute 2,340 0 0 0 0 0 2,340 (2,340)

Movement in market value of investment property 188 0 0 0 0 0 188 (188)

Amounts of non current assets written off on disposal or sale as part of the

gain/loss on disposal to the CIES 2,601 155 0 0 0 0 2,756 (2,756)

Capital grant and contributions unapplied credited to I&E (909) (209) 0 0 0 1,118 0 0

Use of capital grants and contributions to finance capital expenditure 0 0 0 0 (2,337) (2,337) 2,337

Transfer of sale proceeds credited as part of the gain/loss on disposal to the

CIES (3,817) (408) 0 0 4,225 0 0 0

Use of capital receipts reserve to finance capital expenditure 0 0 0 (1,759) 0 (1,759) 1,759

Reversal of items relating to retirement benefits debited or credited to the

Comprehensive Income and Expenditure Statement 2,402 1,087 0 0 0 0 3,489 (3,489)

Differences between statutory debits/credits and amounts recognised as

income and expenditure in relation to financial instruments e.g. Soft loans (3) (205) 0 0 0 0 (208) 208

Reversal of Self Financing Settlement Payment to the Secretary of State 0 24,931 0 0 0 0 24,931 (24,931)

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Reserves




£000 £000 £000 £000 £000 £000 £000 £000

Amount by which council tax income and residual community charge

adjustment included in the Comprehensive Income and Expenditure

Statement is different from the amount taken to the General Fund in

accordance with regulation

(11) 0 0 0 0 (11) 11

Amount by which officer remuneration charged to the CIES on an accruals

basis is different from remuneration chargeable in the year in accordance

with statutory requirements

12 19 0 0 0 0 31 (31)

(Amounts excluded in I&E to be included for determining movement in

general fund)

Statutory Provision for the repayment of debt - (MRP) (638) 0 0 0 0 0 (638) 638

Statutory Repayment of Debt (Finance Lease Liabilities) (58) 0 0 0 0 0 (58) 58

Voluntary provision above MRP (346) (150) 0 0 0 0 (496) 496

HRA capital receipts to housing central pool 183 0 0 0 (183) 0 0 0

Revenue contribution to finance capital (295) (1,377) 0 0 0 0 (1,672) 1,672

Employers contributions to pension schemes (2,243) (1,186) 0 0 0 0 (3,429) 3,429

Reversal of Major Repairs Allowance credited to the HRA 0 (510) 0 510 0 0 0 0

Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 (5,053) 0 0 (5,053) 5,053

Total Adjustments 1,542 23,509 0 0 2,283 (1,219) 26,115 (26,115)

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Reserves




£000 £000 £000 £000 £000 £000 £000 £000

Reversal of items debited or credited to the Comprehensive Income and


Depreciation (excl HRA depreciation) 1,674 0 0 0 0 0 1,674 (1,674)

Amortisation of intangible assets (excl HRA ) 164 164 (164)

HRA Depreciation 0 0 0 4,341 0 0 4,341 (4,341)

HRA amortisation of intangible assets 19 19 (19)

Impairment/revaluation losses (charged to I&E) 1,103 87,063 0 0 0 0 88,166 (88,166)

Revenue Expenditure Funded from Capital under Statute 3,478 0 0 0 0 0 3,478 (3,478)

Movement in market value of investment property (160) (12) 0 0 0 0 (172) 172

Amounts of non current assets written off on disposal or sale as part of the

gain/loss on disposal to the CIES 388 304 0 0 0 0 692 (692)

Capital grant and contributions unapplied credited to I&E (4,592) (307) 0 0 0 4,899 0 0

Use of capital grants and contributions to finance capital expenditure 0 0 0 (4,076) (4,076) 4,076

Transfer of sale proceeds credited as part of the gain/loss on disposal to the

CIES (391) (625) 0 0 1,016 0 0 (9)

Use of capital receipts reserve to finance capital expenditure 0 0 (3,861) 0 (3,861) 3,861

Reversal of items relating to retirement benefits debited or credited to the

Comprehensive Income and Expenditure Statement (8,047) (1,118) 0 0 0 0 (9,165) 9,165

Differences between statutory debits/credits and amounts recognised as

income and expenditure in relation to financial instruments e.g. Soft loans (2) (231) 0 0 0 0 (233) 233

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Reserves




£000 £000 £000 £000 £000 £000 £000 £000

Amount by which council tax income and residual community charge

adjustment included in the Comprehensive Income and Expenditure

Statement is different from the amount taken to the General Fund in

accordance with regulation

21 0 0 0 0 21 (21)

Amount by which officer remuneration charged to the CIES on an accruals

basis is different from remuneration chargeable in the year in accordance

with statutory requirements

70 0 0 0 0 0 70 (70)

(Amounts excluded in I&E to be included for determining movement in

general fund)

Statutory Provision for the repayment of debt - (MRP) (631) 0 0 0 0 0 (631) 631

Statutory Repayment of Debt (Finance Lease Liabilities) 0 0 0 0 0 0 0 0

Voluntary provision above MRP (379) (163) 0 0 0 0 (542) 542

HRA capital receipts to housing central pool 392 0 0 0 (392) 0 0 0

Revenue contribution to finance capital (588) (1,546) 0 0 0 0 (2,134) 2,134

Employers contributions to pension schemes (2,096) (1,155) 0 0 0 0 (3,251) 3,251

Reversal of Major Repairs Allowance credited to the HRA 0 (623) 0 623 0 0 0 0

Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 (4,983) 0 0 (4,983) 4,983

Total Adjustments (9,596) 81,587 0 0 (3,237) 823 69,577 (69,586)

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Note 8 – Transfers to/from Earmarked Reserves

These amounts are held to meet expenditure in future financial years. The

movements on these Reserve Accounts during the year have been as follows:

Balance Appropriations Balance

@ 31.03.11 To Reserve From Reserve @ 31.03.12

£'000 £'000 £'000 £'000

General Fund

Western Growth Corridor 3 0 (3) 0

2007/08 Carry Forwards 24 0 0 24

Concessionary Fares 34 0 (22) 12

Unused DRF 260 29 (106) 183

IT Reserve 197 209 (30) 376

Invest to Save 2,440 474 (867) 2,047

Mayoral car 16 8 0 24

Member training 6 0 0 6

Managed Workspace 70 0 0 70

Car Parking Strategy 25 0 0 25

Planning Delivery Grant 52 0 0 52

Private Sector Stock

Condition Survey 61 0 0 61

Strategic Plan 7 Approved

Bids 674 0 (674) 0

Stronger, Safer Communities

Fund 198 0 (131) 67

Uphill/ Downhill Bus 63 30 0 93

Mercury Abatement 146 76 0 222

2008/09 Carry Forwards 37 0 (24) 13

Leisure Debt Management 53 0 (26) 27

2009/10 Carry Forwards 19 0 (16) 3

Homelessness Case Worker 12 0 (7) 5

Boston Audit Contract 3 5 0 8

Commons Parking 5 2 0 7

Backdated pay claim 150 0 (9) 141

Loss of income on asset Sales 123 76 (122) 77

Grants & Contributions

Supporting People 36 0 (12) 24

Communities Against Drugs 14 0 (14) 0

Empty Homes 31 0 (2) 29

Handy Persons Scheme 5 0 (5) 0

NRF Administration 10 0 (10) 0

Local Enterprise Growth

Initiative 2 0 0 2

Neighbourhood Renewals

Fund 7 0 (7) 0

Safer Communities 8 0 (8) 0

Department of Health 139 0 0 139

Planning Delivery Grant 72 0 0 72

Horticultural Apprenticeship 2 0 (2) 0

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Balance Appropriations Balance

@ 31.03.11 To Reserve From Reserve @ 31.03.12

£'000 £'000 £'000 £'000

Court Desk Advocacy 25 0 (9) 16

Gypsy Traveller 8 0 0 8

Homelessness 27 0 0 27

Local Crime Reduction 1 0 0 1

Mortgage Rescue 27 0 0 27

Smoke free 4 0 (4) 0

Free Swimming (DCMS) 12 0 (12) 0

Free Swimming (LSP) 31 0 (25) 6

Choice Based Lettings 94 0 0 94

Local Public Services Grant 0 130 (54) 76

Pollution Grant 0 15 0 15

Neighbourhood Planning

Grant 0 20 0 20

NHS PCT 0 15 0 15

Preventing Repossessions 0 49 0 49

Housing Benefit Transition 0 18 0 18

New Homes Bonus 0 83 0 83

Revenues & Benefits shared

service 42 8 0 50

Recycling Reserve 15 0 0 15

Tree Risk Assessment 90 20 0 110

Olympic Event

(Infrastructure) 50 53 0 103

2010/11 Carry Forwards 124 0 (111) 13

Backdated rent review 0 60 0 60

Funding for Strategic Priorities 0 127 0 127

R&M Reserve 0 125 0 125

County Wide Broadband

Initiative 0 34 0 34

MA Reserve 0 9 0 9

2011/12 Carry Forwards 0 216 (117) 99

5,547 1,891 (2,429) 5,009

HRA

Unused DRF 2,837 693 0 3,530

Invest to Save 0 500 0 500

HRA Repairs Account 750 7,513 (7,349) 914

HRA Survey Works 133 3 0 136

Stock Retention 22 0 0 22

3,742 8,709 (7,349) 5,102

Insurance Fund 1,944 510 (240) 2,214

Total Earmarked Reserves 11,233 11,110 (10,018) 12,325

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Insurance Reserve

The insurance fund has been set up to ensure adequate funding for the insurance

risk covered by the City of Lincoln Council. In 2011/12 the risk in respect of Public

Liability Insurance had an excess of £100,000 (per claim) with no cap ceiling. The

movements on the fund are as follows:

2010/11 2011/12

£'000 £'000

2,088 Opening Balance 1,944

(478) Funding of claims/losses (240)

334 Contributions from revenue 510

0 Release of reserve 0

1,944 Closing Balance 2,214

Note 9 – Other Operating Expenditure

2010/11 2011/12

£'000 £'000

705 Levies 713

392 Payments to the Government Housing Capital

Receipts Pool 183

(324) Gains/ losses on the disposal of non-current assets (1,469)

773 Total (573)

Note 10 - Financing and Investment Income and Expenditure

2010/11 2011/12

£'000 £'000

2,449 Interest payable and similar charges 2,430

2,366 Pensions interest cost and expected return on pension

assets 878

(241) Interest Receivable and similar income (260)

4,574 Total 3,048

Note 11 – Taxation and Non-Specific Grant Income

2010/11 2011/12

£'000 £'000

(6,222) Council tax income (6,316)

(9,247) Non domestic rates (6,279)

(1,499) Non ring-fenced government grants (2,792)

*(4,898) Capital grants and contributions (1,118)

(21,866) Total (16,505)

* 2010/11 comparator figures for HRA capital grants have been restated to be in line with the CIPFA

Code requirements.

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Note 12 – Non Current Assets including Property, Plant and Equipment, Investment Properties, Intangible Assets and Non Current Assets Held for Sale

The movement in the Council’s Fixed Assets during the year was as follows:

Movements in 2011/12

Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2011 164,170 69,459 8,116 711 135 1,925 244,516 15,479 952 65 261,012

Additions 6,518 999 349 180 19 325 8,389 0 289 0 8,678

Revaluation

increases/(decreases)

recognised in the

Revaluation Reserve

2,666 (679) 0 0 0 0 1,987 0 0 0 1,987

Revaluation


recognised in the

Surplus/Deficit on the

Provision of Services

(4,572) (37) 0 0 0 0 (4,609) (188) 0 0 (4,797)

De-recognition-

disposals (158) 0 0 0 0 0 (158) (2,537) 0 (65) (2,760)

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Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

De-recognition-

other 0 0 0 0 0 0 0 0 0 0 0

Other movements in

cost or valuation 0 6 0 0 0 (6) 0 0 0 0 0

At 31 March 2012 168,624 69,748 8,465 891 154 2,244 250,125 12,754 1,241 0 264,120

Depreciation & Impairments

At 1 April 2011 (539) (2,335) (4,147) 0 0 0 (7,021) 0 (502) 0 (7,523)

Depreciation for year (4,165) (1,068) (1,145) 0 0 0 (6,378) 0 (193) 0 (6,571)

Depreciation written

out to the

Revaluation Reserve

1,479 43 0 0 0 0 1,522 0 0 0 1,522


out to the



2,678 8 0 0 0 0 2,686 0 0 0 2,686

Impairment

losses/(reversals)

recognised in the

Revaluation Reserve

0 368 0 0 0 0 368 0 0 0 368

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Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Impairment

losses/(reversals)

recognised in the



533 (79) 0 0 0 0 454 0 0 0 454

De-recognition -

disposals 4 0 0 0 0 0 4 0 0 0 4

At 31 March 2012 (10) (3,063) (5,292) 0 0 0 (8,365) 0 (695) 0 (9,060)

Net book value of

assets at 31.03.12 168,614 66,685 3,173 891 154 2,244 241,760 12,754 546 0 255,060

Net book value of

assets at 31.03.11 163,631 67,124 3,969 711 135 1,925 237,495 15,478 451 65 253,489

Nature of asset holding

Owned 168,614 62,120 2,182 891 154 2,244 236,205 12,754 546 0 249,505

Finance lease 4,565 991 5,556 5,556

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Comparative Movements in 2010/11

Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2010 246,785 68,705 7,992 543 635 1,032 325,692 15,235 855 311 342,093

Additions 10,236 1,531 368 159 0 1,206 13,500 72 98 0 13,670

Donations 0 0 0 0 0 0 0 0 0 0 0

Revaluation


recognised in the

Revaluation Reserve

(799) 723 0 0 (500) 0 (576) 0 0 0 (576)

Revaluation


recognised in the



(91,741) (1,379) 0 0 0 0 (93,120) 172 0 29 (92,919)

De-recognition-

disposals (311) (121) (308) 0 0 0 (740) 0 0 (275) (1,015)

De-recognition- other 0 0 0 0 0 (313) (313) 0 0 0 (313)

Other movements in

cost or valuation 0 0 64 9 0 0 73 0 0 0 73

At 31 March 2011 164,170 69,459 8,116 711 135 1,925 244,516 15,479 953 65 261,013

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Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000


At 1 April 2010 (1,259) (858) (3,351) 0 0 0 (5,468) 0 (319) 0 (5,787)

Depreciation for year (3,998) (913) (1,104) 0 0 0 (6,015) 0 (183) 0 (6,198)


out to the Revaluation

Reserve

0 614 0 0 0 0 614 0 0 0 614


out to the



3,987 214 0 0 0 0 4,201 0 0 0 4,201

Impairment

losses/(reversals)

recognised in the

Revaluation Reserve

0 (1,400) 0 0 0 0 (1,400) 0 0 0 (1,400)

Impairment

losses/(reversals)

recognised in the



724 0 0 0 0 0 724 0 0 0 724

De-recognition -

disposals 7 8 308 0 0 0 323 0 0 0 323

At 31 March 2011 (539) (2,335) (4,147) 0 (7,021) 0 (502) 0 (7,523)

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Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Net book value of

assets at 31.03.11 163,631 67,124 3,969 711 135 1,925 237,495 15,479 451 65 253,490

Net book value of

assets at 31.03.10 245,526 67,847 4,641 543 635 1,032 320,224 15,235 536 311 336,306

Nature of asset holding

Owned 163,631 62,531 2,416 711 135 1,925 231,349 15,479 451 65 247,344

Finance lease 4,593 1,553 6,146 6,146

The tables above have been adjusted in line with the Balance Sheet restatements at 1 April 2010 and 31 March 2011 to reflect the prior period adjustment correcting the classification of

assets on transition to IFRS.

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Fixed Asset Valuation

The Council carries out a rolling programme that ensures that all Property, Plant and

Equipment and Investment Properties required to be measured at fair value are re-

valued at least every five years. The statement below shows the progress of the

Council’s rolling programme of fixed asset revaluations.

Council

Dwellings

Operational

Land &

Buildings

Vehicles Plant

& Equip.

Investment

Properties

£'000 £'000 £'000 £'000

Valuation at historical cost 2,636 9,069

Valued at current value as at:

01/04/11 167,850 61,880 15,478

01/04/10 169,280 69,469 15,235

01/04/09 247,721 43,418 26,982

01/04/08 291,936 39,471 31,320

01/04/07 295,046 33,945 26,764

The valuations of the Council’s freehold and leasehold properties have been carried

out in accordance with the Statements of Asset Valuation Practice and Guidance

Notes of the Royal Institute of Chartered Surveyors. All valuations are either

undertaken by the following Council Officers, or by the District Valuer.

Principal Property Surveyor Mr P Clifton MRICS

Senior Property Surveyor Mr A Wiswould MRICS

Property Surveyor Mrs L A East MRICS Fixed Assets Depreciation

Tangible Fixed Assets

Depreciation, as stated in the Accounting Policies, is calculated on a straight-line

basis. Non-operational assets are treated as investment properties and as such are

not depreciated. The standard useful lives of assets, used for depreciation purposes

(unless overwritten by asset valuations), are as follows:

Category Of Asset Useful Economic Life

Council Dwellings 34 years

Other Land & Buildings

- Council Buildings 50 years

- Car Parks 60 years

- Cemeteries 50 years

- Crematorium 21 years

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- Community Centres 50 years

- Offices 50 years

- Depots & Workshops 50 years

- Public Conveniences 50 years

- Recreation Grounds 50 years

- Sports Centres 50 years

Vehicles, Plant & Equipment

- Computers 5 years

- Equipment 10 years

- Fixtures and Fittings 5 years

- Plant 7/10 years

- Vehicles 5/7 years

Intangible Assets

Intangible fixed assets are amortised in the Income and Expenditure Account on a

straight-line basis, as stated in the Accounting Policies. The standard useful life, used

for amortisation purposes is:


Intangible Asset

- Software 5 years

Note 13 – Heritage Assets Reconciliation of the Carrying Value of Heritage Assets Held by the Council

Heritage Musical Civic Total

vehicles Instruments Insignia Other Assets

£000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2010 130 2,070 2,357 110 4,667

At 31 March

2011 130 2,070 2,357 110 4,667

Cost or Valuation

At 1 April 2011 130 2,070 2,357 110 4,667

At 31 March

2012 130 2,070 2,357 110 4,667

Heritage Vehicles

The Council's collection of heritage vehicles is reported in the Balance Sheet at

insurance valuation which is based on market values. These insurance valuations

64


2 0 1 1 / 1 2

are reviewed annually and revalued every five years by an appropriately qualified

valuer.

The collection consists of a Vintage Leyland Bus, a World War I tank and a Station

Pilot Steam locomotive. The Bus and Tank are on display at the Museum of

Lincolnshire Life. The Station Pilot is located at Ludborough Station, where it is

operated periodically by the North Thoresby and Ludborough steam society for

special events.

Musical Instruments

This category contains a donated asset, a violin by Antonio Stradivari of Cremona

dated 1695, which is on loan to the Halle Orchestra. The violin was valued by

Sotheby's in November 2011 at £2.000 million.

Civic Insignia

The collection of civic insignia includes the Mayor's and Sheriff's badges and chains

of office and mace. All items are on display at the Guildhall, Lincoln. It also includes

four ceremonial and fighting swords of significant historical significance, which

together are valued at £1.400 million. The Council's collection of civic insignia is

reported in the Balance Sheet at insurance valuation which is based on market

values. These insurance valuations are reviewed annually and revalued every five

years by an appropriately qualified valuer.

Other Heritage assets

This category includes artwork and paintings and miscellaneous assets recognised in

the Balance Sheet, such as the Books of Remembrance kept on display at the City

Crematorium. These are reported at insurance valuation which is based on market

values and are subject to periodic revaluation by an appropriately qualified valuer.

Heritage Assets not recognised in the Balance Sheet

In addition to the assets recognised in the Balance Sheet and disclosed in the

above table, the Council holds a number of assets which are by their nature

heritage assets but are not recognised in the Balance Sheet. The Council does not

consider that reliable cost or valuation information can be obtained for these assets

due to the nature of the assets and the lack of market values. Examples of this type

of asset are ancient structures and ruins, War memorials and public art.

These are listed below.

Scheduled Ancient Monuments

St Paul in the Bail Walls & Well

Saltergate Roman Wall and

Posterngate

Wall & Gate

Mint Wall, West Bight Wall

Newport Arch Arch & Wall

Pottergate Arch

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Scheduled Ancient Monuments

Lower West Gate & Wall, City

Hall

Gate & Wall

St Marys conduit Conduit

Temple Gardens, Close Wall Wall

Roman Wall, Mary Sookias

House, Cecil street

Wall

Memorials

High Street War memorial

Dixon Street War memorial

Birchwood Avenue War memorial

Newark Road/Maple Street War memorial

Public Art

The Chimes, Brayford Wharf

North

Artwork

Empowerment, Waterside Artwork

Exotic Cone I and II Artwork

Lilies, Altham Terrace Artwork

Lion, Arboretum Artwork

Love Seat, The Lawn Artwork

Dr Charlesworth Statue, The

Lawn

Artwork

Mother and Child, The Lawn Artwork

St Marks Obelisk Artwork

Light Sculpture, Wigford Bridge Artwork

Note 14 – Investment Properties

Movements in the value of Investment Properties are shown in note 12.

The following items of income and expenditure have been accounted for in the

Comprehensive Income and Expenditure Statement:

2010/11 2011/12

£'000 £'000

1,077 Rental income from investment property 945

(452) Direct operating expenses arising from investment

property (383)

625 Net gain/(loss) 562

There are no restrictions on the Council’s ability to realise the value inherent in its

investment property or on the Council’s right to the remittance of income and the

proceeds of disposal. The Council has no contractual obligations to purchase,

construct or develop investment property or repairs, maintenance or enhancement. Note 15 – Intangible Assets

Movements in the value of Intangible Assets are shown in note 12.

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Note 16 – Financial Instruments

The borrowings and investments disclosed in the Balance Sheet are made up of the

following categories of financial instruments:

Long-Term Current

31/03/11 31/03/12 31/03/11 31/03/12

£’000 £’000 £’000 £’000

Financial Liabilities (principal amount)* 50,447 75,409 43 59

Accrued Interest due within 12 months 0 0 922 934

Financial Liabilities at Amortised Cost 50,447 75,409 43 59

Financial Liabilities at Fair Value through

the CIES** 0 0 0 0

Total Borrowings 50,447 75,409 965 993

Financial Assets (principal amount)* 449 449 15,297 20,645

Accrued Interest due within 12 months 0 0 282 78

Loans and Receivables 0 0 15,297 20,645

Available-for-Sale Financial Assets 449 449 0 0

Financial Assets at Fair Value through the

CIES 0 0 0 0

Total Investments 449 449 15,579 20,723

* This is the actual principal value of loans/investments not arising from any adjustments. From

1st April 2009 the carrying amounts of liabilities and assets in the Balance Sheet exclude

accrued interest due within the next 12 months i.e. principal +/- adjustments for breakage

costs or stepped rates if applicable. Accrued interest is shown separately under short-term

investments/borrowing if due within one year.

** Fair value has been measured by direct reference to published price quotations in an

active market; and/or estimated using a valuation technique.

Financial Instrument Gains/Losses

The gains and losses recognised in the Comprehensive Income and Expenditure

Statement in relation to financial instruments are made up as follows:

67


2 0 1 1 / 1 2

2011/12

Financial

Liabilities

Financial Assets Total

Liabilities

measured

at

amortised

cost

Loans and

Receivables

Available-

for-Sale

Assets

Fair

Value

through

the

CIES

£’000 £’000 £’000 £’000 £’000

Comprehensive Income &


Interest expense 2,430 0 0 0 2,430

Impairment losses 0 0 0 0 0

Interest payable and similar

charges

2,430 0 0 0 2,430

Interest income 0 (291) (15) 0 (306)

Interest and investment income 0 (291) (15) 0 (306)

Net (gain)/loss for the year 2,430 (291) (15) 0 2,124

2010/11

Financial

Liabilities

Financial Assets Total

Liabilities

measured

at

amortised

cost

Loans and

Receivables

Available-

for-Sale

Assets

Fair

Value

through

the

CIES

Comprehensive Income &


£’000 £’000 £’000 £’000 £’000

Interest expense 2,449 0 0 0 2,449

Impairment losses 0 0 0 0 0

Interest payable and similar

charges

2,449 0 0 0 2,449

Interest income 0 (265) (14) 0 (279)

Interest and investment income 0 (265) (14) 0 (279)

Net (gain)/loss for the year 2,449 (265) (14) 0 2,170

Fair Value of Assets and Liabilities carried at Amortised Cost

Financial liabilities and financial assets represented by loans and receivables are

carried on the Balance Sheet at amortised cost. Their fair value can be assessed by

calculating the present value of the cash flows that take place over the remaining

life of the instruments, using the following assumptions:

68


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For loans from the Public Works Loan Board (PWLB) and other loans payable,

premature repayment rates from the PWLB have been applied to provide the

fair value under PWLB debt redemption procedures;

For loans receivable prevailing benchmark market rates have been used to

provide the fair value;

No early repayment or impairment is recognised;

Where an instrument has a maturity of less than 12 months, or is a trade or

other receivable, the fair value is taken to be the principal outstanding or the

billed amount;

The fair value of trade and other receivables is taken to be the invoiced or

billed amount.

The fair values calculated are as follows: Financial Liabilities

31/03/11 31/03/12

Carrying

Amount

Fair Value Carrying

Amount

Fair Value

£’000 £’000 £’000 £’000

33,862 36,482 PWLB Debt 58,793 68,138

16,000 19,162 Money Market Debt 16,000 17,076

561 369 Stock 561 369

57 57 Other 114 114

50,480 56,070 Total Debt 75,468 85,697

9,095 9,095 Trade Creditors 8,907 8,907

59,575 65,165 Total Financial Liabilities 84,375 94,604

The fair value is greater than the carrying amount because the Council’s portfolio of

loans includes a number of fixed rate loans where the interest rate payable is higher

than the rates available for similar loans in the market at the Balance Sheet date.

This is to be expected given that the current rates of interest are at a historically low

level.

69


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Financial Assets

31/03/11 31/03/12

Carrying

Amount

Fair

Value Carrying

Amount

Fair

Value

£’000 £’000 £’000 £’000

15,297 15,579 Money Market Investments <1 year 20,645 20,723

15,297 15,579 Total Investments 20,645 20,723

6,358 6,358 Trade Debtors 7,829 7,829

21,655 21,937 Total Loans and receivables 28,474 28,552

The differences are attributable to fixed interest instruments payable being held by

the Council, whose interest rate is higher than the prevailing rate estimated to be

available at 31 March. This increases the fair value of financial assets and raises the

value of loans and receivables.

The fair values for financial liabilities have been determined by reference to the

(PWLB) redemption rules and prevailing PWLB redemption rates as at each Balance

Sheet date, and include accrued interest. The fair values for non-PWLB debt have

also been calculated using the same procedures and interest rates and this

provides a sound approximation for fair value for these instruments.

Similarly, the fair values for loans and receivables have also been determined by

reference to the PWLB redemption rules, which provide a good approximation for

the fair value of a financial instrument and includes accrued interest. The

comparator market rates prevailing have been taken from indicative investment

rates at each Balance Sheet date. In practice, rates will be determined by the size

of the transaction and the counterparty, but it is impractical to use these figures,

and the difference is likely to be immaterial. Note 17 – Inventories

In undertaking its work the Council holds reserves of inventories together with

amounts of uncompleted work (work in progress). The figure shown in the Balance

Sheet may be subdivided as follows:

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2 0 1 1 / 1 2

Consumable

Stores

City Maintenance

Services Materials

City Maintenance

Services Work in

Progress

Total

2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Balance

outstanding at

the start of the

year

55 53 87 68 41 19 183 140

Purchases 4 14 0 7 0 0 4 21

Recognised as

an expense in

the year

(6) (4) (19) (5) (22) (11) (47) (20)

Written off

balances 0 0 0 0 0 0 0 0

Balance

outstanding at

the year-end

53 63 68 70 19 8 140 141

Note 18 – Debtors

Debtors listed under current assets are monies due which the Council expects to

collect within one year of the Balance Sheet date and are analysed as follows:

31/03/11 31/03/12

£’000 £’000

2,190 Central Government Bodies 3,682

1,015 Other Local Authorities 1,154

65 NHS Bodies 9

0 Public Corporations and Trading Funds 1

6,068 Other Entities and Individuals 6,231

9,338 Total 11,077

Debtors balances are shown gross of impairment of doubtful debts (£2.354m in

2011/12, £2.147m in 2010/11) Note 19 – Cash and Cash Equivalents

The balance of Cash and Cash Equivalents is made up of the following elements:

31/03/11 31/03/12

£’000

£’000

1 Cash held by the Council 1

395 Bank Current accounts (4)

71


2 0 1 1 / 1 2

396 (3)

Note 20 – Assets Held for Sale

Movements in the value of Assets Held for Sale are shown in note 12. Note 21 – Creditors

Creditors shown as current liabilities are amounts payable by the Council within one

year of the Balance Sheet date and are analysed as follows:

31/03/11 31/03/12

£’000 £’000

(1,371) Central Government Bodies (4,131)

(426) Other Local Authorities (261)

(30) Public Corporations and Trading Funds (25)

(7,755) Other Entities and Individuals (7,490)

(9,582) Total (11,907)

Note 22 – Provisions

These amounts are set aside to provide for potential liabilities relating to specific

occurrences and comprise the following balances:

Balance

31/03/11

£’000

Transfers

(From)

£’000

Transfers

To

£’000

Balance

31/03/12

£’000

Cory Pension (165) 0 0 (165)

CLAU Legacy Work (7) 0 0 (7)

Licensing Application Fee (9) 0 0 (9)

Environmental Searches (20) 0 0 (20)

Asbestos Claims (13) 13 0 0

Business Rates Rateable

Value reduction

– Think Tank

(23) 0 (14) (37)


Value reduction

– The Terrace

(35) 0 (36) (71)


Value reduction

– Greetwell Place

0 0 (154) (154)

Accumulated Absences (274) 274 (304) (304)

Second Tier

management review

0 0 (286) (286)

Total (545) 287 (794) (1,053)

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2 0 1 1 / 1 2

Note 23 – Usable Reserves

Movements in the Council’s usable reserves are detailed in the Movement in

Reserves Statement and Note 7.

Note 24 – Unusable Reserves

The Council keeps a number of unusable reserves in the Balance Sheet. Some are

required to be held for statutory reasons; some are needed to comply with proper

accounting practice.

Reserve Balance

31/03/11

Net

Movement

in Year

Balance

31/03/12

Purpose of Reserve Further Details of

Movements

£'000 £'000 £'000

Revaluation

Reserve 16,733 3,424 20,157 Store of gains on

revaluation of fixed

assets

a) below

Capital Adjustment

Account

183,870 (25,790) 158,080 Store of capital

resources set aside to

meet past

expenditure

b) below

Financial

Instruments

Adjustment

Account

(505) 207 (298) Balancing

mechanism between

the rates at which

gains and losses are

recognised under the

Code of Practice

c) below

Available for Sale

Financial

Instruments

Account

430 0 430 Store of gains on

revaluation of

investments not yet

realised through sales

d) below

Collection Fund

Adjustment

Account

65 11 76 Store of Council’s

share of

accumulated

surpluses and deficits

on the Collection

Fund

e) below

73


2 0 1 1 / 1 2

Reserve Balance

31/03/11

Net

Movement

in Year

Balance

31/03/12

Purpose of Reserve Further Details of

Movements

£'000 £'000 £'000

Accumulated

Absences Account

(274) (30) (304) Absorbs the

differences that

would otherwise arise

on the General Fund

balance from

accruing for

compensated

absences earned but

not taken in the year

(i.e. annual leave

entitlement carried

forward at 31 March

f) below

Deferred Capital

Receipts

57 0 57 Expected future

repayments from

sales of assets

received in

instalments

g) below

Pensions Reserve (39,327) (10,894) (50,221) Balancing account

to allow inclusion of

Pensions Liability in

the Balance Sheet

Note 43 to the

financial

statements

161,049 (33,072) 127,977

a) Revaluation Reserve

The Revaluation Reserve contains the gains made by the Council arising from

increases in the value of its Property, Plant and Equipment and Intangible Assets. The

balance is reduced when assets with accumulated gains are:

re-valued downwards or impaired and the gains are lost

used in the provision of services and the gains are consumed through

depreciation, or

disposed of and the gains are realised.

The Reserve contains only revaluation gains accumulated since 1 April 2007, the

date that the Reserve was created.

The Revaluation Reserve balance at 1 April 2010 has been restated for two

changes:-

Change in accounting policy in respect of Heritage assets in 2011/12 applied

retrospectively

Prior year adjustment in respect of assets incorrectly classified on IFRS

transition.

74


2 0 1 1 / 1 2

2010/11

£’000

2010/11

restated

£’000

2011/12

£’000

(12,290) (18,376) Balance 1 April (16,733)

(1,337) (1,337) Upward Revaluation of assets (5,264)

2,699 2,699

Downward revaluation of assets and impairment losses

not charged to the Surplus/Deficit on Provision of

Services

1,386

1,362 1,362

Surplus or deficit on revaluation of non-current assets not

posted to the Surplus or Deficit on the Provision of

Services

(3,878)

281 281

Difference between fair value depreciation and

historical cost depreciation

454

0 0 Accumulated gains on assets sold or scrapped

0

(10,647) (16,733)

Balance 31 March

(20,157)

The Balance Sheets at 1 April 2010 and 31 March 2011 have been restated to reflect the prior period adjustment to

correct the classification of assets on transition to IFRS. The note above has been restated to show these changes. b) Capital Adjustment Account

The Capital Adjustment Account absorbs the timing differences arising from the

different arrangements for accounting for the consumption of non-current assets

and for financing the acquisition, construction or enhancement of those assets

under statutory provisions. The Account is debited with the cost of acquisition,

construction or enhancement as depreciation, impairment losses and amortisations

are charged to the Comprehensive Income and Expenditure Statement (with

reconciling postings from the Revaluation Reserve to convert fair value figures to a

historical cost basis). The Account is credited with the amounts set aside by the

Council as finance for the costs of acquisition, construction and enhancement.

The Account contains accumulated gains and losses on Investment Properties and

gains recognised on donated assets that have yet to be consumed by the Council.

The Account also contains revaluation gains accumulated on Property, Plant and

Equipment before 1 April 2007, the date that the Revaluation Reserve was created

to hold such gains.

Note 7 provides details of the source of all the transactions posted to the Account,

apart from those involving the Revaluation Reserve.

75


2 0 1 1 / 1 2

2010/11

£’000

2010/11

restated

£’000

2011/12

£’000

(267,134) (265,715) Balance 1 April (183,870)

Reversal of items relating to capital expenditure

debited or credited to the Comprehensive Income

and Expenditure Statement:

6,198 6,198 - Charges for depreciation and amortisation of non-

current assets 6,571

87,993 87,993 - Revaluation losses and impairments on Property,

Plant and Equipment 1,658

3,478 3,478 - Revenue expenditure funded from capital under

statute 27,271

693 693

- Amounts of non-current assets written off on

disposal or sale as part of the gain/loss on disposal to

the Comprehensive Income and Expenditure

Statement

2,756

(9) (9) Other adjustments 0

98,353 98,353 38,256

(281) (281) Adjusting amounts written out of the Revaluation

Reserve (454)

98,072 98,072 Net written out amount of the cost of non-current

assets consumed in the year 37,802

Capital Financing applied in year:

(3,861) (3,861) Use of Capital Receipts to finance new capital

expenditure (1,759)

(4,983) (4,983) Use of the Major Repairs Reserve to finance new

capital expenditure (5,053)

(2,134) (2,134) Capital expenditure charged against the General

Fund and HRA balances (1,672)

(4,076) (4,076) Application of Capital Grants to finance new capital

expenditure (2,336)

(1,173) (1,173)

Statutory Provision for the financing of capital

investment charged against the General Fund and

HRA balances (MRP/VRP)

(1,192)

(16,227) (16,227) (12,012)

(185,289) (183,870) Balance 31 March

(158,080)

The Balance Sheets at 1 April 2010 and 31 March 2011 have been restated to reflect the prior period adjustment to

correct the classification of assets on transition to IFRS. The note above has been restated to show these changes.

c) Financial Instruments Adjustment Account

The Financial Instruments Adjustment Account provides a balancing mechanism

between the rates at which gains and losses (such as premiums on the early

repayment of debt) are recognised under the Code of Practice and are required by

statute to be met from the General Fund and HRA balances.

76


2 0 1 1 / 1 2

2010/11

£’000

2011/12

£’000

739 Balance 1 April 505

51

Proportion of discounts incurred in previous financial

years to be credited to the General fund Balance in

accordance with statutory requirements

22

(285)

Proportion of premiums incurred in previous financial

years to be charged against the General fund Balance

in accordance with statutory requirements

(229)

505 Balance 31 March 298

d) Available for Sale Financial Instruments Account

The Available for Sale Financial Instruments Account contains the gains and losses

arising from movements in fair value of Available for Sale investments, which are

recognised in the Comprehensive Income and Expenditure Statement.

2010/11

£’000

2011/12

£’000

(430) Balance 1 April (430)

0 Gain on revaluations in year 0

(430) Balance 31 March (430)

e) Collection Fund Adjustment Account

The Collection Fund Adjustment Account was introduced on 1 April 2009 to comply

with the new accounting requirements for the Collection Fund contained within the

Statement of Recommended Practice 2009/10 (SORP 2009). The difference between

accrued income for the year as shown in the Income and Expenditure Account and

the amount required to be credited to the General Fund is taken to the Collection

Fund Adjustment Account. The balance on the account represents the Council’s

share of the accumulated surpluses and deficits on the Collection Fund at the

Balance Sheet date.

2010/11

£’000 2011/12

£’000


21 Council’s share of (surplus)/deficit for the year (11)


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2 0 1 1 / 1 2

f) Accumulated Absences Account

The Accumulated Absences Account absorbs differences that would otherwise arise

on the General Fund Balance from accruing for compensated absences earned

but not taken in year, e.g. annual leave entitlement carried forward at 31 March.

Statutory arrangements require that the impact on General Fund Balance is

neutralised by transfers to or from this account.

2010/11

£’000

2011/12

£’000


203 Settlement or cancellation of accrual made at the end

of the preceding year

274

(274) Amounts accrued at the end of the current year (304)

71 Amount by which officer remuneration charged in the

Comprehensive Income and Expenditure Statement on

an accruals basis is different from remuneration

chargeable in the year in accordance with statutory

requirements

30


g) Deferred Capital Receipts

This account contains the expected future repayments of capital from sales of

assets which will be received in instalments over an agreed period of time. They

arise principally from mortgages on sold Council Houses. When made, these

payments are regarded as being of a capital nature and transactions during the

year were as follows:

2010/11

£’000

2011/12

£’000


9 Council’s share of (surplus)/deficit for the year 0


Note 25 – Cash Flow Statement - Operating Activities The cash flows for operating activities include the following items:

2010/11 2011/12

£'000 £'000

(592) Interest received (476)

2,353 Interest paid 2,419

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2 0 1 1 / 1 2

Note 26 – Cash Flow Statement – Adjustment to surplus or deficit on provision of services for non-cash movements 2010/11 2011/12

£'000 £'000

(6,198) Depreciation (6,571)

(88,883) Revaluation losses and impairments recognised in

Comp I&E (2,503)

888 Revaluation gains and reversal of impairments

recognised in Comp I&ES 845

(69) Contribution (to)/from provisions (507)

5,914 Movement on Pension Reserve (60)

(19) RTB admin charges deducted for purposes of pooling (8)

(692) Carrying amount of non-current assets sold (2,756)

(983) Other non-cash transactions (61)

(1,456) (Decrease)/increase in debtors 1,418

2,860 (Increase)/decrease in creditors 391

(43) (Decrease)/increase in stock 1

(1,228) Movement in Collection Fund balances (2,723)

(392) Housing pooled capital receipts (183)

(90,301) (12,717)

Note 27 – Cash Flow Statement – Adjustment to surplus or deficit on the provision of services for items that are investing & financing activities 2010/11 2011/12

£'000 £'000

186 Increase in short term investments 5,348

(1,000) Decrease in long term investments 0

1,040 Proceeds from sale of PPE, investment property and

intangible assets 4,020

4,899 Capital Grants recognised in CI&ES 1,118

(97) (Increase)/decrease in short term borrowing (11)

5,028 10,475

Note 28 – Cash Flow Statement - Investing Activities 2010/11 2011/12

£'000 £'000

13,774

Purchase of property, plant and equipment, investment

property and intangible assets 8,777

(1,040) Proceeds from sale of non-current assets (4,020)

(760) Other receipts from investing activities (1,057)

11,974 Net cash flows from investing activities 3,700

79


2 0 1 1 / 1 2

Note 29 – Cash Flow Statement - Financing Activities 2010/11 2011/12

£'000 £'000

(39) Cash receipts of short-term and long-term borrowing (24,995)

5 Repayments of short and long-term borrowing 19

517

Cash payments for the reduction of outstanding

liabilities relating to finance leases 536

483 Net cash flows from investing activities (24,440)

80


2 0 1 1 / 1 2

Note 30 – Amounts Reported for Resource Allocation Decisions 2011/12

Service Information

Corporate

Chief

Executive

Directorate of

Development &

Environmental

Services

Directorate of

Housing &

Community

Services

Directorate of

Resources HRA Total

£000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income (10) (1,896) (6,351) (9,708) (13,096) (25,621) (56,682)

Government grants 0 0 (71) (65) (40,367) (209) (40,712)

Total Income (10) (1,896) (6,422) (9,773) (53,463) (25,830) (97,394)

Employee expenses 376 1,321 3,372 3,683 5,872 3,131 17,755

Other operating expenses 1,546 237 2,187 12,338 43,173 40,086 99,567

Support Service Recharges 73 550 5,112 3,279 6,008 4,627 19,649

Total operating expenses 1,995 2,108 10,671 19,300 55,053 47,844 136,971

Net Cost of Services 1,985 212 4,249 9,527 1,590 22,014 39,577

Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure Statement

£000s

Cost of Services in Service Analysis 39,577

Add services not included in main analysis

Add amounts not reported in service

management accounts (1,909)

81


2 0 1 1 / 1 2


£000s

Remove amounts reported to

management not included in

Comprehensive Income and Expenditure

Statement 0

Net Cost of Services in Comprehensive

Income and Expenditure Statement 37,668

Reconciliation to Subjective Analysis

Service

Analysis

Services not

in Analysis

Note reported in

service

management

a/c'

Not included

in I&E

Allocation of

recharges

Net Cost of

Services

Corporate

Amounts Total

£000s £000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income (56,682) 1,317 17,108 (38,257) 0 (38,257)

Surplus or deficit on associates and joint

ventures 0 0 0 0 (257) (257)

Interest and investment income 0 0 0 0 (260) (260)

Income from council tax 0 0 0 0 (6,316) (6,316)

Government grants and contributions (40,712) 209 0 (40,503) (10,189) (50,692)

Pension - expected return on assets 0 0 0 0 (6,225) (6,225)

Total Income (97,394) 0 1,526 0 17,108 (78,760) (23,247) (102,007)

Employee expenses 17,755 (47) 0 17,708 0 17,708

Other service expenses 99,567 (2,829) (12,599) 84,139 0 84,139

Support Service recharges 19,649 (13) (4,509) 15,127 0 15,127

Depreciation, amortisation and

impairment 0 (546) 0 (546) 0 (546)

82


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Service

Analysis

Services not

in Analysis

Note reported in

service

management

a/c'

Not included

in I&E

Allocation of

recharges

Net Cost of

Services

Corporate

Amounts Total

£000s £000s £000s £000s £000s £000s £000s £000s

Interest Payments 0 0 0 0 2,430 2,430

Precepts & Levies 0 0 0 0 713 713

Payments to Housing Capital Receipts Pool 0 0 0 0 183 183

Gain or Loss on Disposal of Fixed Assets 0 0 0 0 (1,469) (1,469)

Pension - interest on pension liabilities 0 0 0 0 7,103 7,103

Total operating expenses 136,971 0 (3,435) 0 (17,108) 116,428 8,960 125,388

Surplus or deficit on the provision of

services 39,577 0 (1,909) 0 0 37,668 (14,287) 23,381

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2010/11 Comparator figures

Service Information

Corporate

Chief

Executive

Directorate of

Development &

Environmental

Services

Directorate of

Housing &

Community

Services

Directorate of

Resources HRA Total

£000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income 0 (2,161) (6,617) (10,835) (13,231) (23,899) (56,743)

Government grants (4,749) 0 (43) (121) (38,505) (307) (43,725)

Total Income (4,749) (2,161) (6,660) (10,956) (51,736) (24,206) (100,468)

Employee expenses 437 1,273 3,660 3,800 5,212 3,148 17,530

Other operating expenses (8,623) 516 2,655 13,592 42,504 97,055 147,699

Support Service Recharges 218 627 5,698 3,765 6,496 1,769 18,573

Total operating expenses (7,968) 2,416 12,013 21,157 54,212 101,972 183,802

Net Cost of Services (12,717) 255 5,353 10,201 2,476 77,766 83,334


£000s

Cost of Services in Service Analysis 83,334

Add amounts not reported in service

management accounts 5,168

Net Cost of Services in Comprehensive

Income and Expenditure Statement *88,502

84


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Service

Analysis

Services not

in Analysis

Note reported in

service

management

a/c's

Not included

in CIES

Allocation of

recharges

Net Cost of

Services

Corporate

Amounts Total

£000s £000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income (56,743) 0 1,392 0 22,012 (33,339) 0 (33,339)

Surplus or deficit on associates and joint

ventures 0 0 0 0 0 0 (540) (540)

Interest and investment income 0 0 0 0 0 0 (241) (241)

Income from council tax 0 0 0 0 0 0 (6,222) (6,222)

Government grants and contributions (43,725) 0 5,055 0 0 (38,670) *(15,645) (54,315)

Pension - expected return on assets 0 0 0 0 0 0 (6,137) (6,137)

Total Income (100,468) 0 6,447 0 22,012 (72,009) (28,785) (100,794)

Employee expenses 17,530 0 (54) 0 0 17,476 0 17,476

Other service expenses 147,699 0 (1,052) 0 (16,668) 129,979 0 129,979

Support Service recharges 18,573 0 (321) 0 (5,344) 12,908 0 12,908

Depreciation, amortisation and

impairment 0 0 148 0 0 148 0 148

Interest Payments 0 0 0 0 0 0 2,449 2,449

Precepts & Levies 0 0 0 0 0 0 705 705

Payments to Housing Capital Receipts Pool 0 0 0 0 0 0 392 392

Gain or Loss on Disposal of Fixed Assets 0 0 0 0 0 0 (324) (324)

Pension - interest on pension liabilities 0 0 0 0 0 0 8,503 8,503

Total operating expenses 183,802 0 (1,279) 0 (22,012) 160,511 11,725 172,236

Surplus or deficit on the provision of

services 83,334 0 5,168 0 0 88,502 (17,060) 71,442

* 2010/11 comparator figures for HRA capital grants have been restated to be in line with the CIPFA Code requirements.

.

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Note 31 – Trading Operations

The Council operates City Maintenance Services (CMS), which carries out day to

day maintenance on Council Housing and other public buildings as well as

environmental works, street furniture etc. The Council also owns and manages a

fruit, vegetable and retail market situated within the City Centre and also operates

and manages a bus station and several car parks located throughout the city. It

also manages a number of industrial estates and commercial properties. The Printing

Unit provided graphic design, general printing and duplicating to both internal and

external clients.

2011/12 2010/11

Exp. Inc. Net Exp. Inc. Net

£'000 £'000 £'000 £'000 £'000 £'000

Markets 195 (252) (57) 224 (277) (53)

Car Parks 1,808 (4,069) (2,261) 1,790 (3,979) (2,189)

(Surplus)/ Deficit

applicable to a service

2,003 (4,321) (2,318) 2,014 (4,256) (2,242)

CMS 5,685 (5,735) (50) 5,496 (5,422) 74

City Bus Station 169 (85) 84 176 (78) 98

Industrial Estates 82 (403) (321) 259 (383) (124)

Lincoln Properties 599 (569) 30 290 (882) (592)

Printing Unit 0 0 0 3 0 3

(Surplus)/ Deficit not

applicable to a service

6,535 (6,792) (257) 6,224 (6,765) (541)

Total (Surplus)/Deficit 8,538 (11,113) (2,575) 8,238 (11,021) (2,783)

Note 32 – Agency Services

In accordance with the code, the collection and distribution of National Non-

Domestic Rates (NNDR) and Council Tax is deemed to be an agency arrangement.

The costs of collection of NNDR and the surplus or deficit on the Collection Fund for

the year, are shown in the Collection Fund Statement. Note 33 – Members Allowances

The Local Authorities (Members’ Allowances)(Amendment) Regulations 1995 requires

local authorities to publish the amounts paid to members made under the members’

allowance scheme.

The payments made to the City Council members during 2011/12 totalled £210,711

(£215,516 in 2010/11).

Payments are defined as:

i. Basic Allowance

ii. Special Responsibility Allowance.

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Note 34 – Officers Remuneration

The Accounts and Audit Regulations 2011 require the Council to disclose

remuneration paid to senior employees.

For the purposes of the regulation senior employees are persons whose salary is in

excess of £150,000 per year or whose salary is £50,000 or more and are deemed to

have responsibility for the management of the Council to the extent that they have

the power to direct or control the major activities. The remuneration paid to the

Council’s senior employees is as follows:

Officers’ Emoluments – Senior Employees

2011/12

Post Title Salary Bonuses Expense

Allowances

Compensation

for loss of

office

Pension

Contributions Total

£ £ £ £ £ £

Chief Executive 118,420 0 1,665 0 27,829 147,914

Director of

Housing &

Community

Services

86,235 0 1,732 0 20,265 108,232

Director of

Development &

Environmental

Services

86,235 0 1,427 0 20,265 107,927

Director of

Resources 86,235 0 1,947 0 20,265 108,447

Total 377,125 0 6,771 0 88,624 472,520

2010/11


Allowances

Compensation

for loss of

office

Pension

Contributions Total

£ £ £ £ £ £

Chief Executive 118,911 0 2,590 0 27,944 149,445

Director of

Housing &

Community

Services

86,235 0 1,669 0 20,265 108,169

Director of

Development &

Environmental

Services

86,235 0 1,813 0 20,265 108,313

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2010/11


Allowances

Compensation

for loss of

office

Pension

Contributions Total

£ £ £ £ £ £

Director of

Resources 86,235 0 2,434 0 20,265 108,934

Total 377,616 0 8,506 0 88,739 474,861

The number of Council employees (inclusive of the senior employees in the table

above) receiving more than £50,000 remuneration for the year (excluding

employer’s pension contributions) were paid as follows:

Remuneration Band Number of

£ Employees

2011/12 2010/11

50,000 - 54,999 1 3

55,000 - 59,999 5 4

60,000 - 64,999 2 5

65,000 – 69,999 0 1

70,000 – 74,999 0 0

75,000 – 79,999 0 0

80,000 – 84,999 0 0

85,000 – 89,999 3 3

90,000 – 94,999 0 0

95,000 – 99,999 1 0

100,000 – 104,999 0 1

105,000 – 109,999 1 0

110,000 – 114,999 1 0

115,000 – 119,999 0 0

120,000 – 124,999 3 1

The numbers of exit packages with total cost per band and total cost of the

compulsory and other redundancies are set out in the table below:

Exit

package

cost band

(including

special

payments)

Number of

compulsory

redundancies

Number of other

departures

agreed

Total number of

exit packages by

cost band [b + c]

Total cost of exit

packages in each

band

2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12

£ £

£0 -

£20,000 4 9 0 0 4 9 49,065 72,871

£20,001 -

£40,000 1 5 0 0 1 5 63,151 131,323

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Exit

package

cost band

(including

special

payments)

Number of

compulsory

redundancies

Number of other

departures

agreed

Total number of

exit packages by

cost band [b + c]

Total cost of exit

packages in each

band

2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12

£ £

£40,001 -

£60,000 1 3 0 0 1 3 51,534 138,543

£60,001 -

£80,000 0 0 0 2 0 2 0 122,722

£80,001 -

£100,000 1 0 0 1 1 1 89,299 99,539

£100,000 -

£150,000 0 0 0 1 0 1 0 112,075

Total

7 17 0 4 7 21 253,049 677,073

None of the exit packages shown in the table above related to senior employees.

Note 35 – External Audit Costs

In 2011/12 the following fees relating to External Audit and Inspection were incurred

and paid to the Audit Commission:

2010/11 2011/12

£'000 £'000

*109 Fees Payable with regard to external audit services

carried out by the appointed auditor

*103

0 Fees payable in respect of statutory inspection 0

25 Fees payable for the certification of grant claims and

returns

31

0 Fees payable for other services 0

134 Total 134

* F e e s a r e s h o w n g r o s s o f r e b a t e s r e c e i v e d ( £ 1 0 k i n 2 0 1 0 / 1 1 a n d £ 8 k i n

2 0 1 1 / 1 2 )

Note: the fees relating to grant claims can vary from year to year depending on the

number of claims to be audited. The figure for 2011/12 is an estimate, as the work will

be carried out in the period August to December 2012. Note 36 – Grant Income

The Council credited the following grants, contributions and donations to the

Comprehensive Income and Expenditure Statement in 2011/12.

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Credited to Taxation and Non Specific Grant Income

2010/11 2011/12

£'000 £'000

(1,343) Revenue Support Grant (1,941)

0 Council Tax Freeze Grant (157)

(60) LPSA2 performance grant (28)

(57) Cohesion 0

(23) Climate Change Levy 0

0 New Homes Bonus (536)

0 Local Services Support Grant (130)

(16) Other Government Grants 0

(200) Lincolnshire PCT 0

(200) Football Foundation 0

(252) Disabled Facilities Grants (298)

(36) Centrica energy efficiency grants 0

(238) Section 106 agreements (355)

(1,561) Homes and Communities Agency 0

(563) Regional Housing Board 0

(62) Natural England (4)

0 The Cory Trust (38)

0 North Kesteven District Council (105)

0 East Midlands Development Agency (115)

0 Environment Agency (27)

(109) Decent Homes contract – profit share (101)

(1,364) Lincolnshire County Council (36)

(1) Heritage Lottery Fund (23)

(63) Leaseholder contributions (12)

(131) Renovation Grants 0

(118) Other capital grants and contributions (4)

*(6,397) Total (3,910)

2010/11 Credited to Services 2011/12

£'000 £'000

(14,216) Rent Allowances (15,532)

(7,803) Council Tax Benefit (8,025)

(14,163) Rent Rebates (15,099)

(35) Discretionary Housing Payments (40)

(907) Housing Benefit Administration (874)

(153) Business Rates Administration (152)

(766) Concessionary Fares 0

(93) Homelessness 0

(34) New Burdens Grant Determination 0

(41) Innovation Lincolnshire (15)

(25)

Department for Culture, Media & Sport - Free

Swimming Grant 0

(20) Lincolnshire Sports Partnership - Free Swimming Grant 0

0 Preventing Repossessions (49)

0 English Heritage (35)

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2010/11 Credited to Services 2011/12

£'000 £'000

(42) Supporting People (14)

(90) UK Parliamentary Elections 0

0 The Electoral Commission (96)

0 Neighbourhood Planning (20)

(115) Other Grants (160)

*(38,503) Total (40,111)

2010/11 2011/12

£'000 Revenue Grants Received in Advance £'000

(130) Innovation Lincolnshire 0

(24) Discretionary Housing Payments (19)

(320) Rent Rebates 0

(474) Total (19)

* 2010/11 comparator figures for HRA capital grants have been restated to be in line with the CIPFA

Code requirements.

There were no capital grants received in advance in 2011/12.

Note 37 – Related Parties

It is a requirement for the Council to disclose any transactions with a related party,

including non-financial transactions. A ‘related party’ is defined as being an

organisation with which the Council has dealings and where Officers or Members of

the Council have a controlling interest or influence in the activities of that

organisation. The code requires local authorities to disclose material transactions

with ‘related parties’. The disclosure is required in order that the true and fairness of

the accounts can be understood by the reader of the accounts having knowledge

of any ‘related parties’ of the Council.

Members/Officers - For 2011/12 the Council sent a letter, dated 1 April 2012, to all

Members, Chief Officers and Heads of Service, requesting disclosure of any ‘related

party transactions’. All letters were returned, no Members or Officers declared

pecuniary interests in accordance with section 117 of the Local Government Act

1972.

In addition, the table below details both Member and Officer representation on the

boards of levying bodies, assisted organisations with which the Council makes

material financial assistance and Joint Ventures.

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Name of Organisation Member

Representative

Officer Representative

Upper Witham – Drainage Board Cllr Vaughan

Cllr Coupland

Cllr Jackson

Cllr Hewson

N/A

Witham First – Drainage Board Cllr Coupland

Cllr Hewson

Cllr Vaughan

Cllr Jackson

N/A

Witham Third – Drainage Board Cllr Coupland

Cllr Hewson

Cllr Vaughan

Cllr Jackson

N/A

Lincoln Arts Trust Cllr Bushell N/A

Lincoln Dial-a-Ride Cllr Charlesworth Director of Resources

Citizens Advice Bureau Cllr Burke N/A

Investors in Lincoln Cllr Metcalfe

Cllr Murry

N/A

Central Lincolnshire Joint Strategic

Planning Partnership

Cllr Metcalfe

Cllr Murray

Cllr West

Director of

Development &

Environmental

Services

The Shared Revenues & Benefits Joint

Committee

Cllr Metcalfe

Cllr Nannestad

Director of Resources,

Head of Shared

Revenues & Benefits

None of the above Members or Officers took part in the decision making of any

financial assistance awarded to any of the organisations.

Central Government - has significant influence over the general operations of the

Council. It is responsible for providing the statutory framework within which the

Council operates, provides the majority of its funding in the form of grants and

prescribes the terms of many of the transactions that the Council has with other

parties (e.g. housing benefits).

Details of transactions with government departments are set out in note 36.

Other Bodies - transactions with other bodies levying demands on the Council Tax -

Levying bodies in 2011/12 were as follows:

2010/11 2011/12

£'000 £'000

373 Upper Witham Drainage Board 380

113 Witham 1st Drainage Board 114

219 Witham 3rd Drainage Board 219

705 Total 713

Assisted Organisations - the Council made material financial assistance to the

following organisations during the year:-

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2010/11 2011/12

£'000 £'000

303 Lincoln Arts Trust 271

46 Lincoln Dial-a-Ride 47

48 Citizens Advice Bureau 49

Joint Ventures – The Council holds 5.6% (£14,000) of the ordinary share capital of

£250,000 of Investors in Lincoln Ltd. (IIL)

The principal activity of the company is the promotion of economic regeneration

and the development and expansion of industry, commerce and enterprise of all

forms for the benefit of the community in and around the City of Lincoln. Investors in

Lincoln Ltd grants the Council the sole and exclusive right to licence and manage its

managed workspace development at Greetwell Place.

The company's accounting year-end is 31st March and the latest (audited)

accounts are for the year ended 31st March 2011, showing net assets of £3,435,823

and a profit of £228,770 before taxation, £177,302 after tax (£243,214 before tax and

£188,697 after tax in 2009/10).

The Council is fully responsible for meeting the first £100,000 of any cumulative deficit

on operating the managed workspace units. In the event that the cumulative

deficiency exceeds £100,000 the Council shall meet 75% of the deficiency. In

2011/12 a deficit on the managed workspace units of £1,208 was attributable to the

Council.

Details of amounts received from IIL during 2011/12 are shown below:

2010/11 2011/12

£'000 £'000

179 Property Management costs 180

90 Facility Fee 90

0 Management Fee (1)

An amount of £13,584 was owed to IIL at 31st March 2012 in respect of property

management costs, facility fees and management fees. This is included in the

creditors balance in the Council’s Balance Sheet.

The accounts of the company may be obtained from The Company Secretary, 5

Beck Hall, Welton, LN2 3LJ.

Joint Ventures - The Council has a collaborative arrangement with North Kesteven

and West Lindsey District Councils to provide the Central Lincolnshire Joint Planning

Unit. This arrangement is hosted by North Kesteven District Council. The Council also

has a collaborative arrangement with North Kesteven to provide a shared Revenues

and Benefits Service. This shared service is hosted by the City of Lincoln Council.

Both of these arrangements are governed through a Joint Committee

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2 0 1 1 / 1 2

representing each of the partner authorities. These arrangements are considered as

Jointly Controlled Operations, where ventures use their own resources to undertake

an activity subject to joint control, and as such do not require consolidation into the

Council’s accounts. The Council’s proportion of activity is accounted for separately

within the Core Financial Statements.

Note 38 – Capital Expenditure and Capital Financing

The total amount of capital expenditure incurred in the year is shown in the table

below (including the value of assets acquired under finance leases), together with

the resources that have been used to finance it. Where capital expenditure is to be

financed in future years by charges to revenue as assets are used by the Council,

the expenditure results in an increase in the Capital Financing Requirement (CFR).

The Capital Financing Requirement (CFR) is a measure of the capital expenditure

incurred historically that has yet to be financed. The CFR is analysed in the second

part of this note.

Total Capital expenditure and financing during the year:

2010/11 2011/12

£’000 £’000

Capital investment

13,500 Property, Plant and Equipment 8,389

72 Investment Properties 0

97 Intangible Assets 289

3,165 Revenue Expenditure Funded from Capital under Statute** 27,271

16,834 35,949

Sources of finance

(3,861) Capital Receipts (1,759)

(4,076) Government grants and other contributions (2,337)

(2,134) Revenue Contributions (1,672)

(4,983) Major Repairs Reserve (5,053)

1,780 Capital Financing Requirement 25,128

Capital Financing Requirement - Funded by:

1,020 Supported Borrowing 0

760 Unsupported Borrowing 25,128

1,780 25,128

Analysis of movements in the Capital Financing Requirement

in Year:

56,882 Opening CFR 57,554

1,020 Supported borrowing 0

760 Unsupported borrowing 25,128

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2010/11 2011/12

£’000 £’000

65 Adjustments in respect of embedded leases reflected within

non-current assets 0

(1,173) Minimum Revenue Provision/Voluntary Revenue Provision (1,192)

57,554 Closing CFR 81,490

**Revenue Expenditure Funded from Capital under Statute includes the HRA self financing settlement

payment of £24.931m.

The Council has a five-year Housing Investment programme, of which £5.242m is

contractually committed. This is for a period of investment of two years and relates

to a partnership arrangement to ensure that all our properties continue to meet

Decent Homes Standard.

In addition, the Council also has a five-year General Fund Investment Programme,

of which £1.033m is contractually committed.

£ 000

Lucy Tower Street Car Park Works 523

Lucy Tower Lift Works 56

Mercury Abatement 454

Total 1,033

Note 39 – Leases Council as Lessee Finance Leases

The Council has acquired two car parks and the Bus Station and fleet vehicles under

finance leases. The assets acquired under these leases are carried as Property, Plant

and Equipment in the Balance Sheet at the following amounts:

31/03/11 31/03/12

£000 £000

4,593 Other Land and Buildings 4,565

1,553 Vehicles, Plant and Equipment 991

6,146 5,556

The Council is committed to making minimum payments under these leases

comprising settlement of the long term liability for the interest in the property

acquired and finance costs that will be payable by the Council in future years while

the liability remains outstanding. The minimum lease payments are made up of the

following amounts:

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2 0 1 1 / 1 2

31/03/11 31/03/12

£000 £000

Finance lease liabilities (net present value of

minimum lease payments)

536 current 535

1,342 non-current 807

614 Finance costs payable in future years 457

2,492 Minimum lease payments 1,799

Minimum Lease Payments Finance Lease Liabilities

31/03/11 31/03/12 31/03/11 31/03/12

£000 £000 £000 £000

Not later than one year 693 650 536 535

Later than one year and not later

than five years

1,257 661 994 482

Later than five years 542 488 348 325

2,492 1,799 1,878 1,342

Operating leases

The Council has acquired the use of a number of assets, such as vehicles and

buildings, under operating leases.

The future minimum lease payments due under non-cancellable leases in future

years are:

31/03/11 31/03/12

£000 £000

125 Not later than one year 141

484

Later than one year and not later than

five years 526

190 Later than five years 83

799 750

The expenditure charged to the Comprehensive Income and Expenditure

Statement during the year in relation to these leases was:

2010/11

2011/12

£000 £000

5 Vehicles Plant & Equipment 21

146 Land and Buildings 121

151 Minimum lease payments 142

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Council as Lessor

Finance Leases

The Council has granted a long-term lease to Lincolnshire County Council for the use

of The Collection (City and County Museum) accounted for as a finance lease.

Rental is at a peppercorn, meaning no rentals are receivable. There was no net

investment in this asset in 2011/12.

Operating Leases

The Council leases out property under operating leases for the following purposes:

for the provision of community services, such as sports facilities and

community centres

for economic development purposes to provide suitable affordable

accommodation for local businesses

for income generation purposes (investment properties)

The future minimum lease payments receivable under non-cancellable leases in

future years are:

2010/11 2011/12

£000 £000

502 Not later than one year 574

1,510 Later than one year and not later than

five years 1,629

3,354 Later than five years 3,478

5,366 5,681

The minimum lease payments do not include rents that are contingent on events

taking place after the lease was entered in to, such as rent reviews. In 2011/12,

£0.247m contingent rents were received by the Council (2010/11 £0.217m).

Note 40 – Impairment Losses

During 2011/12, the Council has reversed an impairment loss on Lucy Tower Street

Car Park of £0.368m, which is equal to the value of corrective works undertaken in

year. This reduces the impairment of £0.900m recognised in 2010/11 so that the

balance carried forward at 31 March 2012 is £0.532m.

An impairment on Thornbridge car park of £0.500m recognised in 2010/11 has been

carried forward at 31 March 2012.

The car parks are in urgent need of extensive restoration works to maintain full

capacity usage and hence income generating potential. The values of the car

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parks have been revised to reflect this impairment of their service potential and the

impairments have been charged to the Revaluation Reserve, reducing the balance

of previous accumulated gains in respect of these assets. The value of the

impairment was determined by consideration of the value of the capital works

required to restore full service potential. Note 41 – Capitalisation of Borrowing Costs

As permitted by the code, the Council has adopted a policy of accounting for

borrowing costs in the Comprehensive Income and Expenditure Statement as they

arise. No borrowing costs are capitalised. Note 42 – Termination Benefits

The Council terminated the contracts of a number of employees in 2011/12,

incurring liabilities of £0.677m (£0.253m in 2010/11) – see note 34 for the number of

exit packages and total cost per band. These costs exclude any ill health retirements

or departures as they are not termination benefits in accordance with the

requirements of the code. Note 43 – Defined Benefit Pension Scheme Participation in Pension Schemes

As part of the terms and conditions of employment of its officers and other

employees, the Council offers retirement benefits. Although these benefits will not

actually be payable until employees retire, the Council has a commitment to make

the payments that need to be disclosed.

The Council participates in the Local Government Pension Scheme, administered by

Lincolnshire County Council. This is a funded scheme, meaning that the Council and

employees pay contributions into a fund, calculated at a level intended to balance

the pensions liability with investment assets.

Transactions Relating to Retirement Benefits

The Council recognises the cost of retirement benefits in the Net Cost of Services

when they are earned by employees, rather than when the benefits are eventually

paid as pensions. However, the charge that is required to go against Council Tax is

based on the cash payable in the year, so the real cost of retirement benefits is

reversed out in the Movement in Reserves Statement. The following transactions

have been made in the Comprehensive Income & Expenditure Statement and the

General Fund Balance via the Movement in Reserves Statement during the year:

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31/03/11

31/03/12

£’000 £’000

Comprehensive Income & Expenditure Statement

Net Cost of Services:

2,757 Current Service Cost 2,417

(14,331) Past Service Costs* 143

43 Curtailment and Settlements (NDC) 51

0 Decrease in irrecoverable surplus 0

Net Operating Expenditure:

(6,137) Expected Return on Employer Assets (6,225)

8,503 Interest on Pension Scheme Liabilities 7,103

(9,165) Net Charge to the Comprehensive Income & Expenditure

Statement

3,489

Movement in Reserves Statement

(9,165) Reversal of net charges made for retirement benefits in

accordance with IAS 19

3,489

3,252 Actual amount charged against the General Fund Balance

for pensions in year

3,429

* The past service cost in 2010/11 included £14.331m, in respect of changes to pension increases introduced in the

Chancellor’s budget statement (future pension increases are linked to CPI and not RPI). The effect is shown as a

negative past service cost in the Comprehensive Income & Expenditure Statement.

In addition to the entries recognised in Cost of Services in the Comprehensive

Income and Expenditure Statement, the Statement also includes an actuarial loss of

£10.834m on Other Comprehensive Income & Expenditure.

Assets and Liabilities in Relation to Retirement Benefits

Reconciliation of present value of scheme liabilities:

2010/11 2011/12

£'000 £'000

(166,460) 1 April (128,462)

(2,757) Current Service Cost (2,417)

(8,503) Interest Cost (7,103)

(852) Contributions by Members (821)

30,786 Actuarial Losses/Gains (5,867)

14,331 Past Service Costs/Gains (143)

(43) Losses/Gains on Curtailments (51)

223 Estimated Unfunded Benefits Paid 233

0 Liabilities Assumed in a Business Combination (2,148)

4,813 Estimated Benefits Paid

5,267

(128,462) 31 March (141,512)

Reconciliation of fair value of the scheme assets:

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2010/11 2011/12

£'000 £'000

88,183 1 April 89,135

6,137 Expected rate of return 6,225

852 Contributions by scheme participants 821

3,031 Employer contributions 3,199

223 Contributions in respect of Unfunded Benefits 233

(4,255) Actuarial Gains/Losses (4,881)

0 Asserts Acquired on a Business Combination 2,059

(223) Unfunded Benefits Paid (233)

(4,813) Benefits paid

(5,267)

89,135 31 March 91,291

The expected return on scheme assets is determined by considering the expected

returns available on the assets underlying the current investment policy. Expected

yields on fixed interest investments are based on gross redemption yields as at the

Balance Sheet date. Expected returns on equity investments reflect long-term real

rates of return experienced in the respective markets. Scheme History

2011/12 2010/11 2009/10 2008/09 2007/08

£'000 £'000 £'000 £'000 £'000

Fair value of employer

assets

91,291 89,135 88,183 68,554 85,298

Present value liabilities (141,512) (128,461) (166,460) (104,293) (107,602)

Surplus/(Deficit) (50,221) (39,326) (78,277) (35,739) (22,304)

The total liability of £50.221m has a substantial impact on the net worth of the

Council as recorded in the Balance Sheet, resulting in an overall balance of

£149.523m. However, statutory arrangements for funding the deficit mean that the

financial position of the Council remains healthy. The deficit on the scheme will be

made good by increased contributions over the remaining working life of

employees, as assessed by the scheme’s actuary.

The total contributions expected to be made to the Local Government Pension

Scheme by the Council in the year to 31 March 2013 is £2.859m Basis for estimating assets and liabilities

Liabilities have been assessed on an actuarial basis using the projected unit method,

an estimate of the pensions that will be payable in future years dependent on

assumptions about mortality rates, salary levels etc. The liabilities have been

assessed by Hymans Robertson, an independent firm of actuaries.

The principal assumptions used by the actuary have been:

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2010/11 2011/12

Long-term expected rate of return on assets in the scheme:

7.5% Equity Investments 6.2%

4.9% Bonds 4.4%

5.5% Property 4.4%

4.6% Cash 3.5%

Mortality Assumptions:

Longevity at 65 for current pensioners:

21.2 yrs Men 21.2 yrs

23.4 yrs Women 23.4 yrs

Longevity at 65 for future pensioners:

23.7 yrs Men 23.7 yrs

25.7 yrs Women 25.7 yrs

2.8% Rate of inflation (CPI) 2.5%

5.1% Rate of increase in salaries 4.8%

2.8% Rate of increase in pensions 2.5%

5.5% Rate of discounting scheme liabilities 4.8%

Take-up of option to convert annual pension into retirement

lump sum:

25.0% Membership prior to 1 April 25.0%

63.0% Membership post 1 April 63.0%

The pension scheme’s assets consist of the following categories, by proportion of the

total assets held:

2010/11 2011/12

76% Equities 74%

12% Bonds 13%

11% Property 12%

1% Cash 1%

History of experience gains and losses

The actuarial gains identified as movements on the Pension Reserve can be

analysed into the following categories, measured as a percentage of assets or

liabilities:

2011/12 2010/11 2009/10 2008/09 2007/08

% % % % %

Differences between the

expected and actual

return on assets

(5.35) (4.77) 17.79 (32.52) (19.89)

Experience gains and

losses on liabilities

1.37 (8.96) 0.08 0.01 (2.49)

Further information can be found in the County Council’s Superannuation Fund

Annual Report which is available on request from the County Treasurer’s

Department, County Offices, Newland, Lincoln LN1 1YG.

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Note 44 – Contingent Liabilities

A contingent liability is a possible liability arising from past events whose existence

will be confirmed only by the occurrence of one or more uncertain future events not

wholly within the Council’s control. Where a material loss can be estimated with

reasonable accuracy a provision is accrued within the financial statements. If,

however a loss cannot be accurately estimated or the event is not considered

sufficiently certain, a contingent liability will be disclosed in a note to the Balance

Sheet.

There are no contingent liabilities at 31st March 2012. Note 45 – Contingent Assets

The Council has no Contingent Assets as at 31st March 2012. Note 46 – Nature and Extent of Risks Arising from Financial Instruments

The Council’s activities expose it to a variety of financial risks. The key risks are:

Credit risk – the possibility that other parties might fail to pay amounts due to

the Council.

Liquidity risk – the possibility that the Council might not have funds available

to meet its commitments to make payments.

Re-financing risk – the possibility that the Council might be requiring to renew

a financial instrument on maturity at disadvantageous interest rates or terms.

Market risk - the possibility that financial loss might arise for the Council as a

result of changes in such measures as interest rates movements.

Overall Procedures for Managing Risk

The Council’s overall risk management procedures focus on the unpredictability of

financial markets, and implementing restrictions to minimise these risks. The

procedures for risk management are set out through a legal framework set out in the

Local Government Act 2003 and the associated regulations. These require the

Council to comply with the CIPFA Prudential Code, the CIPFA Treasury Management

in the Public Services Code of Practice and Investment Guidance issued through

the Act. Overall these procedures require the Council to manage risk in the

following ways:

by formally adopting the requirements of the Code of Practice;

by the adoption of a Treasury Management Policy Statement and treasury

management clauses within its standing orders;

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by approving, annually in advance, prudential indicators for the following

three years limiting:

o The Council’s overall borrowing;

o Its maximum and minimum exposures to fixed and variable rates;

o Its maximum and minimum limits on the maturity structure of its debt;

o Its maximum annual exposures to investments maturing beyond a year.

by approving an investment strategy for the forthcoming year setting out its

criteria for both investing and selecting investment counterparties in

compliance with the Government Guidance;

These are required to be reported and approved at or before the Council’s annual

Council Tax setting budget. These items are reported with the annual Treasury

Management Strategy, which outlines the detailed approach to managing risk in

relation to the Council’s financial instrument exposure. Actual performance is also

reported semi-annually to Members.

The annual Treasury Management Strategy which incorporates the prudential

indicators was approved by Council on 1st March 2011 and the prudential indicators

were revised on 6th March 2012 and is available on the Council’s website

(www.lincoln.gov.uk). The key issues within the strategy were:

The Authorised Limit for 2011/12 was set at £60.7m. This is the maximum limit of

external borrowings or other long term liabilities during the year. This was

revised during 2011/12 to £85.0m to include borrowing in respect of the HRA

self financing settlement payment.

The Operational Boundary was expected to be £58.5m. This is the expected

level of debt and other long term liabilities during the year. This was revised in

year to £83.6m to allow for the HRA borrowing in respect of the self financing

payment.

The maximum amounts of fixed and variable interest rate exposure were set

at £51.7m and £22.4m based on the Council’s net debt.

The maximum and minimum exposures to the maturity structure of debt are

shown within this note.

These policies are implemented by the Treasury team in Financial Services. The

Council maintains written principles for overall risk management, as well as written

policies covering specific areas, such as interest rate risk, credit risk, and the

investment of surplus cash through Treasury Management Practices (TMPs). These

TMPs are a requirement of the Code of Practice and are reviewed regularly.

http://www.lincoln.gov.uk/

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Credit risk

Credit risk arises from deposits with banks and financial institutions, as well as credit

exposures to the Council’s customers. This risk is minimised through the Annual

Investment Strategy, which requires that deposits are not made with financial

institutions unless they meet identified minimum credit criteria, in accordance with

the Fitch, Moody’s and Standard & Poors Ratings Services. The Annual Investment

Strategy also imposes maximum amounts and time limits in respect of each

financial institution. Deposits are not made with banks and financial institutions

unless they meet the minimum requirements of the investment criteria outlined

above. Details of the Investment Strategy can be found on the Council’s website

(www.lincoln.gov.uk). The key areas are that the minimum criteria for investment

counterparties in 2011/12 included:

Credit ratings of Short Term of F1, Long Term AA-, Support 2 and Individual B

(Fitch or equivalent rating), with the lowest available rating being applied to

the criteria.

Part Government owned UK banks.

The full Investment Strategy for 2011/12 was approved by full Council on 1st March

2011 and is available on the Council’s website.

The following analysis summarises the Council’s potential maximum exposure to

credit risk, based on experience of default assessed by Fitch credit rating agency

(based on details of global corporate finance average cumulative default rates

(including financial organisations) for the period 1990-2009 on investments out to 5

years) and the Council’s experience of its customer collection levels over the last

five financial years, adjusted to reflect current market conditions:

Amount at

31/03/12

Historical

experience of

default**

Adjustment for

market

conditions at

31/03/12

Estimated

maximum

exposure to

default

£’000 % % £’000

a b c (a * c)

Deposits with banks and financial

institutions

AAA* rated counterparties

(investments up to 1 year) 14,645 0.00 0.00 0

AA* rated counterparties

(investments up to 1 year) 0 0.003 0.03 2

A* rated counterparties (investments

1-2 years) 5,000 0.009 0.08 0

BBB rated counterparties

(investments up to one year) 1,000 0.09 0.24 1

Other Investments 449 9.87 9.87 44

Debtors 8,723 7.17 7.17 625

29,817 672

http://www.lincoln.gov.uk/

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*See Glossary for a definition of AAA, AA and A ratings

No breaches of the Council’s counterparty criteria occurred during the reporting

period and the Council does not expect any losses from non-performance by any of

its counterparties in relation to deposits and bonds.

Whilst the current credit crisis in international markets has raised the overall possibility

of default, the Council maintains strict credit criteria for investment counterparties.

As a result of these high credit criteria, historical default rates have been used as a

good indicator under these current conditions.

Analysis of Investments by country of origin

Short term Long term

Principal

invested

Fixed

rate

Variable

rate

Fixed

rate

Variable

rate

£’000 £’000 £’000 £’000 £’000

UK Banks & Building Societies

Lloyds TSB Bank plc 2,000 2,000 0 0 0

Royal Bank of Scotland 1,000 1,000 0 0 0

Barclays Bank plc 1,000 1,000 0 0 0

Close Brothers 1,000 1,000 0 0 0

Nationwide Building Society 1,000 1,000 0 0 0

UK Money Market Funds

BNP Paribas MMF 4,840 0 4,840 0 0

Ignis MMF 4,805 0 4,805 0 0

Prime Rate MMF 5,000 0 5,000 0 0

20,645 6,000 14,645 0 0

The Council allows credit for its trade debtors, an age analysis of those debtors as at

31 March 2012 is as follows:

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31/03/11

£’000

31/03/12

£’000

290 Less than one month 490

136 One to three months 186

68 Three to six months 115

111 Six months to one year 127

881 More than one year 905

1,486 Total 1,823

Collateral – During the reporting period the Council held no collateral as security.

Liquidity risk

The Council manages its liquidity position through the risk management procedures

above (the setting and approval of prudential indicators and the approval of the

Treasury Management and Investment Strategy reports), as well as through a

comprehensive cash flow management system, as required by the Code of

Practice. This seeks to ensure that cash is available when it is needed.

The Council has ready access to borrowings from the Money Markets to cover any

day to day cash flow need, and whilst the PWLB provides access to longer term

funds, it also acts as a lender of last resort to councils (although it will not provide

funding to a council whose actions are unlawful). The Council is also required to

provide a balanced budget through the Local Government Finance Act 1992,

which ensures sufficient monies are raised to cover annual expenditure. There is

therefore no significant risk that it will be unable to raise finance to meet its

commitments under financial instruments.

Refinancing and Maturity Risk

The Council maintains a significant debt and investment portfolio. Whilst the cash

flow procedures above are considered against the refinancing risk procedures,

longer term risk to the Council relates to managing the exposure to replacing

financial instruments as they mature. This risk relates to both the maturing of longer

term financial liabilities and longer term financial assets.

The approved prudential indicator limits for the maturity structure of debt and the

limits placed on investments placed for greater than one year in duration are the

key parameters used to address this risk. The Council approved treasury and

investment strategies address the main risks and the central treasury team addresses

the operational risks within the approved parameters. This includes:

monitoring the maturity profile of financial liabilities and amending the profile

through either new borrowing or the rescheduling of the existing debt; and

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monitoring the maturity profile of investments to ensure sufficient liquidity is

available for the Council’s day to day cash flow needs, and the spread of

longer term investments provide stability of maturities and returns in relation to

the longer term cash flow needs.

The maturity analysis of financial liabilities (principal amount) is as follows:

31/03/11 31/03/12

£’000 £’000

43 Less than one year 59

10 Between one and two years 26

14 Between two and seven years 29

8,397 Between seven and 15 years 8,397

42,026 More than fifteen years 66,957

50,490 Total borrowing 75,468

The maturity analysis of financial assets (principal amount) is as follows:

All trade and other payables that are due to be paid in less than one year of

£11.907m and trade and other debtors of £8.723m are not shown in the table above.

Market risk

Interest rate risk - The Council is exposed to interest rate movements on its

borrowings and investments. Movements in interest rates have a complex impact

on the Council, depending on how variable and fixed interest rates move across

differing financial instrument periods. For instance, a rise in variable and fixed

interest rates would have the following effects:

borrowings at variable rates – the interest expense charged to the Income

and Expenditure Account will rise;

borrowings at fixed rates – the fair value of the borrowing liability will fall;

investments at variable rates – the interest income credited to the Income

and Expenditure Account will rise; and

31/03/11 31/03/12

£’000 £’000

15,297 Less than one year 20,645

0 Between one and two years 0

0 Between two and three years 0

449 More than three years 449

15,746 Total Investments 21,094

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investments at fixed rates – the fair value of the assets will fall.

Borrowings are not carried at fair value on the Balance Sheet, so nominal gains and

losses on fixed rate borrowings would not impact on the Comprehensive Income

and Expenditure Statement. However, changes in interest payable and receivable

on variable rate borrowings and investments will be posted to the Comprehensive

Income and Expenditure Statement and affect the General Fund Balance, subject

to influences from Government grants. Movements in the fair value of fixed rate

investments will be reflected in other Comprehensive Income and Expenditure,

unless the investments have been designated as Fair Value through the Income and

Expenditure Account, in which case gains and losses will be posted to the

Surplus/Deficit on Provision of Services.

The Council has a number of strategies for managing interest rate risk. The Annual

Treasury Management Strategy draws together the Council’s prudential indicators

and its expected treasury operations, including an expectation of interest rate

movements. From this Strategy a prudential indicator is set which provides

maximum and minimum limits for fixed and variable interest rate exposure. The

central treasury team will monitor market and forecast interest rates within the year

to adjust exposures appropriately. For instance, during periods of falling interest

rates, and where economic circumstances make it favourable, fixed rate

investments may be taken for longer periods to secure better long term returns,

similarly the drawing of longer term fixed rate borrowing would be postponed.

If all interest rates had been 1% higher with all other variables held constant the

financial effect would be:

2010/11 2011/12

£’000 £’000

0 Increase in interest payable on variable rate borrowings 0

(157) Increase in interest receivable on variable rate

investments

(225)

(157) Impact on Income and Expenditure Account (225)

(22) Share of overall impact credited to the HRA (59)

(135) Share of overall impact credited to the General Fund (166)

(157) Total (225)

The approximate impact of a 1% fall in interest rates would be as above but with the

movements being reversed. These assumptions are based on the same

methodology as used for Fair Value of Assets and Liabilities carried at Amortised

Cost.

Price risk - The Council does not generally invest in equity shares but does

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have shareholdings to the value of £0.449m in a number of joint ventures and in

local industry. Whilst these holdings are generally illiquid, the Council is exposed to

losses arising from movements in the prices of the shares.

As the shareholdings have arisen in the acquisition of specific interests, the Council is

not in a position to limit its exposure to price movements by diversifying its portfolio.

The majority of the shareholdings are in the Dunham Bridge Company (£0.430m) and

Investors in Lincoln (£0.014m). A representative of the Council sits on the Investors in

Lincoln Board, enabling the Council to monitor factors that might cause a fall in the

value of specific shareholdings.

The shares are all classified as Available-for-Sale, meaning that all movements in

price will impact on gains and losses recognised in Other Comprehensive Income

and Expenditure.

Foreign exchange risk - The Council has no financial assets or liabilities denominated

in foreign currencies. It therefore has no exposure to loss arising from movements in

exchange rates.

Note 47 – Heritage Assets: Summary of Transactions

Transitional information on heritage assets is presented from 1 April 2010 onwards.

Previous accounting rules do not require this disclosure and information on these

transitions is not available for periods earlier than April 2010.

There have been no additions or disposals of heritage assets since 1 April 2010.

All Heritage assets recognised in the Balance Sheet at 1 April 2010 had been held by

the Council for in excess of five years. Note 48 – Heritage Assets: Change in Accounting Policy Required by the Code of Practice for Local Authority Accounting in the United Kingdom

The code introduced a change to the treatment in accounting for heritage assets

held by the Council. As set out in the Council’s accounting policies, the Council

now requires heritage assets to be carried in the Balance Sheet at valuation.

For 2011/12 the Council is required to change its accounting policy for heritage

assets and recognise them at valuation. Previously, heritage assets were recognised

as community assets (at cost) in the property, plant and equipment classification in

the Balance Sheet or were not recognised in the Balance Sheet as it was not

possible to obtain cost information on the assets. Community Assets (that are now to

be classed as heritage assets) that were donated to the Council were held at

valuation as a proxy for historical cost. The Council’s accounting policies for

recognition and measurement of heritage assets are set out in the Council’s

Accounting Policies in note 1.

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The Council will recognise an additional £4.667m for the value of heritage assets that

were not previously recognised in the Balance Sheet. Of this, £4.652m has been

recognised in the Revaluation Reserve. The remaining £0.015m relates to the fair

value of the donated asset at acquisition and has been recognised in the Capital

Adjustment Account. The 1 April 2010 and 31 March 2011 Balance Sheets and the

2010/11 comparative figures have been restated in the 2011/12 Statement of

Accounts to apply the new policy.

The effects of the restatements are as follows:

At 1 April 2010 the carrying amount of heritage assets is presented as its

valuation of £4.667m. None of these assets had been previously recognised

in property, plant and equipment. The Revaluation Reserve has been

increased by £4.652m and £0.015m has been credited to the Capital

Adjustment Account

The fully restated 1 April 2010 Balance Sheet is provided on page 21. The

adjustments that have been made to the Balance Sheet over the previously

published version in the 2010/11 Statement of Accounts are as follows:

Effect on Opening Balance Sheet 1

April 2010

Opening

balances as

at 1/04/10

Restatement

Restatement

required to

opening

balances as

at 1 April

2010

£000 £000 £000

Property ,Plant & Equipment 306,427 0 306,427

Heritage Assets 0 4,667 4,667

Long –term assets 337,920 4,667 342,587

Total Net Assets 221,462 4,667 226,129

Unusable Reserves (200,787) (4,667) (205,454)

Total Reserves (221,462) (4,667) (226,129)

The restatement of the relevant lines in the Movement in Reserves Statement

as at 31 March 2011, as a result of the application of this new accounting

policy is presented below:

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As

previously

stated

31/03/11

As Restated

31 March

2011

Restatement

2011

£000 £000 £000

Balance as at end of the previous

reporting period – 31 March 2010

200,787 4,667 205,454

Surplus or Deficit on Provision of

Services

Other Comprehensive Income and

Expenditure

25,172 0 25,172

Adjustments between the

accounting basis and the funding

basis under regulations

(69,586) 0 (69,586)

Other adjustments 9 0 9

Increase/(decrease) in the year (44,405) 0 (44,405)

Balance at the end of the current

reporting period 31 March 2011 156,382 4,667 161,049

The fully restated 31 March 2011 Balance Sheet is provided on page 21. The

adjustments that have been made to the Balance Sheet over the previously

published version in the 2010/11 Statement of Accounts are as follows:

Effect on Balance Sheet at 31 March

2011

Balance

Sheet at

31/03/11 Restatement

Restatement

required to

Balance

Sheet at 31

March 2011

£000 £000 £000

Property ,Plant & Equipment 223,698 0 223,698

Heritage Assets 0 4,667 4,667

Long –term assets 254,095 4,667 258,762

Total Net Assets 175,193 4,667 179,860

Unusable Reserves 156,382 4,667 161,049

Total Reserves 175,193 4,667 179,860

The effect of the change in accounting policy in 2011/12 has been that heritage

assets are recognised at £4.667m in the Balance Sheet resulting in a increase to the

Revaluation Reserve of £4.652m.

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H R A I N C O M E A N D E X P E N D I T U R E S T A T E M E N T F O R T H E Y E A R E N D I N G 3 1 M A R C H 2 0 1 2

Restated

2010/11

Notes 2011/12 2011/12

£’000 £’000 £’000

Expenditure

*(6,967) Repairs and Maintenance 3 (7,349)

*(7,876) Supervision and Management (5,115)

2,866 Supervision and Management – exceptional item,

negative pension past service cost

0

(20) Rents, rate, taxes and other charges (45)

(1,058) Negative HRA Subsidy payable 6 (2,199)

(366) Negative HRA subsidy transferable to the General

Fund

(446)

(11,772) Depreciation and impairment of non-current

assets

(5,755)

(79,476) Exceptional item, decrease in Social Housing

discount factor applied to asset valuations

0

(64) Debt management costs (72)

(105) Movement in the allowance for bad debts (197)

0 Self Financing settlement payment to the

Secretary of State

(24,931)

(104,838) Total Expenditure (46,109)

Income

22,961 Dwelling rents 7 24,289

461 Non-dwelling rents 477

477 Charges for services and facilities 783

23,899 Total Income 25,549

(80,939) Net Cost of HRA Services as included in the

Comprehensive Income and Expenditure

Statement

(20,560)

0 HRA Services’ share of Corporate and

Democratic Core

0

2,866 HRA share of other amounts included in the

whole authority Net Cost of Services but not

allocated to specific services

0

(115) Transfer from CMS (82)

(78,188) Net Cost for HRA Services (20,642)

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H R A I N C O M E A N D E X P E N D I T U R E S T A T E M E N T F O R T H E Y E A R E N D I N G 3 1 M A R C H 2 0 1 2

HRA share of the operating income and

expenditure included in the Comprehensive

Income and Expenditure Statement

321 Gain or loss on the sale of HRA assets 253

(1,442) Interest payable and similar charges (1,448)

38 Interest and investment income 71

(841) Pensions interest cost and expected return on

pensions assets

8 (304)

307 Capital grants and contributions receivable 209

(79,805) Surplus or (deficit) for the year on HRA services (21,861)

* 2010/11 comparator figures have been restated to reflect re-analysis within expenditure categories

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M O V E M E N T O N T H E H O U S I N G R E V E N U E A C C O U N T S T A T E M E N T

2011/12 2011/12

£'000 £'000

1,000 Balance on the HRA at the end of the previous year 1,183

(79,805) Surplus or (deficit) for year on the HRA Income and Expenditure

Statement

(21,861)

81,587 Adjustments between accounting basis and funding basis under

statute

23,509

1,782 Net increase or (decrease) before transfers to or from reserves 1,648

(1,599) Transfers (to) or from reserves (1,559)

183 Increase or (decrease) in year on the HRA 89

1,183 Balance on the HRA at the end of the current year 1,272

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N O T E S T O T H E H O U S I N G R E V E N U E A C C O U N T

Note 1 – Fixed Assets

The number of dwellings in the Council’s housing stock, as at 31 March 2012, totalled

7,924 properties. The type of properties and the period in which they were built, were

as follows:

<1945 1945-64 1965-74 >1974 TOTAL

Property Type No. No. No. No. No.

Low Rise Flats

(Blocks up to 2 Storeys)

1 Bed 44 663 379 361 1,447

2 Bed 6 98 35 43 182

3 Bed 0 - 13 1 14

Sub-Total 50 761 427 405 1,643

Medium Rise Flats

(Blocks of 3 up to 5 Storeys)

1 Bed 2 298 464 383 1,147

2 Bed - 252 165 194 611

3 Bed - 15 4 2 21

Sub-Total 2 565 633 579 1,779

High Rise Flats

(Blocks of 6 Storeys or more)

1 Bed - 58 138 0 196

2 Bed - 30 74 0 104

Sub-Total 0 88 212 0 300

Houses / Bungalows

1 Bed 159 146 32 9 346

2 Bed 766 838 107 237 1,948

3 Bed 871 605 79 225 1,780

4 or more Beds 101 22 0 5 128

Sub-Total 1,897 1,611 218 476 4,202

Total Dwellings 31 March 2012 1,949 3,025 1,490 1,460 7,924

The Council’s in-house Valuation Officers, and the District Valuer, have undertaken

the valuations of HRA dwellings, land, and other property in accordance with Royal

Institute of Chartered Surveyor guidelines.

The balance sheet value of council dwellings is calculated by applying a Social

Housing discount factor (currently 34%) to the open market or vacant possession

value as determined by the District Valuer, as shown below:

£ 000

Vacant possession value of council dwellings at 31 March 2012 494,779

Balance sheet valuation applying the Social Housing discount factor (34%) 168,225

The movement in fixed assets during the year was as follows:

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HRA Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Assets under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Properties

Non current assets

held for sale

Intangible

assets TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2011 163,771 12,046 1,043 135 0 176,995 301 0 149 177,445

Additions 6,518 29 0 0 93 6,640 0 0 27 6,667

Donations 0 0 0 0 0 0 0 0 0 0

Revaluation


recognised in the

Revaluation Reserve

2,666 (130) 0 0 2,536 0 0 0 2,536

Revaluation


recognised in the



(4,572) 0 0 0 (4,572) 0 0 0 (4,572)

Derecognition - disposals (158) 0 0 0 (158) 0 0 0 (158)

Other movements in cost

or valuation 0 (29) 0 0 29 0 0 0 0 0

At 31 March 2012 168,225 11,916 1,043 135 122 181,441 301 0 176 181,918


At 1 April 2011 (533) (301) (431) 0 (1,265) 0 0 (27) (1,292)

Depreciation for year (4,160) (163) (179) 0 (4,502) 0 0 (41) (4,543)

Depreciation written out to

the Revaluation Reserve 1,479 6 0 0 1,485 0 0 0 1,485

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HRA Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Assets under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Properties

Non current assets

held for sale

Intangible

assets TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000


the Surplus/Deficit on the


2,677 0 0 0 2,677 0 0 0 2,677

Impairment

losses/(reversals)

recognised in the



533 0 0 0 533 0 0 0 533

De-recognition - disposals 4 0 0 0 4 0 0 0 4

At 31 March 2012 0 (458) (610) 0 0 (1,068) 0 0 (68) (1,136)

Net book value of assets at

31.03.12 168,225 11,458 433 135 122 180,373 301 0 108 180,782


31.03.11 163,238 11,745 612 135 0 175,730 301 0 122 176,153

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Comparative movements in 2010/11

HRA Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Properties

Non current assets

held for sale

Intangible

assets TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2010 246,392 11,975 983 135 0 259,485 289 0 84 259,858

Additions 10,231 23 4 0 0 10,258 0 0 65 10,323

Revaluation


recognised in the

Revaluation Reserve

(799) 87 0 0 0 (712) 0 0 0 (712)

Revaluation


recognised in the



(91,741) (39) 0 0 0 (91,780) 12 0 0 (91,768)

Derecognition - disposals (311) 0 0 0 0 (311) 0 0 0 (311)

Other movements in cost

or valuation 0 0 55 0 0 55 0 0 0 55

At 31 March 2011 163,772 12,046 1,042 135 0 176,995 301 0 149 177,445


At 1 April 2010 (1,258) (206) (239) 0 0 (1,703) 0 0 (8) (1,711)

Depreciation for year (3,361) (156) (192) 0 0 (3,709) 0 0 (19) (3,728)

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Comparative movements in 2010/11

HRA Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Properties

Non current assets

held for sale

Intangible

assets TOTAL

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000


the Revaluation Reserve 0 55 0 0 0 55 0 0 0 55


the Surplus/Deficit on the


3,354 7 0 0 0 3,361 0 0 0 3,361

Impairment

losses/(reversals)

recognised in the



724 0 0 0 0 724 0 0 0 724

De-recognition - disposals 7 0 0 0 0 7 0 0 0 7

At 31 March 2011 (534) (300) (431) 0 0 (1,265) 0 0 (27) (1,292)


31.03.11 163,238 11,745 611 135 0 175,730 301 0 122 176,153


31.03.10 245,134 11,769 744 135 0 257,782 289 0 76 258,147

The tables above have been adjusted in line with the Balance Sheet restatements at 1 April 2010 and 31 March 2011 to reflect the prior period adjustment correcting the classification of

assets on transition to IFRS.

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Note 2 – Major Repairs Reserve

The Major Repairs Reserve details the Major Repairs Allowance (MRA) received by

the Council. The MRA is based on national average unit costs for each of the

property types and represents the estimated long-term average amount of capital

spending required to maintain a local authority’s stock in its current condition. The

MRA received in the year totalled £5,052,781 all of which was used to finance

capital spend in the Housing Investment Programme in 2011/12.

2010/11 2011/12

£’000 £’000

0 Balance on 1 April 0

Amount transferred from the HRA

- Depreciation

(3,994) Dwellings (4,160)

(366) Other Assets (383)

(623) - Appropriations from HRA (510)

(4,983) (5,053)

4,983 - HRA Capital Expenditure 5,053

0 - Appropriations to HRA 0

4,983 5,053

0 Balance on 31 March 0

Note 3 – Housing Repairs Account

The Housing Repairs Account was set up on 1 April 2001 in order to assist with the

longer term planning of repairs and maintenance expenditure. The following

analysis details the movement on the Housing Repairs Account during the year.

2010/11 2011/12

£’000 £’000

(17) Balance on 1 April (750) Expenditure in year

3,622 Tenant Notified Repairs 3,597

1,276 Void Repairs 1,495

1,476 Servicing Contracts 1,552

93 Painting Programme 295

178 Asbestos Removal/Surveys 41

278 Aids & adaptations 323

20 Decoration Grants 22

24 Other Expenditure 24

6,967 7,349 Income in year

(7,677) Contribution from HRA (7,427)

(18) Contribution from Insurance Reserve (74)

(2) Contribution from Leaseholders (5)

(3) Interest Received in year (7)

(7,700) (7,513)

(750) Surplus Balance on 31 March (914)

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Note 4 – Capital Expenditure in the year

The Housing Revenue Account capital expenditure and sources of funding during

the financial year are detailed in the following table:

2010/11 2011/12

£’000 £’000

Capital investment

10,263 Property, Plant and Equipment 6,640

0 Investment Properties 0

65 Intangible Assets 27

0 Revenue Expenditure funded from Capital

under Statute

24,931

10,328 31,598

Sources of funding

(1,020) Supported Borrowing (24,931)

(2,443) Capital Receipts 0

(4,983) Major Repairs Reserve (5,053)

(336) Government grants and other contributions (237)

(1,546) Revenue Contributions (1,377)

(10,328) (31,598)

0 Balance unfunded at 31 March 0

Prior to the implementation of HRA Self-financing on 1 April 2012, supported

borrowing levels have been issued annually by Central Government, authorising the

Council to borrow monies, which were funded by Central Government to cover

capital expenditure. Additionally, the Council was able to take out unsupported or

prudential borrowing, which must be financed from its own resources. Post self

financing implementation and the end of the housing subsidy system, all borrowing

will be prudential borrowing. In 2011/12 , the HRA utilised £24.931m of prudential

borrowing to fund the HRA self financing settlement payment.

Note 5 - Capital Receipts

The cash receipts from the disposal of land, houses and other property within the

HRA in the year are summarised as follows:

2010/11 2011/12

£’000 £’000

Council dwellings -

(612) - Right to Buy (245)

(6) - Discounts repaid (9)

0 - Non-Right to Buy (135)

Other Receipts -

0 - Land sales (19)

(7) - Mortgage Property 0

(625) (408)

392 Less Pooled (Paid to Central Government) 183

(233) Total (225)

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Note 6 - Housing Subsidy

The Government (CLG) bases this subsidy entitlement on a notional account

representing their assessment of what the Council should be collecting and

spending. In 2011/12, the final year of the ‘subsidy regime’, the Council continued in

a ‘negative’ Housing Subsidy position and the amount payable in respect of the

financial year amounted to £2.211m as detailed below:

2010/11 2011/12

£’000 £’000

Housing Subsidy

(13,797) Management & Maintenance (14,018)

(4,983) Major Repairs Allowance (5,053)

(2,041) Capital Charges (2,034)

n/a Self Financing Interest (9)

1 Interest on Receipts 0

21,898 Guideline Rent Income 23,325

1,078 Total in-year HRA Subsidy Payable 2,211

(20) Previous year(s) Subsidy adjustments (12)

1,058 Total HRA Subsidy due to/(from) CLG 2,199

Note 7 - Rent Arrears

During the year 2011/12 total rent arrears increased by £0.127m or 9.3%, to £1.488m.

A summary of rent arrears and prepayments is shown in the following table:

2010/11 2011/12

£’000 £’000

558 Current Tenant Arrears @ 31 March 664

802 Former Tenant Arrears @ 31March 824

1,360 Total Rent Arrears 1,488

(228) Prepayments @ 31 March (264)

1,132 Net Rent Arrears 1,224

A bad debt provision of £0.197m has been made in this year’s accounts in respect of

potentially non-collectable rent arrears, as detailed above, and associated

miscellaneous debts. The value of the bad debt provision held on the Balance Sheet

at 31 March 2012 is £1.327m (£1.230m at 31 March 2011).

Note 8 - Pension Costs

In line with the full adoption of IAS 19 ‘Employee Benefits’ the Net Cost of Services

includes the cost of retirement benefits when they are earned by employees, rather

than when the benefits are eventually paid as pensions. However, the charge that

is required when determining the movement on the HRA Balance for the year is

based on the cash payable in the year, so the real cost of retirement benefits

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is reversed out of the HRA in the Movement on the Housing Revenue Account

Statement. The following transactions have been made in the HRA during the year:

2010/11

2011/12

£’000 £’000

HRA Income & Expenditure Statement

907 Current Service Cost 783

(2,866) Past Service Costs 0

(2,181) Expected Return on Employer Assets (2,152)

3,021 Interest on Pension Scheme Liabilities 2,456

(1,119) Total

1,087

(1,155) Amount to be met from HRA

(1,186)

(2,274) Movement on Pension Reserve (99)

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T H E C O LLE C T I O N F U N D S T A T E M E N T F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 1 2

This account reflects the statutory requirements for all Billing Authorities, such as the

City Council, to maintain a separate Collection Fund Account. This shows the

transactions of the Billing Authority in relation to Non-Domestic Rates and the

Council Tax, and illustrates the way in which these have been distributed to

preceptors (Lincolnshire County Council & Lincolnshire Police Authority) and the

General Fund.

2010/11

£’000

Notes

2011/12

£’000

Income

(31,557) Council Tax Income 4 (31,938)

Transfers from General Fund:

(7,739) Council Tax Benefit 4 (7,973)

(66) Pensioners Discount Contribution 4 0

(35,412) Income collectable from Business Ratepayers 5 (38,994)

(74,774) Total Income (78,905)

Expenditure

39,016 Precepts 6 39,337

Business Rates:

35,259 Payment to National Pool 5 38,842

153 Cost of Collection 152

Provision for Bad & Doubtful Debts:

353 Council Tax/Community Charge 4 303

Contributions:

124 Council Tax Surplus 1(c) & 6 204

74,905 Total Expenditure 78,838

131 Movement on Fund Balance (67)

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N O T E S T O T H E C O LLE C T I O N F U N D

Note 1 - Council Tax

The introduction of Council Tax on 1 April 1993 revised the method of accounting for

the Council’s Collection Fund. The main features of the arrangements may be

summarised as follows:

a) Revenue Support Grant and amounts for distribution from the NNDR National Pool

are paid directly to all Billing and Precepting Authorities and are disclosed in the

Collection Fund Statement.

b) Interest is no longer payable between the General Fund and the Collection Fund

on cash-flow deficits/surpluses. All interest is now payable directly to the General

Fund, as shown on the Collection Fund Statement.

c) The year-end surplus or deficit on the Collection Fund is to be distributed between

Billing and Precepting Authorities on the basis of estimates, made in January of

each year-end balance. For 2011/12, the amount outstanding in January 2012 in

respect of Council Tax when compared with the provision made by the Council

for non-payment, was above the level anticipated and therefore a surplus was

declared.

Note 2 - Council Tax Valuation Bands

Most domestic Dwellings (including flats) whether rented or owned, occupied or not,

are subject to Council Tax. Each Dwelling is allocated to one of eight bands

according to their open market capital value at 1 April 1991.

Valuation Band

Range of Values (£)

A Up to & including £40,000

B £40,001 - £52,000

C £52,001 - £68,000

D £68,001 - £88,000

E £88,001 to £120,000

F £120,001 - £160,000

G £160,001 - £320,000

H More than £320,001

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Note 3 - Council Tax Income

The amount of Council Tax payable is calculated by establishing a ‘Council Tax

Base’. This is the Council’s estimated number of chargeable dwellings expressed in

relation to those dwellings in Band D. Once this has been determined, the Council

Tax payable for each band is established as follows:

(The actual amount payable for each property is also subject to discounts where

applicable.)

Band Calculated

number of

dwell ings

Ratio to

Band D

Equated

number of

dwell ings

Council

Tax

Payable

Z 85 5/9 47 827.13

A 20,510 6/9 13,673 992.55

B 6,987 7/9 5,434 1,157.98

C 4,017 8/9 3,571 1,323.40

D 2,106 9/9 2,106 1,488.83

E 879 11/9 1,074 1,819.68

F 320 13/9 462 2,150.53

G 106 15/9 177 2,481.38

H 7 18/9 14 2,977.66

26,558

Note 4 - Council Tax Required

The amount of Council Tax required for Band D was calculated on the following

basis:

(i) Preceptor’s Council Tax Requirements £39,540,382

(ii) Number of Band D equivalent Dwellings 26,558

Band D ( i divided by ii ) £1,488.83

The Council Tax required then forms part of Collection Fund Statement as detailed in

the following table:

2010/11 2011/12

£’000 £’000

31,557 Net Amount 31,938

7,739 Benefits 7,973

66 Pensioners Discount Contribution 0

(353) Use of Provision for Doubtful Debts (303)

131 Balance carried forward (67)

39,140 Council Tax Requirement 39,541

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Note 5 – Non-Domestic Rates

Non-Domestic Rates are organised on a national basis. The Government specifies

an amount and subject to the effects of transitional arrangements, local businesses

pay rates calculated by multiplying their rateable value by that amount. In 2011/12

the amount was 43.3p (41.4p = 2010/11). The Council is responsible for collecting

rates due from the ratepayers in its area but pays the proceeds into an NNDR Pool

administered by the Government.

The Government redistributes the sums paid into the Pool back to local authorities

on the basis of a fixed amount per head of population. This is shown in the

Collection Fund Statement.

The total rateable value @ 31 March 2012 was £104,645,206 (31 March 2011 =

£102,771,442).

Note 6 - Precepts & Demands

The following amounts were paid from the fund:

2010/11

£’000

2011/12

£’000

6,243 City of Lincoln Council 6,307

28,160 Lincolnshire County Council 28,448

4,737 Lincolnshire Police Authority 4,786

39,140 Total 39,541

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INDEPENDENT AUDITORS’ REPORT TO MEMBERS OF CITY OF LINCOLN COUNCIL

Opinion on the Authority financial statements

I have audited the financial statements of City of Lincoln Council for the year ended

31 March 2012 under the Audit Commission Act 1998. The financial statements

comprise the Movement in Reserves Statement, the Comprehensive Income and

Expenditure Statement, the Balance Sheet, the Cash Flow Statement, the Housing

Revenue Account Income and Expenditure Statement, the Movement on the

Housing Revenue Account Statement and Collection Fund and the related notes.

The financial reporting framework that has been applied in their preparation is

applicable law and the CIPFA/LASAAC Code of Practice on Local Authority

Accounting in the United Kingdom 2011/12.

This report is made solely to the members of the City of Lincoln Council in

accordance with Part II of the Audit Commission Act 1998 and for no other purpose,

as set out in paragraph 48 of the Statement of Responsibilities of Auditors and

Audited Bodies published by the Audit Commission in March 2010.

Respective responsibilities of the Director of Resources and auditor

As explained more fully in the Statement of the Director of Resources Responsibilities,

the Director of Resources is responsible for the preparation of the Statement of

Accounts, which includes the financial statements, in accordance with proper

practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority

Accounting in the United Kingdom, and for being satisfied that they give a true and

fair view. My responsibility is to audit and express an opinion on the accounting

statements in accordance with applicable law and International Standards on

Auditing (UK and Ireland). Those standards require me to comply with the Auditing

Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the

financial statements sufficient to give reasonable assurance that the financial

statements are free from material misstatement, whether caused by fraud or error.

This includes an assessment of: whether the accounting policies are appropriate to

the Authority’s circumstances and have been consistently applied and adequately

disclosed; the reasonableness of significant accounting estimates made by the

Director of Resources; and the overall presentation of the financial statements. In

addition, I read all the financial and non-financial information in the explanatory

foreword and the annual report to identify material inconsistencies with the audited

financial statements. If I become aware of any apparent material misstatements or

inconsistencies I consider the implications for my report.

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Opinion on financial statements

In my opinion the financial statements:

give a true and fair view of the financial position of City of Lincoln Council as

at 31 March 2012 and of its expenditure and income for the year then ended;

and

have been prepared properly in accordance with the CIPFA/LASAAC Code

of Practice on Local Authority Accounting in the United Kingdom 2011/12.

Opinion on other matters

In my opinion, the information given in the explanatory foreword and the content of

the Annual Report for the financial year for which the financial statements are

prepared is consistent with the accounting statements.

Matters on which I report by exception

I report to you if:

in my opinion the annual governance statement does not reflect

compliance with ‘Delivering Good Governance in Local Government: a

Framework’ published by CIPFA/SOLACE in June 2007;

I issue a report in the public interest under section 8 of the Audit Commission

Act 1998;

I designate under section 11 of the Audit Commission Act 1998 any

recommendation as one that requires the Authority to consider it at a public

meeting and to decide what action to take in response; or

I exercise any other special powers of the auditor under the Audit

Commission Act 1998.

I have nothing to report in these respects Conclusion on Authority’s arrangements for securing economy, efficiency and effectiveness in the use of resources Respective responsibilities of the Authority and the auditor

The Authority is responsible for putting in place proper arrangements to secure

economy, efficiency and effectiveness in its use of resources, to ensure proper

stewardship and governance, and to review regularly the adequacy and

effectiveness of these arrangements.

I am required under Section 5 of the Audit Commission Act 1998 to satisfy myself that

the Authority has made proper arrangements for securing economy, efficiency and

effectiveness in its use of resources. The Code of Audit Practice issued by the Audit

Commission requires me to report to you my conclusion relating to proper

arrangements, having regard to relevant criteria specified by the Audit Commission.

I report if significant matters have come to my attention which prevent me

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from concluding that the Authority has put in place proper arrangements for

securing economy, efficiency and effectiveness in its use of resources. I am not

required to consider, nor have I considered, whether all aspects of the Authority’s

arrangements for securing economy, efficiency and effectiveness in its use of

resources are operating effectively.

Scope of the review of arrangements for securing economy, efficiency and effectiveness in the use of resources

I have undertaken my audit in accordance with the Code of Audit Practice, having

regard to the guidance on the specified criteria, published by the Audit Commission

in October 2011, as to whether the Authority has proper arrangements for:

securing financial resilience; and

challenging how it secures economy, efficiency and effectiveness.

The Audit Commission has determined these two criteria as those necessary for me

to consider under the Code of Audit Practice in satisfying myself whether the

Authority put in place proper arrangements for securing economy, efficiency and

effectiveness in its use of resources for the year ended 31 March 2012.

I planned my work in accordance with the Code of Audit Practice. Based on my risk

assessment, I undertook such work as I considered necessary to form a view on

whether, in all significant respects, the Authority had put in place proper

arrangements to secure economy, efficiency and effectiveness in its use of

resources. Conclusion

On the basis of my work, having regard to the guidance on the specified criteria

published by the Audit Commission in October 2011, I am satisfied that, in all

significant respects, the City of Lincoln Council put in place proper arrangements to

secure economy, efficiency and effectiveness in its use of resources for the year

ended 31 March 2012.

Certificate

I certify that I have completed the audit of the accounts of City of Lincoln Council in

accordance with the requirements of the Audit Commission Act 1998 and the Code

of Audit Practice issued by the Audit Commission. Mr Tony Crawley

District Auditor

Audit Commission, 4th Floor, Mill House, Brayford Wharf North, Lincoln, LN1 1YT

Date 30 September 2012

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GLOSSARY

AAA FITCH RATING

Highest credit quality - ‘AAA’ ratings denote the lowest expectation of credit risk.

They are assigned only in case of exceptionally strong capacity for timely payment

of financial commitments. This capacity is highly unlikely to be adversely affected by

foreseeable events.

AA FITCH RATING

Very high credit quality - ‘AA’ ratings denote a very low expectation of credit risk.

They indicate very strong capacity for timely payment of financial commitments. This

capacity is not significantly vulnerable to foreseeable events.

A FITCH RATING

High credit quality - ‘A’ ratings denote a low expectation of credit risk. The capacity

for timely payment of financial commitments is considered strong. This capacity

may, nevertheless, be more vulnerable to changes in circumstances or in economic

conditions than is the case for higher ratings.

ACCOUNTING PERIOD

The period of time covered by the accounts, normally a period of twelve months

commencing on 1 April. The end of the accounting period is the Balance Sheet

date.

ACCRUALS

Sums included in the final accounts to recognise revenue and capital income and

expenditure earned or incurred in the financial year, but for which actual payment

had not been received or made as at 31 March.

ACTUARIAL GAINS AND LOSSES

For a defined benefit pension scheme, the changes in actuarial surpluses or deficits

that arise because:

Events have not coincided with the actuarial assumptions made for the last

valuation (experience gains and losses); or

The actuarial assumptions have changed

ASSET

An item having value to the Council in monetary terms. Assets are categorised as

either current or fixed:

A current asset will be consumed or cease to have material value within the

next financial year (e.g. cash and stock);

A fixed asset provides benefits to the Council and to the services it provides

for a period of more than one year and may be tangible e.g. a community

centre, or intangible, e.g. computer software licences.

AUDIT OF ACCOUNTS

An independent examination of the Council’s financial affairs.

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BALANCE SHEET

A statement of the recorded assets, liabilities and other balances at the end of the

accounting period.

BORROWING

Government support for capital investment is described as either Supported Capital

Expenditure (Revenue) known as SCE(R) or Supported Capital Expenditure (Capital

Grant) known as SCE(C). SCE can be further classified as either Single Capital Pot

(SCP) or ring-fenced. BUDGET

The forecast of net revenue and capital expenditure over the accounting period.

CAPITAL EXPENDITURE

Expenditure on the acquisition of a fixed asset, which will be used in providing

services beyond the current accounting period, or expenditure which adds to and

not merely maintains the value of an existing fixed asset.

CAPITAL FINANCING

Funds raised to pay for capital expenditure. There are various methods of financing

capital expenditure including borrowing, leasing, direct revenue financing, usable

capital receipts, capital grants, capital contributions, revenue reserves and

earmarked reserves.

CAPITAL PROGRAMME

The capital schemes the Council intends to carry out over a specific period of time.

CAPITAL RECEIPT

The proceeds from the disposal of land or other fixed assets. Proportions of capital

receipts can be used to finance new capital expenditure, within rules set down by

the government but they cannot be used to finance revenue expenditure.

CLAW-BACK

Where average council house rents are set higher than the government’s

prescribed average limit rent, used in the calculation of rent rebates, the

percentage difference reduces the amount of rent rebate subsidy due to the

Council, i.e. it is “clawed-back” by the government.

CIPFA

The Chartered Institute of Public Finance and Accountancy

COLLECTION FUND

A separate fund that records the income and expenditure relating to Council Tax

and non-domestic rates.

COMMUNITY ASSETS

Assets that the Council intends to hold in perpetuity, that have no determinable

useful life and that may have restrictions on their disposal. Examples of community

assets are parks and historical buildings.

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CONSISTENCY

The concept that the accounting treatment of like items within an accounting

period and from one period to the next are the same.

CONTINGENT ASSET

A contingent asset is a possible asset arising from past events whose existence will

be confirmed only by the occurrence of one or more uncertain future events not

wholly within the Council’s accounts.

CONTINGENT LIABILITY

A contingent liability is either:

A possible obligation arising from past events whose existence will be

confirmed only by the occurrence of one or more uncertain future events not

wholly within the Council’s control; or

A present obligation arising from past events where it is not probable that a

transfer of economic benefits will be required, or the amount of the obligation

cannot be measured with sufficient reliability.

CORPORATE AND DEMOCRATIC CORE

The corporate and democratic core comprises all activities that local authorities

engage in specifically because they are elected, multi-purpose authorities. The cost

of these activities are thus over and above those which would be incurred by a

series of independent single purpose, nominated bodies managing the same

services. There is therefore no logical basis for apportioning these costs to services.

CREDITOR

Amount owed by the Council for work done, goods received or services rendered

within the accounting period, but for which payment has not been made by the

end of that accounting period.

CURRENT SERVICE COST (PENSIONS)

The increase in the present value of a defined benefits pension scheme’s liabilities,

expected to arise from employee service in the current period.

DEBTOR

Amount owed to the Council for works done, goods received or services rendered

within the accounting period, but for which payment has not been received by the

end of that accounting period.

DEFERRED CHARGES

Expenditure which can be properly deferred (i.e. treated as capital in nature), but

which does not result in, or remain matched with, a tangible asset. Examples of

deferred charges are grants of a capital nature to voluntary organisations.

DEFINED BENEFIT PENSION SCHEME

Pension schemes in which the benefits received by the participants are

independent of the contributions paid and are not directly related to the

investments of the scheme.

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DEPRECIATION

The measure of the cost of wearing out, consumption or other reduction in the useful

economic life of the Council’s fixed assets during the accounting period, whether

from use, the passage of time or obsolescence through technical or other changes.

DISCRETIONARY BENEFITS (PENSIONS)

Retirement benefits, which the employer has no legal, contractual or constructive

obligation to award and are awarded under the Council’s discretionary powers

such as the Local Government (Discretionary Payments) Regulations 1996.

EQUITY

The Council’s value of total assets less total liabilities.

EVENTS AFTER THE BALANCE SHEET DATE

Events after the Balance Sheet date are those events, favourable or unfavourable,

that occur between the Balance Sheet date and the date when the Statement of

Accounts is authorised for issue.

EXCEPTIONAL ITEMS

Material items which derive from events or transactions that fall within the ordinary

activities of the Council and which need to be disclosed separately by virtue of their

size or incidence to give fair presentation of the accounts.

EXPECTED RETURN ON PENSION ASSETS

For a funded defined benefit scheme, this is the average rate of return, including

both income and changes in fair value but net of scheme expenses, which is

expected over the remaining life of the related obligation on the actual assets held

by the scheme.

EXTRAORDINARY ITEMS

Material items, possessing a high degree of abnormality, which derive from events or

transactions that fall outside the ordinary activities of the Council and which are not

expected to recur. They do not include exceptional items, nor do they include prior

period items merely because they relate to a prior period. FAIR VALUE

The fair value of an asset is the price at which it could be exchanged in an arm’s

length transaction less, where applicable, any grants receivable towards the

purchase or use of the asset.

FINANCE LEASE

A lease that transfers substantially all of the risks and rewards of ownership of a fixed

asset to the lessee.

GOING CONCERN

The concept that the Statement of Accounts is prepared on the assumption that the

Council will continue in operational existence for the foreseeable future.

GOVERNMENT GRANTS

Grants made by the government towards either revenue or capital

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expenditure in return for past or future compliance with certain conditions relating to

the activities of the Council. These grants may be specific to a particular scheme or

may support the revenue spend of the Council in general.

HOUSING BENEFITS

A system of financial assistance to individuals towards certain housing costs

administered by authorities and subsidised by central government.

HOUSING REVENUE ACCOUNT (HRA)

A separate account to the General Fund, which includes the income and

expenditure arising from the provision of housing accommodation by the Council.

IMPAIRMENT

A reduction in the value of a fixed asset to below its carrying amount on the

Balance Sheet.

INCOME AND EXPENDITURE ACCOUNT

The revenue account of the Council that reports the net cost for the year of the

functions for which it is responsible and demonstrates how that cost has been

financed from precepts, grants and other income.

INFRASTRUCTURE ASSETS

Fixed assets belonging to the Council that cannot be transferred or sold, on which

expenditure is only recoverable by the continued use of the asset created.

Examples are highways, footpaths and bridges. INTANGIBLE ASSETS

An intangible (non-physical) item may be defined as an asset when access to the

future economic benefits it represents is controlled by the reporting entity. This

Council’s intangible assets comprise computer software licences.

INTEREST COST (PENSIONS)

For a defined benefit scheme, the expected increase during the period of the

present value of the scheme liabilities because the benefits are one period closer to

settlement.

INVESTMENTS (PENSION FUND)

The investments of the Pension Fund will be accounted for in the statements of that

fund. However, authorities are also required to disclose, as part of the disclosure

requirements relating to retirement benefits, the attributable share of the pension

scheme assets associated with their underlying obligations.

LIABILITY

A liability is where the Council owes payment to an individual or another

organisation.

A current liability is an amount which will become payable or could be called

in within the next accounting period, e.g. creditors or cash overdrawn.

A deferred liability is an amount which by arrangement is payable beyond

the next year at some point in the future or to be paid off by an annual sum

over a period of time.

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LIQUID RESOURCES

Current asset investments that are readily disposable by the Council without

disrupting its business and are either:

Readily convertible to known amounts of cash at or close to the carrying

amount; or

Traded in an active market

LONG-TERM CONTRACT

A contract entered into for the design, manufacture or construction of a single

substantial asset or the provision of a service (or a combination of assets or services

which together constitute a single project), where the time taken to substantially

complete the contract is such that the contract activity falls into more than one

accounting period.

MATERIALITY

The concept that the Statement of Accounts should include all amounts which, if

omitted, or mis-stated, could be expected to lead to a distortion of the financial

statements and ultimately mislead a user of the accounts.

MINIMUM REVENUE PROVISION (MRP)

The minimum amount which must be charged to the revenue account each year in

order to provide for the repayment of loans and other amounts borrowed by the

Council.

NEGATIVE SUBSIDY

If the Subsidy Housing Revenue Account produces a result, which assumes that the

Council’s income is higher than its expenditure, a “negative subsidy” situation arises.

In this case the Council must pay an amount equivalent to the deficit, from its

Housing Revenue Account to the government.

NET BOOK VALUE

The amount at which fixed assets are included in the Balance Sheet, i.e. their

historical costs or current value less the cumulative amounts provided for

depreciation.

NET DEBT

The Council’s borrowings less cash and liquid resources.

NON-DISTRIBUTED COSTS

These are overheads for which no user now benefits and as such are not

apportioned to services

NATIONAL NON-DOMESTIC RATES (NNDR)

The National Non-Domestic Rate is a levy on businesses, based on a national rate in

the pound set by the government and multiplied by the assessed rateable value of

the premises they occupy. It is collected by the Council on behalf of central

government and then redistributed back to support the cost of services.

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NON-OPERATIONAL ASSETS

Fixed assets held by the Council but not directly occupied, used or consumed in the

delivery of services. Examples are investment properties, assets under construction or

assets surplus to requirements pending sale or redevelopment.

OPERATING LEASE

A lease where the ownership of the fixed asset remains with the lessor.

OPERATIONAL ASSETS

Fixed assets held and occupied, used or consumed by the Council in the pursuit of

its strategy and in the direct delivery of those services for which it has either a

statutory or discretionary responsibility.

PAST SERVICE COST (PENSIONS)

For a defined benefit pension scheme, the increase in the present value of the

scheme liabilities related to employee service in prior periods arising in the current

period as a result of the introduction of, or improvement to retirement benefits.

PENSION SCHEME LIABILITIES

The liabilities of a defined benefit pension scheme for outgoings due after the

valuation date. Scheme liabilities measured during the projected unit method

reflect the benefits that the employer is committed to provide for service up to the

valuation date.

PRECEPT

The levy made by precepting authorities by billing authorities, requiring the latter to

collect income from Council Tax on their behalf.

PRIOR YEAR ADJUSTMENT

Material adjustments applicable to previous years arising from changes in

accounting polices or from the correction of fundamental errors. This does not

include normal recurring corrections or adjustments of accounting estimates made

in prior years.

PROVISION

An amount put aside in the accounts for future liabilities or losses which are certain

or very likely to occur but the amounts or dates of when they will arise are uncertain.

PUBLIC WORKS LOAN BOARD (PWLB)

A Central Government Agency, which provides loans for one year and above to

authorities at interest rates only slightly higher than those at which the government

can borrow itself.

RATEABLE VALUE

The annual assumed rental of a hereditament, which is used for NNDR purposes.

RELATED PARTIES

There is a detailed definition of related parties in FRS 8. For the Council’s purposes

related parties are deemed to include the Council’s members, the Chief Executive,

its Directors and their close family and household members.

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RELATED PARTY TRANSACTIONS

The Statement Of Recommended Practice requires the disclosure of any material

transactions between the Council and related parties to ensure that stakeholders

are aware when these transactions occur and the amount and implications of such.

REMUNERATION

All sums paid to or receivable by an employee and sums due by way of expenses

allowances (as far as those sums are chargeable to UK income tax) and the money

value of any other benefits. Received other than in cash. Pension contributions

payable by the employer are excluded.

RESERVES

The accumulation of surpluses, deficits and appropriations over past years. Reserves

of a revenue nature are available and can be spent or earmarked at the discretion

of the Council. Some capital reserves such as the fixed asset restatement account

cannot be used to meet current expenditure.

RESIDUAL VALUE

The net realisable value of an asset at the end of its useful life.

RETIREMENT BENEFITS

All forms of consideration given by an employer in exchange for services rendered

by employees that are payable after the completion of employment.

REVENUE EXPENDITURE

The day-to-day expenses of providing services.

REVENUE SUPPORT GRANT

A grant paid by Central Government to authorities, contributing towards the general

cost of their services.

STOCKS

Items of raw materials and stores an Council has procured and holds in expectation

of future use. Examples are consumable stores, raw materials and products and

services in intermediate stages of completion.

TEMPORARY BORROWING

Money borrowed for a period of less than one year.

TRUST FUNDS

Funds administered by the Council for such purposes as prizes, charities, specific

projects and on behalf of minors.

USEFUL ECONOMIC LIFE (UEL)

The period over which the Council will derive benefits form the use of a fixed asset. WORK IN PROGRESS (WIP)

The cost of work performed on an uncompleted project at the Balance Sheet date,

which should be accounted for.

Documents

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