Statement of Accounts2005/06

Corporate Governance and Audit Committee29 June 2006

Corporate Services – Financial Management

Corporate Governance and Audit Committee29 June 2006

PrefaceForeword by the Director of Corporate Services i

1 Introductory StatementsResponsibilities 1Corporate Governance 2Statement of Accounting Concepts and Policies 9

2 Main Financial Statements and Explanatory NotesConsolidated Revenue Account 20Consolidated Balance Sheet 21Cash Flow Statement 22Statement of Movements in Reserves 23Explanatory Notes 24

3 Other Financial Statements and Explanatory NotesHousing Revenue Account 61Collection Fund Income and Expenditure Account 69Group Accounts 73

4 Additional InformationDisclosure Notes 88

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Foreword by the Director of Corporate Services

The information contained within these accounts is presented as simply and clearly as possible. However, the accounts of such a large and diverse organisation as Leeds City Council are by their nature both technical and complex and so this foreword explains some of the statements and sections in this document and provides a summary of the authority's financial performance for 2005/06 and its financial prospects.

The Statement of Accounts features four main statements reporting on Leeds City Council’s core activities:

the Consolidated Revenue Account, the Consolidated Balance Sheet, the Cash Flow Statement and the Statement of Total Movement in Reserves.

Each is preceded by a short note describing its purpose, and they are followed by notes explaining various elements within the statements.

The main statements are supplemented by three further sections:

the Housing Revenue Account reports on the council’s activities as a social landlord, which are consolidated into the main statements;

the Collection Fund account reports on the collection of local taxes and their distribution; and the Group Accounts show the full extent of the authority’s activities by including subsidiary

and associate companies and joint ventures.

These too are preceded by notes explaining their purpose and have explanatory notes. A final disclosure section provides miscellaneous supplementary information including spending in defined areas, transactions with related parties and the council’s stewardship of trust funds.

Last year we introduced a new feature: the compact accounts. Whilst having no formal legal standing, by stripping out many of the technicalities, they give a clear if simplified view of our financial position. They are available at www.leeds.gov.uk/accounts.

1 Accountability and financial reporting

Local authorities are governed by a rigorous structure of controls to provide stakeholders with the confidence that public money has been properly accounted for. As part of this process of accountability, the council is required to produce a set of accounts in order to inform you, as a stakeholder of the council, that we have properly accounted for all the public money we have received and spent and that the financial standing of the council is on a secure basis.

The council's Statement of Accounts concentrates on clear and accurate reporting of the financial position of the council in relation to a particular year. It does not however aim to fulfil the role of an annual report of a company. This would duplicate much of the work already published in other documents produced by the council - in particular the Council Plan, the Financial Plan and the Capital Strategy and Asset Management Plan.

The Council Plan outlines our priorities for improvement and our achievements to date. It details how the council will drive improvement in the services it delivers and includes a section summarising the council's financial plans and how the budget provides support for corporate plan priorities.

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The Financial Plan sets out the overall shape of the council's budget over a three year period by determining how available resources will be allocated between services, reflecting council priorities, both revenue and capital, and provides a framework for the preparation of annual budgets.

The Capital Strategy and Asset Management Plan details the council's approach to the management of its assets both at a corporate and at a departmental and service level. The Capital Strategy section outlines capital investment over the next five years, and the Asset Management Plan outlines the approach to asset management and highlights the progress made to date. The plan is designed to improve the property portfolio of the council to ensure that the assets of the council are well maintained, appropriately located, fit for purpose, and accessible for their intended users.

Local electors and taxpayers have statutory rights to inspect the accounts before the audit is completed and to question the auditors. We advertise the inspection ("deposit") period in the Yorkshire Post. To make the accounts as widely available as possible we publish them on the internet at www.leeds.gov.uk/accounts (Leeds residents have free internet access at their local libraries). From the internet page you can also read the Audit Commission briefing Councils' Accounts - Your Rights, e-mail me with any comments or questions you have about the accounts, or click through to the other documents mentioned above.

2 A summary of the council's financial performance for the financial year 2005/06

Revenue – General Fund

The Consolidated Revenue Account, on page 22, summarises the financial performance for the year. The revenue account shows a contribution to reserves of £0.8m which is £1.4m less than the budgeted sum. A detailed report on the financial outturn for the council was presented to the Executive Board on the 14th June 2006. In summary, the major variations were:-

Social Services – the budget included challenging targets for service improvement and realignment. Significant progress has been made during the year but demand pressures have continued and there has been some slippage in planned actions. This has resulted in spend being £1.1m higher than budget, after allowing for a £3m cash injection during the year. In addition to the above, the council’s sheltered workshop incurred a deficit of £2.2m and a fundamental review of the service is being undertaken in the context of supporting disabled employees and our commitment to equality and social inclusion.

City Services – following a fire at a contractor’s recycling facility additional costs of £0.7m were incurred on alternative disposal arrangements. Additional cost pressures within the refuse collection service of £1.3m were contained within the overall budget for the department mainly by reductions in the cost of third party insurance claims following increased investment in highway infrastructure and increased use of car parking facilities. The Property Maintenance trading arm of the department incurred a deficit of £1.5m during the year due to reductions in the trading base following the loss of contracts and an increase in non-chargeable time.

There were no significant variations in other general fund services with three departments spending less than their allocated budgets.

In order to reduce the impact of departmental spending levels on the general reserves position, £2.2m has been transferred from the capital reserve. This has been generated through contributions from departments to unsupported borrowing schemes, primarily for purchases previously funded through leasing. The balance was being accumulated to fund the impact on future debt charges of this unsupported borrowing and future budget strategies will need to take account of this decision. In addition, extra income generated

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from the Housing Revenue account of £1.5m in respect of IT development costs has been brought into the general fund.

In accordance with the authority’s carry forward rules, underspending departments will be permitted to spend an extra £0.6m in 2006/07 and at least 25% of any overspends will be required to be paid back in year. This excludes deficits on the sheltered workshop and property maintenance which have been dealt with in year. The General Fund Reserves position at 31st March 2006 is £10.6m and the following chart shows the level of general fund reserves over the past few years.

The Housing Revenue Account (HRA)

The HRA made an in-year surplus of £7.6m, mainly due to savings on the cost of disrepair (£2m) achieved through proactive claims management, rental income exceeding the budget by £1.8m reflecting in part a significant improvement in the level of voids; savings of £2m in the cost of doubtful debt provision through improved collection rates, and property services income exceeded budget by £2.7m. These savings have been partly offset by additional costs of IT developments of £1.5m.

Of this in-year surplus, the following has been earmarked for specific use:

£2m to mitigate against the potential risk of subsidy losses through not meeting subsidy triggers based on average stock levels;

£0.5m to reflect the pre-procurement costs of the Beeston and Holbeck PFI scheme;

£1.9m for re-distribution to the ALMOs to reflect the savings generated in disrepair claims;

£4.4m for future net costs of the Swarcliffe PFI scheme.

After setting aside the above amounts the level of general reserves in the HRA has fallen by £1.2m, this is £0.4m improvement on the budgeted use of the reserve. As at 31st March 2006 the level of the HRA reserve not earmarked for specific requirements and risk was £3.4m.

The following chart shows the level of general working balances over the past few years:

Leeds City Council General Reserves

£8.5M

£9.0M

£9.5M

£10.0M

£10.5M

£11.0M

£11.5M

31/03

/2001

31/03

/2002

31/03

/2003

31/03

/2004

31/03

/2005

31/03

/2006

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Schools

The outturn on the Individual Schools’ Budget for the year was £3.3m higher than the latest estimate. This has been transferred to the Schools Reserve. Borrowings from the reserve to fund the costs of voluntary early retirement in schools and a short term funding gap in Building Schools for the Future / Private Finance Initiative schemes (see paragraph ## below) has resulted in a year-end reserve position of £3.6m.

Collection Fund

For 2005/06 the Collection Fund showed a small surplus of £0.4m (£0.7m surplus in 2004/05), reducing the deficit on the Collection Fund Reserve to £1.2m. The Collection Fund balance arise because of differences between estimated and actual amounts of total council tax bills. Balances at the year end will feed into the estimate of the collection fund position that is made the following January and the estimated balance at that point in time will be taken into account when calculating the council tax for the following year. National non domestic rates do not impact on the Collection Fund balance as they are paid over to the Government’s national pool and redistributed to Authorities based on population.

The percentage of local taxation bills collected in year reached 96.3% for council tax and 98.6% for national non-domestic rates.

HRA Working Balances Account

£.5M£1.0M£1.5M£2.0M£2.5M£3.0M£3.5M£4.0M£4.5M£5.0M

31/0

3/20

01

31/0

3/20

02

31/0

3/20

03

31/0

3/20

04

31/0

3/20

05

31/0

3/20

06

£2M£4M£6M£8M

£10M£12M£14M£16M

31/03

/2001

31/03

/2002

31/03

/2003

31/03

/2004

31/03

/2005

31/03

/2006

Available schoolbalancesSchool balances net ofborrowing

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Other performance indicators

The overall performance of the council is improving well and the council achieved an overall four star performance in the 2005 Comprehensive Performance assessment. Part of this assessment includes a view on how well the council manages and uses its resources, derived from five individual scores provided by the council's appointed auditor. For 2005/06 the council received an overall score of 3 out of a maximum of 4 in this category.

Sundry income - overall the collection of current year debts and arrears has improved from 82.5% in 2004/05 to 83.1% in the current year. The net amount collectable was nearly £100m.

The percentage of undisputed invoices paid within 30 days reached 90.5%, an improvement of 1.7% over the previous year.

The average external borrowing rate was 5.4% for 2005/06.

For 2005/06 the council delivered £18.9m of in-year efficiencies, with cumulative efficiencies totalling £30.9m compared to the government’s 2.5% efficiency target equating to £15.4m.

Balance Sheet

The following table summarises the final capital expenditure position against the latest approved estimate:

The impact on the balance sheet of this £384m of capital expenditure is to increase the carrying value of the council’s long term assets.

Average External Borrowing Rate of Interest %

4.00

4.50

5.00

5.50

6.00

6.50

7.00

2001/02 2002/03 2003/04 2004/05 2005/06

Latest Budget Actual Variation£m £m £m

General Fund Services 205.7 194.8 (10.9)Housing Revenue Account 173.7 176.2 2.5

Total Capital Programme 379.4 371.0 (8.4)

Capital Spend (Finance Lease) 13.0 13.0 0.0

Total Capital Spend 392.4 384.0 (8.4)

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The external funding of the capital programme comes from a number of in year income sources, primarily capital receipts from the sale of assets (£84m) and Government and private sector funding (£91m). Most of the remaining funding is generated by debt (£191m). In addition to funding the council’s capital programme, new borrowing is also taken out to repay maturing loans, and to take advantage of favourable interest rate conditions by borrowing in advance of the council’s future requirements. The council’s treasury management policy aims to minimise the overall level of debt raised by using available revenue resources (such as reserves and provisions) and by use of the statutory revenue set aside (minimum revenue provision). Overall the balance sheet shows a net increase in debt of £175m (short and long term borrowing) and an increase in short term investments of £48m. The increase in short term investments reflects the decision to raise in advance £79m of debt for use in 2006/07, net of similar funds raised in advance in 2004/05 for use in the current financial year.

Other major movements on the balance sheet are as follows: Increase in the value of tangible fixed assets - £643m. The council is required to revalue

all its assets over a five year period. This increase primarily represents a full revaluation of the council’s housing stock in 2005/06, resulting in an increase in the value of council dwellings of £538m. As this increase in valuation does not result in an actual gain to the council unless the assets are sold, a corresponding entry is made in the Fixed Asset Restatement Account.

The authority’s current debtors increased by £21m. This is mainly reflects the full year effect of the government’s late amending subsidy determination in respect of the ALMOs’ two star status (£13m), and an increase in the outstanding VAT claim with HM Revenue & Customs of £7.5m. The authority’s current creditors have increased by £48m mainly due to two material changes, along with numerous minor factors impacting on general creditors: the two material issues are an increase in capital creditors of £22m (reflecting the scale of increase in the authority’s capital programme) and an £11.4m increase in the management fee outstanding to the ALMOs (due to the late government final determination on SCA allowances for both 2004/05 and 2005/06 not being reflected in the actual management fee payments made in the year).

Long term debtors increased by £7m. This increase mainly reflects the long term debt owed by Yorkshire County Cricket Club in respect of the loan made by the council.

A new accounting requirement in respect of Landfill Tax has led to the recognition of £4.7m of landfill allowances, partly offset by a £3.9m provision for the 2005/06 landfill liability, which is due to be settled in the second half of 2006/07 under the terms of the scheme.

Provisions have increased by £20.9m, primarily due to the creation of a provision for the estimated cost of equal pay claims.

The estimated FRS 17 net pension liability has fallen by £22m, with a corresponding fall in the deficit on the pensions reserve. Within this figure, the value of the council’s pension fund assets have increased above the predicted level, due to continuing high returns from investments during the year. However, this has been partially offset by a more pessimistic forecast for future returns, based on falls in yields on corporate bonds towards the end of 2005/06. The council’s estimated pension liabilities have also increased, but by less than would have been anticipated. This was largely due to a reduction in liabilities arising from a change to the pension rules allowing members to opt to take a higher lump sum in return for a reduced ongoing pension.

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Group performance

Collectively the council’s six ALMO subsidiary companies made a profit after tax of £15.3m (£1.7m deficit in 2004/05). The main reason for this large in year surplus is that the income streams to support ALMO borrowing allowances do not match the related interest charge on debt. Income is received based on the allowances in year while interest is only charged for sixth months in the first year of spend. Therefore reserves need to be accumulated for later years when interest charges are made but income streams have stopped. Currently ALMO reserves stand at £13.6m. Education Leeds made a deficit after tax of £0.2m resulting in a reserve position of £2.7m as at 31st March 2006.

3 Accounting developments

The Code of Practice on Local Authority Accounting in the United Kingdom 2005 (the Code) has introduced the following significant new requirements :

The requirement to include a Statement of Internal Control (page 2) in accordance with Regulation 4(2) of the Accounts and Audit Regulations 2003. This replaces the previous requirement to produce a narrower Statement of Internal Financial Control.

For 2004/05 authorities had the choice as to whether they complied with previous accounting practice in the preparation of group accounts or opted for early adoption of new requirements for group accounts based on UK Generally Accepted Accounting Practice (GAAP). For 2005/06 all authorities must comply with the revised accounting practice in respect of group accounts. Leeds City Council opted for the early adoption of the new accounting practice for the 2004/05 accounts and is therefore unaffected by this change.

For 2006/07 the main proposals to amend the Code are as follows:

Removal of the notional capital financing charge

Replace the Consolidated Revenue Account with an Income and Expenditure account. Income and Expenditure accounts are also proposed for the HRA and group accounts.

A new statement reconciling the Income and Expenditure account with the surplus or deficit on the General Fund.

Replacing the Statement of Total Movement in Reserves with a Statement of Total Recognised Gains and Losses.

Local authorities who have issued listed securities are to adopt the disclosure and measurement requirements of FRS25 and FRS26.

Local authorities have been invited to comment on these proposals and the results of the consultations are currently being reviewed by CIPFA. The ongoing aim of these developments is to move towards full compliance with UK GAAP.

4 Looking forward

There are several developments which will influence the shape of the council’s finances in the forthcoming years, and we are addressing these issues in the context of future financial planning.

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Children’s Services

In response to the Children Act 2004, the Council has appointed a Director of Children’s Services, with a strategic, not operational, brief to transform services through joint planning and commissioning, integration of front line delivery and improving outcomes. The Children and Young People’s Plan will provide a framework for delivery, and will clearly have an influence on the allocation of future resources within the Council.

Annual Efficiency Statement

2005/06 was the first year of a government initiative which requires the public sector to deliver efficiency gains over a three year period. The 2006/07 forward looking statement identifies a further £21m against a target of £17.9m and further efficiencies reviews are currently being undertaken to ensure the 2007/08 target will also be achieved.

Local Area Agreements

In February 2006, the council entered into a three year Local Area Agreement – a contract between central government and local partners to deliver the priorities of local people. The agreement will build upon existing plans and strategies to accelerate delivery of key priorities and programmes and to develop multi-agency work to deliver more lasting change impacting on a number of major issues affecting the people of Leeds, and gives a real opportunity to pool funding streams to use resources flexibly so as to deliver agreed local outcomes.

Service prioritisation

The council is currently developing a service prioritisation model to ensure that resources are aligned to corporate plan priorities. To assist in the process, PriceWaterhouseCoopers llp were commissioned by the council to undertake a high level diagnosis of council services, identifying the relative value and quality of the main service areas and to seek out areas for efficiency and performance improvement and to develop a model. The model is high level and provides for an understanding of the relative strengths, weaknesses and importance of each of the council's main services and teams. As such it can be used to inform or guide the council's budget and service planning processes as well as supporting a wider efficiency and improvement programme.

There is further development work now required to identify and understand efficiency and performance projects that the council can take forward within an improvement programme, which will be used as part of the process for medium term financial planning and as part of future annual budgets preparation by realigning resources towards the council's key priorities and developing the council's efficiency agenda.

Lyons Inquiry

The result of the Lyons Inquiry is due later this year. This will make recommendations as to the future of local government in terms of the role and functions of local authorities and funding sources. It is understood that the proposed Local Government Bill will consider a wide range of issues which will affect the organisation of local authorities with potential implications for single tier authorities, elected mayors and the concept of city regions.

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Statement of Responsibilities The City Council's responsibilities

The City Council is required to :

Make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In Leeds City Council, that officer is the Director of Corporate Services.

Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets.

The Director of Corporate Services' responsibilities

The Director of Corporate Services is responsible for the preparation of the City Council's Statement of Accounts. In preparing the statement, the Director of Corporate Services has :

selected suitable accounting policies and applied them consistently; made judgements and estimates that were reasonable and prudent; complied with the Code of Practice on Local Authority Accounting; applied the accounting concept of a 'going concern' by assuming that the authority's services

will continue to operate for the foreseeable future.

The Director of Corporate Services has also :

kept proper accounting records which were up to date; taken reasonable steps for the prevention and detection of fraud and other irregularities.

Certification of the accounts

I certify that the Statement of Accounts presents fairly the position of Leeds City Council at 31st March 2006 and its income and expenditure for the year ended 31st March 2006.

Alan T Gay CPFA Director of Corporate Services 29 June 2006

Approval of the accounts

I certify that the Statement of Accounts has been approved by a resolution of the Corporate Governance and Audit Committee of Leeds City Council in accordance with the Accounts and Audit Regulations 2003

Councillor Mark Harris Chair, Corporate Governance and Audit Committee 29 June 2006

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Corporate Governance Statement This page is a placeholder for the Corporate Governance Statement, which is a separate item on the agenda and will take up about seven pages in this format. – that is, pages 2 to 8.

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Statement of Accounting Concepts and Policies

The accounts follow the appropriate accounting standards as required by the Accounting Code of Practice on Local Authority Accounting in Great Britain 2005 (the Code). The Code constitutes a “proper accounting practice” under the terms of section 21(2) of the Local Government Act 2003. The Code is based on approved accounting standards, except where these conflict with specific accounting requirements, so that the authority’s accounts present fairly the financial position and transactions of the authority.

The accounting concepts and policies which have a material impact on the accounts are as follows:

1 Fundamental accounting concepts

a Qualitative characteristics of financial information

Relevance:

The accounts have been prepared with the objective of providing information about the authority’s financial performance and position that is useful for assessing the stewardship of public funds and for making economic decisions.

Reliability:

The financial information is reliable as it

has been prepared so as to reflect the reality or substance of the transaction and activities underlying them, rather than their formal legal character

is free from deliberate or systematic bias is free from material error has been prudently prepared.

Comparability:

In addition to complying with the Code, the authority’s accounts also comply with the Best Value Accounting Code of Practice. This code establishes proper practice with regard to consistent financial reporting below the statement of accounts level and therefore aids comparability with other Local Authorities.

Understandability:

These accounts are based on accounting concepts, treatments and terminology, which require reasonable knowledge of accounting and local government. However, every effort has been made to use plain language and where technical terms are unavoidable they have been explained as they occur.

b Materiality

As allowed under the Code the concept of materiality has been utilised in preparing the accounts, so that insignificant items and fluctuations under an acceptable level of tolerance are permitted provided that in aggregate they would not affect the interpretation of the accounts by an informed reader.

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c Pervasive accounting concepts

Accruals:

The financial statements, other than the cash flow information, are prepared on an accruals basis. This means that expenditure and income are recognised in the accounts in the period in which they are incurred or earned, not as money is paid or received.

Going concern:

The accounts have been prepared on the assumption that the authority will continue in operational existence for the foreseeable future.

Primacy of legislative requirements:

In accordance with the Code, where an accounting treatment is prescribed by law then it has been applied, even if it contradicts accounting standards or generally accepted accounting concepts. The following legislative accounting requirements have been applied when compiling these accounts:

i Capital receipts from the disposal of assets are treated in accordance with the provisions of the Local Government Act 2003.

ii The Local Government Act 2003 requires the authority to set aside a minimum revenue provision (MRP) for repayment of debt. This is based on the capital financing requirement, as defined by the act, at the end of the proceeding financial year. The MRP is charged to revenue by an appropriate increase or decrease in the depreciation charge. This adjustment is made by way of an appropriation to or from the capital financing account.

iii The Collection Fund account reflects the statutory requirement of section 89 of the Local Government Finance Act 1988 (as amended by the Local Government Finance Act 1992).

iv The Housing Revenue Account is compiled following proper practice as defined in section 74(1) of the Local Government and Housing Act 1989 and section 21 of the 2003 act.

None of the above legislative requirements impacts on the council's accounts to the extent that they no longer present fairly the financial position of the authority.

2 Accounting policies and estimation techniques

The accounting policies are the principles, bases, conventions, rules and practices that specify how the effects of transactions and other events are reflected in the financial statements of the authority. Consistent accounting policies have been applied both within the year and between years. Where accounting policies are changed, the reason and effect have been separately disclosed.

Where estimating techniques are required to enable the accounting practices adopted to be applied, then the techniques which have been used are, in the authority's view, appropriate and consistently applied. Where the effect of a change to an estimation technique is material, a description of the change and, if practicable, the effect on the results for the current period is separately disclosed.

a Accruals of income and expenditure

i Customer and client receipts in the form of sales, fees, charges and rents are accrued and accounted for in the period to which they relate. In compliance with application note G of FRS 5 – Reporting the Substance of Transactions on Revenue Recognition, such revenue transactions are only recognised when a right to consideration exists due to the

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performance of a contractual obligation. Payments received in advance of such performance have been recognised as a liability on the balance sheet.

ii Employee costs are charged to the accounts of the period within which the employees worked. Accruals have been made for wages earned but unpaid at the year-end.

iii Interest payable on external borrowings and interest income is accrued and accounted for in the period to which it relates on a basis which reflects the overall economic effect of the borrowings.

iv Supplies and services are accrued and accounted for in the period during which they are consumed or received. Accruals have been made for all material sums unpaid at the year-end for goods or services received or work completed.

b Provisions and contingencies

i Provisions have only been recognised in the appropriate accounts when there is a legal or constructive obligation to transfer economic benefits as a result of a past event. Provisions are charged to the revenue account and, depending on their materiality, are either disclosed as a separate item on the Balance Sheet or added to the carrying balance of an appropriate current liability. When expenditure is incurred to which the provision relates, it is charged directly to the provision.

ii Where the authority can estimate, with a degree of certainty, that a future event will confirm a contingent loss (cost) it has been included in the financial statements.

iii Where a material contingent loss cannot be accurately estimated or an event is not considered sufficiently certain, it has not been included within the financial statements but shown in explanatory note 14.4 (page 49).

iv Where a material contingent gain is identified it is not accrued for within the accounting statements but shown in explanatory note 11.6 (page 43).

v The authority accounts for the estimated cost of settling self-insured risk by way of an insurance provision.

vi A provision has been created for stepped interest loans in order for each accounting period to reflect the true economic cost of borrowing. This provision has been calculated based on the assumption that the stepped Lender Option Borrower Option (LOBO) loans run their full term.

vii The carrying amount of debtors has been adjusted for doubtful debts, which should be provided for, and known uncollectable debts have been written off in full.

3 Deferred charges

Capital expenditure that does not generate an asset is written down to revenue over an appropriate period consistent with the consumption of economic benefits controlled by the authority. Where the authority does not gain any economic benefit, or the period of economic benefit is within the financial year, the full cost is charged to revenue. In order to prevent such charges impacting on taxpayers the transactions are reversed out of the revenue account via an appropriation to the capital financing account.

Where the authority does receive economic benefit over a number of years, the deferred charge is recognised on the balance sheet within the appropriate category of asset.

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4 Grants and contributions

Revenue grants are credited to income in the same period in which the related expenditure is charged. Grants made to finance the general activities of the authority or to compensate for loss of income are credited to the revenue account in the period in which they are payable.

Government grants and contributions relating to fixed assets are credited to a government grants deferred account and released to the asset management revenue account in line with the depreciation of the asset. Where an asset is not depreciated, the grant or contribution is transferred to the capital financing account.

Government grants and other contributions are accounted for on an accruals basis and recognised in the accounting statements when the conditions of their receipt have been complied with and there is reasonable assurance that the grant or contribution will be received.

5 Investments

Investments are shown on the Balance Sheet at cost less a provision, where appropriate, for any unrealised loss in the value of the investment. Long-term investments are identified separately on the balance sheet.

Investment income is credited to the revenue account when it falls due.

6 Leases

a Finance leases

Rentals payable under finance leases are apportioned between the finance charge and the reduction of the outstanding obligation, with the finance charge being allocated and charged to revenue over the term of the lease. The amount of outstanding principal has been recognised on the balance sheet as a deferred liability with a corresponding entry into fixed assets.

The amount due from a lessee under a finance lease is recorded as a debtor at the amount of the net investment. The total gross earnings under a finance lease is allocated to accounting periods to give a constant periodic rate of return to the net cash investment in the lease in each period.

b Operating leases

Rentals payable under operating leases are charged to revenue on a straight-line basis over the term of the lease. In addition operating lease rentals payable are accounted for net of benefits received or receivable.

Rental income from operating leases is recognised on a straight-line basis over the period of the lease. Assets held for use in operating leases are recorded as a fixed asset and depreciated over its useful life.

7 Overheads

Support services are charged to service committees, trading undertakings, capital accounts and other support services as part of the authority's internal market for support services. The costs of service management are apportioned to the accounts representing the activities managed. All the bases of apportionment are adopted consistently for all heads to which apportionment should be made. The costs of the corporate and democratic core and of non-

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distributable costs are not charged or apportioned to service committees but are classified separately on the Consolidated Revenue Account.

8 Reserves

Any amounts set aside for purposes falling outside the definition of provisions have been accounted for as reserves, and transfers to and from reserves are shown in the appropriations section of the revenue account and not within service expenditure. Expenditure is charged to revenue and not directly to any reserve.

The exceptions allowed by the Code and statute are:

i The Major Repairs Reserve, which is a statutory reserve for Housing Revenue Accounts in England and Wales. Statute allows authorities to charge defined capital expenditure on assets directly to this reserve, along with sums for a voluntary setaside to repay debt.

ii The Useable Capital Receipts Reserve is required under the Local Government Act 2003 and is credited with income from the disposal of fixed assets. In the year the useable receipts are used to finance capital expenditure they are applied to the Capital Finance Account. Any reserved element of the receipt is paid over to the Government’s national pool for redistribution back to Local Authorities.

iii Under the Code, capital receipts (see ii above) and capital grants and contributions on non-depreciable fixed assets are allocated directly to the Capital Financing Account.

iv Also under the Code, any disposal or revaluation of a fixed asset is accounted for in the Fixed Asset Restatement Account.

v Under the Code any differences between the expected and actual return on Leeds City Council's pension fund assets or between the actuarial assumptions on its liabilities and actual experience should be accounted for as actuarial gains or losses. As such they are treated as movements on the Pension Fund Reserve with no impact on the Consolidated Revenue Account.

9 Pensions

The authority has accounted for its pension costs arising from the Local Government Pension Scheme, and for all unfunded discretionary benefits which it has granted, as defined benefit schemes. Pension costs relating to the national teachers' pension scheme have been treated as defined contribution schemes, in accordance with the Code.

a Defined benefit schemes

For those schemes treated as defined benefit schemes, pension fund assets are accounted for at fair value (that is, market value for investments and properties). Pension liabilities are measured on an actuarial basis using the projected unit method. This requires the use of various assumptions about future events. Details of the assumptions used can be found in explanatory note 6 (page 28).

Within the Consolidated Revenue Account, service revenue accounts and trading services have been charged with their current service cost, which represents the extent to which pensions liabilities have increased as a result of employee service during the year. Past service costs, settlements and curtailments have been charged to non-distributable costs. The interest cost and expected return on assets have been included in net operating expenditure.

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As required by legislation, an appropriation to the Pensions Reserve has been made, which reverses out the FRS 17 based pension costs in the Consolidated Revenue Account and replaces them with the actual pensions related payments made in year. This ensures that the amount to be funded from Council Tax for the year is equal to the employer's pension contributions payable and payments made directly to pensioners.

The pension costs shown within the Housing Revenue Account (HRA) reflect the current service costs relating to HRA staff. The impact of this adjustment is reversed by an appropriation to the Pensions Reserve, so that the pension cost fundable from rents equates to the actual pensions related payments for the year.

Defined contribution schemes

For defined contribution schemes, the pension cost to be accounted for is equal to the pension contributions payable for the year. These costs are recognised within Net Cost of Services. No assets and liabilities are required to be recognised other than accruals relating to these contributions.

10 Stocks and long term contracts

a Stocks

Stocks are valued at estimated cost less an allowance for loss in value. This is assessed annually to ensure there is no material impact on the carrying value of the assets. Work in progress is included with stocks in the Consolidated Balance Sheet at cost less any foreseeable losses.

b Long term contracts

Long-term contracts are assessed on a contract by contract basis and are reflected in revenue by recording turnover and related costs as contract activity progresses. Turnover has been ascertained by reference to valuation of the work carried out to date or, if appropriate, separately ascertainable sales values and costs (e.g. because delivery or customer acceptance has taken place).

When the outcome of a long-term contract can be assessed with reasonable certainty before its conclusion, then the prudently calculated attributable profit is recognised in the revenue account as the difference between the reported turnover and related costs for the contract.

Where applicable detailed guidance contained in application note G of FRS 5 – Reporting the Substance of Transactions on Revenue Recognition has been used to define turnover on long-term contracts.

11 Value Added Tax (VAT)

Value Added Tax is included within the accounts only to the extent that it is irrecoverable and therefore charged to service expenditure or capital expenditure as appropriate.

12 Associated and subsidiary companies, group accounts

The local authority group has been determined by reference to the SORP definitions of subsidiaries, associates and joint ventures. These definitions are consistent with UK Generally Accepted Accounting Principles (GAAP) and in particular the definitions contained within Financial Reporting Standards (FRS) 2 and 9. The scope and classification of the group are shown in the Group Accounts (pages 73-87), along with the identification of any realigned accounting policies.

15

13 Intangible Assets

a Measurement

Intangible assets where the authority has control of the asset through either custody or legal protection are capitalised at cost. Such intangible assets held by the authority are not revalued.

The authority undertakes no research and development (as defined in SSAP 13), nor has it acquired or is it holding any goodwill (as defined under FRS 10).

b Basis for charging for intangible assets

The capital cost of an intangible asset is charged to revenue over its economic life on a straight-line basis. The asset life of each intangible asset is assessed on an annual basis and does not extend beyond any granted legal rights unless the legal rights are renewable and renewal is assured. The asset lives used for the intangible assets are 5 or 10 years. None of the authority’s intangible assets are deemed to have any residual value at the end of their useful life.

Assets have been reviewed for any impairment loss in respect of consumption of economic benefit. Where an impairment loss has occurred, it has been charged to the service revenue account. An amount equal to the amortised charges for the use of intangible assets and relevant impairment losses included in revenue accounts is credited to the asset management revenue account.

c Disposal

Income from the disposal of intangible assets is credited to the useable capital receipts reserve, and accounted for on an accruals basis. Upon disposal, the net book value of the intangible asset disposed of should be written off against the fixed asset restatement account.

14 Tangible fixed assets

a Recognition

All expenditure on the acquisition, construction or enhancement of a tangible asset, as defined by the Accounting Code of Practice, has been capitalised and classified as a fixed asset, where the asset brings benefit to the authority for a period of more than one year.

b Measurement

Operational land and properties are valued on the basis of current value in existing use, unless they are of a specialist nature in which case they are valued on a depreciated replacement cost basis. In particular, and in accordance with Office of the Deputy Prime Minister guidance then in force, council house valuations have been reduced by a regional adjustment factor in recognition of their status as social housing. Consequently council dwellings are included in the balance sheet at 47% of current value.

The value of infrastructure assets, such as highways, in existence at 1st April 1994 is included in the Balance Sheet at the equivalent of any net loan debt outstanding. Since the 1st April 1994 any new infrastructure assets and enhancements are included at construction cost, net of depreciation where appropriate.

The value of community assets in existence at 1st April 1994 is included in the Balance Sheet at nominal value. Since 1st April 1994 all new community assets and enhancements to existing assets have been included at historic cost, net of depreciation where appropriate.

16

Investment properties are valued on the basis of open market value.

Non-operational properties in full commercial use are valued by reference to their open market value in their existing use. Surplus properties are valued on the basis of net realisable value.

Capital spend on tangible fixed assets is included in the carrying value of an asset until such time as it is revalued as part of the five year rolling programme. Any adjustment to the carrying value of an asset upon revaluation is charged to the Fixed Asset Restatement Account (FARA) in accordance with the Accounting Code of Practice. However, under the following circumstances capital spend is charged to the FARA when no valuation has taken place in year –

where the nature of the capital expenditure does not impact on the carrying value of the asset due to the method of valuation (for instance improved lighting in a car park, where the car park is valued on the number of parking spaces); and

where the level of capital spend would not have a material impact on both the carrying value of the asset and the level of depreciation charged.

c Estimation

In accordance with the Code, all valuations are subject to review as part of a five year rolling revaluation programme. In order to reflect a more accurate value of the authority's assets any asset which is not revalued in the year or not included at either cost or nominal value is uplifted based on appropriate indices. The indices used are as follows -

the Royal Institute of Chartered Surveyors' forecast rebuild indices for assets valued at depreciated replacement cost; and

a property rents index produced by external property management surveyors, for assets valued at open market value

New developments from the authority's capital programme are included in the register at construction cost from completion until they are subject to valuation.

The information on authority houses is derived from the number of properties included in the Housing Rents system. The summary totals have been adjusted to reflect all known disposals during 2005/06. Full valuations of the authority's housing stock are carried out on a five-yearly cycle, with an annual desktop exercise during the five years.

d Basis of charge for use of fixed assets:

Capital charges are made to the users of fixed assets and are calculated on the basis of the opening balance sheet value of the asset and comprise –

i A notional interest charge for operational assets using rates which are specified by Central Government each year for all local authorities. For 2005/06 these rates were 3.5% for assets carried at current value and 4.8% for assets carried at historic cost.

ii A depreciation charge for all tangible fixed assets other than on non-depreciable land and non-operational investment properties.

Depreciation is calculated by writing off the cost or revalued amount, less estimated residual value, over the remaining useful life of the asset. For 2005/06 all assets have been depreciated on a straight line basis with no residual value. Since 2001/02 the authority's rolling programme of condition surveys has incorporated the requirement to determine the remaining life for each asset. Individual remaining asset lives are assessed having regard to the structural condition of the building, to age and state of repair,

17

condition of the mechanical and electrical services, compliance with current legislation and suitability for its existing use. Once completed, depreciation is calculated based on the individual remaining asset life. However, where remaining lives are not available for individual assets, a range for remaining asset lives has been determined for a variety of asset categories. The midpoint has then been used as the estimated remaining asset life. The categories and ranges of remaining asset lives used in the estimation are as follows :

vehicles, plant and equipment between 3 and 7 years schools between 20 and 40 years libraries, administration offices and council houses between 40 and 60 years car parks between 40 and 60 years farms, golf clubs, cemeteries and markets 60 years plus all other significant properties between 20 and 40 years infrastructure assets 30 years.

iii Assets have been reviewed for any impairment loss in respect of consumption of economic benefit. Where an impairment loss has occurred, it has been charged to the service revenue account. Other impairments reflecting a general fall in prices are recognised in the Fixed Asset Restatement Account.

iv The basis for charging the external cost of capital financing to the Housing Revenue Account (HRA) is the Item 8 determination contained within Part 6 of the Local Government and Housing Act 1989.

Authorities are also required, by the Accounts and Audit Regulations 2003, to establish and maintain the Major Repairs Reserve (MRR). The main credit to the MRR is an amount equivalent to the total depreciation charges for all HRA assets. The Item 8 determination requires that where depreciation charges for HRA dwellings are greater than or less than the Major Repairs Allowance, an amount equal to the difference should be transferred between the HRA and the major repairs reserve along with any depreciation on non-council dwellings.

v Repairs and maintenance expenditure is charged to the appropriate service revenue account.

15 Capital receipts

Capital receipts from the disposal of assets are treated in accordance with the provisions of the Local Government Act 2003. Capital Receipts must be used to fund capital expenditure or to repay debt, subject to the de minimus level set out in the relevant regulations (currently £10k).

Capital receipts realised from the sale of non-housing land and dwellings are fully usable. Under current legislation 25% of capital receipts from sales of housing land and dwellings are usable. The remaining 75% must be paid over to central government to the national pool. For housing receipts other than right to buy sales, the council can reduce the pooled element by the amount spent on defined capital spend including affordable housing and regeneration.

16 Repurchase of borrowing

Gains or losses arising on the repurchase or early settlement of borrowing are recognised in the consolidated revenue account in the period during which the repurchase or early settlement is made. Where, however, the repurchase of borrowing was coupled with a refinancing or restructuring of borrowing with substantially the same overall economic effect when viewed as a whole, regardless of the source of borrowing, gains or losses have been recognised over the life of the replacement borrowing.

18

17 Exceptional items, extraordinary items and prior year adjustments

Any material exceptional or extraordinary items are included within the cost of the relevant individual service or, if a degree of prominence is necessary in order to give a fair presentation of the accounts, separately identified on the face of the revenue account. Details of any such exceptional or extraordinary items are given in the explanatory notes.

Material prior period adjustments arising from changes in accounting policies or from the correction of fundamental errors have been accounted for by restating the comparative figures in the financial statements and notes, along with the cumulative effect on reserves. Any effect of material prior period adjustments is disclosed separately as a note to the accounts.

18 Post balance sheet events

Any material post balance sheet events, which provide additional evidence relating to conditions existing at the balance sheet date or indicate that application of the going concern concept is not appropriate, have been included in the accounts.

Any material post balance sheet events, which concern conditions which did not exist at the balance sheet date have been disclosed as a separate note to the accounts.

Events after the balance sheet date are included in the accounts up to the date when the Statement of Accounts is authorised for use. For Leeds City Council this date has been determined as the initial date the Director of Corporate Services certifies and the Corporate Governance and Audit Committee approves the accounts.

19 Private Finance Initiatives (PFI)

The authority accounts for its Private Finance Initiative contracts in accordance with application note F of Financial Reporting Standard 5 – Reporting the Substance of Transactions (FRS5), which specifies that properties used to provide services under PFI contracts should be recognised as an asset by whichever party has access to the risks and benefits of the property.

Where the authority concludes that no item is required to be recognised as an asset on its balance sheet as a result of a contract, then in accordance with the Local Authorities (Capital Finance and Accounting) Regulations 2003 (si 3146) as amended by the Local Authorities (Capital Finance and Accounting) (England) Regulations 2004 (si 534), payments made under that contract are accounted for as expenditure for capital purposes in relation to a credit arrangement with nil initial value. The overall effect of this is that the payments made under the contract are charged to the revenue account.

Those assets which have been contributed to PFI contracts by the authority are accounted for as a deferred consideration, which is charged to the revenue account over the life of the contract.

The acquisition of those assets which will transfer back to the authority's ownership at the end of PFI contracts at nil or predetermined cost are accounted for by identifying the element of the contract payments which notionally relates to their acquisition and treating it as a prepayment, creating a long term debtor which is built up over the life of the contract. Application Note F of FRS 5 requires that the value of the long term debtor balance to be built up should be the value which, at the time that the contract is entered into, the authority expects will be the fair value of these assets at the time of their transfer. In order to arrive at an estimate of this value, the authority values the assets in accordance with Accounting Policy 14 above and applies depreciation to this initial value on a straight-line basis over the life of the contract. In order to reflect expected price increases during the life of the contract,

19

the depreciated value is then adjusted for inflation, using the Treasury's long term inflation target figure. The resulting expected value for the assets is built up as a long term debtor in annual equal amounts over the life of the contract, in accordance with the SORP.

If during the life of the contract the expected transfer value of the assets falls, this would treated as an impairment and a provision for the fall in the expected value would be created.

20

Consolidated Revenue Account This statement sets out the net cost of the services for which the council is responsible, corporate income and expenditure relating to the council as a whole, and appropriations to and from reserves. It also shows how the total net cost of the council was financed by general government grant and local taxpayers.

ALAN T GAY CPFA DIRECTOR OF CORPORATE SERVICES

2004/05net

expenditure £000sgross

expendituregross

incomenet

expenditure notes

Continuing Operations(6,107) Central Services 71,548 73,826 (2,278)3,264 Court Services 706 - 706

142,686 Cultural, Environmental and Planning Services 240,148 83,065 157,083413,192 Education 717,596 265,017 452,57959,525 Highways, Roads, and Transport 83,074 17,603 65,47154,539 Housing 445,439 350,071 95,368

213,733 Social Services 343,007 124,158 218,849- Exceptional item – provision for equal pay 19,598 - 19,598 25

14,595 Corporate and Democratic Core 15,258 - 15,2589,276 Non-distributable costs (24,800) - (24,800)

904,703 Net cost of services 1,911,574 913,740 997,834 1

1,090 Parish Council precepts 1,16445 (Surpluses) / deficits on trading undertakings 1,114 4

(15,052) Asset Management Revenue Account (23,431) 3757 (Gains) / losses on the repurchase or early settlement of borrowing 2,384

7,690 Pension interest costs and expected return on assets 11,609 647,589 Housing capital receipts contributed to government pool 39,788 2

(774) Interest and investment income (3,074)

946,048 Net operating expenditure 1,027,388

216 Transfer to / (from) Housing Revenue Account balances 7,627 8(7,676) Net transfers to / (from) other earmarked reserves (2,010) 7

(17,074) Transfer to / (from) Major Repairs Reserve (37,400) H6(23,444) Transfer to / (from) Pensions Reserve 4,264 6(47,589) (39,788) 2(91,495) Transfer to / (from) Capital Financing Account (157,076) 5

758,986 Amount to be met from government grant and local taxpayers 803,005

(360,116) General government grants (352,865)(200,156) Non-domestic rates redistribution (238,346)(199,007) Demand on Collection Fund (211,757)

- Transfer of Collection Fund Surplus (789)

(759,279) Total financing (803,757)

(293) (Surplus) / deficit for the year (752)

2005/06

Transfer to / (from) Usable Capital Receipts

21

Consolidated Balance Sheet The Consolidated Balance Sheet summarises the financial position of the whole council, including the Housing Revenue Account and the Collection Fund, at the end of the financial year.

ALAN T GAY CPFA DIRECTOR OF CORPORATE SERVICES

31 March 2005 £000s 31 March 2006 notes

Long-term assets3,048,467 Tangible fixed assets 3,691,244 11.1

14,344 Intangible fixed assets 14,219 11.26,721 Long-term investments 6,650 11.3

23,301 Long-term debtors 30,352 11.4

3,092,833 3,742,465Current assets

127,132 Debtors 148,076 12.131,399 Investments 79,207 12.22,992 Stocks and work in progress 2,603 12.3

0 Landfill Allowances 4,706 12.4794 Cash in hand 569

162,317 235,161Current liab ilities

(177,328) Creditors (224,865) 13.1(115,279) Borrowing repayable on demand or within one year (39,968) 13.2

(2,741) Cash overdrawn (2,302)

(295,348) (267,135)

2,959,802 Total assets less current liabilities 3,710,491

Long-term liab ilities(842,685) Long-term borrowing (1,092,976) 14.1(530,693) Net pensions liability (508,897) 6(10,765) Provisions (31,699) 14.2(10,336) Deferred liabilities (30,395) 14.3

(1,394,479) (1,663,967)

1,565,323 Total assets less liabilities 2,046,524

Financed by

Deferred items12,162 Deferred credits 10,691 15.1

(76,652) Deferred premiums (73,891) 15.2(2,410) Deferred consideration (8,002) 15.3

(66,900) (71,202)Capital accounting balances

1,397,589 Fixed Asset Restatement Account 1,858,933 16.1546,176 Capital Financing Account 510,180 16.2192,002 Government grants and contributions deferred 228,268 16.3

650 Usable Capital Receipts Reserve 1,530 17

2,136,417 2,598,911Notional reserve

(530,693) Pensions Reserve (508,897) (508,897) 6

Reserves9,859 General Fund Reserve 10,6114,603 Housing Revenue Account Reserve 12,230

(1,533) Collection Fund Reserve (1,156)13,570 Other earmarked reserves 6,027

26,499 27,712

1,565,323 Total reserves and balances 2,046,524

22

Cash Flow Statement This consolidated statement summarises the inflows and outflows of cash arising from transactions with third parties for revenue and capital purposes.

2004/05 £000s 2005/06 notes

Revenue activities:Cash outflows

(729,371) Cash paid to and on behalf of employees (717,780)(738,381) Other operating cash payments (740,486)(65,954) Housing Benefit paid out (70,784)(32,976) Precepts paid (35,472)

(1,566,682) (1,564,522)Cash inflows

687,381 Government grants 724,413 19395,578 Income from local taxation 449,505 20189,793 Cash received for goods and services 184,998156,298 Rents (after rebates) 162,724153,370 Other operating cash receipts 183,666

1,582,420 1,705,306

15,738 Net cash flow from revenue activities 140,784 21.1

Servicing of finance:Cash outflows

(43,970) Interest paid (50,674)(681) Finance lease interest paid (1,047)

Cash inflow774 Interest received 2,958

(43,877) (48,763)

168 Dividends from associates 78

Capital activities:Cash outflows

(219,360) Purchase of fixed assets (324,638)(16,346) Other capital cash payments (19,144)

- Long term loans (9,000)Cash inflows

38,774 Sale of fixed assets 83,62126,672 Capital grants received 51,835

450 Repayment of long-term debtors 14314,942 Other capital cash receipts 1,302

(154,868) (215,881)Management of liquid resources:Cash inflows / outflows

(27,133) Net (increase) / decrease in liquid resources (47,808) 21.2

(209,972) Net cash inflow / (outflow) before financing (171,590)

Financing:Cash outflows

(1,508,031) Short-term loans repaid (343,761)(138,639) Loans repaid (73,891)

(1,132) Finance lease principal repayments (2,768)Cash inflows

1,484,771 New short-term loans raised 304,924375,000 New loans raised 287,300

211,969 171,804 21.2

1,997 Increase / (decrease) in cash 214 21.2

23

Statement of Total Movements in Reserves This statement brings together all of the council’s recognised gains and losses during the financial year. Movements in the council's capital reserves, which do not appear in the Consolidated Revenue Account, are also analysed in this statement in order to explain how they have arisen.

2004/05 £000s notes

Movements in revenue resources293 General Fund surplus / (deficit) 752216 Housing Revenue Account surplus / (deficit) 7,627687 Increase / (decrease) on Collection Fund 377

(7,424) Net increase / (decrease) on other revenue reserves (7,543) 7(23,444) Appropriations to / (from) pensions reserve 4,264 6.1

(284,653) Actuarial gains / (losses) relating to pensions 17,532 6.4

(314,325) 23,009Movements in realised capital resources

502 Increase / (decrease) in useable capital receipts 880 17

502 880Movements in unrealised value of long term assets

(15,485) Gains / (losses) on revaluation of fixed assets 597,086- Changes in value of fixed assets due to general price changes (262)

(15,485) 596,824 21.3Value of assets sold, decommissioned or realised

(70,572) Fixed assets (135,409)(64) Long term investments realised (71)

(70,636) (135,480) 21.3Movements in amounts set aside to finance capital investment

44,446 Capital resources allocated to fund capital investment 86,112(70,530) Net revenue resources used to fund capital investment (119,748)

(481) Long term debtors (financed by borrowing) repaid (2,360)36,303 Increase / (decrease) on deferred government grants 36,266

9,738 270 21.4

(390,206) Total recognised gains and losses 485,503

2005/06

24

Explanatory notes to the main financial statements These notes provide information that supports, and helps in interpreting, the main financial statements. The notes, where practical, follow the order in which topics first appear in the statements..

In addition the section disclosure notes, at the end of these accounts, covers other matters of interest such as specific types of spending including employee pay and members’ allowances, pooled budgets, transactions with related parties, and the council’s stewardship of various trust funds.

1 Net cost of services

The Statement of Accounts follows the Best Value Accounting Code of Practice. The Consolidated Revenue Account on page 20 therefore uses national standard definitions of services so that readers can easily compare like elements in the accounts of other local authorities.

Local authorities organise service delivery in response to the needs and conditions in their area. This table re-analyses the net cost of services in the Consolidated Revenue Account in terms of the organisational structure that Leeds City Council used in 2005/06.

Net cost of services – Leeds City Council organisational units

Within the CRA for 2004/05 Court Services included net expenditure of £2,354k relating to the authority’s contribution to the Magistrates Courts Service (included within the central accounts line in the above table). From 1st April 2005 this service transferred to HM Court Services, for 2005/06 the is no corresponding expenditure.

2 Housing capital receipts

Local Authorities are required by statute to pay a proportion of specified housing related capital receipts to the government for redistribution. This payment of £39,788k is disclosed as expenditure within the net operating expenditure of the authority (£47,589k in 2004/05). The actual money received from the sale of housing assets is initially charged to the Useable Capital Receipts Reserve (see note 16) and appropriated to revenue to fund the payment to the national pool.

3 Asset Management Revenue Account

To reflect the economic cost of using fixed assets in providing services, capital charges are made to service revenue accounts. The capital charges made cover depreciation (representing the cost of using an asset), impairment (representing loss in the value of an asset arising from a consumption of economic benefits) and a capital financing charge calculated by applying a

2004/05 £000s

148 1 April 650

Receipts in year39,276 Usable capital receipts 84,50147,589 Housing Revenue Account pooled receipts 39,788

86,865 124,289Applied

(38,774) To fund new capital expenditure (83,621)(47,589) Transfer to Consolidated Revenue Account (39,788)

(86,363) (123,409)

650 31 March 1,530

2005/06

25

notional interest rate to the amount at which the asset is included in the balance sheet (representing the cost of tying up resources in an asset). The purpose of the Asset Management Revenue Account is to ensure that these capital charges do not impact on the level of Council Tax or Housing Rents and that the authority's accounts are charged only with the capital financing costs.

Asset Management Revenue Account

4 Trading and inter-authority services

The following note provides a full breakdown of the trading results of the Authority, along with detailed information on two specific trading areas (as required by Local Government reporting requirements).

4.1 Trading services

Trading services are disclosed in line with the requirements of the Best Value Accounting Code of Practice (BVACoP) and are mainly activities of a commercial nature which are financed substantially by charges made to recipients of the service. In the table below, trading accounts have been classified into two types: trading operations identified below the Net Cost of General Fund Services in the Consolidated Revenue Account and those that under the BVACoP should be included in individual service accounts.

Trading services

2 0 0 4 / 0 5 £ 0 0 0 s 2 0 0 5 / 0 6

3 6 0 , 1 1 6 R e v e n u e S u p p o r t G r a n t 3 5 4 , 1 3 21 7 8 , 9 2 1 D e p a r t m e n t o f W o r k a n d P e n s i o n s g r a n t s f o r r e b a t e s 1 9 4 , 0 8 3

5 , 2 7 0 P r i v a t e F i n a n c e I n i t i a t i v e 7 , 0 0 05 , 2 6 1 B e n e f i t s a d m i n i s t r a t i o n s u b s i d y 5 , 3 0 63 , 1 8 2 E u r o p e a n S o c i a l a n d R e g i o n a l D e v e l o p m e n t f u n d s 3 , 0 4 31 , 2 4 2 N a t i o n a l N o n - D o m e s t i c R a t e s c o l l e c t i o n a l l o w a n c e 1 , 2 3 5

( 4 , 5 7 7 ) H o u s i n g R e v e n u e A c c o u n t s u b s i d y -6 , 1 4 2 N e i g h b o u r h o o d R e n e w a l F u n d 6 , 2 3 66 , 8 7 0 S i n g l e R e g e n e r a t i o n B u d g e t 2 , 6 5 2

4 4 , 3 9 9 S c h o o l s S t a n d a r d s 4 8 , 4 3 41 3 , 5 7 9 D e p a r t m e n t f o r E d u c a t i o n a n d S k i l l s 1 4 , 9 4 5

8 , 9 0 4 L e a r n i n g a n d S k i l l s C o u n c i l 3 , 0 4 98 9 2 H i g h e r E d u c a t i o n F u n d i n g C o u n c i l 1 , 0 4 9

3 , 3 6 1 E d u c a t i o n m a i n t e n a n c e a l l o w a n c e s 1 1 31 , 9 6 2 O t h e r e d u c a t i o n g r a n t s 4 , 9 0 2

6 , 5 9 9 S o c i a l S e r v i c e s A c c e s s a n d S y s t e m s C a p a c i t y 8 , 3 3 72 , 4 0 5 C h i l d c a r e g r a n t 4 , 2 2 65 , 0 9 1 P r e s e r v e d R i g h t s 3 , 9 4 03 , 1 5 4 M e n t a l H e a l t h 3 , 3 4 85 , 7 1 5 R e s i d e n t i a l A l l o w a n c e 3 , 0 1 06 , 4 5 1 O t h e r s o c i a l c a r e g r a n t s 1 0 , 2 1 1

2 2 , 4 4 2 O t h e r 4 5 , 1 6 2

6 8 7 , 3 8 1 7 2 4 , 4 1 3

notesturnover (surplus) /

deficit £000sturnover (surplus) /

deficit

(Surplus) / deficit from trading operations:98,222 (357) Support services provided in limited competition 108,044 (736) a30,716 461 Property maintenance 18,449 1,820 b14,258 (52) Catering service for schools 15,147 108 b3,589 136 Cleaning service for schools 3,702 32 b

966 (21) Contracts with other public bodies 923 (4) c711 44 Personnel training services 793 (28) dn/a (166) Leeds Bradford International Airport dividend n/a (78)

148,462 45 147,058 1,114

Significant trading services included in Net Cost of Services:8,174 (3,888) Car parks 9,384 (3,032) e4,982 (1,443) Markets 5,130 (1,499) f2,224 (376) Building Control charges 2,476 (434) g1,231 362 Golf courses 1,085 251 h

867 238 Industrial units 930 (258) i

17,478 (5,107) 19,005 (4,972)

2004/05 2005/06

26

a Support services provided in limited competition include former Direct Service Organisations and central departments which do not compete with external suppliers but where budget holders are free to decide the quantity and type of work based on a quoted price. The charges for these services are not set with the primary aim of generating a profit, the surplus element relates to the sum of a number of under and over recovery of costs for the individual services. Any material surplus or deficit is reallocated back to clients.

b These services are provided in a free internal market and therefore are in direct competition with external suppliers. The deficit incurred on Property Maintenance is due to a combination of factors which reflect the fact that the service is still responding to a significant reduction in its trading base as a result of the loss of maintenance contracts with the council’s housing Arms Length Management Organisations.

c These figures relate to contracts under the Local Authority (Goods and Services) Act 1970. Further details of this work can be found in note 4.2 below.

d Council departments are able to choose whether they purchase training services from Corporate Services or from the private sector.

e The council operates a number of pay and display car parks throughout the city. Income and expenditure for these car parks is included in the figures for Highways, Roads and Transport Services in the Consolidated Revenue Account.

f The council operates various retail and wholesale markets facilities throughout the city. Income and expenditure for Markets are included in the Consolidated Revenue Account within the figures for Cultural, Environmental and Planning Services.

g These figures relate to chargeable work carried out under the Local Authority Building Control Regulations. Further details of income and expenditure for the Building Control Unit can be found in note 4.3 below. The Building Control Unit is included within the Cultural, Environmental and Planning Services figures in the Consolidated Revenue Account.

h The council is currently responsible for the operation of four golf courses. Income and expenditure for golf courses are included in the Consolidated Revenue Account within the figures for Cultural, Environmental and Planning Services.

i The Property Services division is responsible for the management of the council's extensive non-residential property portfolio, including industrial units, with a view to maximising economic prosperity and employment potential. Income and expenditure for Property Services are included in the Consolidated Revenue Account within the figures for Cultural, Environmental and Planning Services.

4.2 The Local Authority (Goods and Services) Act 1970

The authority is required to provide details of work carried out for other public bodies. The purpose of this disclosure is to demonstrate the extent to which the authority is engaged in trading activities which would not otherwise be part of its function as a local authority.

All local authorities are allowed to supply goods and services to a number of prescribed public bodies by the 1970 act. The income and expenditure in respect of these activities are included in the authority's Consolidated Revenue Account. Details of the organisations supplied by the authority are shown below:

The Local Authority (Goods and Services) Act 1970

Expenditure Income £000s Expenditure Income

440 453 Other local authorities 435 4378 8 Health authorities and trusts 23 23

497 505 Other public bodies 461 463

945 966 919 923

2004/05 2005/06

27

4.3 Building Regulations charges

The Local Authority Building Control Regulations require the disclosure of information regarding the setting of charges for the administration of the building control function. However, certain activities performed by the Building Control Unit cannot be charged for, such as providing general advice and liaising with other statutory authorities. The statement below shows the total cost of operating the Building Control Unit divided between the chargeable and non-chargeable activities. The chargeable element of the unit is accounted for as a trading service under the Best Value Accounting Code of Practice (see note 4.1 above). The non-chargeable activities of the unit are included in the Cultural, Environmental and Planning Services figures in the Consolidated Revenue Account.

Building Regulations charges

5 Transfer to the Capital Financing Account

The Asset Management Revenue Account (note 3) attempts to minimise departures from generally accepted accounting practice for charging capital financing costs to the revenue account. However under the Local Government Act 2003 there is a requirement to set aside a minimum revenue provision (MRP) from the Revenue Account for debt repayment. Therefore in order to reflect the true cost of capital to government grants and local taxpayers the following adjustments have been made in the appropriation section of the Consolidated Revenue Account:

Transfer to Capital Financing account

2004/05 £000s

17,247 Minimum Revenue Provision (MRP) 19,493

(111,022) Depreciation and impairment (170,115)5,647 Government grants deferred 15,280

(105,375) (154,835)

(88,128) Excess of depreciation and impairment over MRP (135,342)

(10,583) Deferred charges net of grants and contributions written off (28,928)5,721 Housing Revenue Account – voluntary set aside -1,559 Revenue contribution to deferred prepayment 1,962

27 Revenue contribution to capital 5,434(91) Deferred consideration written down (202)

(91,495) Transfer from Consolidated Revenue Account (157,076)

2005/06

2004/05 2005/06Chargeable Non-

chargeableTotal

£000sChargeable Non-

chargeableTotal

Expenditure1,025 423 1,448 Employee expenses 1,207 90 1,297

182 49 231 Premises 111 1 11219 7 26 Supplies and services 34 - 3462 23 85 Transport 82 1 83

560 225 785 Central and support services 607 9 616

1,848 727 2,575 2,041 101 2,142

Income(2,224) - (2,224) Building Regulations charges (2,475) - (2,475)

- (53) (53) Miscellaneous income - (1) (1)

(2,224) (53) (2,277) (2,475) (1) (2,476)

(376) 674 298 (Surplus) / deficit (434) 100 (334)

28

6 Pensions

The authority is required to account for its pension costs under FRS17 (Retirement Benefits). This means that FRS 17 based pensions assets and liabilities are included in the accounts, rather than the actual payments made in relation to pensions during the year. The objective of FRS 17 is to ensure that the authority's financial statements reflect at fair value the future pension liabilities which have been incurred, and the extent to which assets have already been set aside to fund them. This note explains the accounting requirements and actuarial assumptions used in implementing FRS 17 (Retirement Benefits) in the accounts.

6.1 Summary of FRS 17 Impact

In order to show the impact of FRS 17 on the accounts, the following table summarises the transactions made on the Consolidated Revenue Account and the Consolidated Balance Sheet to convert from actual pensions payments made to FRS 17 based pensions accounting.

FRS17 transactions

The net pensions liabilities and the corresponding pensions reserve in the Consolidated Balance Sheet represents a significant decrease in the overall level of reserves. However, this does not represent a reduction in the cash reserves held by the authority, and does not impact on council tax levels. Under the Local Authorities (Capital Finance) (Amendment No2) (England) Regulations, local authorities are not required to fund expenditure relating to an FRS17-based pensions reserve from council tax. Further details of the transactions within the revenue account and the balances that comprise the pension liability are shown below.

6.2 West Yorkshire Pension Fund (WYPF)

The West Yorkshire Pension Fund is treated as a defined benefit scheme under FRS 17, since the authority's liabilities to its current and former employees can be identified within the fund, and the authority will be liable to meet these, irrespective of the future performance of the fund. The figures relating to West Yorkshire Pension Fund assets and liabilities given below include both mainstream pensions and discretionary increases to pensions.

The last full actuarial valuation for the WYPF was carried out as at March 2004. An interim actuarial review was carried out in order to calculate the figures required under FRS 17. In calculating the authority's assets and liabilities, the fund's actuaries had to make a number of assumptions about events and circumstances in the future, meaning that the results of actuarial calculations are subject to uncertainties within a range of possible values. The following actuarial assumptions were made :

2004/05 2005/06WYPF Teachers Total WYPF Teachers Total

In the Consolidated Revenue Account17,033 (1,279) 15,754 Transactions in net cost of services (13,546) (2,327) (15,873)3,846 3,844 7,690 Transactions in operating expenditure 7,770 3,839 11,609

(20,879) (2,565) (23,444) Appropriation to / (from) pension reserve 5,776 (1,512) 4,264

In the Consolidated Balance Sheet(456,772) (73,921) (530,693) Pension liability (429,934) (78,963) (508,897)456,772 73,921 530,693 Pensions reserve 429,934 78,963 508,897

29

WYPF – actuarial assumptions

At 31st March 2006, the fund's actuaries estimated that the authority had the following assets and liabilities relating to pensions payable through the West Yorkshire Pension Fund :

WYPF – assets and liabilities

The following table shows the movements in the net pension fund assets/(liability) during the year. Amounts relating to Service expenditure shown below appear within the Net Cost of Service in the Consolidated Revenue Account and Finance gains and losses appear within Net Operating Expenditure. Actuarial gains and losses are shown in the Statement of Total Movements in Reserves.

31/03/2005 31/03/2006

Financial assumptions2.9% Rate of inflation 2.9%4.7% Rate of increase in salaries 4.7%2.9% Rate of increase in pensions 2.9%5.4% Discount rate 4.9%

Expected rate of return on assets7.5% Equities 7.0%4.7% Government bonds 4.3%5.4% Other bonds 4.9%6.5% Property 6.0%4.8% Cash/Liquidity 4.5%

n/a Other 7.0%

Split of assets between investment categories74.9% Equities 73.9%10.6% Government bonds 6.9%2.0% Other bonds 4.8%5.3% Property 5.1%7.2% Cash / liquidity 6.2%

n/a Other 3.1%

31/03/2005 £000s 31/03/2006

(1,674,019) Estimated present value of liabilities (1,952,154)1,217,247 Fair value of assets 1,522,220

(456,772) Net asset / (liability) (429,934)

30

WYPF – movement in net pension asset / (liability)

Within the above table is a net gain on Past service costs. This arose from changes to the provisions of the local government pension scheme which came into force on 1st April 2006. As the changes were approved prior to 31st March 2006, the authority’s FRS 17 figures have been prepared in accordance with the amended provisions. The change allows members to take a higher lump sum than the current 3/80ths basis in return for commuting part of their pension. It is less costly for the pension fund to provide for the lump sum than the pension and has therefore had the effect of reducing the employer’s pension costs. The actuaries have assessed that this will result in a past service gain for 2005/06 of £29,762k. The primary cause of the change from an estimated net liability of £456.8m at 31st March 2005 to an estimated net liability of £429.9m at 31st March 2006 has been the impact of actuarial gains and losses. These represent the extent to which actual outcomes during 2005/06 differed from the assumptions used in calculating the estimated assets and liabilities at 31st March 2005, together with the consequent revision of these assumptions going forward. The table below shows these changes as percentages of the overall assets and liabilities.

WYPF – actuarial gains and losses

The net actuarial gain of £21,061k comprises an actuarial loss of £158,298k as a result of changes in the demographic and financial assumptions for the liabilities. This is as a result of the use of more conservative assumptions for 2005/06 due to the fall in yields on corporate bonds during the year. The actuarial loss of £42,384k representing the difference between the

2004/05 2005/06net asset / (liability) £000s net asset / (liability)

(157,950) 1 April (456,772)

Service expenditure(48,330) Current service cost (54,108)(3,905) Past service cost / curtailment cost / settlements 28,12135,202 Employer contributions 39,534

(17,033) 13,547Finance gains and losses

(79,762) Interest on pension liabilities (90,796)75,916 Expected return on assets 83,026

(3,846) (7,770)Actuarial gains and losses

(287,648) Change in assumptions (158,298)66,686 Asset gain / (loss) 221,743

(56,981) Liability gain / (loss) (42,384)

(277,943) 21,061

(456,772) 31 March (429,934)

£000s

(158,298)

(42,384)

221,743

21,061

Difference between expected and actual return on assets

Changes in demographic and financial assumptions affecting estimation of liabilities

Difference between actuarial assumptions on liabilities and actual experience

percentage

14.6% of assets

gain / (loss)

2.2% of liabilities

8.1% of liabilities

1.1% of liabilities

31

assumptions and actual experience for the liabilities is as a result of changes in the method of valuing secondary benefits payable on death or disability. These liabilities are outweighed by the asset gain of £221,743k as a consequence of the strong performance of the investments of the fund over the year to 31st March 2005, when compared to the expected returns.

The £429.9m net liability relating to the WYPF represents the difference between the value of the authority's pension fund assets at 31st March 2006 and the estimated present value of the future pension payments to which it was committed at that date. These pensions liabilities will be paid out over a period of many years, during which time the assets will continue to generate returns towards funding them. Any significant changes in global equity markets after 1st April 2006 would also have an impact on the capital value of the pension fund assets. The extent to which the expected future returns on assets are sufficient to cover the estimated net liabilities was considered by the actuaries in their full actuarial review of the Pension Fund, carried out as at 31st March 2004. This concluded that the Pension fund was 82% funded, and set contribution rates for the next three years which are designed to move the fund towards a fully funded position.

6.3 Teachers' pensions

Under the Accounting Code of Practice guidance on FRS 17, the Teachers Pension scheme is classed as a multi-employer defined benefit scheme for which the liabilities of individual employers cannot be separated, meaning that it should be treated in the same way as a defined contribution scheme under FRS 17. The 2005/06 contribution rate for the teachers pension scheme was 13.5% of pensionable pay. The actual amount payable to the teachers pension scheme for 2005/06 was £26,006k. However, the authority has granted discretionary additional pensions to some of its former teachers, for which it is directly responsible. Under FRS 17 guidelines, these discretionary pensions are required to be treated as a defined benefit scheme, with an FRS 17 liability being disclosed. As the authority funds these pensions on a 'pay as you go' basis, there are no pensions assets for this scheme.

In calculating the pension liability for discretionary teachers pensions, the authority's actuaries have used the following assumptions :

Teachers’ discretionary pensions – actuarial assumptions

The Authority's FRS 17 pensions liability in respect of teachers discretionary pensions has been calculated as :

Teachers’ discretionary pensions – assets and liabilities

31/03/2005 31/03/2006

Financial assumptions2.9% Rate of inflation 2.9%2.9% Rate of increase in pensions 2.9%5.4% Discount rate 4.9%

31/03/2005 £000s 31/03/2006

(73,921) Estimated present value of liabilities (78,963)

32

Teachers’ discretionary pensions – movement in net pension asset / (liability)

The actuarial gains and losses included above represent the extent to which actual outcomes during 2005/06 differed from the assumptions used in calculating the estimated assets and liabilities at 31st March 2005. The table below shows these changes as percentages of the overall assets and liabilities.

Teachers’ discretionary pensions – actuarial gains and losses

6.4 Actuarial gains and losses on the pensions reserve

The authority is required to disclose actuarial gains and losses on its pensions reserve for the current and up to four previous years. Actuarial gains and losses represent the extent to which actual outcomes have differed from the assumptions which were used in calculating FRS 17 figures. They are recognised as movements in reserves, with no impact on the Consolidated Revenue Account.

The actuarial gains and losses identified as movements on the WYPF Pensions reserve can be analysed into the following categories, measured as absolute amounts and as percentages of the assets or liabilities at 31 March for each year:

2004/05 2005/06net asset / (liability) £000s net asset / (liability)

(64,646) 1 April (73,921)

Service expenditure- Current service cost -

5,239 Employer contributions 5,648(3,960) Past service cost / curtailment cost / set (3,321)

1,279 2,327Finance gains and losses

(3,844) Interest on pension liabilities (3,839)

(3,844) (3,839)Actuarial gains and losses

(7,707) Change in assumptions (3,530)997 Liability gain / (loss) -

(6,710) (3,530)

(73,921) 31 March (78,963)

£000s

(3,530)

-

(3,530)

gain / (loss)percentage

4.5% of liabilities

Changes in demographic and financial assumptions affecting estimation of liabilities

4.5% of liabilities

Difference between actuarial assumptions on liabilities and actual experience

0% of liabilities

33

Movements on the West Yorkshire Pension Fund reserve

The actuarial gains identified as movements on the Teacher' Discretionary Pensions reserve can be analysed into the following categories, measured as absolute amounts and as percentages of assets or liabilities at 31 March for each year:

Movements on the Teachers' Discretionary Pensions reserve

7 Reserves

Leeds City Council has a number of earmarked reserves for specific revenue and capital purposes.

Earmarked Reserves

£000s £000s £000s £000s

2002/03 (312,447) -34.5% (312,447)2003/04 145,773 13.2% 145,7732004/05 66,686 5.5% (56,981) -3.4% (287,648) -17.2% (277,943)2005/06 221,743 14.6% (42,384) -2.2% (158,298) -8.1% 21,061

Differences on liabilities

between expected and actual return on assets

between acturial assumptions about liabilities and actual

experience

changes in demographic and financial assumptions

used in estimating

Total differences

Differences on assets

£000s £000s £000s £000s

2002/03 306 0.5% 3062003/04 (505) 0.8% (505)2004/05 997 1.3% (7,707) 10.4% (6,710)2005/06 - - (3,530) -4.5% (3,530)

Differences on assets Differences on liabilities Total differences

between expected and actual return on assets

between acturial assumptions about liabilities and actual

experience

changes in demographic and financial assumptions

used in estimating

34

a Schools reserves

In accordance with section 48 of the School Standards and Framework Act 1998, the Leeds scheme for the financing of schools provides for the carry forward of individual school surpluses. However, a temporary transfer of £1.0m from schools reserves to the Consolidated Revenue Account has been made in 2005/06. This is to be used to pay for Voluntary Early Retirement costs relating to Education department staff, and is to be repaid over the next 5 years from Consolidated Revenue Account resources. In addition, in respect of the previous years a repayment of £0.7m was made to schools reserves from the Consolidated Revenue Account, representing the repayment of one fifth of original balance borrowed (the net amount of VER borrowing outstanding from previous years stood at £1.3m). Consequently the actual level of reserves available to schools is £6.8m. In the event of schools requiring to call on the whole of their available reserves, the amounts not yet repaid would be transferred from the General Fund Reserve.

b Other earmarked reserves

The authority has also set aside several reserves for various purposes including future payments to contractors under a Private Finance Initiative scheme; a reserve for the Landfill Allowances Trading scheme and a ring fenced reserve for the taxi and private hire licensing service. In addition, in order to fund consequential losses incurred which are not covered by fire insurance, schools have borrowed against these reserves (£0.7m still to be repaid as at 31st March 2005) and are making annual repayments.

c Major repairs reserve

The Accounts and Audit regulations require local authorities to maintain a major repairs reserve and, unlike other reserve, authorities are able to charge capital expenditure directly to the reserve. Consequently the movement in the year on this reserve is not included in the appropriation to or from earmarked reserves in the Consolidated Revenue Account. Further details of the transactions within the major repairs reserve for the financial year can be found in note H6 to the Housing Revenue Account on page XX.

8 Housing Revenue Account (HRA)

The HRA income and expenditure has been consolidated into the revenue account line by line and the surplus of £7.6m (£0.2m surplus in 2004/05) has been appropriated to the Housing Revenue Account Reserve.

Further details of the HRA can be found on pages 61 to 68.

£000s31/03/2005 net

movements31/03/2006

Earmarked revenue reservesSchools reserves 8,035 (4,425) 3,610 aOther reserves 2 2,415 2,417 b

Total earmarked reserves 8,037 (2,010) 6,027Major repairs reserve 5,533 (5,533) - c

Total reserves 13,570 (7,543) 6,027

35

9 Leasing

The Statement of Recommended Practice requires the Authority to disclose it’s obligations under operating and finance leases, along with a statement on the assets it holds and leases out to third parties.

9.1 Operating leases

a Where the authority is the lessee:

The authority has entered into agreements to lease vehicles, plant and equipment. The amount paid under these arrangements in 2005/06 was £3.5m.

The authority has entered into agreements to lease land and buildings. The amount paid under these arrangements in 2005/06 was £3.4m.

At 31st March 2006 the authority was committed to make payments of £6.2m in 2006/07 under operating leases as follows:

Operating lease payment commitments for 2006/07

b Where the authority is the lessor:

The authority has granted a number of leases on land and buildings, including a number of investment properties, generating rentals in 2005/06 of £9,525k. The following table shows the value of assets held for use in operating leases, and the related accumulated depreciation charge.

Assets leased to third parties

9.2 Finance leases

a Where the authority is the lessee:

The authority has acquired new heating systems for its council houses, with rentals payable under these arrangements in 2005/06 of £2,149k (£911k in 2004/05). Financing costs of £906k have been charged to revenue by way of the Asset Management Revenue Account and the principal element of £1,242k used to write down the deferred liability on the balance sheet. The

£000s

land and buildings

vehicles,plant and

equipment

Leases expiring in 2006/07 140 721Leases expiring between 2007/08 and 2011/12 678 1,166Leases expiring after 2011/12 2,944 599

3,762 2,486

gross value depreciation to date

income 2004/05 £000s

gross value depreciation to date

income 2005/06

39,571 (3,056) 7,498 Operational properties 44,062 (4,014) 9,1865,090 - 330 Investment properties 4,785 - 339

44,661 (3,056) 7,828 48,847 (4,014) 9,525

36

acquired assets have been classified on the balance sheet as plant and equipment. The authority is not committed to any further acquisitions under this contract.

The authority has also acquired the use of software licenses and IT equipment with rental payments of £1,460k in 2005/06 (£901k in 2004/05). Financing costs of £142k have been charged to revenue by way of the Asset Management Revenue Account and the principal element of £1,328k used to write down the deferred liability on the balance sheet. The licenses acquired have been classified on the balance sheet as an intangible asset, and the IT equipment is held within tangible fixed assets.

The following table analyses by category the value of assets held under finance leases at the year end. Depreciation is charged on opening balances in accordance with the authority's accounting policy.

Assets held under finance leases

Outstanding obligations under these leases (excluding finance costs) at 31st March 2006, included within the figure for deferred liabilities above, are:

Amounts due under finance leases (excluding financing costs)

b Where the authority is the lessor:

There are no finance leases where the authority is the lessor.

10 Private Finance Initiative

The following note outlines the planned and committed contracts under PFI arrangements.

10.1 PFI Schemes where service delivery has commenced

The following details the Authority’s commitments under PFI contracts:

a Leeds Seven Schools PFI Project

On 31st October 2001 the authority entered into a 29-year contract under the Private Finance Initiative (PFI) for the provision and maintenance of five primary schools and two secondary schools in Leeds. Service commenced between June 2002 and August 2003 and the contract

2004/05 £000s 2005/06

7,361 Vehicles, plant and equipment 19,6313,287 Intangible assets 2,699

10,648 22,330

£000s

vehicles,plant and

equipment

intangible assets

Payable within 1 year 2,356 889Payable in 2 to 5 years 6,873 149Payable after 5 years 8,761 -

17,990 1,038

37

will finish on 31st July 2030. The actual contract payments made in 2005/06 amounted to £6.2m (£5.9m in 2004/05). It is estimated that the total payments made to the PFI contractor in 2006/07 will amount to £6.2m, although the actual amount will be affected by the contractor's performance. The authority will receive PFI Special Grant amounting to £3.8m in 2006/07 in support of the project.

b Leeds Primary Schools PFI Project

The authority also entered into a long term contract on 31st March 2004 for the provision and operation of ten Primary Schools in Leeds. Service for the first school started on 30th March 2005 and commencement for the remaining nine schools took place between July and September 2005. The contract will finish on 31st July 2031. The total payments made to the contractor during 2005/06 amounted to £3.7m and it is estimated that the total payments made to the contractor in 2006/07 will amount to £5.6m, although the actual amount will be affected by the contractor's performance. The authority will receive PFI Special Grant amounting to £2.7m in 2006/07 in support of the project. 2006/07 will be the first full operational year for all 10 schools.

c Leeds Combined Secondary Schools PFI Project

The authority entered into a long term contract for the provision and operation of five secondary schools and one primary school in Leeds on 31st March 2005. The first four schools will commence service in September 2006 and the final two in September 2007. The first full financial year when the schools will be operational will be 2008/09 and the contract payments for that year are estimated to be £13.4m with the PFI Special Grant amounting to £9.5m.

d Swarcliffe PFI Project

On 16th March 2005 the authority entered into a 30-year contract for the refurbishment and maintenance of 1,781 council houses. Service commencement took place in June 2005 and the contract expires on 31st March 2035. The actual contract payments made in 2005/06 amounted to £6.1m, and it is estimated that the total payments made to the contractor in 2006/07 will amount to £6.4m.

e Street Lighting PFI Project

The authority entered into a long term contract on 31st March 2006 for the renewal of 80% of the lighting columns in Leeds over a five year period. The contract includes the operation of the street lighting service in Leeds from July 2006 through to the completion of the contract in June 2032. The first full financial year when the five-year capital investment programme will be completed will be 2011/12 and the contract payments for that year are estimated to be £14.8m, inclusive of electricity costs, with the PFI Special Grant amounting to £7.6m.

10.2 Proposed PFI projects where service delivery has not yet commenced

The following PFI schemes have government support but await outline business case approval:

a Little London: Social Housing Project;

b Independent Living: replacement of mental health hostels by independent living units;

c Joint Services Centres: face to face services;

d Building Schools for the Future;

e New Leaf project: leisure centres.

38

11 Assets

The following section provides additional information on the long term assets held on the Consolidated Balance Sheet.

11.1 Tangible fixed assets

a Balance sheet value

This note analyses the total balance sheet value of the authority’s housing, land and other fixed assets. For each category of asset it shows the total of the most recent valuations of individual assets and the adjustments which have been made to arrive at the book value.

Balance sheet value of tangible fixed assets

Operational fixed assets£000s

Council dwellings

Other land &buildings

Infrastructure Vehicles,plant, eqpt

Communityassets

Total operational

Latest certified valuations as at 31 March 2005 1,515,919 1,061,377 - - - 2,577,296

Assets at cost - - 216,639 32,314 24,302 273,255Uplift 253 139,114 - - - 139,367Accumulated depreciation (42,246) (49,907) - - - (92,153)Impairment (3,905) (6,760) - - - (10,665)

Opening Net book value as at 31 March 2005 1,470,021 1,143,824 216,639 32,314 24,302 2,887,100

Revaluations (i) 538,072 95,779 - (216) (47) 633,588Additions 173,608 28,119 39,737 28,074 5,705 275,243Disposals (43,925) (24,092) - - - (68,017)Depreciation (66,157) (39,969) (13,310) (7,596) (443) (127,475)Impairment (13,717) (22,867) - - - (36,584)

Net book value 2,057,902 1,180,794 243,066 52,576 29,517 3,563,855

Non-operational fixed assets£000s

Assets under construction

Surplusassets

Investment properties

Total non- operational

Total fixedassets

Latest certified valuations as at 31 March 2005 - 103,683 16,167 119,850 2,697,146

Assets at cost 40,429 - - 40,429 313,684Uplift - 1,088 1,157 2,245 141,612Accumulated depreciation - (571) (16) (587) (92,740)Impairment - (392) (178) (570) (11,235)

Opening Net book value as at 31 March 2005 40,429 103,808 17,130 161,367 3,048,467

Revaluations (39,263) 14,582 1,469 (23,212) 610,376Additions 60,319 47 162 60,528 335,771Disposals - (67,339) (53) (67,392) (135,409)Depreciation - (632) - (632) (128,107)Impairment - (3,270) - (3,270) (39,854)

Net book value 61,485 47,196 18,708 127,389 3,691,244

39

note (i) Revaluations and reclassifications

The assets revaluation rows in the balance sheet value table include the reclassification on completion of assets which were under construction at 1st April 2005. The value of the completed assets is transferred from assets under construction to the relevant category of operational assets.

b Valuation periods

These tables summarise when the most recent valuations were carried out in each asset category, and so show the progress of the council's five year rolling programme for revaluation. The bases for valuation are set out in accounting policy 14 on page 16.

Valuation periods

c Asset valuations

The authority's fixed assets are valued on the balance sheet in accordance with the Statement of Asset Valuation Principles and guidance notes issued by the Royal Institution of Chartered Surveyors.

All Housing Revenue Account assets have been valued by external commercial valuers. HRA dwellings were valued by Craig Fulton FRICS of DTZ and E H Eaglestone MRICS and A Webb MRICS of King Sturge. All other HRA assets were valued by Stephen Hornby MRICS of Gerald Eve. All other asset valuations were supervised by Chris Gomersall MRICS, Head of Property Services, Development Department, Leeds City Council.

d Major fixed assets

The balance sheet value includes the following items :

Operational fixed assets£000s

Council dwellings

Other land and buildings

Infrastructure Vehicles,plant, eqpt

Communityassets

Total operational

Valued at historical cost - - 243,066 52,576 29,517 325,159Valued at current value in –

1999/00 8 96 - - - 1042000/01 - 7,242 - - - 7,2422001/02 2,008 62,280 - - - 64,2882002/03 836 192,625 - - - 193,4612003/04 801 363,652 - - - 364,4532004/05 489 253,179 - - - 253,6682005/06 2,053,761 301,720 2,355,481

2,057,903 1,180,794 243,066 52,576 29,517 3,563,856

Non-operational fixed assets£000s

Assets under construction

Investment properties

Surplusassets

Total non- operational

Total fixedassets

Valued at historical cost 61,485 - - 61,485 386,644Valued at current value in –

1999/00 - - 26 26 1302000/01 - 2,685 4 2,689 9,9312001/02 - 3,929 304 4,233 68,5212002/03 - 5,252 6,909 12,161 205,6222003/04 - 1,164 13,574 14,738 379,1912004/05 - 1,212 18,963 20,175 273,8432005/06 4,466 7,415 11,881 2,367,362

61,485 18,708 47,195 127,388 3,691,244

40

Major fixed assets

i See note H5.2 (page 64) for further details. ii 105 garages have been demolished, one has been built. iii 3 schools merged to form Fountain Primary School, 3 were replaced by North West

Specialist Inclusive Learning Centre, and 2 were replaced by New Bewerley Community School.

iv Harehills Children’s Centre was rebuilt; 12 sites changed use and are now Public Halls, Community and Civic Centres.

v Roseville sheltered workshop changed classification to Sheltered Workshop; St Michaels and Prospect House hostels closed.

vi Roseville sheltered workshop reclassified. vii Addition of new City Museum premises (previously the Civic Theatre). viii Horsforth, Gildersome and Drighlington previously classified as Public Halls. ix Civic Theatre being transformed into City Museum, Carriageworks Theatre opened. x 3 reclassified as libraries, 12 were previously classified as other educational centres, new

Independent Living Resource Centre. xi Disposal of sixteen properties. xii Stanningley, Redcourt and Westover Road offices merged. 2 magistrates’ courts no longer

owned. Westland Road Depot was previously classified with Depots and Warehouses. Millshaw Office back in use, Burley Neighbourhood Housing Office brought back into use.

xiii Westland Road Depot – change of use to administrative building, Potternewton Depot demolished.

xiv 6km of roads adopted. xv Disposal of eight plots.

Where properties are used for more than one purpose, they have been included as separate assets in the analysis above.

31/03/2005 31/03/2006 note

62,839 Council dwellings 61,201 i7,176 Council garages 7,072 ii

297 Schools 292 iii95 Other educational centres 84 iv87 Homes and homeless hostels 84 v30 Family nursing centres and day centres 3012 Adult training centres and sheltered workshops 13 vi

492 Sports pitches 492446 Parks and recreation grounds 44631 Leisure and recreation centres 316 Art galleries and museums 7 vii

43 Libraries 46 viii1 Theatres 1 ix

22 Public halls, community and civic centres 32 x25 Cemeteries and crematoria 25

332 Shops, shopping centres and markets 33298 Industrial properties and business centres 82 xi62 Administrative buildings and area offices 62 xii12 Depots and warehouses 10 xiii49 Car parks 49

2,992 Roads (km) 2,998 xiv65 Industrial and agricultural land (plots) 57 xv

41

11.2 Intangible assets

Intangible assets are assets that do not have physical substance but are identifiable and are controlled by the authority through custody or legal rights. The £14.2m intangible assets in the table below mainly represent software licenses and the IT development of in-house software systems.

Intangible assets

Intangible assets are amortised on a straight line basis to revenue over the useful economic life of the individual assets. Accounting policy 13 gives further details on accounting for intangible assets.

11.3 Long term investments

The authority has the following investments :

Long term investments

For Leeds Bradford International Airport Ltd the shareholding represents 40% of the share capital of the company and is shown in the Balance Sheet at book value. The terms of the debenture are that it is to be repaid over 25 years on an annuity basis with an annual interest rate of 10.25% (the last repayment will be in the 2011/12 financial year). The amount of the debenture which will be repaid in 2006/07 is £78,169. Due to the significance of the authority's shareholding, Leeds Bradford International Airport Ltd is classed as an associated company of the authority and as such has been included in the authority's group accounts. Further details of the company and its relationship with the authority can be found in the note G9.1 to the Group Accounts on page 86.

Other investments include various stock holdings.

£000s

Purchasedsoftwarelicences

Licences, trademarks and artistic

originals

Total intangible assets

Value as at 31 March 2005Assets at cost 3,287 17,145 20,432Accumulated amortisation - (6,088) (6,088)Impairment - - -

Net book value as at 31 March 2005 3,287 11,057 14,344

Revaluations - - -Additions - 2,029 2,029Amortisation (587) (1,567) (2,154)Disposals - - -Impairment - - -

Net book value 2,700 11,519 14,219

31/03/2005 £000s

Leeds Bradford International Airport Ltd6,000 Shares 6,000

674 Debentures 603

6,674 6,603

47 Other 47

6,721 6,650

31/03/2006

42

11.4 Long term debtors

This note identifies amounts owing to the authority which are being repaid over various periods longer than one year. Long term debt which has become due in less than twelve months has been reclassified as short term debt. The authority's main long term debtors comprise :

mortgages granted to housing associations and occupiers of council dwellings under the council house 'right to buy' scheme;

a joint venture agreement established with Wakefield MDC for the realisation of the authority's portion of the Welbeck waste disposal site;

a loan to Yorkshire County Cricket Club to enable the purchase of the Headingley cricket ground.

amounts owed by Wakefield MDC arising from Leeds City Council's contributions to capital costs of the former West Yorkshire Waste Management Joint Committee, for which Wakefield MDC received the Standard Spending Assessment;

loans to Leeds Metropolitan University in respect of debt still serviced by the authority. In 2005/06 the university took the decision to repay this debt in full;

loans to Leeds Bradford International Airport for capital works; and deferred prepayments relating to Private Finance Initiatives. Under the terms of these

contracts, the assets provided will revert to the authority's ownership at nil additional cost at the conclusion of the contract. In accordance with the SORP, the element of the annual contract payment which is deemed to relate to the acquisition of these assets has been accounted for as a prepayment, which will accumulate over the life of each contract.

Long term debtors

11.5 Deferred Charges

Deferred charges represent capital expenditure which does not generate an asset on the Council’s balance sheet. For 2005/06 the expenditure on deferred charges amounted to £31,418k. This included raising a provision for capital expenditure in settling the authority’s equal pay liability (see note 14.2 below) of £19,598k.

All deferred charges have been charged to revenue in year and reversed out of revenue by way of appropriations to the Capital Financing Account.

31/03/2005 £000s

Mortgages896 Council house mortgages 718460 Other housing mortgages 444

1,356 1,162Other long term debtors

10,686 Wakefield MDC 10,066- Yorkshire County Cricket Club Headingley Loan 8,723

4,608 Leeds Bradford International Airport 4,6082,782 Leeds Metropolitan University -

573 Employee car loans 4876 Other 54

18,655 23,938Deferred prepayments

3,290 7 Schools PFI contract 4,849- Primaries PFI contract 370- Swarcliffe PFI contract 33

3,290 5,252

23,301 30,352

31/03/2006

43

11.6 Contingent assets

Contingent assets are assets which may possibly arise as a result of past events, and whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the authority's control. Contingent assets are not accounted for in the financial statements because this could result in the recognition of material gains that may never be realised, but they should be disclosed.

The authority has been closely following the progress of an ongoing Value Added Tax (VAT) tribunal case in relation to off-street car parking, between HM Revenues and Customs (HMRC) and a number of local authorities. If the appeal process confirms that off-street car parking is not a business activity, and if local councils then prove that there is no distortion of competition, they will no longer have to account for VAT on such income (on-street car parking is already classed as non business). Leeds City Council has requested repayment of £4,415,752 output tax declared from April 1998 to March 2006 from HMRC. HMRC is withholding the repayment pending an appeal to the high court and then possibly the European Court of Justice.

12 Current assets

The following section provides additional information on the short term assets held on the Consolidated Balance Sheet.

12.1 Debtors

As the balance sheet represents the position at the end of the financial year, there are monies owed to the authority at that date which are yet to be received as cash. The following analysis shows the amounts owed to the authority which had not been received at 31st March 2006.

The authority also makes provision for outstanding monies which it is anticipated will not be recovered. These amounts are then deducted from the total value of debtors shown in the accounts. An analysis of this provision for bad and doubtful debts is included below.

44

Debtors

The significant value of sundry debtors at the year end represents income due to be received from routine fees and charges.

12.2 Investments

At 31st March the authority held a number of short term investments totalling £79,207k (£31,399k as at 31st March 2005). Of this balance, £74m represented amounts borrowed during 2005/06 to pre fund the authority’s 2006/07 capital programme, which have been invested until required. Further details of this borrowing activity can be found in note 14.1 on page 47.

12.3 Stocks

At 31st March 2006 the authority held stocks and work in progress to the value of £2.6m (£3.0m at 31st March 2005) after accounting for the provision for obsolete stock.

The stocks and work in progress held are analysed by category as follows :

31/03/2005 £000s

Government15,414 HM Revenue and Customs 22,8998,679 Office of the Deputy Prime Minister 19,9118,150 Department for Education and Skills 7,988

10,811 Other departments 6,462

43,054 57,260Taxpayers

16,546 Council Tax 16,3036,367 Business rate 9,245

22,913 25,548Group entities

7,071 Education Leeds 8,29212,237 Arms-length Management Organisations 7,071

94 Other group entities 94

19,402 15,457Public sector organisations

11,028 Local authorities and other public bodies 14,580

Other14,354 Housing rents 13,94742,943 Other 48,848

57,297 62,795

153,694 175,640

Provisions for bad and doubtful debts(11,582) Taxpayers (11,210)(9,533) Housing rents (9,023)(5,447) Other (7,331)

(26,562) (27,564)

127,132 148,076

31/03/2006

45

Stocks and work in progress

12.4 Landfill Allowances

The Waste and Emissions Trading Act 2003 places a duty on waste disposal authorities to reduce the amount of biodegradable municipal waste (BMW) disposed to landfill. The act also provides the legal framework for the Landfill Allowances Trading Scheme (LATS). The scheme allocates landfill allowances to each waste disposal authority, to be set against its verified BMW landfill usage. An authority is able to trade any surplus allowances with potential buyers in the market.

Under the terms of the scheme, landfill usage is verified and the resulting liability settled six months after the year end. The balance of £4.7m held at 31st March 2006 therefore represents the full value of landfill allowances allocated to the authority for 2005/06. The corresponding estimated liability of £3.9m is included in the balance sheet as a Provision (see note 14.2 on page 48). The authority’s surplus allowances not used this year are intended to be used in future years when it is projected that the in year allowances given will be less than the annual liability.

13 Current liabilities

The following section provides additional information on the short term liabilities held on the Consolidated Balance Sheet.

13.1 Creditors

Since the authority's Balance Sheet represents the financial position at the end of the financial year, there are monies owed by the authority at that date which have yet to be paid. There are also amounts which the authority has received before the end of the financial year which relate to services which have not yet been provided, or are to fund schemes which have not yet taken place. This analysis shows the amounts owed which had not yet been paid and the amounts received in advance as at 31st March 2006.

31/03/2005 £000s 31/03/2006

Stocks860 Food, drink, consumables 865399 Re-saleable items 271264 Building materials 187283 Highways materials 358160 Non-Highways materials 14920 Stationery, furniture, office equipment 17

460 Other 480

2,446 2,327

546 Work in progress 276

2,992 2,603

46

Creditors

The significant value of sundry creditors at the year end relates to payments due for routine goods and services. The balance reflects the normal timing delay between goods and services being provided to the authority and invoices being received and processed.

13.2 Borrowing repayable on demand or within one year

The table below summarises the authority's borrowing which is due to be repaid within one year.

Borrowing repayable within one year

Details of the authority’s overall long term borrowing activities are given in note 14.1 below.

The balance of £16.4m temporary loans shown above at 31st March 2006 represents amounts invested with the Council by its subsidiary Education Leeds.

31/03/2005 £000s

Government15,051 HM Revenue and Customs 15,78512,584 Office of the Deputy Prime Minister 7,6478,103 Other departments 4,563

35,738 27,995Group entities

3,135 ALMOs 14,9581,882 Education Leeds 2,303

5,017 17,261Public sector organisations

12,432 Local authorities and other public bodies 10,420

Taxpayers3,054 Business rate 6,9241,892 Council Tax 2,250

4,946 9,174Other

13,804 Interest on borrowing (Public Works Loan Board) 16,3411,819 Housing rents 2,614

68,207 Sundry creditors 99,763

83,830 118,718

141,963 183,568

Receipts in advance24,214 Capital grants and contributions 28,70411,151 Other 12,593

35,365 41,297

177,328 224,865

31/03/2006

31/03/2005 £000s 31/03/2006

60,002 Long term borrowing with less than one year to mature 23,52855,277 Temporary loans 16,440

115,279 39,968

47

14 Long-term and contingent liabilities

The following section provides additional information on the long term liabilities held on the Consolidated Balance Sheet.

14.1 Long-term borrowing

The table below analyses the whole of the authority’s long term borrowing portfolio by maturity. Borrowing with more than one year to mature is shown within long term liabilities on the Consolidated Balance Sheet. Long-term borrowing which is due to mature within one year is included with short term borrowing within current liabilities on the Consolidated Balance Sheet (see note 13.2 above).

Long-term borrowing by maturity

The following table analyses all long-term borrowing, irrespective of maturity, by lender. Long-term borrowing by lender

Long term borrowing is undertaken by the council for the purpose of financing its capital expenditure. Under the CIPFA Prudential Code, the council is permitted to borrow in advance of need for up to three future years projected capital financing requirements, if this is deemed to be a prudent Treasury Management decision. During 2005/06, the council took advantage of the availability of low interest rates on long term borrowing to borrow £77m in relation to its 2006/07 capital funding requirement. £74m of this advanced borrowing has been invested until required (see note 12.2 above).

In accordance with the Local Government Act 2003 and having regard to CIPFA's Prudential Code, the council has set various borrowing limits as part of its treasury management policy. In particular the council is required to set an upper limit on its fixed and variable interest rate exposure. Having considered the long and short term market predictions for fixed and variable

31/03/2005 £000s 31/03/2006

23,538 Maturing in 1 – 2 years -- Maturing in 2 – 5 years -

1,970 Maturing in 5 – 10 years 31,970414,121 Maturing in 10 – 25 years 451,823193,056 Maturing in more than 25 years 354,183210,000 Variable (LOBO *) 255,000

842,685 Borrowing with more than one year to mature 1,092,976

60,002 Long-term borrowing maturing within one year 23,528

902,687 Total long-term borrowing 1,116,504

31/03/2005 £000s

667,811 Public Works Loans Board 837,837

Bonds, stock and mortgages125,000 Banks and other monetary sector 160,00085,000 Direct sterling borrowing from abroad 95,00024,823 Local Authority stock issues 23,641

- Building Societies -53 Local bonds, mortgages, individuals 26

234,876 278,667

902,687 1,116,504

31/03/2006

48

interest rates and also reviewed the balance of risk, the upper limit on variable interest rate exposure was set at 40% of net debt for 2005/06.

The council currently has £255m of debt in the form of Lender Option Borrower Option loans (LOBOs), which equates to 24% of net debt. LOBO agreements have periodic option dates on which lenders can opt to change the interest rate on a loan. If lenders exercise their option then the council can either repay the loan (at no extra cost) or agree to the change of interest rate for the remaining term of the loan or until the lender has the next option in the loan. Due to their structure, LOBOs can be obtained at lower interest rates than fixed rate long term borrowing, but carry an element of interest rate risk. The authority seeks to ensure that the interest rate risk in any one year from its LOBO portfolio is minimised, by ensuring that option dates are evenly spread over future years. Of the £255m LOBO debt, only £85m will be exposed to variable rates through lender options in 2006/07, and £95m in 2007/08. In previous years, the authority has borrowed some of its LOBOs as part of rescheduling exercises. In accordance with accounting policy 18 (page 28), where a repurchase of borrowing is coupled with a refinancing or restructuring of borrowing with substantially the same overall economic effect when viewed as a whole, gains or losses are recognised over the life of the replacement borrowing. In line with this accounting policy the council currently has deferred discounts of £0.2m and deferred premiums of £73.9m which will be written to revenue over the life of the replacement loans. Any discount or premium arising from debt restructuring where a LOBO was used in the refinancing are being written down over the full life of the replacement loan, as the council has determined that LOBOs should be accounted for over their full term.

14.2 Provisions

In general, provisions are deducted from or added to the carrying balance of the relevant asset or liability on the Consolidated Balance Sheet. However, where the value of a provision is considered to be sufficiently material, it is shown as a separate item on the Consolidated Balance Sheet. The table below identifies those provisions which are considered sufficiently material to require separate disclosure.

Provisions

Leeds City Council is in the process of settling a liability in respect of equal pay, arising from the Single Status Agreement, introduced in 1997 by the National Joint Council for Local Government Services to bring together manual and white collar employees under one set of Terms and Conditions of employment. A compensation offer has been made to employees who are deemed to have been affected and the accounts include a provision of £19.6m. The authority received a special dispensation from the then Office of the Deputy Prime Minister to allow this cost to be funded from capital resources. The actual liability relating to 2005/06 is uncertain as some employees may take independent employment tribunal action against the authority instead of accepting the compensation offered.

The insurance provision covers the value of insurance claims for which the authority estimates that it has a potential legal liability. Employee, public liability and motor third party liability claims are covered by external insurance policies which limit the council's maximum liability on individual claims to £500k (£164k for motor third party liability claims). The authority is also limited to a maximum liability of £12m for employee and public liability claims

2004/05 £000s 2005/06

- Equal pay compensation 19,59810,440 Insurance liabilities 8,036

- Biodegradable municipal waste landfill usage 3,944325 Stepped interest on borrowing 121

10,765 31,699

49

from 2003/04 and £6m for any previous year. Included within the provision is £385k in respect of housing disrepair claims. The movement in the total value of the provision during 2005/06 was due to the cost of settling claims to the value of £8,056k from the provision, and additional contributions of £5,651k made to the provision.

Details of contingent liabilities relating to insurance appear in below in note 14.4.

In 2005/06, the Government introduced the Landfill Allowances Trading Scheme. Under the scheme, an authority’s final BMW (biodegradable municipal waste) landfill usage for each year is not confirmed until six months after the year end. Authorities are therefore required to raise a provision for their estimated BMW landfill usage. More details of the scheme and the landfill allowance assets which the authority currently holds in order to offset this liability are given in note 12.4.

A provision is also maintained for the averaging of interest on a number of specific long term loans which have a stepped interest rate structure. The provision has been created in order to equalise the interest rate charged to revenue over the life of the borrowing. The provision has reduced by £204k from the 2004/05 level because debt rescheduling during the year has reduced the value of such loans held.

14.3 Deferred liabilities

Deferred liabilities include amounts due in relation to assets acquired under finance leases, returnable bonds and other long term liabilities. The authority had the following deferred liabilities at 31st March 2005:

Deferred liabilities

The above figures include a £9.8m liability in relation to debt arising from the former West Yorkshire Waste Management Joint Committee. This represents the balance outstanding of the authority’s share of borrowing undertaken by the former joint committee before its termination in 1998/99, and has been accounted for as a liability for the first time in 2005/06 following a review of accounting treatment. Further details are given in note 24 on page 59.

Further information on the writing down of finance leases appears in note 9.2 on page 35.

14.4 Contingent liabilities

When it can estimate contingent losses with some certainty, the authority accrues them into the financial statements. This note summarises other contingent losses, which may result in future costs but cannot be estimated accurately or are considered sufficiently uncertain.

The authority had the following contingent liabilities at 31st March 2006:

a General

The authority has a number of general litigious matters ongoing which could result in payments totalling £0.5m (£0.75m at 31st March 2005).

2004/05 £000s 2005/06

8,830 Amounts due on finance leases 19,031- WYWM Residual Debt 9,803

970 Returnable bonds 974468 PFI Cardinal Heenan 51968 Other 68

10,336 30,395

50

b Specific

Insurance claims. The authority has been advised by its actuaries that the value of outstanding legal liability claims against it is £28.3m (£36.3m on 31st March 2005). It is estimated that, if successful, £4.9m of these claims would be met by the authority's external insurers (£8.2m on 31st March 2005) leaving a balance of £23.4m where any liabilities would be met by the authority. A provision has been set aside on the Balance Sheet to the value of £8m for the estimated future settlement of these claims. The contingent liability value for insurance claims therefore stood at £15.4m at 31st March 2006.

Welbeck waste disposal site. A joint venture agreement has been established with Wakefield MDC for the realisation of the authority's portion of the Welbeck waste disposal site. The authority has agreed to contribute towards the cost of any calls made pursuant to the various warranties and indemnities that Wakefield MDC have agreed to offer to Yorkshire Environmental Services during the first ten years of the lifetime of the Joint Venture. The authority's exposure to this indemnity in 2005/06 was £2.2m. From 2004/05 onwards, the authority's exposure is gradually reducing until there is no exposure to risk after 2008/09.

Pension fund guarantees. The authority has acted as guarantor to a number of organisations admitted to the West Yorkshire Pension Fund. Any liability would only be payable if the admitted body did not have sufficient assets to meet the pension liabilities. The estimated potential liability as at 31st March 2006 was £12.3m.

15 Deferred items

The authority holds on its balance sheet a number of deferred debits and credits. These represent costs in relation to which the authority derives benefit over a number of years, and capital income due to be received in future years.

15.1 Deferred credits

Deferred credits include deferred capital receipts, which relate to future income to be received from long term debtors or to investments where the original advance was not financed by borrowing. The two remaining elements of this relate to :

council house 'right to buy' sales where the authority has granted a mortgage rather than made a cash sale;

amounts owed by Wakefield MDC arising from the Welbeck waste disposal site joint venture agreement.

Other deferred credits comprise discounts that have arisen following the early redemption of long term debt. These are treated as deferred credits and written off to revenue. The authority complies with FRS4 (Capital Instruments) in that those gains relating to the replacement of borrowing where the new arrangements have substantially the same overall economic effect are recognised over the life of the replacement borrowing (currently between 1 and 25 years). Where gains have arisen due to the repurchase or early settlement of debt this has been recognised in the Consolidated Revenue Account in the period during which the repurchase or early settlement was made.

Deferred credits

31/03/2005 £000s

Deferred capital receipts10,062 Wakefield MDC 9,6161,032 Council house mortgages 849

733 Leeds Metropolitan University -

11,827 10,465Other deferred credits

335 Deferred discounts 226

12,162 10,691

31/03/2006

51

15.2 Deferred premiums

In line with the requirements of the Statement of Recommended Practice, gains or losses arising from the repurchase or early settlement of borrowing have been written off to revenue. However where the repurchase or borrowing was coupled with a refinancing or restructuring of borrowing with substantially the same overall economic effect when viewed as a whole, gains or losses have been recognised over the life of the replacement loan. The following table shows the level of deferred premiums (for deferred credits see note E11.4 above).

Deferred premiums

15.3 Deferred consideration

The deferred consideration balance of £8,002k (£2,410k as at 31st March 2005) relates to the remaining unamortised balance of assets that have been contributed to PFI contracts and have resulted in a reduced unitary charges for the contracts. Deferred consideration is charged to the consolidated revenue account over the life of the PFI contracts, with the impact being reversed as part of the appropriation to the Capital Financing Account.

16 Capital accounting balances

Accounting practice in Local Government requires the use of a number of technical and complex capital accounts, most of which are unique to Local Authorities.

16.1 Fixed asset restatement account

The fixed asset restatement account is a revaluation reserve which represents the difference between the historic cost of acquiring and enhancing fixed assets and their associated revaluations in the asset register.

Fixed asset restatement account

2004/05 £000s

1,483,710 1 April 1,397,589

(70,572) Disposal of fixed assets (135,409)(16,171) Revaluation of fixed assets 610,376

- Revaluation of exceptional item: WYWM Residual Deb (13,552)686 Revaluation of intangible assets -(64) Disposal of long term investments (71)

(86,121) 461,344

1,397,589 31 March 1,858,933

2005/06

2004/05 £000s

40,149 1 April 76,652

38,702 Expenditure in year – deferred premiums 124(2,199) Written off to revenue account (2,885)

36,503 (2,761)

76,652 31 March 73,891

2005/06

52

The disposal of a long term investment included in the table relates to the repayment of debenture principal by Leeds Bradford International Airport (see note 11.3 on page 41).

16.2 Capital Financing Account

The capital financing account contains the amounts which statute requires the authority to set aside from capital receipts for the repayment of external loans and the amount of capital expenditure financed from revenue, capital receipts, capital grants and capital contributions. It also contains appropriations to the revenue account where the total of depreciation and impairment exceeds the authority's minimum revenue provision (MRP) for debt repayment. In addition, the account is used to write down deferred charges, deferred considerations arising from the contribution of assets to private finance initiative (PFI) contracts, deferred prepayments relating to the acquisition of assets at the close of PFI contracts, and long term debtors and investments.

Capital Financing Account

16.3 Deferred government grants and contributions

This account recognises any capital grants and contributions which the authority has used to finance the acquisition or enhancement of those fixed assets which are subject to depreciation. The grants and contributions are released to revenue in line with the depreciation charge.

Deferred government grants and contributions

2004/05 £000s

572,741 1 April 546,176

Capital financing38,774 Usable capital receipts 83,62126,637 Major Repairs Reserve 36,4795,763 Capital grants and contributions 2,491

27 Revenue contributions 5,434

71,201 128,025Other movements

(88,128) MRP less depreciation, net of government grants deferred (135,342)5,721 HRA Voluntary set aside -1,559 Deferred prepayments 1,962

(16,346) Write-off of deferred charges (31,418)(481) Write-down of long term debtors (2,360)(91) Write-down of deferred consideration (202)

- Exceptional Item - WYWM Residual Debt 3,339

(97,766) (164,021)

546,176 31 March 510,180

2005/06

2004/05 £000s 2005/06

155,699 1 April 192,002

42,318 Grants and contributions applied during the year 51,546Transfers to revenue –

(5,647) Depreciated assets (15,280)(368) Deferred charges -

36,303 36,266

192,002 31 March 228,268

53

17 Usable capital receipts reserve

Income from the disposal of fixed assets is credited to the usable capital receipts reserve, where it is split between usable and reserved elements (See Accounting Policy 15, page 17). The reserved element is paid over to the Government’s national pool for redistribution back to Local Authorities. The usable element can be applied to the financing of new capital expenditure or remain in this account. The authority currently utilises all the usable capital receipts received as cash in year and so this element of the account is transferred to the capital financing reserve. The balance remaining on the usable capital receipts reserve represents disposals for which debtors have been raised as the cash had not been received at 31st March 2005, and consequently cannot yet be used to finance new capital expenditure.

Usable capital receipts

18 Capital expenditure and financing

Total capital expenditure in 2005/06 was £369.4m (£259.3m in 2004/05). All capital expenditure, including accrued spending, is funded in year

The following tables analyse capital spending by category of asset and source of funding:

Capital expenditure

Capital financing

2004/05 £000s

148 1 April 650

Receipts in year39,276 Usable capital receipts 84,50147,589 Housing Revenue Account pooled receipts 39,788

86,865 124,289Applied

(38,774) To fund new capital expenditure (83,621)(47,589) Transfer to Consolidated Revenue Account (39,788)

(86,363) (123,409)

650 31 March 1,530

2005/06

2004/05 £000s 2005/06

189,295 Operational assets 275,24340,329 Non-operational assets 60,52816,346 Deferred charges 31,418

- Long term debtors 9,000- Deferred consideration 5,793

5,752 Intangible assets 2,0297,590 Unfunded 2003/04 creditors -

259,312 384,011

2004/05 £000s 2005/06

135,513 Supported borrowing 191,47138,773 Capital receipts 83,62147,714 Grants and contributions 54,03726,637 Major Repairs Allowance 36,47910,648 Finance leases 12,969

27 Revenue contributions to capital 5,434

259,312 384,011

54

Significant schemes within the authority's capital programme include improvements to the authority’s housing stock to meet decency standards delivered by the six arms-length management organisations; a continuing programme of investments in the schools estate, major transport schemes including the East Leeds Link Road and Inner Ring Road stage 7; investment in the cultural infrastructure of the city including a new city museum and the transformation scheme at the Leeds Grand Theatre; and significant investment in Information and Communications Technology (ICT) projects.

In addition to the capital expenditure in the table above, the authority is contractually committed to further expenditure of £263.4m over the next three financial years. The projected phasing of these commitments is for £194.8 m to be spent in 2006/07, £43.4m in 2007/08 and £25.2m in 2008/09. The major committed schemes include Grand Theatre / Opera North Phase 1, the Swimming and Diving Centre and the ICT and Highways maintenance programmes.

19 Government grants

The government grants shown on the Cash Flow Statement represent the cash received by the authority and may differ from the amounts included within gross income figures in the Consolidated Revenue Account, which is prepared on an accruals basis. This table summarises cash received as government grants :

Government grants

20 Local taxation

This table analyses cash received from local taxation as shown on the Cash Flow Statement. As the figures report cash actually received during the year they do not equal the figures on the Collection Fund Account, which is prepared on an accruals basis.

2004/05 £000s 2005/06

360,116 Revenue Support Grant 354,132178,921 Department of Work and Pensions grants for rebates 194,083

5,270 Private Finance Initiative 7,0005,261 Benefits administration subsidy 5,3063,182 European Social and Regional Development funds 3,0431,242 National Non-Domestic Rates collection allowance 1,235

(4,577) Housing Revenue Account subsidy -6,142 Neighbourhood Renewal Fund 6,2366,870 Single Regeneration Budget 2,652

44,399 Schools Standards 48,43413,579 Department for Education and Skills 14,9458,904 Learning and Skills Council 3,049

892 Higher Education Funding Council 1,0493,361 Education maintenance allowances 1131,962 Other education grants 4,902

6,599 Social Services Access and Systems Capacity 8,3372,405 Childcare grant 4,2265,091 Preserved Rights 3,9403,154 Mental Health 3,3485,715 Residential Allowance 3,0106,451 Other social care grants 10,211

22,442 Other 45,162

687,381 724,413

55

Local taxation

21 Reconciliations between the main accounting statements

21.1 General Fund surplus and net cash flow

The surplus on the Consolidated Revenue Account includes transactions which do not result in cash flows. The following table identifies these transactions and reconciles the Consolidated Revenue Account surplus (page 20) with the actual net revenue cash flows shown on the Cash Flow Statement (page 22).

Reconciliation of General Fund surplus and net cash flow

Note: This reconciliation shows provisions separately, but they are netted off for the equivalent

Consolidated Balance Sheet figures.

2004/05 £000s

238,326 National Non-Domestic Rates (NNDR) 252,651(36,603) NNDR contribution to the national pool (11,919)

201,723 240,732193,855 Council Tax 208,773

395,578 449,505

2005/06

2004/05 £000s 2005/06

293 Consolidated Revenue Account – surplus / (deficit) for the year 752

Non-cash transactionsCapital transactions charged to revenue :

32,358 Housing Major Repairs Allowance to Capital Financing reserve 36,47917,247 Minimum Revenue Provision 19,493

757 Premiums and discounts written down to revenue 2,65227 Revenue contribution to capital outlay 5,434

(368) Grants amortised to revenue -- Landfill allowances received (4,706)

50,021 59,352(6,521) Reserves (including HRA and Collection Fund) 461

908 Provisions set aside in year 2,348

44,408 62,161Accrued items

(31,970) (Increase) / decrease in debtors (see note) (13,591)(5,551) Increase / (decrease) in creditors (see note) 40,510

73 (Increase) / decrease in stocks (see note) 389154 Increase / (decrease) in deferred credits 154

(37,294) 27,462Items in another classification in the cash flow statement

46,643 External interest paid 53,445(774) External iterest received (2,958)(168) Dividends from associates (78)

45,701 50,409Items not chargable to revenue

(37,370) Premiums and discounts paid and received -

15,738 Revenue activities net cash flow 140,784

56

21.2 Reconciliation of net cash flow and the movement in net debt

The following table analyses the movement of the authority's net debt balances (i.e. cash, liquid resources, borrowing and finance lease debt) during the year. For the purposes of the cashflow statement, the authority classifies liquid resources as investments repayable on demand and investments which are held for less than one year.

The non cash movement in the finance lease balance during the year represents new leases entered into. The non cash movement on residual debt for the former WY Waste Management joint committee reflects the fact that this had not previously been reflected as a liability in the authority’s accounts (see note 24 below for further details).

Movement in net debt balances

The following table reconciles the net cash flow movement as identified in the Cash Flow Statement (page 22) and the movement in net debt.

Reconciliation of net cash flow and movement in net debt

£000s 01/04/2005 Cash flow Other 31/03/2006movement

Cash balancesCash in hand 794 (225) - 569Overdraft (2,741) 439 - (2,302)

(1,947) 214 - (1,733)

Management of liquid resourcesShort term investments 31,399 47,808 - 79,207

Financing activitiesBorrowing due within one year (115,279) 75,311 - (39,968)Borrowing due after one year (842,685) (250,291) - (1,092,976)Former WYWM Residual Debt - 408 (10,211) (9,803)Amounts Due on Finance Leases (8,830) 2,768 (12,969) (19,031)

(966,794) (171,804) (23,180) (1,161,778)

Net debt (937,342) (123,782) (23,180) (1,084,304)

£000s

Net cash flow 214

Net cash inflow / (outflow) from debt (171,804)Net cash inflow / (outflow) from management of liquid resources 47,808

(123,996)

Cashflow movement in net debt (123,782)

New finance leases (12,969)

Total movement in net debt (136,751)

2005/06

57

21.3 Analysis of movements in reserves relating to fixed asset revaluations and disposals

The following table further analyses the figures for Movements in unrealised value of fixed assets and the Value of assets sold disposed of or decommissioned as shown in the Statement of Total Movements in Reserves, and reconciles these figures to the Fixed Assets Restatement Account (see note 16.1).

Movements in value of fixed assets

£000s Fixed AssetRestatement

Account

Balance as at 31/04/2005 1,397,589

Movements in unrealised value of long term assetsGains / (losses) on revaluation of fixed assets

Current year revaluation of assets 610,638Revaluation Re Former WYWM Residual Debt (13,552)

597,086Changes in value of fixed assets due to general price changes (262)Gains/(losses) on market value of investments

596,824Value of assets sold, decommissioned or realised Fixed assets (135,409)Long term investments realised (71)

(135,480)

Balance as at 31/03/2006 1,858,933

58

21.4 Analysis of movements in amounts set aside to finance capital investment

The following table further analyses the figures for Movements in amounts set aside to finance capital investment shown in the Statement of Total Movement in Reserves, and reconciles these to the Capital Financing Account (see note 16.2) and the Government Grants and contributions deferred account (see note 16.3).

Movements in amounts set aside to finance capital investment

22 Net assets employed

The Accounting Code of Practice requires disclosure of the authority's overall net asset position with regards to the General Fund, Housing Revenue Account (HRA) and any trading undertakings where material. Since none of the authority's trading services uses a material level of the overall net assets, the analysis below identifies the split between net assets employed by the HRA and the General Fund.

Net assets employed

2004/05 £000s 2005/06

606,460 General Fund 381,5301,037,925 Housing Revenue Account 1,664,994

1,644,385 2,046,524

£000s Capital Govmt TotalFinancing Grants

Account Deffered

Balance as at 31/04/2005 546,176 192,002 738,178

Movements in amounts set aside to financecapital investmentCapital resources allocated to fund capital investment

Usable capital receipts applied 83,621Capital grants and contributions 2,491

86,112 86,112Net revenue resources used to fund capital investment

Major Repairs Reserve 36,479Revenue contributions 5,434MRP less depreciation, net of govt grants deferred (135,342)Deferred prepayments 1,962Less Write down of deferred charges (31,418)Less Write down of deferred consideration (202)Former WYWM Residual Debt 3,339

(119,748) (119,748)Long term debtors (financed by borrowing) repaid (2,360) (2,360)Increase / (decrease) on deferred government grants 36,266 36,266

Balance as at 31/03/2006 510,180 228,268 738,448

59

23 Excepted items

There are certain topics that councils have to report on but that do not affect Leeds City Council’s accounts for 2005/06. This note schedules those topics.

a Discontinued operations : no significant operations or services were discontinued during the year.

b Agency arrangements : under a number of statutory powers, the authority is permitted to undertake work on behalf of other bodies. Under such arrangements all expenditure, including administration costs, would be reimbursed by the entity concerned. The authority currently has no such arrangements in place.

c Transport Act 2000 : under the provisions of the Transport Act 2000, details of any scheme of road user charging or work place parking levy should be notified. For 2005/06, no such activities have been entered into by Leeds City Council.

d Business Improvement Districts : there were no Business Improvement Districts established within Leeds during the year.

e Changes in depreciation methods used : depreciation methods have been used consistently.

f Changes in amortisation method used : there have been no changes to the amortisation methods used in writing down deferred charges.

24 Former West Yorkshire Waste Management Residual Debt

The West Yorkshire Waste Management (WYWMC) joint committee was dissolved in 1998/99. As part of the termination agreement, responsibility for the WYWMC’s outstanding debt relating to its capital expenditure was allocated between the five West Yorkshire districts, as were the assets which that debt had financed. Wakefield MDC retained responsibility for managing the residual debt, and it was agreed that each authority would pay off its share of the debt at a rate of 4% per year on the reducing balance.

Whilst the authority has continued to pay off its portion of the residual debt in accordance with the agreement, the outstanding liability has never been reflected in the authority’s accounts. A review of the accounting treatment of the residual debt has concluded that the remaining balance should have been reflected as a deferred liability in the authority’s balance sheet. The residual debt should have been treated as the consideration for which the authority acquired its share of WYWMC fixed assets, including the Long Term Debtor arising from its interest in the Welbeck site (see note 11.4 above), whereas these assets were actually treated as having been acquired at nil consideration. The entries needed to bring the deferred liability into the authority’s accounts therefore affect the Fixed Asset Restatement Account (reflecting the original value of the debt allocated to the authority) and the Capital Financing Account (reflecting the amount paid off to date). No adjustments are required to the authority’s general fund reserves, as the amounts charged to the CRA for repayments of debt are equal to the amounts which would have been charged in relation to it as MRP if the deferred liability had been properly recognised.

The balance of residual debt outstanding as at 1st April 2005 was £10,212k. In order to bring this into the accounts, the balance of the FARA has been reduced by £13,552k and the balance of the CFA increased by £3,340k. A further £408k has been repaid during 2005/06, leaving a balance of £9,803k at 31st March 2006.

25 Exceptional or extraordinary items and prior period adjustments

The authority has accounted for one exceptional item in its accounts in 2005/06. Leeds City Council is in the process of settling a liability in respect of equal pay, arising from the Single

60

Status Agreement, introduced in 1997 by the National Joint Council for Local Government Services to bring together manual and white collar employees under one set of Terms and Conditions of employment. A compensation offer was made to the affected employees, and the authority received a special dispensation from the then Office of the Deputy Prime Minister to allow the estimated cost of £19.6m to be funded from capital resources. The final liability relating to 2005/06 remains uncertain as some employees may take independent employment tribunal action against the authority instead of accepting the compensation offered. The authority has therefore raised a provision for capital expenditure of £19.6m. This capital expenditure has been treated as a deferred charge since there is no ongoing benefit to the authority. The full amount has therefore been charged to Net Cost of Services within the Consolidated Revenue Account and reversed via the Appropriation to the Capital Financing Account.

There have been no extraordinary items affecting the authority’s accounts during 2005/06.

There has been one prior year adjustment arising from a change in accounting policy for the HRA. Details are given in note H10 to the HRA. This prior year adjustment affects the HRA only, and has had no impact on reserves or on the authority’s main financial statements.

26 Post Balance Sheet events

The Statement of Accounts were signed by the Director of Corporate Services and authorised for issue by the council’s Corporate Governance Committee on 29th June 2006. Events happening between the balance sheet date and this date are classed as post balance sheet events. Post balance sheet events which arose due to events happening before the balance sheet date have been incorporated into the financial statements.

Any post balance sheet events which arose due to events happening after the 31st March 2006 would be classed as non-adjusting events, which would require disclosure but would not be included in the financial statements. There have been no such events requiring disclosure since the balance sheet date.

61

The Housing Revenue Account The Housing Revenue Account reflects a statutory obligation to account separately for local authority housing provision. This summary shows the major elements of Housing Revenue Account expenditure and how they are met from rents, subsidy and other income.

2004/05 Summary income and expenditure account notes£000s

140,984 Dwellings 143,2342,477 Non-dwellings 2,567

143,461 Gross rent income 145,801209 Housing Revenue Account subsidy 29,000 H2

8,599 Other income 9,152

152,269 Total service income 183,953

50,595 Supervision and management 66,304 H339,893 Repairs and maintenance 42,656 H32,040 Rents, rates, taxes and other charges 2,063 H3

49,235 Depreciation and impairment 82,094 H4.156,806 Cost of capital 78,980 H4.12,342 Provision for doubtful debts 985

- Amortisation of deferred charges 622 H5.3

200,911 Total service expenditure 273,704

48,642 Net cost of service 89,751

(40,033) Asset Management Revenue Account (68,792) H4.2(77) Investment income (55)

2,675 Amortised premiums and discounts 3,512 H4.3105 Pension interest cost and expected return on assets 200 H7

11,312 Net operating expenditure 24,616

(17,074) Transfer to / (from) the Major Repairs Reserve (37,400) H6(175) Transfer to / (from) the Pensions Reserve (277) H7

- Revenue contributions to capital outlay 5,4345,721 Contribution to Minimum Revenue Provision - H4.3

(216) Deficit / (surplus) (7,627)

2004/05 Housing Revenue Account reserves 2005/06£000s

4,387 1 April 4,603216 (Deficit) / surplus for the year 7,627

4,603 31 March 12,230 H8

2005/06

62

Explanatory notes to the Housing Revenue Account

H1 Rent income

Gross rent income for dwellings is the total income due for the year for occupied properties. Rents averaged over 52 weeks were £45.71 in 2005/06 (£43.74 in 2004/05).

H1.1 Housing rent arrears

The rent arrears of current tenants, as a proportion of gross dwelling rent income, were 4.2% at 31st March 2006 compared with 4.8% at 31st March 2005.

Rent arrears for current and former tenants were:

Housing rent arrears

The provision for uncollectable housing rents was £9.0m as at 31st March 2006 (£9.5m as at 31st March 2005).

H2 Housing Revenue Account (HRA) subsidy

The following table analyses the HRA subsidy payable to the authority for the financial year in accordance with elements set out in the general formula in paragraph 3.1 of the government's general determination of Housing Revenue Account subsidy for the year :

HRA subsidy

2004/05 £000s

47,529 Allowance for maintenance 52,10931,849 Allowance for major repairs 30,92824,013 Allowance for management 28,5653,916 Allowance for Arms Length Management Organisations 22,580

- Allowance for PFI 6,097

24,473 Charges for capital 23,880(96) Other income (66)

131,684 164,093

(131,451) Guideline rent (135,148)(4) Adjustment in respect of previous years 80

(20) Rent Rebate subsidy limitation (25)

(131,475) (135,093)

209 29,000

2005/06

2004/05 £000s 2005/06

7,487 Former tenants 6,8566,867 Current tenants 5,999

14,354 12,855

63

H3 Arms Length Management Organisations (ALMOs) management fees

The council paid a management fee of £94.7m to its six ALMOs for the management of its housing stock (2004/05 £70.6m). In order to comply with proper accounting practice this management fee has been split between

repairs and maintenance, supervision and management, and rent, rates, taxes and other charges

and is the major part of these elements on the face of the Housing Revenue Account. The fee has been allocated to these headings based on the original agreed contractual split and any subsequent agreed amendments to the fee. This contractual fee is consolidated out of the Group Account statements and replaced by the ALMOs' actual spend and contribution to reserves.

H4 HRA capital charges

H4.1 Capital charges included within the net cost of service

The HRA is charged with the following notional capital charges in order to reflect the full cost of Housing at the net cost of service level :

depreciation and impairment charges of £82.1m (£68.4 and £13.7m respectively), a cost of capital charge of £79.0m determined by applying a notional rate of interest of 3.5%

to the value of operational assets, and the amortization (writing-down) of deferred charges of £0.6m.

H4.2 Asset Management Revenue Account (AMRA)

The aim of this account is to reverse the notional capital charges identified in paragraph H4. 1 above and replace them with the actual interest charge on debt as defined by the Item 8 Debit (General) Determination:

Asset Management Revenue Account

The only notional capital charge not reversed in the AMRA is that for depreciation. For the treatment of the depreciation charge, see paragraph H6 on page 65.

H4.3 Capital asset charges as calculated in accordance with statute

The following capital charges are calculated in accordance with the Item 8 Debit (General) Determination for the year and made below the net cost of service level. The charges represent the actual debt financing costs charged to the service:

an apportionment of interest payable on external debt of £24.5m, contained within the Asset Management Revenue Account (paragraph H4.2 above); and

2004/05 £000s

Capital charges made to the housing revenue account: (56,746) Notional interest (78,931)(5,234) Impairment (13,717)

- Deferred charges (622)

(61,980) (93,270)

21,947 External interest charges 24,478

(40,033) Transfer to Housing Revenue Account (68,792)

2005/06

64

an apportionment of premiums and discounts on the early redemption of external debt £3.5m, separately shown on the face of the HRA.

There is an option to make a voluntary set side to repay debt from either the Major Repairs Reserve or from revenue, separately shown on the face of the HRA. The authority did not use this option for 2005/06 (£5.7m in 2004/05).

H5 HRA assets

H5.1 Fixed assets

This note identifies the total balance sheet value of land, houses and other property within the HRA.

Fixed assets

The revaluations column includes the reclassification of assets. Two hostels with a value of £287k are now surplus to requirements and therefore reclassified as non-operational.

The impairment figure of £13,717k mainly reflects council dwellings which were identified for demolition during the year.

H5.2 Housing stock

At 31st March 2006 the authority was responsible for managing 61,201 dwellings. The composition of the stock was as follows :

Housing stock

The net reduction in housing stock consists of :

£000sValue at1st April

Acquisition,improvement

Depreciation Disposal Revaluation Impairment Value at31st March

Operational assetsCouncil dwellings 1,465,594 173,367 (66,059) (43,707) 538,124 (13,717) 2,053,602Other land, buildings 26,726 272 (1,458) (158) 3,537 - 28,919Vehicles, plant, eqpt 7,671 10,598 (828) - - - 17,441

- - - - 287 - 287

Totals 2005/06 1,499,991 184,237 (68,345) (43,865) 541,948 (13,717) 2,100,249

Totals 2004/05 1,627,886 104,179 (57,646) (125,398) (43,796) (5,234) 1,499,991

Non-operational assets

31/03/2005 number 31/03/2006

37,550 Houses 36,299 59.3%25,270 Flats 24,883 40.7%

19 Shared dwellings or ownership 19 0.0%

62,839 61,201 100.0%

65

Changes in housing stock

* The 19 properties shown as being brought back into use during 2005/06 had been taken out of stock as ready for demolition at the end of 2004/05.

H5.3 Deferred charges

A deferred charge is capital expenditure which does not generate an asset and is written down to revenue over an appropriate period consistent with the consumption of economic benefit. In 2005/06 the HRA incurred capital expenditure of £622k in respect of IT development costs. In accordance with proper accounting practice these amounts have been written off to revenue in year.

H5.4 Vacant possession values

In accordance with government guidance, council house valuations have been reduced by a regional adjustment factor in recognition of their status as social housing. As a consequence the authority recognises council dwellings at a value of £2,054m on the balance sheet. At vacant possession the same dwellings would have a value of £4,366m therefore recognising an economic cost to the government of providing council housing at less than open market rents of £2,312m.

H6 Major Repairs Reserve

The Accounts and Audit Regulations 2003 require local authorities to maintain a Major Repairs Reserve. The main credit to the reserve is an amount equivalent to the total depreciation charges for all HRA assets. The determination under item 8 of part 6 of the Local Government and Housing Act 1989 requires any difference between the depreciation credit on the reserve and the Major Repairs Allowance to be transferred back to the HRA. Authorities are able to charge capital expenditure directly to the reserve, along with any voluntary set aside to repay debt. The following table shows the movement on the Major Repairs Reserve for the financial year :

Major Repairs Reserve

2004/05 number

64,943 1 April 62,839

- Brought back into use * 192 New buildings, acquisitions -

2 19

(1,866) Right to buy sales (1,189)(198) Demolition (463)(42) Disposals (5)

(2,106) (1,657)

62,839 31 March 61,201

2005/06

2004/05 £000s

5,281 1 April 5,533

43,963 Transfer to the reserve 68,346

(26,637) Capital expenditure charged to the reserve (36,479)(12,074) Transfer from the reserve (37,400)(5,000) Voluntary set-aside -

(43,711) (73,879)

5,533 31 March -

2005/06

66

H7 Contributions to and from the pensions reserve

This table identifies the total HRA share of contributions to and from the Pensions Reserve and breaks the figure down to show the type of contribution to or from the reserve.

Contributions to and (from) the pensions reserve

H8 HRA reserves

As there is a statutory requirement to account for the Housing Revenue Account separately from the rest of Leeds City Council, the accumulated surplus is also recognised separately. Given the significance of recent developments, it has been thought prudent to maintain a higher reserve than in previous years and to identify elements within it.

HRA reserves

i The future net costs of this Private Finance Initiative

ii If the authority fails to meet the property reduction trigger in HRA subsidy (10% or 3,000 properties over a two-year period), then the subsidy will be rebased with costs of at least £3m. This is not now likely to occur in 2006/07.

iii A reserve which will be distributed to the six Arms Length.Management Organisations covering Leeds and the tenant management organisation in 2006/07 as an additional one-off fee.

iv The pre-procurement costs of the Beeston Hill and Holbeck scheme; that is, the costs of

developing the formal bid rather than those of the PFI scheme itself.

£000s 01/04/2005 net movements

31/03/2006 notes

General reserve 4,603 (1,192) 3,411Swarcliffe PFI - 4,373 4,373 iSubsidy - 2,000 2,000 iiALMOs - 1,946 1,946 iiiPFI pre-procurement - 500 500 iv

4,603 7,627 12,230

2004/05 £000s

Pension costs included in Net Cost of Service:(543) Current service cost (563)473 Past service cost 486

(70) (77)

Pension interest cost and expected return on assets2,071 Expected return on assets 2,134

(2,176) Interest on liabilities (2,334)

(105) (200)

(175) Transfer to / (from) the Pensions Reserve (277)

2005/06

67

H9 HRA capital transactions

H9.1 Capital expenditure and funding

The following tables identify the total capital expenditure on land, houses and other assets within the HRA during the financial year, and break it down according to the various funding sources :

HRA capital expenditure

HRA capital funding

* For details of the Partnership Heating Master Lease Agreement, see note 9.2a on page 35.

H9.2 Capital receipts

The table below identifies HRA capital receipts from the disposal of assets:

Capital receipts

The Local Government Act 2003 stipulates that income from the disposal of assets must be split into 'usable' and 'reserved' elements. The reserved element is paid over to the national pool (£39,788k in 2005/06) and the useable element can be used to fund capital expenditure.

H10 Prior year adjustment

A prior year adjustment has been made following a change in accounting policy with regard to the inclusion of certain FRS 17 entries in the HRA. The HRA share of interest on liabilities and expected return on assets are included on the face of the HRA with a corresponding contribution to or from the pension reserve. The adjustment does not impact upon the HRA reserve.

2004/05 £000s 2005/06

66,775 Council houses 54,7953,247 Other property 982

498 Land 48

70,520 55,825

2004/05 £000s 2005/06

99,197 Council dwellings 173,3677,467 Vehicles, plant and equipment 10,598

- Deferred charges 622- Other land and buildings 272

106,664 184,859

2004/05 £000s 2005/06

67,097 Borrowing 128,10926,637 Major Repairs Reserve 36,479

7,361 Heatlease * 10,5833,687 Useable capital receipts 4,9411,882 Grants and contributions 1,210

- Revenue contributions 5,434

106,664 186,756

68

H11 Excepted items

There are certain topics that councils have to report on but that do not affect Leeds City Council’s Housing Revenue Account for 2005/06. This note schedules those topics.

a Housing repairs account : local authorities have the option to operate a separate housing repairs account for recording income and expenditure on HRA repairs and maintenance. The authority has decided not to operate such an account, with actual repairs and maintenance being charged to the authority's six ALMOs.

b Directions by the Secretary of State : the Secretary of State has not directed any sums to be debited or credited to the HRA.

c Exceptional items : there are no exceptional items of income or expenditure which need to be disclosed to give a fair presentation of the accounts.

69

The Collection Fund This account reflects the statutory requirement for billing authorities to establish and maintain a separate fund for the collection and distribution of amounts due in respect of council tax and national non-domestic rates.

2004/05 Summary income and expenditure account notes£000s

Income

(196,514) Council tax (208,844)(36,927) Council tax benefits (39,063)

4 Transitional relief 3

(233,437) (247,904)

(238,001) National non-domestic rates (251,500) C2

(471,438) (499,404) Expenditure

Payments to precepting authorities:199,007 Leeds City Council 212,82022,650 West Yorkshire Police Authority 24,3679,236 West Yorkshire Fire and Civil Defence Authority 9,941

230,893 247,128 C3

Provision for uncollectable amounts and write-offs:1,839 Council tax 672

National non-domestic rates:236,759 Payment to national pool 250,265

1,242 Costs of collection 1,235 C2

238,001 251,500 C2

Adjustments to previous years:18 Community charge (273)

(687) (Surplus) / deficit (377)

2004/05 Collection Fund balances 2005/06£000s

(2,220) 1 April (1,533)687 Surplus / (deficit) for the year 377

(1,533) 31 March (1,156)

2005/06

70

Explanatory notes to the Collection Fund accounts These notes are intended to explain figures in the Collection Fund Summary Income and Expenditure Account and the Collection Fund Reserve.

C1 Council tax base

For 2005/06 there were an estimated 318,447 residential properties in Leeds which were placed in one of eight valuation bands, depending on their capital value, by the Listing Officer of the government’s Valuation Office Agency. The totals for each band are converted by use of appropriate multipliers and expressed in terms of a number of Band D dwellings to give a tax base. In 2005/06 the tax base for Leeds was 226,508 properties and this was used to calculate the Band D council tax of £1,080.46, sufficient to generate the income required to cover the net expenditure of the three authorities that precept on the Collection Fund. The table below shows the number of properties in each band and the number of Band D equivalent properties (the tax base).

Council tax base

* Adjustments for disabled relief, appeals on bandings, single person discounts etc. ** Includes dwellings that pay 5/9 of Band D by virtue of adjustments for disabled relief.

C2 Non-domestic rates

Leeds City Council collects national non-domestic rates (NNDR) for its area on behalf of central government. These rates are based on rateable values for properties set by the Valuation Office Agency, part of HM Revenues and Customs, which are multiplied by a uniform business rate set by central government. The uniform business rate was set at 42.2p in the pound for 2005/06 (45.6p for 2004/05). In 2005/06 small business rate relief was introduced with its own multiplier (41.5p in the pound for 2005/06). The rateable value at 31st March 2006 was £759,222k (£638,777k at 31st March 2005). The amount has increased by a significant amount from last year due to a national revaluation during 2005. The total amount due, after adjusting for certain reliefs and other deductions, is paid into a central pool managed by central government. The government redistributes the sums paid into the pool back to local authorities in proportion to population. Leeds' share of the pool for 2005/06, paid directly to the Consolidated Revenue Account (page 20), amounted to £238,346k.

Band number of properties in

the band

less exempt properties

chargeable dwellings

adjusted chargeable dwellings*

proportion of Band D

council tax

Band D equivalent dwellings

A** 130,726 (9,314) 121,412 104,080 6/9 69,356B 64,923 (4,492) 60,431 54,842 7/9 42,655C 60,314 (2,581) 57,733 53,715 8/9 47,747D 28,152 (1,202) 26,950 25,454 9/9 25,454E 18,416 (517) 17,899 17,066 11/9 20,859F 9,056 (187) 8,869 8,501 13/9 12,279G 6,257 (126) 6,131 5,889 15/9 9,815H 603 (17) 586 543 18/9 1,087

318,447 (18,436) 300,011 270,090 229,252

Allowance for non-collection (2,751)Defence-exempt properties 7

Base for calculating Leeds City Council 2005/06 council tax 226,508

71

The amounts included in the Collection Fund account under these arrangements are shown below.

National non-domestic rates

C3 Precepts

The following table analyses council tax payments out of the Collection Fund :

Precepts

Any surpluses on the council tax account are transferred to the three authorities in proportion to their demands on the fund in the year in which the surplus arose. The surpluses are used in future years to adjust the level of council tax.

2004/05 £000s

289,142 Gross rates and empty rates due 308,207

allowances and adjustments(22,694) Exemptions and allowances (23,915)(13,658) Net variations in rateable value assessments (7,231)(11,441) Mandatory and discretionary relief (8,403)(2,070) Write-offs, provision for bad and doubtful debts (1,802)

(665) Interest paid on refunds of rates (1,185)(613) Transitional adjustments (14,171)

(51,141) (56,707)

238,001 Income due from business ratepayers 251,500

(1,242) Cost of collecting national non-domestic rates (1,235)

236,759 Contribution to national pool 250,265

2005/06

2004/05 £000s

Leeds City Council199,007 Annual precept 211,757

- Payment of council tax surplus 1,063

199,007 212,819West Yorkshire Police Authority

22,650 Annual precept 24,246- Payment of council tax surplus 121

22,650 24,367West Yorkshire Fire and Civil Defence Authority

9,236 Annual precept 9,892- Payment of council tax surplus 49

9,236 9,942

230,893 247,128

2005/06

72

73

The Group Accounts

GA1 Introduction

For a variety of legal, regulatory and other reasons, a rising diversity of other bodies are being used by the authority to carry out some of its activities. Since different entities are being used to deliver some of Leeds City Council’s services, the council’s own financial statements may not reflect fully the activities of the authority.

The aim of the Group Accounts is to give an overall picture of the activities of the authority and the resources used to carry out those activities. The Group Accounts also provide further information on the material financial risks and benefits of all entities over which the authority exercises control, significant influence or joint control.

GA2 Inclusion within the group accounts

The authority has relationships with a number of entities over which it has varying degrees of control or influence. The Statement of Recommended Practice 2005 requires these to be classified into the categories of subsidiaries, associates and joint ventures. The meanings of these are outlined below:-

Subsidiary: “An entity is a subsidiary of the reporting authority (LCC) if the authority is able to exercise control over the operating and financial policies of the entity and the authority is able to gain benefits from the entity or is exposed to the risk of potential losses arising from this control.”

The following entities are classified as subsidiaries of Leeds City Council:-

Education Leeds Arms Length Management Organisations for Housing (ALMO’s)

Associate: “An entity other than a subsidiary or joint venture in which the reporting authority (LCC) has a participating interest and over whose operating and financial policies the reporting authority (LCC) is able to exercise significant influence.”

The following entity is classified as an associate of Leeds City Council:-

Leeds Bradford International Airport

The figures for the financial performance of Leeds Bradford International Airport are not currently available. The final company results are still subject to agreement with their external auditors and as they are of a commercially sensitive nature they have not been included in the Group statements until the position is agreed.

Joint Venture: “An entity in which the reporting authority (LCC) has an interest on a long term basis and which is jointly controlled by the reporting authority (LCC) and one or more other entities under a contractual or other binding arrangement.”

Leeds City Council currently has no joint venture arrangements with any other entities.

More detailed information regarding the individual subsidiaries and associates of Leeds City Council are included in note G8 of the explanatory notes to the group accounts (Pages 84 - 87).

74

Excluded

There are a number of charitable companies over which the authority has significant control, but in which it retains no financial interest. Under the definitions in the accounting code of practice these charitable companies now fall outside the scope of the group accounts, and therefore they are excluded from the group financial statements.

GA3 Accounting policies used in preparing the group financial statements

Individual entities within the group have properly adopted different accounting policies, consistent with their different circumstances. In order to ensure consistency of accounting treatment across the group, the accounts of each group entity have been realigned to the group accounting policies. The accounting policies used in preparing the group accounts are generally those of Leeds City Council (see pages 9 - 19), but to align them more closely to some aspects of UK Generally Accepted Accounting Practices (GAAP), they differ in the following respects :

G1.1 Fixed Assets

a Any profits or losses on disposals of fixed assets are included as a separate line before net cost of services in the group income and expenditure account.

b Charges to services for the use of fixed assets cover depreciation only.

c Government grants amortised in the year, in relation to fixed assets, are included as a separate line before net cost of services in the group income and expenditure account.

d Fixed assets held by group entities which fall within the asset categories covered by the authority's own accounting policies are revalued in line with the authority's accounting policies where material. Fixed assets held by group entities which are sufficiently specialist in nature not to fall within the scope of the authority's accounting policies are valued in accordance with the accounting policies of the individual entities.

G1.2 Controlled Funds

Adjustments have been carried out for any assets and liabilities of trusts considered to be material and regarded as directly controlled by the authority and generating benefits for the authority. The income and expenditure has been disclosed gross in the group income and expenditure account before net cost of services.

G1.3 Consolidation

a Subsidiaries have been consolidated on a line by line basis, and associates have been consolidated using the equity method.

b Adjustments have been carried out for any assets and liabilities of trusts considered to be material and regarded as directly controlled by the authority and generating benefits for the authority. The income and expenditure has been disclosed gross in the group income and expenditure account before net cost of services.

c Details of the two trust funds which have been consolidated in their entirety into the group accounts appear in explanatory note G2f (page 79).

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Group Income and Expenditure Account

This statement sets out the income and expenditure relating to the council and its subsidiaries and associates as a whole, together with any appropriations to reserves.

2004/05net

expenditure £000sgross

expendituregross income net

expenditure notes

393,437 Education 703,756 272,475 431,281209,739 Social Services 338,421 124,157 214,264132,447 Cultural, Environmental and Plannin 228,272 83,165 145,107

49,899 Highways, Roads and Transport 72,041 17,603 54,4393,264 Court Services 706 - 706(822) Housing 321,047 319,359 1,688

(6,925) Central Services 71,204 73,826 (2,622)- Exceptional Item - Equal Pay Provis 19,598 - 19,598

14,595 Corporate and democratic core 15,258 - 15,2589,587 Non distributable costs (29,099) - (29,099)

(5,647) Deferred government grants (15,280) - (15,280)(541) Share of operating results of associa - - -

- Profit/Losses on Disposal of Assets 205 249 (44)

799,033 Net cost of services 1,726,130 890,835 835,295

48,998 Interest payable 53,44547,589 Contribution of Housing capital receipts to government pool 39,788

7,690 Leeds City Council pension interest costs and expected return on as 11,609566 Group pension interest costs and expected return on assets (332)

1,090 Parish Council Precepts 1,164757 Gains and losses on the repurchase or early settlement of borrowin 2,383386 Depreciation on surplus assets 835231 Share of interest payable by associates -157 Share of Corporation Tax payable by associates -141 Other taxation 279

78 Dividends payable by associates -45 (Surpluses) / deficits on trading undertakings 1,114

(1,494) Interest and investment income (4,052)(92) Share of interest receivable by associates -

905,175 Net operating expenditure 941,528

(91,495) Transfer to / (from) Capital Financing Account (157,032)

(47,589) (39,788)(23,444) Transfer to / (from) Leeds City Council Pensions Reserve 4,264

(7,676) Transfer to / (from) other earmarked revenue reserves (2,010)(3,559) Transfer to / (from) associated and subsidiary entity reserves 15,170(2,876) Transfer to / (from) group pensions reserves 2,28130,218 Transfer to / (from) Major Repairs reserve 30,945

216 Transfer to / (from) Housing Revenue Account balances 7,62716 Transfer to / (from) trust fund reserves 19

758,986 Amount to be met from government grants and local taxpayers 803,005

(360,116) General government grants (352,865)(200,156) Non-domestic rates redistribution (238,346)(199,007) Demand on Collection Fund (211,757)

- Transfer of Collection Fund Surplus (790)

(759,279) Total financing (803,757)

(293) Group (surplus) / deficit for the year (752)

Transfer to / (from) Usable Capital Receipts reserve - contribution to Housing Pooled Capital Receipts

2005/06

76

Group Balance Sheet The Group Balance Sheet summarises the financial position of the council and its subsidiaries and associates as a whole. It shows the value of the group assets and liabilities at the end of the financial year.

31 March 2005 £000s 31 March 2006

Long-term assets3,049,395 Tangible fixed assets 3,691,972

14,344 Intangible fixed assets 14,21912,100 Long-term investments 6,65023,301 Long-term debtors 30,346

3,099,140 3,743,187Current assets

111,420 Debtors 135,78932,538 Investments 88,28829,506 Cash in hand 8,9492,992 Stocks and work in progress 2,607

- Landfill Allowances 4,706

176,456 240,339Current liabilities

(188,531) Creditors (228,214)(115,279) Borrowing repayable on demand or within one year (23,529)

(2,741) Cash Overdrawn (2,302)

(306,551) (254,045)

2,969,045 Total assets less current liabilities 3,729,481

Long-term liabilities(842,685) Long-term borrowing (1,092,976)(548,654) Net pensions liability (529,019)(10,765) Provisions (31,699)(10,596) Deferred liabilities (30,592)

(1,412,700) (1,684,286)

1,556,345 Total assets less liabilities 2,045,195

Deferred Items12,162 Deferred credits 10,691

(76,652) Deferred premiums (73,891)(2,410) Deferred considerations (8,002)

(66,900) (71,202)Capital accounting balances

1,397,589 Fixed Asset Restatement Account 1,858,933546,176 Capital Financing Account 510,180192,002 Deferred government grants and contributions 228,268

650 Usable Capital Receipts Reserve 1,530

2,136,417 2,598,911Notional reserves

(530,693) Leeds City Council pensions reserve (508,897)(17,961) Subsidiary companies' pensions reserves (20,122)

(548,654) (529,019)Reserves

13,570 Leeds City Council earmarked reserves 6,0279,859 General Fund Reserve 10,6118,983 Group companies general reserves 18,7934,603 Housing Revenue Account Reserve 12,230

(1,533) Collection Fund Reserve (1,156)

35,482 46,505

1,556,345 Total reserves and balances 2,045,195

77

Group Cash Flow Statement

The Group Cash Flow Statement summarises the cash flows of the council and its subsidiaries and associates during the year.

2004/05 £000s 2005/06 Revenue activities:

27,690 Net cash inflow / (outflow) 144,295

Dividends from associates and joint ventures:168 Dividends received 78

Servicing of finance:Cash outflows

(45,317) Interest paid (50,674)(681) Finance lease interest paid (1,047)

Cash inflows1,481 Interest received 4,026

(44,517) (47,695)Taxation:

(46) Tax paid (213)

Capital activities:Cash outflows

(219,853) Purchase of fixed assets (324,935)(16,347) Other capital cash payments (19,144)

- Long Term Loans (9,000)Cash inflows

38,774 Sale of fixed assets 83,62126,672 Capital grants received 51,835

450 Repayment of long-term debtors 14314,942 Other capital cash receipts 1,302

(155,362) (216,178)

Management of liquid resources:(27,133) Net increase / (decrease) in liquid resources (72,209)

(199,200) Net cash inflow / (outflow) before financing (191,922)

Financing:Cash outflows

(1,508,031) Short-term loans repaid (343,761)(138,639) Loans repaid (73,891)

(1,132) Finance lease principal repayments (2,768)Cash inflows

1,484,771 New short-term loans raised 304,924375,000 New loans raised 287,300

211,969 171,804

12,769 Increase / (decrease) in cash (20,118)

78

Group Statement of Total Movement in Reserves This statement shows the movements in the reserves held by the authority and its subsidiaries and associates for 2005/06.

£000s1 April

2005Net surplus or

(deficit)Financing of fixed assets

Other movements

31 March 2006

Leeds City CouncilFixed Asset Restatement Account 1,397,589 - (135,480) 596,824 1,858,933Capital Financing Account 546,176 - (35,996) 510,180Deferred government grants and contributions 192,002 - 36,266 228,268General Fund 9,859 752 - 10,611Earmarked reserves 13,570 (7,543) - 6,027Housing Revenue Account balance 4,603 7,627 - 12,230Usable capital receipts 650 - - 880 1,530Collection Fund (1,533) 377 - (1,156)Pensions Reserve (530,693) 21,796 - (508,897)

1,632,223 23,009 (135,210) 597,704 2,117,726SubsidiariesGeneral reserves 3,604 15,307 - - 18,911Pensions reserves (17,961) (2,161) - - (20,122)

1,617,866 36,155 (135,210) 597,704 2,116,515Associates and joint venturesGroup general reserves - - -Group pensions reserves - - -

1,617,866 36,155 (135,210) 597,704 2,116,515

The other movements above consist of – Impairment losses arising

from revaluations

Unrealised losses from

revaluing fixed assets

Movement in realised

capital resources

Totals

Fixed Asset Restatement Account (262) 597,086 - 596,824Usable capital receipts - - 880 880

(262) 597,086 880 597,704

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Explanatory Notes to the Group Accounts Where figures in the group accounts differ materially from the authority’s accounts, the relevant explanatory notes have been prepared on a consolidated basis. The notes below give information on the areas that have materially changed on consolidation of the group entities into the authority’s accounts.

The notes for 2005/06 do not include any figures relating to Leeds Bradford International Airport (LBIA), as the financial statements for LBIA are not currently available.

G2 Alignment with UK generally accepted accounting principles (GAAP)

In applying the different accounting policies required by the SORP for the group statements (see page 74), the following adjustments were made to the Leeds City Council figures given in the Consolidated Revenue Account (CRA) in order to produce the group income and expenditure account :

a An overall profit of £44k on the disposal of fixed assets has been included as a separate line before net cost of services in the group income and expenditure account.

b Government grants deferred of £15,280k shown within the Asset Management revenue account in the CRA were transferred to the net cost of services in the group statement.

c Entries for notional interest charges of £130,776 included in the CRA within the net cost of services, and reversed out in the Asset Management revenue account, have been taken out.

d Depreciation on surplus assets of £835k and external interest payable of £53,445k shown within the Asset Management revenue account in the CRA are both shown as separate items in the group statement.

e Depreciation on HRA assets of £68,345k shown within the Asset Management revenue account and reversed out within the transfer to the Major Repairs Reserve in the CRA has been taken out. The remaining entries for HRA depreciation in the group statement are a charge within the net cost of services, reversed as part of the transfer to the capital financing account. The remaining transfer to the Major Repairs Reserve is made up of the Major Repairs Allowance less amounts used from the reserve to redeem borrowing.

f At the 31st March 2005 the authority was responsible for and the sole trustee of 83 trust funds. Of these, two material trusts – St Aidan's Trust and Fulford Endowment – meet the criteria of directly managed funds and have been consolidated in their entirety into the group accounts.

The purpose of the St Aidan’s Trust is to fund the environmental restoration works on completion of mining at the St Aidan's site and make the trust land available in the interests of social welfare for public recreation and leisure time occupation for those living, working in, or visiting the South Leeds area. In 2005/06 the net movement in funds of the charity was an increase of £39k (£86k in 2004/05). On 31st March 2005 it had net assets of £2,318k (£2,279k in 2004/05).

The Fulford Endowment is a trust fund set up for the enrichment of Temple Newsam Estate, a historic building and parklands owned by the authority. The trust has been used to fund part of the restoration cost of the house and to contribute to the purchase of items and security of the house. In 2005/06 the net movement in funds balances was an decrease of £20k (£70k in 2004/05). On 31st March 2005 it had net assets of £117k (£137k in 2004/05).

80

G3 FRS17 pension assets and liabilities

The object of FRS17 is to ensure that the authority's financial statements reflect at fair value the future pension liabilities which have been incurred, and the extent to which assets have already been set aside to fund them. This means that FRS17-based pensions assets and liabilities are included in the Group Income and Expenditure Account and in the Group Balance Sheet. Group subsidiaries contribute to two pension schemes; the West Yorkshire Pension Fund (WYPF) and Teachers’ Discretionary Pensions. The inclusion of the group entities’ figures for the West Yorkshire Pension Fund have a material impact on the required explanatory notes. The Teachers Discretionary Pensions note is unaffected in the group accounts The table below gives a summary of the FRS 17 transactions within the Group Accounts:

Summary of FRS 17 transactions

The last full actuarial valuation for the WYPF was carried out as at March 2004. An interim actuarial review was carried out in order to calculate the figures required under FRS 17. In calculating the authority's assets and liabilities, the fund's actuaries had to make a number of assumptions about events and circumstances in the future, meaning that the results of actuarial calculations are subject to uncertainties within a range of possible values. The following actuarial assumptions were made:

2004/05 2005/06WYPF Teachers Total WYPF Teachers Total

In the group income and expenditure account19,239 (1,279) 17,960 Transactions in net cost of services (15,496) (2,327) (17,823)3,442 3,844 7,286 Transactions in operating expenditure 7,438 3,839 11,277

(20,879) (2,565) (23,444) Appropriation to / (from) LCC pension reserve 5,777 (1,512) 4,265(1,802) - (1,802) Appropriation to / (from) group pension reserves 2,281 - 2,281

In the group balance sheet(474,733) (73,921) (548,654) Pension liability (450,056) (78,963) (529,019)474,733 73,921 548,654 Pensions reserve 450,056 78,963 529,019

81

WYPF – actuarial assumptions

At 31st March 2006, the fund’s actuaries estimated that the group had the following assets and liabilities for pensions payable through the West Yorkshire Pension Fund.

WYPF – assets and liabilities

WYPF – movement in net pension asset / (liability)

31/03/2005 31/03/2006

Financial assumptions2.9% Rate of inflation 2.9%4.7% Rate of increase in salaries 4.7%2.9% Rate of increase in pensions 2.9%5.4% Discount rate 4.9%

Expected rate of return on assets7.5% Equities 7.0%4.7% Government bonds 4.3%5.4% Other bonds 4.9%6.5% Property 6.0%4.8% Cash / liquidity 4.5%n/a Other 7.0%

Split of assets between investment categories74.9% Equities 73.9%10.6% Government bonds 6.9%2.0% Other bonds 4.8%5.3% Property 5.1%7.2% Cash / liquidity 6.2%n/a Other 3.1%

31/03/2005 £000s 31/03/2006

(1,784,643) Estimated present value of liabilities (2,106,452)1,309,910 Fair value of assets 1,656,396

(474,733) Net asset / (liability) (450,056)

2004/05net asset / (liability) £000s

(169,914) 1 April (474,733)

Service expenditure(53,367) Current service cost (60,605)(4,216) Past service cost / curtailment cost / settlements 32,42038,344 Employer contributions 43,681

(19,239) 15,496Finance gains and losses

(84,970) Interest on pension liabilities (97,526)81,528 Expected return on assets 90,088

(3,442) (7,438)Actuarial gains and lossesChanges relating to 04/05 (521)

(296,101) Change in assumptions (172,987)71,622 Asset gain / (loss) 240,651

(57,659) Liability gain / (loss) (50,524)

(282,138) 16,619

(474,733) 31 March (450,056)

2005/06net asset / (liability)

82

WYPF – movement in net pension asset / (liability)

G4 Debtors and creditors

The only material change to the authority’s debtors and creditors note is the removal of the indebtedness between the authority and the group entities and the inclusion of the trade debtors and creditors of the group entities.

The total debtors disclosed in the authority’s debtors table of £148,076k, include intragroup indebtedness of £16,182k. After removing the intragroup indebtedness and the inclusion of subsidiary company’s trade debtors of £3,860k, the total group debtors figure was £135,754k.

The total creditors disclosed in the authority’s creditors table of £224,866k, include intragroup indebtedness of £17,261k. After removing the intragroup indebtedness and the inclusion of subsidiary company’s trade creditors of £20,574k, the total group creditors figure was £228,179k.

£000s

(173,508)

(50,524)

240,651

16,619 0.8% of liabilities

Difference between actuarial assumptions on liabilities and actual experience

2.4% of liabilities

gain / (loss)percentage

Difference between expected and actual return on assets

14.5% of assets

Changes in demographic and financial assumptions affecting estimation of liabilities

8.2% of liabilities

83

G5 Summary of movement in reserves

Group company general reserves

The table above does not include the 2005/06 reserves figure Leeds Bradford International Airport, the figures will be included when the accounts are received. The inclusion of the reserve figure will result in the correct profit/loss for the year being shown in the table.

G6 Contingent liability for Leeds City Council

The authority acts as a guarantor for Education Leeds’ admittance to the West Yorkshire Pension Fund. Any liability to the authority would only occur if Education Leeds did not have sufficient assets to meet its pension liabilities.

G7 Reconciliations between the group accounting statements

G7.1 Net surplus on the income and expenditure account and the revenue activities net cash flow

The surplus on the income and expenditure account includes transactions which do not result in cash flows. The following table identifies these and so reconciles the account with the net revenue cash flow on the group cash flow statement.

£000s31/03/2005 net

movements31/03/2006

Subsidiary companiesEducation Leeds 2,907 (172) 2,735Leeds North East Homes 286 1,234 1,520Leeds East Homes 182 3,775 3,957Leeds South East Homes 522 1,092 1,614Leeds South Homes (1,813) 3,139 1,326Leeds West Homes (129) 3,454 3,325Leeds North West Homes (767) 2,649 1,882

1,188 15,171 16,359Associates and joint venturesLeeds Bradford International Airport 5,379 (5,379) -

5,379 (5,379) -Directly managed fundsSt Aidan's Trust 2,279 39 2,318Fulford Endowment 137 (20) 117

2,416 19 2,435

Total Group Companies General Reserves 8,983 9,811 18,794

84

Reconciliation of group surplus / deficit and net revenue cash flow

G8 Group subsidiary company performance

The authority has seven entities which have been classified as subsidiaries in accordance with the SORP 2005. These are :

Education Leeds The six Arms Length Management Organisations for Housing (ALMOs)

The dominant relationship that Leeds City Council exerts over these entities results in this classification. Due to this relationship, the group financial statements treat the financial information of the authority and its subsidiaries as a single economic entity to show the resources controlled by the group, the obligations of the group and the results the group achieves with its resources.

Further information regarding these subsidiaries is outlined below.

G8.1 Education Leeds Ltd (Companies House registration number 4155758)

Nature of the business:

The company has been established by the authority to promote the raising of educational standards in Leeds through the delivery to schools, pupils and parents of high quality and timely

2004/05 £000s 2005/06

293 Consolidated Revenue Account – surplus / (deficit) for the year 752

Non-cash transactionsCapital transactions charged to revenue :

32,358 Housing Major Repairs Allowance to Capital Financing reserve 36,47917,247 Minimum Revenue Provision 19,493

640 Group entities depreciation charges 497757 Premiums and discounts written down to revenue 2,65227 Revenue contribution to capital outlay 5,434

(368) Grants amortised to revenue -- Landfill allowances received (4,706)

50,661 59,849(6,521) Reserves (including HRA and Collection Fund) 461(1,320) Group income and expenditure account - surplus/ (deficit) 14,275

908 Provisions set aside in year 2,348

43,728 76,933Accrued items

(32,412) (Increase) / decrease in debtors (26,251)7,523 Increase / (decrease) in creditors 42,740

73 (Increase) / decrease in stocks 385154 Increase / (decrease) in deferred credits 154

(24,662) 17,028Items in another classification in the cash flow statement

46,643 External interest paid 53,445(774) External iterest received (4,032)(168) Dividends from associates (78)

- Taxation 247

45,701 49,582Items not chargable to revenue

(37,370) Premiums and discounts paid and received 0 -

27,690 Revenue activities net cash flow 144,295

85

education support and administrative services. A contract agreement exists between the authority and Education Leeds.

Relationship with the authority:

The company has no share capital and is wholly owned by the authority. The authority would be entitled to all of Education Leeds’ assets in the event of winding up, once all debts and liabilities have been satisfied.

The authority holds 40% of the voting rights. The company has five members: two from the authority, two from Capita Business Services Limited and an independent Chair, each agreeing to contribute £1 if the company is wound up.

As Education Leeds is wholly owned by the authority, which has a 40% representation at board level, the authority has the ability to exercise dominant influence.

The authority acts as a guarantor for Education Leeds’ admittance to the West Yorkshire Pension Fund. Any liability to the authority would only occur if Education Leeds did not have sufficient assets to meet its pension liabilities.

Financial performance:

In 2005/06 the company made an operating deficit of £172k (an operating surplus of £137k in 2004/05).

On 31st March 2006 it had net liabilities after depreciation of £12,552k (net assets after depreciation of £2,907 at 31st March 2005).

Accounts:

The financial accounts of the company can be obtained from the Strategic Manager, Resource Management, 8th Floor East, Merrion House, Leeds, LS2 8DT.

G8.2 Arms Length Management Organisations for Housing

Company Companies House registration number Leeds North East Homes 4594820 Leeds East Homes 4584842 Leeds South East Homes 4594819 Leeds South Homes 4594833 Leeds West Homes 4596082 Leeds North West Homes 4594852

Nature of the business:

On 1st February 2003, the authority established six Arms Length Management Organisations (ALMOs) to manage its stock of council houses.

The ALMOs provide, manage, maintain, improve, demolish or convert the housing stock. They also provide amenities and services for residents of the housing stock and carry out activities which contribute to the regeneration or development in the area.

Relationship with the authority:

The six ALMOs have no share capital and are wholly owned by the authority. The authority would be entitled to the assets of the ALMOs in the event of their winding up, after debts and liabilities have been met.

86

The total number of Board Members must be at least fifteen and no more than eighteen. The council has the entitlement to have a maximum number of eight board members. The proportion of voting rights the authority currently holds therefore varies between each ALMO.

As the ALMOs are wholly owned by the authority the authority has the rights to exercise dominant influence.

Financial Performance:

In 2005/06 the ALMOs made a net operating surplus totalling £15,879k (a deficit of £3,766k in 2004/05). The ALMOs’ operating results are shown in detail in the table below.

On 31st March 2006, they had total net assets of £8,738k (net liabilities of £636k at 31st March 2005).

2005/06 ALMO Operating Results

Accounts:

The financial accounts for the ALMOs can be obtained from the Director of Corporate Services, Leeds City Council.

G9 Associates and joint ventures

The authority does not have any joint ventures to include in the group accounts.

For an entity in which an authority holds a participating interest and exercises significant influence, the SORP requires recognition as an associate in the group. Under this definition, Leeds Bradford International Airport has been classified as an associate. Further details of this entity are outlined below.

G9.1 Leeds Bradford International Airport Limited

Nature of the business:

The principal activity of the company is the operation of a regional and international airport.

Relationship with the authority:

The authority holds a 40% share in the airport. In the event that the airport should cease trading, the authority would receive 40% of net assets.

The authority has invested in the company by way of a debenture loan, which currently has a balance outstanding of £603k (£674k in 2004/05) – see explanatory note 11.3 ‘Long Term Investments on page 41.

Operating surplus

/ (deficit)

FRS 17 surplus / (deficit)

Net operating

surplus/ (deficit)

Leeds North East Homes 1,234 117 1,084Leeds East Homes 3,775 582 4,179Leeds South East Homes 1,285 174 1,029Leeds South Homes 3,139 361 3,325Leeds West Homes 3,612 261 3,417Leeds North West Homes 2,649 305 2,845

15,694 1,800 15,879

87

Leeds Bradford International Airport is a limited company and the authority has no liability to meet any accumulated deficits or losses.

Financial performance:

In 2005/06 the airport made a net profit before tax of £0k and a net profit after tax of £0k. (In 2004/05 £1,267k and £790k respectively).

On 31st March 2006 it had net assets of £0k (£36,652k on 31st March 2005).

The following tables summarise the authority's share of the key items in the airport's accounts.

40% share of LBIA assets and liabilities

40% share of LBIA turnover

Within the above share of fixed assets, £16,720k relates to assets specific in nature to the airport and which are not covered by the authority's accounting policies (such as runways and terminal buildings), with the remaining £2,578k being general categories of assets. No revaluation has been done to align these assets with the authority's accounting policies.

Accounts:

The financial accounts of Leeds Bradford International Airport Ltd can be obtained from Leeds Bradford International Airport Ltd, Yeadon, Leeds, LS19 7TZ.

G10 Excepted items

There are certain topics that councils have to report on but that do not affect Leeds City Council’s group accounts for 2005/06. There is only one such topic.

a Combinations. During 2005/06 there were no new combinations within the group, either as mergers (where the combination is based on the legal of transfer of stock) or as acquisitions (where stock is purchased).

£000s

18,757 Fixed assets -1,642 Current assets -

(2,053) Liabilities due within one year -(2,446) Liabilities due after one year or more -(1,284) Provisions for liabilities and charges -

14,616 Net assets -

31 March 200631 March 2005

2004/05 £000s 2005/06

8,247 Turnover -507 Profit before tax -

(158) Taxation -349 Profit after tax -

88

Disclosure notes to the main financial statements These notes provide miscellaneous information which is supplementary to the other accounting statements. They report on spending in defined areas, on transactions with related parties and on the council’s stewardship of trust funds.

D1 Section 137 of the Local Government Act 1972

Under the powers granted by section 137 of the Local Government Act 1972 (as amended), the authority is empowered to incur expenditure which it considers to be in the interests of the inhabitants of its area. The authority is restricted by this law to spending a maximum of £3.55 per person living in Leeds, which produced a spending limit for 2005/06 of £2.5m. The actual expenditure under this provision in 2005/06 was £0.5m, which is analysed below:

Section 137

D2 Publicity

Section 5(1) of the Local Government Act 1986 requires the council to provide details of its spending on publicity. The act does not provide a clear definition of publicity, but this analysis shows the elements of expenditure which the authority judges to be relevant.

Publicity

D3 Pooled budgets

Section 31 of the Health Act 1999 allows partnership arrangements between National Health Service bodies, local authorities and other agencies in order to improve and co-ordinate services. Each partner makes a contribution to a pooled budget, with the aim of focussing services and activities for a client group. Funds contributed are those normally used for the services represented in the pooled budget and allow the organisations involved to act in a more cohesive way.

D3.1 Joint Commissioning Board for People with Learning Disabilities

The authority has established this board in association with the North East Leeds Primary Care Trust and independent sector providers. The pooled budget fund is summarised below:

2004/05 £000s 2005/06

455 Positive Action in Training and Housing 411148 Other 64

603 475

2004/05 £000s 2005/06

1,930 Staff recruitment advertising 2,0281,815 Promotions and promotional services 1,812

545 Other advertising 526

4,290 4,366

89

Joint Commissioning Board for People with Learning Disabilities

D3.2 Leeds Community Equipment Services

This is an integrated service managed jointly by the five Leeds Primary Care Trusts and the authority. It holds, delivers, collects and refurbishes a wide range of equipment, issuing 59,486 items and collecting 39,100 items last year. Some of the equipment issued by the store is purchased by a pooled equipment fund, which is made up of contributions by the managing agencies, and is provided following assessment and recommendation by a range of health and social care staff. The pooled budget fund is summarised below:

Leeds Community Equipment Services

D4 Members' allowances

The Local Authorities (Members'Allowances) (England) Regulations 2003 require disclosure of the value of allowances paid to members of the council. This is shown in the following table:

Members’ allowances

D5 Employee remuneration

The Accounts and Audit Regulations 2003 require the disclosure of officers' remuneration in excess of £50,000:

2004/05 £000s 2005/06

Funding:(22,821) Leeds City Council (27,527)(21,324) NE Leeds Primary Care Trust (23,289)

(3,727) Government grants (2,648)

(47,872) (53,464)

Expenditure on services provided by:26,587 Independent sector 29,45211,045 Leeds City Council (Social Services Department) 12,69410,240 NE Leeds Primary Care Trust 11,318

47,872 53,464

2004/05 £000s 2005/06

Funding:(478) Primary Care Trusts (567)(375) Leeds City Council (430)

(853) (997)

Expenditure on services provided by:478 Primary Care Trusts 567375 Leeds City Council (Social Services Department) 430

853 997

2004/05 £000s 2005/06

1,226 Basic Allowance 1,369567 Special Responsibility Allowance 615

1,793 1,984

90

The above includes lump sum payments arising from voluntary early retirement. This can mean that some employees who would not normally fall within the disclosure may do so in the year that they retire because of the payment of a lump sum. This can result in distortions to year on year comparisons.

The table also includes payments made in respect of the duties of the Returning Officer for European and Local Elections.

The table includes headteachers.

D6 Related party transactions

The Statement of Recommended Practice requires the disclosure of any material transactions with related parties to ensure that stakeholders are aware when these transactions take place and the amount and implications of such transactions.

All such material related party transactions are disclosed in aggregate form below:

D6.1 Authority members

In respect of the 2005/06 financial year a number of authority members had a controlling interest in a company, partnership, trust or entity which generated a related party transaction with the authority. The controlling interest was by way of ownership, or as a director, trustee, governor or partner of an organisation. The transactions amounted to net payments of £7,894k made by the authority in 2005/06 (£6,196k in 2004/05), including £239k accrued at 31st March, of which £2,168k related to committee approved grants in support of the arts, promotion, tourism and sport (£2,217k in 2004/05).

It may be noted that all members' pecuniary and non-financial interests which could conflict with those of the authority are open to public inspection as required by the Local Authority (Members Interests) Regulations 1992 (si 1992/618) laid under section 19 of the Local Government and Housing Act 1989. In addition the awarding of any contracts by the authority to individual companies is governed by the authority's Contract Procedure Rules as approved by the Executive Board.

D6.2 Chief officers

2004/05 Number of employees 2005/06

98 £50,000 to £60,000 16338 £60,000 to £70,000 3714 £70,000 to £80,000 315 £80,000 to £90,000 78 £90,000 to £100,000 1- £100,000 to £110,000 4- £110,000 to £120,000 51 £120,000 to £130,000 -- £130,000 to £140,000 1- £140,000 to £150,000 -- £150,000 to £160,000 -- £160,000 to £170,000 -- £170,000 to £180,000 -1 £180,000 to £190,000 1

165 250

91

For the purpose of this disclosure the term 'chief officer' is defined as the Chief Executive, the Deputy Chief Executive and departmental directors. The note also covers members of those officers' close families or households. In 2005/06 there were no related party transactions requiring disclosure in relation to chief officers.

As in the case of members there is a code of conduct governing the disclosure of such interests, under Section 117 of the Local Government Act 1972.

D6.3 Other material related party transactions

Related party transactions with National Health Service Bodies amounted to income to the authority of £9,218k in 2005/06 (£10,832k in 2004/05), including £127k accrued at 31st March and £152k provision for doubtful debts. This income relates to various schemes and included funded nursing care for local authority funded residents from 1st April 2003, under Section 49 of the Health and Social Care Act 2001.

Agency payments by way of grants made to voluntary organisations for undertaking certain statutory duties on behalf of the authority amounted to £9,940k in 2005/06 (£10,577k in 2004/05). This includes £330k accrued at 31st March .

The following related party transactions are disclosed elsewhere in the accounts :

Precepting authorities (see the Consolidated Revenue and Collection Fund Accounts, pages 20 and 69)

Pension fund (see explanatory note 6, pages 28-33) Government Grants (see explanatory note 19, page 54) Associated and subsidiary companies (see the explanatory notes to the Group Accounts,

pages 79-87) Local Authority (Goods & Services) Act 1970 (see explanatory note 4.2, page 26) Joint Commissioning Service (see disclosure note D3, pages 88-89)

D7 Audit fees

The 2003 SORP requires a summary of the fees paid to external auditors:

Audit fees

a services carried out under section 5 of the Audit Commission Act 1998; b services carried out under section 28 of the Audit Commission Act 1998; c services carried out under section 10 of the Local Government Act 1999.

D8 Preparing for the Euro

The authority is required to disclose information relating to the proposed introduction of the Euro.

During 2005/06, the council continued to monitor the situation through literature issued by relevant bodies. There is no firm indication that the United Kingdom will join the single currency

2004/05 £000s 2005/06 notes

461 General audit 465 a174 Certification of grant claims and returns 155 b35 Best Value inspection 18 c5 Other audit work 84

675 722

92

in the near future, and the council is not planning to allocate specific budgetary provision to Euro preparations. Any work carried out in 2006/07 will be met from within existing resources, as it was in 2005/06.

D9 Bequests, scholarships and trust funds

The council is responsible for administering a number of trust funds. These funds are not council assets, so they are not included in the balance sheet.

At the 31st March 2006 the council was sole trustee of eighty-one trust funds.

Trust funds

St Aidan's Trust is a charity whose purpose is to make trust land available in the interests of social welfare for the public recreation and leisure time of people living in, working in or visiting the South Leeds area.

2004/05 £000s 2005/06

2,279 St. Aidan's Trust 2,318141 Joseph Emmot 149137 Fulford endowment 117492 Other funds 473

3,049 3,057