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Statement of Accounts 2010/11

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Tunbridge Wells Borough Council

Draft Statement of Accounts for 2010/11


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Contents

Contents Pages

Explanatory Foreword

Statement of Responsibilities

Committee Approval

Annual Governance Statement

Independent Auditor‟s Report

Core Financial Statements:

Movement in Reserves Statement

Comprehensive Income and Expenditure Statement

Statement of Total Recognised Gains and Losses

Cash Flow Statement

Notes to the Core Financial Statements

Collection Fund Statement and Notes


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1 Layout of the Statement of Accounts

This Statement of Accounts consists of the following:

The Statement of Responsibilities, setting out the general responsibilities of both the Borough Council, and of the Head of Finance and Governance, in making proper financial arrangements and in maintaining financial records.

The Independent Auditor‟s report [to follow at the completion of the audit]

The core accounting statements:

o The Movement in Reserves Statement shows the movement in the year on the different reserves held by

the Council, analysed into “usable reserves” (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Surplus (or Deficit) on the Provision of Services line shows the true economic cost of providing the Council‟s services, more details of which are shown in the Comprehensive Income and Expenditure Account. These are different from the statutory amounts required to be charged to the General Fund Balance for tax setting purposes (see Note 4 for details). The line entitled “Net Increase / Decrease before Transfers to Earmarked Reserves” shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.

o The Comprehensive Income and Expenditure Statement shows the accounting cost in the year of

providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Councils raise taxation to cover expenditure in accordance with regulations, and this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

o The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by

the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first grouping is of usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (such as the Capital Receipts Reserve being restricted to fund capital expenditure or to repay debt). The second grouping includes reserves that hold unrealised gains or losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line “Adjustments between accounting basis and funding basis under regulations”.

o The Cash Flow Statement shows the changes in cash and cash equivalents of the Council during the

reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of the services provided by the Council. Investing activities represent the amount to which cash outflows have been made for resources which are intended to contribute towards the Council‟s future service delivery. Cash flows arising from financing activity are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council.

o Notes to the core financial statements, giving further detailed information.

o The Collection Fund Statement, together with notes to this account.

2 Tunbridge Wells Borough Council 2010-11 Performance

The Council produces an Annual Performance Report which sits alongside our Strategic Compass and outlines our key achievements of the last year and our aspirations for the year to come. Below is a summary of this report:

The financial year 2010/11 has proved to be challenging, but the Council has responded well to what is a changing political and economic climate. Applications for housing and council tax benefit have risen by around 25% as a result of the economic downturn, but we have continued to deliver those services with minimum additional cost and have halved the time it takes to process housing and council tax benefits in the last three years. The Gateway allows us to join up our services with over 30 other agencies, which means that we can deal with enquiries quickly and effectively.

Residents of the borough said that low crime rates and feeling safe are important, so we set up the Community Safety Unit (CSU), bringing together officers from different agencies including Kent Police, Tunbridge Wells Borough Council and Kent County Council to combat crime and anti-social behaviour jointly. Crime levels have remained one of the lowest in Kent.


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Residents rated good shopping facilities, thriving businesses and low unemployment as important. We worked in partnership with Business Link and Enterprise First, to provide advice and guidance to new businesses starting up in the borough. We supported Paddock Wood, Cranbrook and Hawkhurst to secure external funding to improve their economies. The Tunbridge Wells Farmers Market has been shortlisted in the top seven „FARMA‟ Certified markets in the country.

Residents felt that activities for young people are important, so we launched the new „Street Cruiser‟ youth bus in partnership with Kent Youth Service. This was fully funded by a grant from Kent County Council which was applied for by young people. The Street Cruiser is a „mobile youth club‟, which can be taken to different locations across the borough.

Residents said that they would not want us to withdraw funding for community organisations such as the Citizens Advice Bureau and Trinity Theatre, so we have continued our funding support for these organisations. During 2010/11 we donated a total of £402,000 in community grants to 23 voluntary and community organisations working in the borough.

Residents said that events, theatre and the arts are important to them. We have continued to support a lively culture and arts scene in Tunbridge Wells. The Assembly Hall Theatre attracts 170,000 visits a year, whilst our busy exhibitions and events programme attracts more than 60,000 visitors to the Museum & Art Gallery. We also helped to fund „Applause‟ rural touring and a range of arts activities.

Residents said the inspection of food premises and entertainment venues to maintain safety standards is important so we are putting in place the National Food Hygiene Rating Scheme to publicise the hygiene standards in food establishments.

We have also encouraged good health by working closely with GPs, leisure providers and others to offer healthy living information, advice and activities – we have helped over 200 people this year to make long-lasting changes such as stopping smoking, losing weight or becoming more physically active, enabling them to enjoy a healthier and longer life.

Residents said that planning is important. Over the last year, we received over 1,700 planning applications and decided more than 95% of those within eight weeks, after notifying over 10,000 neighbours.

The role of residents is important too. We have provided services, including the collection of plastic bottles and cans, to help residents to recycle and compost 48% of your household waste. Together we have achieved the highest rate in Kent.

We work closely with the local community, and the Cranbrook Conservation Area Appraisal was adopted in mid 2010 after the active participation of the local community groups. The restoration of the Colonnade at Hawkhurst was completed following a partnership including the local community, the Borough Council and other public bodies. We also carried out a community governance review to look at whether Rusthall should become a parish as a result of a request from the community of Rusthall. A decision will be made later this year..

We pride ourselves on good customer service. We will not keep customers waiting. 99% of telephone calls are now answered within 10 seconds. We established a severe weather text alert service to provide live information with regards to refuse and recycling collections and council office opening hours during the period of snow. You can text the word “SNOW” to 07537 401 900 to register.

Under the Strategic Compass Community quadrant lie the Council‟s four key priorities:

1. A Prosperous Tunbridge Wells

2. A Healthy Tunbridge Wells

3. A Green Tunbridge Wells

4. A Confident Tunbridge Wells

We clearly cannot deliver our priorities in isolation. Whilst the Annual Performance Report reflects on our achievements for the year, it should be seen as a key document of a wider partnership approach to ensure Tunbridge Wells is prosperous, green, healthy and confident. The Report is therefore supported by the broader Sustainable Community Strategy and the Strategic Compass.

Progress against these priorities and the key objectives set out in the Strategic Compass 2011-2012 will be monitored closely as part of quarterly performance reports to Cabinet.

Overall 2010/11 has been a challenging but successful period for the Council. The Council has continued to respond exceptionally well to the impacts of the downturn and early financial planning has put the Council‟s medium-term financial position on a sound footing.


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3 Net Revenue Outturn figures for 2010/11

Introduction

The table below sets out the net expenditure for the year compared to budgets.

Revised Budget Outturn Variance

£000 £000 £000

Chief Executive Chief Executive 732 737 5

Head Policy & Partnerships 2,225 2,173 (52)

2,957 2,910 (47)

Change & Communities Director 172 160 (12)

Finance & Governance (5,947) (5,499) 448

Housing & Wellbeing 2,257 2,861 604

Customer Access Transformation & Delivery 3,522 3,439 (83)

4 961 957

Regeneration & Sustainability Director 176 184 8

Environment & Street Scene 7,398 6,535 (863)

Economic Development (3,193) (2,610) 583

Planning 2,348 1,880 (468)

6,729 5,989 (740)

Cost of Services 9,690 9,860 170

Accounting adjustments 6,709 6,709 -

Parish Council Precepts 1,600 1,600 -

Interest payable - 282 282

Interest receivable (924) (1,093) (169)

Capital expenditure from revenue 80 80 -

Transfer to / (from) earmarked reserves (1,070) (1,129) (59)

Net Expenditure 16,085 16,309 224

Redistributed business rates (6,108) (6,108) -

General government grants (910) (931) (21)

Council Tax from Collection Fund (8,097) (8,097) -

Balance transferred from General Fund 970 1,173 203

Commentary

(1) The Directorate of Change and Communities overspent by £957,000 compared to the revised Budget for 2010/11. The main variances were:

£372,000 restatement of the 2009/10 Housing Benefit claim to the Department of Work and Pensions. The claim over-recovered benefits paid and this was reimbursed in 2010/11.

Court Cost income was £136,000 lower than budget. This was due to overambitious budgeting rather than any change in policy or performance, and is still £24,000 more than achieved in 2009/10.

£81,000 net additional costs for Concessionary Fares. Many more senior residents applied for permits and were travelling than anticipated, although the increase was partially mitigated by the snow over the Christmas period when usage reduced considerably. The Council had absolutely no control over the take-up and usage of these passes, but from 1

st April 2011 responsibility passed to Kent County

Council, removing the Council‟s exposure to this risk.

£78,000 under achievement of budgeted vacant posts. The budget assumed a £480,000 negative expenditure for approved posts vacant due to attrition and recruitment timing differences. Only £402,000 was actually achieved.

£63,000 additional Legal costs due to the new Mid-Kent Partnership taking longer to embed than anticipated.

(2) The Directorate of Regeneration and Sustainability was underspent by £740,000 compared to the revised Budget

for 2010/11. The main variances were:


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£333,000 due to a reduction in parking and net penalty charge notice income. The number of pay and display ticket sales declined overall by 4% compared with this time last year and 6% for season tickets. There were a number of Civil Enforcement Officer vacancies throughout the year which have now been filled. This should have a positive impact on income in 2011/12.

£296,000 Land Charges income over budget. There is an outstanding Court case surrounding charging for land searches that had caused the Council to be cautious about recognising this income, hence the low budget of just £20,000. The case was not settled in the financial year and the income has been realised.

£165,000 compensation payment for inadequate building work carried out at the Sports centre in 2009/10.

£113,000 received in additional recycling credits. The price per ton has improved by 3% but the tonnage of recycling has also increased.

£184,000 reduced grounds maintenance costs, due mainly to the new maintenance contract in place for parks and the cemetery.

£81,000 in reduced Business Rates, after revaluations at the Crescent Road car park, the Town Hall and the Depot, and refunds for the public conveniences now transferred to the parishes.

£106,000 received from unbudgeted Second Homes Grants from Kent County Council. These grants were allocated against specific pieces of work or events and therefore reduce the costs in the Directorate.

(3) Net interest received was £114,000 less than budget. Net interest payable on the unbudgeted £20,000,000 loan

from the Public Works Loan Board received on the 19th July 2010 was £151,000. There was also £182,000 less

income received from investment interest. However, this was partially offset by a reduction of £44,000 in the provision for interest on Section 106 developer contributions should the funds not be spent within the contractual time period. There was also an additional £175,000 in interest received from a successful claim for the reimbursement of VAT on sports education courses provided at the Tunbridge Wells Sports Centre prior to 1994.

(4) The transfers to/from the General Fund are £203,000 over budget. This is comprised of £170,000 Net Expenditure on Services over budget as described above, £114,000 interest receivable below budget less some small increases in grants and transfers from Earmarked reserves above budget.

Comparison to 2009/10

The figures in the Comprehensive Income and Expenditure Statement are based on a national standard analysis of services, whereas the budget, as shown above, is analysed and monitored according to the internal structure of the Council. Much of the variance in that Statement between years is due to accounting adjustments, such as for pension liabilities or asset impairments, which do not impact on the General Fund balance or the call on Council Tax. The table below shows the movements in the General Fund for 2009/10 and 2010/11, using the national standard service groupings, but excluding the accounting adjustments and also the recharges of support services.

Heading 2009/10 2010/11 Net

Change

£000 £000 £000

Central services to the public (222) 9 231 Cultural, environmental, regulatory and planning services 9,428 7,919 (1,509)

Highways and transport services (1,901) (1,709) 192

Other housing services 596 1,423 827

Corporate and democratic core 1,089 1,056 (33)

Non distributed costs 1,418 1,740 322

Support Services 5,662 6,130 468

Cost Of Services 16,070 16,568 498

Parish Council Precepts 1,444 1,600 156

Interest payable 83 283 200

Interest receivable (1,183) (1,093) 90

Capital expenditure financed from revenue 718 80 (638)

Transfer to (from) earmarked reserves (1,656) (1,129) 527

Total expenditure 15,476 16,309 833

Non-ringfenced government grants (1,618) (931) 687

Council Tax receivable (7,841) (8,097) (256)

NNDR redistribution (5,655) (6,108) (453)


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Heading 2009/10 2010/11 Net

Change

£000 £000 £000

Net Expenditure 362 1,173 811

Transfer to (from) General Fund (362) (1,173) (811)

4 Capital Programme and Outturn

The Council originally approved a capital programme of £7,733,000. Throughout the year additional projects have been approved and added to the programme, whereas some existing projects have been re-scheduled for completion in 2011/12. The net result was an outturn for 2010/11 of £1,198,000.

In July 2010, the £20,000,000 loan was approved for property investment opportunities in the capital programme, but reduced by £1,000,000 when this was repaid in January 2011 as per the terms of the loan. This £19,000,000 is the significant increase in the additional approvals seen below.

Gross Expenditure

£000's

Original Approval 7,733

Addtional Approvals/Deletions 18,862

Re-schedule to 2010/11 (24,627)

Outturn 2010/11 1,968

No material assets were acquired or disposed of during 2010/11.

5 Liability for Pension Costs

The Council‟s liability for future pension costs, as shown in the balance sheet and in Note 15 to the accounts, has reduced by around half, from £52m to £27m. About £15m of this reflects more favourable assumptions about life expectancy and rates of inflation, while the change for pensions increases, being based on the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI), accounts for a further £8m. Annual fluctuations in the accounting figure for the liability do not directly impact on contributions payable, which are based on longer-term projections of liabilities and on returns on investments held by the Pension Fund. The same factors that affect the annual figures, however, also impact on planned contributions, and, like most other councils in Kent, the Council has been able to reduce its contributions for 2012/11.

6 Material and Unusual Charges in the accounts

As explained in paragraph 5 above, a significant part of the reduction in the liability for future pension costs arose because of the change from the RPI to the CPI as a means of inflation-proofing local authority pensions. This reduction, amounting to £8,217,000, appears as a negative “past service cost” in the “Non-Distributed Costs” line of the Comprehensive Income and Expenditure Statement. This credit in the Comprehensive Income and Expenditure Account has the effect of reducing the negative balance of the Pensions Reserve, rather than increasing the General Fund.

7 Changes to Accounting Policies: International Financial Reporting Standards

For the first time this Statement of Accounts, in common with those for all other local authorities, is compiled in line with International Financial Reporting Standards (IFRS). This brings local authority accounting in line with the rest of the public sector, which adopted IFRS in its published accounts from 2009/10. IFRS requires entities to re-state the previous financial year‟s results in line with IFRS, and as if they had always produced their accounts under IFRS. The balance sheets as at the start and end of 2009/10 have therefore been re-stated in this set of accounts, together with all of the accounting statements and notes for the year.

Changing the way in which we account does not in itself add or deduct from the overall resources, but it does enable the Council to show more clearly what resources are available. The table below shows how the change in accounting policies has affected the Council‟s overall reserves, as shown in the previously published and re-stated balance sheets. Most of the individual figures in this table are comparatively insignificant, but the material changes are discussed in more detail in Note 1 to the accounting statements.


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1 April 2009

31 March 2010

Usable Unusable Total

Usable Unusable Total

£000 £000 £000

£000 £000 £000

25,845 41,229 67,074 Published 2009/10 accounts 23,383 22,719 46,102

- 4,879 4,879 Government Grants Deferred - 2,015 2,015

386 - 386 Capital grants & contributions 493 - 493

219 - 219 Grants received in advance 171 - 171

- 23 23 Deferred capital receipts - 23 23

- (300) (300) Leased asset - (106) (106)

20 (20) - Capital Financing Requirement 20 (20) -

- (21) (21) Intangible assets - (35) (35)

-

26,470 45,790 72,260 Restated reserve balances 24,067 24,596 48,663

8 Borrowing

During 2010/11 the Council investigated the possibility of purchasing properties within Tunbridge Wells for the purposes of investment and possible future use by the Council. To put itself in a position to bid for and complete the purchase it borrowed £20m from the Public Works Loan Board. In the event the Council decided not to proceed with such purchases during the year, and this amount has not been used to finance capital expenditure. The proceeds from borrowing have been put into planned investments, the result of which was a loss during 2010/11, but which will be show a surplus over the period of the loan.

The Council is making repayments of this loan of £1m each year, and is able to do this by ensuring that the right level of its corresponding investments expire in time to make the repayment. The Council now has the choice of repaying the money early, or of spending it on further planned property purchases.

9 Funds set aside to meet capital expenditure plans

The Council has set its budget for 2011/12 in line with its Medium Term Financial Strategy. This sets out to align its plans and commitments for services with the anticipated restrictions on government grants and a policy to increase Council Tax by 2.5% year on year unless government grants are provided to offset any further Council Tax freeze, as was the case in 2011/12.

The Council has also approved various capital schemes, totaling £28,683,000, up to the year 2014/15. The table below sets out how this will be funded.

2011/12 2012/13 2013/14 2014/15 Total

£000's £000's £000's £000's £000's

Reserves and capital receipts 24,527 555 555 555 26,192

Government grants 444 444 444 444 1,776

External contributions 715

715

-

Total approved programme 25,686 999 999 999 28,683

The funds approved for 2012/13 onwards are likely to be the minimum requirement. Any additional funding required will go through the Council‟s normal approval process.

10 Material events after reporting date

[to be reviewed before accounts are issued, and updated for any events up to late September]

11 Impact of current economic climate

[to follow]

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Statement of Responsibilities

Statement of Responsibilities for the Statement of Accounts

The Borough Council’s Responsibilities

The Council is required to:

Make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs. In this Council, that officer is the Head of Finance and Governance.

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

Approve the Statement of Accounts

The Responsibilities of the Head of Finance and Governance

The Head of Finance and Governance is responsible for the preparation of the Council‟s statement of accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Council Accounting in the United Kingdom („the Code‟).

In preparing this statement of accounts, the Finance Director has:

selected suitable accounting policies and then applied them

made judgements and estimates that were reasonable and prudent

complied with the local Council Code

The Head of Finance and Governance has also:

kept proper accounting records which were up to date

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

L.M. Colyer CPFA

Head of Finance and Governance (s151 Officer)

xx June 2011

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Governance Statement

Independent Auditor’s Report

Report

[to follow at the conclusion of the audit]

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Movement in Reserves Statement

Gen

era

l

Fu

nd

Earm

ark

ed

Reserv

es

Cap

ital

Gra

nts

&

Co

ntr

ibs

.

Cap

ital

Receip

ts

To

tal

Usab

le

Reserv

es

Un

us

ab

le

Reserv

es

To

tal

Reserv

es

£000 £000 £000 £000 £000 £000 £000

Balance at 31 March 2009 16,974 6,618 386 2,492 26,470 45,790 72,260

Movement in Reserves in 2009/10

Surplus or (deficit) on provision of services (accounting basis)

(1,043) - - - (1,043) - (1,043)

Other Comprehensive Expenditure and Income - - - - - (22,554) (22,554)

Total Comprehensive Expenditure and Income (1,043) - - (1,043) (22,554) (23,597)

Adjustments between accounting and funding basis under regulation

(974) - 107 (493) (1,360) 1,360 -

Net Increase / (Decrease) before Transfers to Earmarked Reserves

(2,017) - 107 (493) (2,403) (21,194) (23,597)

Transfers to / from Earmarked Reserves 1,655 (1,655) - - - - -

Increase / Decrease in Year (362) (1,655) 107 (493) (2,403) (21,194) (23,597)

Balance at 31 March 2010 16,612 4,963 493 1,999 24,067 24,596 48,663

Movement in Reserves in 2010/11

Surplus or (deficit) on provision of services (accounting basis)

3,763 - - - 3,763 - 3,763

Other Comprehensive Expenditure and Income - - - - - 17,615 17,615

Total Comprehensive Expenditure and Income 3,763 - - 3,763 17,615 21,378


(6,065) - (29) 1 (6,093) 6,093 -

Net Increase / (Decrease) before Transfers to Earmarked Reserves

(2,302) - (29) 1 (2,330) 23,708 21,378

Transfers to / from Earmarked Reserves 1,129 (1,129) - - - - -

Increase / Decrease in Year (1,173) (1,129) (29) 1 (2,330) 23,708 21,378

Balance at 31 March 2011 15,439 3,834 464 2,000 21,737 48,304 70,041

Details of Comprehensive Income and Expenditure are given in the Comprehensive Income and Expenditure Statement. A further analysis of adjustments between accounting and funding bases are given in Note 4, and further information on earmarked reserves and unusable reserves in Note 5.

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d Balance

Comprehensive Income and Expenditure Account

2009/10

2010/11

Expend. Income Net

Expend. Income Net

£000 £000 £000

£000 £000 £000

8,231 (7,779) 452 Central services to the public 9,153 (8,021) 1,132

18,414 (8,315) 10,099 Cultural, environmental, regulatory and planning services

20,894 (8,330) 12,564

4,309 (5,580) (1,271) Highways and transport services 4,342 (5,651) (1,309)

31,932 (30,515) 1,417 Other housing services 33,466 (31,293) 2,173

3,045 (46) 2,999 Corporate and democratic core 3,095 (58) 3,037

188 (9) 179 Non distributed costs (7,737) - (7,737)

66,119 (52,244) 13,875 Cost Of Services 63,213 (53,353) 9,860

237 (317) (80) Gain / (Loss) on disposal of non-current assets 18 (405) (387)

1,444 - 1,444 Parish Council Precepts 1,600 - 1,600

1,681 (317) 1,364 Other Operating Expenditure 1,618 (405) 1,213

83 - 83 Interest payable 282 - 282

- (1,159) (1,159) Interest income - (1,105) (1,105)

4,534 (2,332) 2,202 Pensions interest cost and expected return on assets

5,068 (3,615) 1,453

4,617 (3,491) 1,126 Financing and Investment Income and Expenditure

5,350 (4,720) 630

- (1,618) (1,618) Non-ringfenced government grants - (931) (931)

- (248) (248) Capital grants and contributions - (283) (283)

- (7,801) (7,801) Council Tax receivable - (8,144) (8,144)

- (5,655) (5,655) NNDR redistribution - (6,108) (6,108)

- (15,322) (15,322) Taxation and Non-Specific Grant Income - (15,466) (15,466)

1,043 (Surplus) or Deficit on Provision of Services

(3,763)

1,109

(Surplus) or deficit on revaluation of property plant and equipment

(57)

21,445

Actuarial (gains) / losses on pension assets / liabilities

(17,558)

22,554

Other Comprehensive Income and Expenditure

(17,615)

23,597 Total Comprehensive Income and Expenditure

(21,378)

The negative amount shown under “Non-Distributed Costs” in the statement above includes a sum of £8,217,000 relating to the change from the Retail Prices Index to the Consumer Prices Index as the reference for future increases in pensions, as explained in paragraphs 5-6 of the Explanatory Foreword.

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The Balance Sheet

31 March 2009 31 March 2010 Note 31 March 2011

£000

£000

£000

74,364

75,064

9 Property, Plant & Equipment 73,942 858

991

10 Intangible Assets 996

5,000

10,000

12 Long Term Investments 5,000 543

628

13 Long Term Debtors 575

80,765

86,683

Long Term Assets

80,513

20,945

8,356

12 Short Term Investments 34,448 27

37

Stock 38

3,457

6,970

13 Short Term Debtors 3,754 2,172

3,403

Cash and Cash Equivalents 2,886

-

87

11 Assets held for sale -

26,601

18,853

Current Assets

41,126

-

-

Short Term Borrowing (2,090)

11 Assets held for sale 87

(4,367)

(3,619)

14 Short Term Creditors (4,302) (306)

(224)

Capital grants receipts in advance (303)

(4,673)

(3,843)

Current Liabilities

(6,608)

-

-

Long Term Borrowing (17,000) (325)

(462)

14 Long Term Creditors (109)

(198)

(198)

Provisions - (29,451)

(51,754)

15 Long Term Pension Liability (27,111)

(459)

(616)

Capital grants receipts in advance (770)

(30,433)

(53,030)

Long Term Liabilities

(44,990)

72,260

48,663

Net Assets

70,041

26,470

24,067 5 Usable reserves

21,737

45,790

24,596 5 Unusable Reserves

48,304

72,260

48,663

Total Reserves

70,041

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Cash Flow Statement

The Cash Flow Statement

2009/10

2010/11

£000 £000

£000 £000

(7,774)

Taxation (8,154)

(38,953)

Grants (42,296)

(5,655)

National Non-Domestic Rates redistribution (6,108)

(12,485)

Sale of goods and rendering of services (12,541)

(1,949)

Interest received (1,016)

(1,550)

Other receipts from operating activities (1,950)

(68,366) Cash inflows generated from operating activities

(72,065)

13,867

Employees 13,586

28,659

Housing Benefit paid out 30,347

1,652

Precepts paid 1,810

18,547

Cash paid to suppliers of goods and services 17,201

21

Interest paid 243

7,640

Other payments for operating activities 9,282

70,386 Cash outflows generated from operating activities

72,469

2,020 Net cashflows from operating activities

404

1,177 Purchase of property, etc. and intangible assets

607

114,900 Purchase of short-term and long-term investments

218,100

(317) Proceeds from sale of property etc

(387)

(121,900)

Proceeds from sale of short-term and long-term investments

(197,100)

(322) Grants and contributions to non-current assets

(516)

(6,462) Net cashflows from investing activities

20,704

- Cash receipts from short-term and long-term borrowing

(20,000)

- Repayments of short-term and long-term borrowing:

1,000

492 Changes in Council tax balances held for preceptors

(384)

2,719 Changes in NNDR balances held for central government

(1,207)

3,211 Net cashflows from financing activities

(20,591)

(1,231)

Net (increase) / decrease in cash and cash equivalents

517

Details of the cash balances are shown below.

1 April 2009 2009/10 31 March

2010 2010/11 31 March

2011

£000

£000 £000 £000

Cash and bank balances (28) (269) (297) (417) (714)

Money held in interest-bearing call accounts (2,200) 5,900 3,700 (100) 3,600

Total cash and cash equivalents (2,228) 5,631 3,403 (517) 2,886

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Notes to the Core Financial Statements

1 Changes to Accounting Policies and to previous years’ figures

1.1 Introduction

For the first time this Statement of Accounts has been prepared in accordance with International Financial Reporting Standards (IFRS). This has required the Council to re-state the balance sheets as at 1 April 2009 and 31 March 2010 in line with IFRS, and to adjust all of the main accounting statements and the notes accordingly.

Where changes to the accounting policies have resulted in material differences between the amounts reported in the 2009/10 Balance Sheet and Comprehensive Income and Expenditure Statement, they are explained below.

Various items on the balance sheet and in the Comprehensive Income and Expenditure Statement have been adjusted for non-material changes to accounting policies, and, for the Intangible Assets balances, to move to a more accurate accounting estimate of useful lives.

1.2 Government grants and contributions used to finance capital expenditure

Under previous accounting rules grants and contributions previously used to finance capital expenditure were held in the Government Grants Deferred Account, and released over a number of years through the Income and Expenditure Statement to the Capital Adjustment Account (an unusable reserve). This arrangement has been discontinued, and the entire balance on the Government Grants Deferred Account transferred to the Capital Adjustment Account. The following changes have therefore been made to the balance sheet:

Balance 1 April 2009 Balance 1 April 2010

2009/10

Published Adjustment

2009/10 Published

Adjustment

£000 £000 £000 £000

Government grants deferred (4,879) 4,879 (2,015) 2,015

Capital adjustment account (59,967) (4,879) (65,024) (2,015)

-

-

There is also an impact on the Comprehensive Income and Expenditure Statement, with the removal of the annual credits to net service expenditure lines as shown below:

2009/10 Published

Adjustment

£000 £000

Central services to the public 408 30

Cultural, environmental, regulatory and planning services 7,719 2,792

Highways and transport services (1,192) (75)

Other housing services 1,081 68

Corporate and democratic core 2,818 178

Non distributed costs 168 11

3,004

There is no change to the General Fund Balance, as under the previous practice a transfer was made from the General Fund to the Capital Adjustment Account to reverse the impact, and this reversal has now been discontinued.

1.3 Cash held in call accounts

The Council places money in interest-bearing call accounts as part of its overall cash management policy. The Council included the balance at 1 April 2009 as short term investments, but changed its policy during 2009/10 to count the balance as part of cash. This change of policy was not sufficient, under the previous code of practice, to justify a prior year adjustment, but an adjustment has now been made, as shown below:

Balance 1 April 2009 Balance 1 April 2010

2009/10

Published Adjustment

2009/10 Published

Adjustment

£000 £000 £000 £000

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Short term investments 23,145 (2,200) 8,357 -

Cash and cash equivalents 56 2,200 3,764 -

-

-

No change was required as at 1 April 2010.

2 Accounting Policies, Critical Judgements and Estimation Techniques

2.1 General Principles

The Statement of Accounts summarises the Council‟s transactions for the 2010/11 financial year and its position at the end of 31 March 2011, the close of the financial year. The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2003, which specify that the Statement is prepared in accordance with proper accounting practices. These primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2010/11, and the Best Value Accounting Code of Practice 2010/11, supported by International Financial Reporting Standards. The accounting convention adopted is historical cost, modified by the revaluation of certain categories of non-current assets.

2.2 Accruals of Expenditure and Income

We account for activity in the year that it takes place, not simply when cash payments are made or received. In particular:

Revenue from the sale of goods is recognised when the Council transfers the significant risks and rewards of ownership to the purchase, and it is probable that the economic benefits or service potential associated with the transaction will flow to the Council.

Revenue from the provision of services is recognised when the Council can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Council.

Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, and where the amounts are significant, they are carried as stocks on the Balance Sheet.

Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received, rather than when the payments are made.

Interest payable on borrowings and receivable on investments is accounted for on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract.

Where income and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where it is doubtful that debts wil l be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.

The Council collects income from payers of Non-Domestic Rates on behalf of the Government. As this is categorised as an agency service, the Council does not account for the income or the payment over of business rates within its Income and Expenditure Account, and includes a single creditor or debtor in its balance sheet, representing the net amount of Non-Domestic Rate debtors, adjustments for doubtful debts, income in advance, and amounts due to or from the Government.

Similarly the Council collects income from Council Tax payers, but only part relates to this Council, the balance being on behalf of other major precepting authorities. The amounts of debtors, adjustments for doubtful debts, and income in advance that relate to the precepting authorities are shown as a single net creditor in the balance sheet. The element of the Collection Fund due to preceptors is split between payments due to be made in the following financial year, which are held as Short Term Creditors, and any other amounts, due in succeeding financial years, which are shown as Long Term Creditors. In the event of a deficit, the amounts would be split between Short Term and Long Term Debtors.

2.3 Cash and Cash Equivalents

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

Cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and which form an integral part of the Council‟s cash management.

2.4 Charges to Revenue for Non-Current Assets

Services including support services are debited with the following amounts to record the cost of holding non-current assets during the year:

Depreciation attributable to the assets used by the relevant service;

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Revaluation and impairment losses on assets used by the service, where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off;

The annual write-down of intangible fixed assets attributable to the service.

The Council is not required to raise Council Tax to fund these charges, and they are therefore reversed through an appropriation from the Capital Adjustment Account to the General Fund.

2.5 Contingent Assets

A contingent asset is a possible asset that arises from a past event and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Council. Typically a contingent asset is related to a legal action by the authority, whose outcome is uncertain when the balance sheet is compiled.

Contingent assets are not recognised in the balance sheet, but their existence is recorded in a note to the accounting statements.

2.6 Contingent Liabilities

A contingent liability is a possible obligation that arises from a past event and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Council. Typically a contingent liability is related to a legal action against the authority, whose outcome is uncertain when the balance sheet is compiled.

Contingent liabilities are not recognised in the balance sheet, but their existence is recorded in a note to the accounting statements.

2.7 Employee Benefits

Benefits Payable during Employment

Accounting standards require that accruals for expenditure are made for short-term compensated absences, covering entitlements for annual leave, flexi-time and time in lieu. The Council has determined that the net value of the accumulated leave, etc in previous years is immaterial, and therefore makes no adjustment for these amounts. At the end of each financial year an assessment is made to ensure that the amounts involved remain immaterial.

Termination Benefits

Termination benefits include lump sum payments to departing employees, enhancements to retirement benefits, and salaries paid to the end of a notice period, but when the employee ceases to provide services to the Council. We accrue for such payments at the point when a decision is made to terminate employment, rather than when the benefits fall due for payment. These payments are charged to the appropriate service line in the Comprehensive Income and Expenditure Statement.

Post-Employment Benefits

The majority of employees of the Council are members of the Local Government Pension Scheme, administered by Kent County Council for local authorities within Kent. This scheme provides defined benefits to members (retirement lump sums and pensions), earned as employees work for the Council. We therefore account for this scheme as a defined benefit plan.

The liabilities of the Kent County Council pension scheme attributable to this Council are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projections of projected earnings for current employees.

Liabilities are discounted to their value at current prices, using a discount rate of 5.5% (based on the indicative rate of return on the Iboxx Sterling Corporates Index, AA over 15 years).

We include the assets of the Kent County Council Pension Fund attributable to this Council in the Balance Sheet at their fair value:

o quoted securities – current bid price

o unquoted securities – professional estimate

o unitised securities – current bid price

o property – market value.

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

o current service cost – the increase in liabilities as a result of years of service earned this year, allocated in the Comprehensive Income and Expenditure Statement to the service for which the employees worked.

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o interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid, debited to the Financing and Investment Income and Expenditure section of the Comprehensive Income and Expenditure Statement.

o contributions by scheme participants, which reduce plan liabilities, but correspondingly increase plan assets, and are therefore not reflected in the Comprehensive Income and Expenditure Statement

o actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions

o benefits paid, which reduce plan assets, but correspondingly reduce its liabilities, and are therefore not reflected in the Comprehensive Income and Expenditure Statement

o past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Non-Distributed Costs line in the Comprehensive Income and Expenditure Statement

o curtailments, which are normally linked to an event giving rise to a post employment benefit - debited to the Non-Distributed Costs line in the Comprehensive Income and Expenditure Statement

o expected return on assets – the annual investment return on the fund assets attributable to the Council, based on an average of the expected long-term return, credited to the Financing and Investment Income and Expenditure section of the Comprehensive Income and Expenditure Statement.

o contributions paid to the Kent County Council Pension Fund – the employer‟s contributions to the pension fund for the financial year, not accounted for as an expense.

Statutory provisions require the Council to charge the General Fund balance with the amount payable by the Council to the pension fund in the year, not the amount calculated according to the relevant accounting standards. This means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and the amounts payable to the fund but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of contributions paid rather than as benefits are earned by the employee.

2.8 Events after the Balance Sheet date

Events after the Balance Sheet Date are those events, both favourable and unfavourable, that occur between the end of the financial year and the date when the Statement of Accounts is authorised for issue. There are potentially two types of events:

If they provide evidence of conditions that existed at the end of the reporting period, the Statement of Accounts is amended to reflect these events;

If they are indicative of conditions that arose after the reporting period, the Statement of Accounts is not amended. If, however, an event would have a material effect, a disclosure is made in the notes to the accounts, outlining the event and its estimated financial effect.

Any event taking place after the accounts are authorised for issue is not reflected in the Statement of Accounts.

2.9 Exceptional items and prior period adjustments

Exceptional Items

Where items of income and expense are material, their nature and amount is disclosed separately on the face of the Comprehensive Income and Expenditure Account and also in the notes to the accounts.

Prior period adjustments

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes to accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council‟s financial position or financial performance. When a change is made, it is applied retrospectively (unless stated otherwise), by adjusting opening balances and comparative amounts for the prior period as if the new policy had always applied.

Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative figures for the prior period.

Changes in accounting estimates

Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change, and do not give rise to a prior period adjustment.

2.10 Financial instruments

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Financial Assets

The term “financial asset” covers cash, equity instruments, and beneficial contractual rights to receive or exchange cash or liabilities. All of the Council‟s investments come within the category of “loans and receivables”. These are financial assets that have fixed or determinable payments, and are not quoted in an active market. The Council‟s balance sheet includes four groups of financial assets:

Trade debtors are recorded as invoices issued to individuals or other entities, for which immediate payment is required. The balance awaiting collection (“Trade accounts receivable”) is included in the balance sheet under “short term debtors”.

Cash held in current or call accounts, together with investments for periods of less than one month, is included in the balance sheet under “cash and cash equivalents”.

Investments taken out for periods of between three months and one year are included in the balance sheet as “short term investments”.

Investments taken out for periods of longer than one year are included in the balance sheet as “long term investments”.

Trade debtors are regularly assessed for possible non-payment, and an adjustment is made for possible impairment to the gross balance.

Loans and receivables are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For the Council‟s short-term investments this means that the amount presented in the Balance Sheet is the outstanding principal and interest, and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year according to the loan instrument. The position is the same for long term investments, except that outstanding interest receivable within the next year is included under “short-term investments”.

Financial Liabilities

The term “financial liability” covers contractual obligations to deliver or exchange financial assets to another entity. The Council‟s financial liabilities consist of loans taken out with the Public Works Loan Board, which come within the category of “loans and receivables”.

These financial liabilities are initially measured at fair value and carried at their amortised cost. Annual charges to the Comprehensive Income and Expenditure Account for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. This Council‟s borrowing bears a single rate of interest payable throughout the life of the loan, meaning that the effective rate of the interest is the same as the original repayable rate. The amount presented in the Balance Sheet under “long term borrowing” is therefore the outstanding principal repayable. As the accrued interest is payable within one year of the balance sheet date, it is included under “short term borrowing”.

The Council‟s policy is to capitalise the cost of borrowing (comprising interest) where such cost is directly attributable to the acquisition, construction of production of an asset. This includes all interest costs incurred between initially incurring expenditure undertaking activities relating to such an asset, and the substantial completion of work enabling the asset to be brought into use. At the end of the 2010/11 the council had not yet financed any capital investment from loan, and had not, therefore, needed to apply this policy in practice. With the exception of capitalised borrowing costs, interest charged to the Comprehensive Income and Expenditure Account is the amount payable for the year in the loan agreement.

2.11 Government grants and other contributions

Whether paid on account, by instalments or in arrears, we recognise government grants and third party contributions and donations as due to the Council when there is reasonable assurance that the Council will comply with the conditions attached to the payments, and that the grants and contributions will be received.

Amounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor.

Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as capital grants received in advance (either current or long-term). When conditions are satisfied the grant or contribution is credited to the Comprehensive Income and Expenditure Statement.

Grants and contributions towards specific services for revenue purposes are credited against the appropriate line in the Cost of Services, but if grants and contributions are not related to specific services they are credited as Taxation and Non-Specific Grant Income, along with all grants and contributions receivable towards investment in Property Plant and Equipment, Investment Properties or Intangible Assets. As these capital grants and contributions are not legally a credit to

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the General Fund, an equivalent appropriation is made from the General Fund into the Capital Grants and Contributions Reserve, which is set aside for the financing of capital investment.

2.12 Intangible assets

Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council.

Internally generated assets (not including websites intended to promote or advertise the council‟s goods and services) are capitalised where it is demonstrable that they project is technically feasible and is intended to be completed, with adequate resources being available, and that the Council will be able to generate future economic benefits or service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset, and is restricted to that incurred in the development phase, not, therefore, including research expenditure.

Intangible assets are measured initially at cost. The depreciable amount of an intangible asset is written down over its useful life, as estimated by the Head of Customer Access, Transformation & Delivery, to the appropriate line in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired, and any losses are posted to the appropriate line in the Income and Expenditure Statement.

The calculated amounts for amortisation and impairment are charged to the Cost of Services in the Comprehensive Income and Expenditure Account, but they are not legal charges against the General Fund. A transfer is therefore made from the Capital Adjustment Account to the General Fund to reverse the impact.

2.13 Leasing

Definition of a lease

A lease is an agreement whereby the lessor conveys to the lessee, in return for a payment or a number of payments, the right to use an asset (property, plant and equipment, investment properties, non-current assets available for sale or intangible assets) for an agreed period of time. A finance lease is a lease that transfers substantially all of the risk and rewards incidental to ownership to the lessee. Any lease that does not come within the definition of a finance lease is accounted for as an operating lease.

The Council has a number of leasing agreements, acting both as lessee (paying for the use of assets) and as lessee (receiving money for the use of assets owned by others).

The Council may also enter into an agreement which, while not itself a lease, nevertheless contains a right to use an asset in the same way as a lease. Such agreements are treated as either finance leases or operating leases as set out below (the Council has no such arrangements).

The Council reviews all of its leases to determine how they stand against various criteria which distinguish between finance and operating leases. In undertaking this review, however, the Council operates a de minimis level, so that all leases with a term of less than 10 years, or for assets valued at less than £10,000 are treated within the accounts as an operating lease.

Finance leases – Council acting as lessee

Where the council uses or occupies an asset held under a finance lease, the asset is recognised as such in the appropriate line in the balance sheet, subject to the de minimis limit noted in 2.16 below. The value recognised is the fair value, or (if lower) the present value of the minimum lease payments. This value is offset on the balance sheet by a creditor or long term liability for the leasing charge.

As these assets are included as part of the Council‟s property plant and equipment balance, they are subsequently accounted for, in relation to disposal, depreciation, impairment, etc, as set out below in 2.16.

Minimum lease payments are apportioned between interest payable as the finance charge and the reduction of the outstanding liability. The finance charge is calculated to produce a constant periodic rate of interest on the remaining balance of the liability.

Operating leases – Council acting as a lessee

Lease payments for operating leases are recognised as an expense on a straight-line basis over the lease term, unless they can be otherwise apportioned in line with benefits received.

Finance leases – Council acting as lessor

Where the council acts as lessor for an asset held under a finance lease, the relevant asset is written out of the balance sheet as a disposal, and accounted for in line with Accounting Policy 2.16 below. At the start of the lease a receivable (long term debtor or short term debtor) is recognised as at an amount equal to the net investment in the lease. The lease payment receivable is apportioned between the repayment of principle and interest, the interest being calculated to produce a constant periodic rate of interest on the remaining balance of the liability.

Operating leases – Council acting as a lessor

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Income from operating leases is recognised on a straight-line basis over the lease term, unless they can be otherwise apportioned in line with the benefits provided.

2.14 Overheads and Support Services

The costs of overheads and support services are charged to those services that benefit from the supply or service in accordance with the costing principles of the CIPFA Best Value Accounting Code of Practice 2010/11 (BVACOP). The total absorption costing principle is used – the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:

Corporate and Democratic Core – costs relating to the Council‟s status as a multi-functional, democratic organisation,

Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring early, and any depreciation and impairment losses chargeable on non-operational properties.

These two cost categories are defined in BVACOP and accounted for as separate headings in the Income and Expenditure Account, as part of the Cost of Services.

2.15 Property plant and equipment

Definition and Categories

Property plant and equipment consists of assets that have physical substance and are held for use in the provision of services, for rental to others, or for administrative purposes, and that are expected to be used during more than one financial year. They exclude assets which are held purely for investment purposes (Investment properties) and assets which the Council is actively seeking to sell (Assets available for sale). Property plant and equipment consists of the following categories:

Land and buildings – properties owned by the Council, other than those in another category shown below, or Investment Properties.

Vehicles, plant and equipment – individual items or groupings of items which are purchased from capital resources.

Infrastructure – for this Council, this category includes only footway lighting.

Community assets – properties such as parks, which are used for the community as a whole, with no determinable market value in their present use, and which are not likely to be sold.

Surplus assets – individual properties which the Council has determined to be surplus to operational requirements, but which are not actively being marketed.

Assets under construction – capital expenditure on an asset before it is brought into use.

Recognition

Expenditure on the acquisition, creation or enhancement of property plant and equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that secures but does not add to an asset‟s potential to deliver future economic benefits or service potential (e.g. repairs and maintenance) is charged to the Comprehensive Income and Expenditure Account as an expense when it is incurred. Assets valued at less than £25,000 are not included on the balance sheet, provided that the total excluded has no material impact.

Measurement

Assets are initially measured at cost, comprising all expenditure that is directly attributable to bringing the asset into working condition for its intended use. Assets are then carried in the Balance Sheet using the following measurement bases:

Land and buildings – fair value, usually based on the market value for the existing use (EUV). Some specialised properties, where the valuer cannot identify a market for the asset, are instead valued on the basis of depreciated replacement cost (DRC).

Vehicles, plant and equipment – fair value, for which depreciated historic cost is normally used as a proxy.

Infrastructure – depreciated historic cost

Community Assets – historic cost, depreciated where appropriate.

Surplus assets - fair value, based on the market value for the existing use (EUV).

Assets under construction – historic cost

Revaluation

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We revalue assets included in the Balance Sheet at current value when there have been material changes in the value, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Gains are credited to the Income and Expenditure Account where they arise from the reversal of an impairment loss previously charged to a service revenue account. Reductions in value are charged to the Revaluation Reserve, up to the amount held for that asset in the Revaluation Reserve, or otherwise to the Comprehensive Income and Expenditure Statement.

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account.

Impairment

The values of each category of assets and of material individual assets that are not being depreciated are reviewed at the end of each financial year for evidence of reductions in value. Where impairment is identified as part of this review or as a result of a valuation exercise, it is written off against any revaluation gains attributable to the relevant asset in the Revaluation Reserve, with any excess charged to the relevant service revenue account.

Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised.

Disposals

When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continued use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before its reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains to fair value are recognised only up to the amount of any losses previously recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on Assets Held for Sale.

If assets no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to property plant and equipment and valued at the lower of their carrying amount before they were classified as held for sale, adjusted for depreciation or revaluations that would have been recognised had they not been classified as Held for Sale, and their recoverable amount at the date of the decision not to sell.

When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Account. An equivalent transfer is made to the General Fund to the Capital Adjustment Account to eliminate impact on the General Fund, and any revaluation gains accumulated for the asset in the Revaluation Reserve are also transferred to the Capital Adjustment Account.

Amounts received for a disposal in excess of £10,000 are categorised as capital receipts. These are credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Account, but an equivalent appropriation is made from the General Fund to the Capital Receipts Reserve .There is a legal requirement that sale proceeds held in this reserve can only be used to reduce debt or to finance capital expenditure.

In some cases the receipt of income from asset disposals is delayed until a future financial year. In such cases a credit is made to the unusable Deferred Capital Receipts Reserve, matched by a long-term or short term debtor. When the income is received, the debtor is written down and a transfer is made from the Deferred Capital Receipts Reserve to the Capital Receipts Reserve.

Depreciation

Depreciation is provided for on all assets with a determinable finite life by allocating the value of the asset in the Balance Sheet over the periods expected to benefit from their use. Depreciation is based on the opening net book value, as adjusted by gains or losses arising from revaluations at 1 April each year.

Depreciation is calculated on the following bases:

Land – not subject to depreciation

Buildings – straight-line allocation over the life of the property as estimated by the valuer

Vehicles, plant and equipment – a percentage of the value of each class of assets in the Balance Sheet:

ICT equipment 5 years

Litter bins 5 years

Wheeled bins 15 years

Play area equipment 10 years

Other equipment Normally 5 years

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Infrastructure –footway lighting is depreciated on a straight-line basis over a period of 30 years.

Community assets – not subject to depreciation

Surplus assets - straight-line allocation over the life of the property as estimated by the valuer

Assets under construction – not subject to depreciation

Where new assets are acquired or brought into use, depreciation is charged from the start of the following year. Depreciation is charged for the full final year when assets are sold.

Where an asset has major components with different estimated useful lives, these are depreciated separately.

Depreciation is charged to the Cost of Services in the Comprehensive Income and Expenditure Account, but a not a legal charge against the General Fund. A transfer is therefore made from the Capital Adjustment Account to the General Fund to reverse the impact.

Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

2.16 Provisions

The Council recognises provisions to represent liabilities of uncertain timings or amounts. Provisions in the balance sheet represent cases where:

The Council has a present obligation as a result of a past event;

It is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation;

A reliable estimate can be made of the amount of the obligation.

2.17 Reserves

The Council maintains two groups of reserves, usable and unusable.

Usable reserves comprise the following:

Capital Receipts Reserve: proceeds from the sales of Property, Plant and Equipment are initially credited to the Income and Expenditure Account, but legally can only be used to finance capital expenditure, and so are transferred to the Capital Receipts Reserve and afterwards used for this specific purpose.

Capital Grants and Contributions Reserve: similarly the Council receives grants and contributions towards capital expenditure, and these are also credited to the Income and Expenditure Account and immediately transferred into the Capital Grants and Contributions Reserve until required to finance capital investment.

Collection Fund Adjustment Account: the net amount of the Council‟s share of Council tax collectable for the year is credited to the Income and Expenditure Account, but only the amount previously estimated and formally notified can be added to the General Fund. The difference between the two amounts is credited or debited to the Collection Fund Adjustment Account, and cannot be used until the following financial year.

Earmarked reserves: the Council may set aside earmarked reserves to cover specific projects or contingencies. These are transferred from the General Fund, and amounts are withdrawn as required to finance such expenditure. The expenditure itself is charged to the appropriate line in the Comprehensive Income and Expenditure Statement. There are no legal restrictions on the use of earmarked reserves, and unspent balances can be taken back to the General Fund in the same way.

General Fund: this represents all other usable reserves, without legal restrictions on spending, which arise from annual surpluses or deficits.

Unusable Reserves consist of those which cannot be used to finance capital or revenue expenditure:

Deferred Capital Receipts: in some cases (particularly former housing stock disposed of, where the purchaser financed the transaction through a mortgage from the council) an asset is disposed of, but the income cannot be collected immediately. The council maintains records for a long term debtor, offset by a balance in the Deferred Capital Receipts Account. When the income is received the debtor is written down and a transfer is made between this account and the Capital Receipts Reserve.

Revaluation Reserve: this consists of accumulated gains on individual items of Property, Plant and Equipment. The Reserve contains only gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains before that date are consolidated into the balance on the Capital Adjustment Account. The balance is reduced when assets with accumulated gains are:

o revalued downwards or impaired and the gains are lost

o used in the provision of services and the gains are consumed through depreciation, or

24

o disposed of and the gains are realised.

Capital Adjustment Account: receives credits when capital is financed from revenue resources or other usable reserves, and receives debits to offset depreciation and other charges relating to capital which are not chargeable against the General Fund. The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement. The account contains revaluation gains accumulated on Property Plant and Equipment before 1 April 2007, the date on which the Revaluation Reserve was created to hold such gains.

Pensions Reserve: this is a statutory reserve to offset the Pension Liability assessed on an accounting and actuarial basis, and to ensure that variations in this liability do not affect the General Fund.

Financial instruments Adjustment Account: this represents the difference between the accounting and legislative charges for finance costs.

Collection Fund Adjustment Account: this represents the differences arising from the recognition of council tax income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers, compared with the statutory arrangements for paying across amounts from the Collection Fund to the General Fund.

2.18 Revenue Expenditure financed from capital under statute

Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of a non-current asset, is charged as expenditure to the relevant service revenue account in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer to the Capital Adjustment Account then reverses out the amounts charged, so there is no impact on the level of Council Tax.

2.19 Stocks

Where the values are significant to an operation, stocks are included in the Balance Sheet at the lower of cost and net realisable value.

2.20 Value Added Tax (VAT)

VAT is included as an expense only to the extent that it is not recoverable from Her Majesty‟s Revenue and Customs (HMRC). VAT receivable is excluded from income, except in the unusual circumstance where VAT was charged to customers in a previous financial year, but where the Council was able to challenge successfully the legality of the charge. In these circumstances recovered VAT is credited to the appropriate line in the Comprehensive Income and Expenditure Statement.

2.21 Accounting policies issued but not yet adopted

The 2011/12 accounting Code of Practice includes a change relating to Heritage Assets, which is likely, for this Council, to require some additional assets to be brought on to the balance sheet. The area most likely to be involved relates to the contents of the Museum.

[This note will be expanded to provide more detail before the audited Statement of Accounts is published.]

2.22 Critical Judgements in Applying Accounting Policies

Under the accounting Code of Practice some legal agreements, such as waste collection contracts, may be regarded as containing a lease for the use of assets operated by the contractors. Such leases, in turn, may be judged to be either finance leases or operating leases, as set out in accounting policy 2.13 above. The Council has examined its service contracts, particularly the Waste Collection contract, and has determined that, in the circumstances in which the contract was negotiated and is operated, it does not contain such a lease.

2.23 Assumptions made about the future, and other major sources of estimating uncertainty

The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made, taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates.

For this Council the only balance with a material degree of uncertainty is the liability for future pension costs, which stood at about £27m at 31 March 2011. The estimate of this liability depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes to retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries, Barnett Waddingham, is engaged to provide the Council with expert advice about the assumptions to be applied. For example, a 0.1% increase in the discount rate would result in a decrease in the pension liability of £1,824,000. The assumptions interact in complex ways, however.

In 2010/11 the actuaries advised that the net pensions liability had reduced by £5,840,000 as a result of estimates being corrected in the light of experience, and had also reduced by £11,718,000 through the updating of assumptions.

3 Events after the Balance Sheet Date

25

This draft Statement of Accounts was certified as a true and fair statement of the financial position, and authorised for issue on xx September 2011.

Added commentary will be required:

If Statement of Accounts is amended following audit;

Information about conditions at 31 March, coming to light before accounts are issued, that update disclosures relating to 31 March balances;

Details of non-adjusting events after balance sheet date, but before date accounts are authorised for issue.

4 Adjustments between Accounting and Funding Basis under Regulations

This note details the adjustments that are made to the comprehensive income and expenditure recognised by the Council in the year according to proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure.

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2009/10

Reversal of items debited or credited to Comprehensive Income and Expenditure Statement:

Write down Intangible Assets 110 - - - 110 (110) -

Depreciation of Property Plant and Equipment 2,395 - - - 2,395 (2,395) -

Impairment to Property Plant and Equipment (3,599) - - - (3,599) 3,599 -

Revenue Expenditure financed from Capital under Statute

496 - - - 496 (496) -

Gain or (Loss) on sale of non-current assets (80) - - 317 237 (237) -

Difference between accounting and statutory finance costs

24 - - - 24 (24) -

Difference between accounting and statutory credit for Council Tax

40 - - - 40 (40) -

Difference between accounting and statutory pension costs

606

606 (606) -

Insertion of items not debited or credited to Comprehensive Income and Expenditure Statement:

Capital expenditure from revenue (718) - - - (718) 718 -

Capital grants and contributions in Comprehensive I&E Account

(248) - 248

- - -

Financing of capital expenditure directly from reserves:

Financing from capital grants and contributions reserve

- - (141) - (141) 141 -

Financing from capital receipts reserve - - - (810) (810) 810 -

Total to Movement in Reserves Statement (974) - 107 (493) (1,360) 1,360 -

2010/11


Write down Intangible Assets 118 - - - 118 (118) -

Depreciation of Property Plant and Equipment 2,289 - - - 2,289 (2,289) -

Impairment to Property Plant and Equipment (650) - - - (650) 650 -


214 - - - 214 (214) -

Gain or (Loss) on sale of non-current assets (387) - - 406 19 (19) -


(13) - - - (13) 13 -


(47) - - - (47) 47 -


(7,226) - - - (7,226) 7,226 -


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£000 £000 £000 £000 £000 £000 £000

Capital expenditure from revenue (80) - - - (80) 80 -

Capital grants and contributions in Comprehensive I&E Account

(283) - 283 - - - -


Financing from capital grants and contributions reserve

- - (312) - (312) 312 -

Financing from capital receipts reserve - - - (405) (405) 405 -

Total to Movement in Reserves Statement (6,065) - (29) 1 (6,093) 6,093 -

5 Reserves

5.1 Unusable Reserves

Note 2.18 sets out the purpose and use of the various usable and unusable reserves maintained by the Council, and the Movement in Reserves Statement shows detail of the annual movements. The Movement in Reserves Statement shows only a summary of the movements in unusable reserves, and a detailed analysis is shown below.

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£000 £000 £000 £000 £000 £000 £000

Balance at 31 March 2009 24 10,717 (29,550) 64,504 - 95 45,790

Gain or (Loss) on revaluation of assets - (1,109) - - - - (1,109)

Actuarial gains / (losses) on pension assets / liabilities - - (21,445) - - - (21,445)

Total Other Comprehensive Expenditure and Income

- (1,109) (21,445) - - - (22,554)


Write down Intangible Assets - - - (110) - - (110)

Depreciation of Property Plant and Equipment - - - (2,395) - - (2,395)

Impairment to Property Plant and Equipment - - - 3,599 - - 3,599


- - - (496) - - (496)

Gain or (Loss) on sale of non-current assets - (237) - - - - (237)


- - - - (24) - (24)


- - - - - (40) (40)


- - (606) - - - (606)


Capital expenditure financed from revenue - - - 718 - - 718


Capital expenditure financed from grants and contributions

- - - 141 - - 141

Capital expenditure financed from capital receipts - - - 810 - - 810

Other Adjustment:

Adjustment for depreciation on revalued non-current assets

- (106) - 106 - - -

27

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£000 £000 £000 £000 £000 £000 £000


- (343) (606) 2,373 (24) (40) 1,360

Increase / Decrease in Year - (1,452) (22,051) 2,373 (24) (40) (21,194)

Balance at 31 March 2010 24 9,265 (51,601) 66,877 (24) 55 24,596

Gain or (Loss) on revaluation of assets - 57 - - - - 57

Actuarial gains / (losses) on pension assets / liabilities - - 17,558 - - - 17,558

Total Other Comprehensive Expenditure and Income

- 57 17,558 - - - 17,615


Write down Intangible Assets - - - (118) - - (118)

Depreciation of Property Plant and Equipment - - - (2,289) - - (2,289)

Impairment to Property Plant and Equipment - - - 650 - - 650


- - - (214) - - (214)

Gain or (Loss) on sale of non-current assets (19) - - - - - (19)


- - - - 13 - 13


- - - - - 47 47


- - 7,226 - - - 7,226


Capital expenditure financed from revenue - - - 80 - - 80


Capital expenditure financed from grants and contributions

- - - 312 - - 312

Capital expenditure financed from capital receipts - - - 405 - - 405

Other Adjustment: - - - - - -

Adjustment for depreciation on revalued non-current assets

- (100) - 100 - - -


(19) (100) 7,226 (1,074) 13 47 6,093

Increase / Decrease in Year (19) (43) 24,784 (1,074) 13 47 23,708

Balance at 31 March 2011 5 9,222 (26,817) 65,803 (11) 102 48,304

5.2 Earmarked Reserves

The table below shows the balances for earmarked reserves, and the transfers made to or from the General Fund.

1 April 2009 Movement

31 March 2010 Movement

31 March 2011

£000 £000 £000 £000 £000

Capital and Revenue Initiatives 3,998 (1,582) 2,416 (404) 2,012

Planned Maintenance 206 (96) 110 (110) -

28

1 April 2009 Movement

31 March 2010 Movement

31 March 2011

£000 £000 £000 £000 £000

Dunorlan Park 65 (65) - - -

Torrington Car Park 249 - 249 - 249

On-Street Parking 17 - 17 - 17

Local Development Framework 16 (16) - 225 225

General Reserve 371 (371) - - -

LABGI 289 (289) - - -

Section 106 contribution interest 160 (60) 100 (60) 40

Maintenance of graves 32 - 32 - 32 Maintenance of Garden of Remembrance 23 (6) 17 - 17

Strategic Plan 669 (159) 510 (307) 203

Second Homes 35 (35) - - -

Performance Reward 270 40 310 (78) 232

RVP Car Park Maintenance - 600 600 (261) 339

Restructure Phase 1 - 128 128 (128) -

Restructure Phase 2 - 253 253 (253) -

Carbon Reduction - 50 50 - 50

Government Grants 218 (47) 171 (93) 78

2012 Reserve - - - 170 170

Invest to Save - - - 154 154

Cultural Reserve - - - 16 16

Total 6,618 (1,655) 4,963 (1,129) 3,834

The reasons for maintaining these earmarked reserves are shown below:

Capital & Revenue Initiatives Reserve – the reserve is used to support future capital and revenue schemes in accordance with the Council‟s Corporate and Financial Plan

Planned Maintenance – to provide for deferred expenditure on revenue planned maintenance

Dunorlan Park – a reserve from an insurance claim to be used for improvements to the park

Torrington Car Park – a reserve to refurbish the car park

On Street Parking Reserve – the ring-fenced parking surplus that is used to fund highways and transport schemes in the borough

Local Development Framework – a reserve for costs associated with the Local Development Framework due to a re-phasing of timeframes and costs

General Reserve – this is used to finance particular revenue projects which are accommodated within the revenue budget and are committed by the end of the financial year, but where the expenditure is delayed until the following year

LABGI – a reserve for Local Authority Business Growth Incentive Scheme government grant which is used for economic development projects. This reserve was closed at the start of 2009/10 and the balance transferred to the Strategic Plan reserve

Section 106 Contributions – these are developers‟ contributions to be used to finance capital projects: normally they would have to be repaid with interest if they cannot be used for the specified purpose within a given time. Sufficient money is retained within this reserve to pay interest on unapplied contributions. This reserve was previously classified as a provision, but has been moved following a review of accounting principles

Maintenance of graves and garden of remembrance – where money is donated for these purposes it is retained in these reserves until it can be spent. These reserves were previously classified as provisions, but have been moved following a review of accounting principles

Strategic Plan reserve – where the Council obtains more money from investment income than it has budgeted for, it places the excess into this reserve, which is then used to finance various strategic projects

Second Homes – additional money receivable from Council Tax on second homes and payable as part of the precept to Kent County Council is then distributed to district councils and used to fund particular projects

29

Performance Reward – money received as a result of reaching targets under the Local Area Agreement has been set aside to fund individual projects, 50% of which is reserved for capital schemes

Restructure Phase 1 – to fund one-off costs relating to the senior management review phase of the Council‟s restructuring programme

Restructure Phase 2 – to fund one-off costs of subsequent phases of the Council‟s restructuring programme

Carbon Reduction Reserve – to enable the Council to purchase initial and subsequent allowances under the Carbon Reduction Commitment scheme, a mandatory „cap and trade‟ scheme starting in April 2010

Government Grants – contains the equivalent amount of grants provided by the Government during the financial year that cannot be used until after 31 March

The Invest to Save Reserve was created essentially to cover the redundancy costs of the Revenues and Benefits restructure but the remainder will be used for other initiatives as and when they arise.

The 2012 reserve has been established to set aside funds for events associated with the Queen‟s Golden Jubilee and the Olympics.

Cultural - to support grant applications and encourage fund-raising, thereby providing an enhanced pot of money to undertake key cultural projects in the Borough.

6 Grants and Contributions

The table below outlines Government grants and other external contributions accounted for within the Comprehensive Income and Expenditure Statement and the Cash Flow Statement.

2009/10 2010/11

Grants Contribs. Total Grants Contribs. Total

£000 £000 £000 £000 £000 £000

(35,230) - (35,230) DWP benefits grants (36,216) - (36,216)

(1,022) - (1,022) Benefits administration grants (968) - (968)

(835) - (835)

Grants towards revenue expenditure financed from capital under statute (1,052) - (1,052)

(336) - (336) Concessionary fares grant (442) - (442)

- (1,336) (1,336)

Contributions from other local authorities and health sector - (1,430) (1,430)

- (111) (111)

Contributions to revenue expenditure financed from capital under statute - (118) (118)

(367) (234) (601) Other grants and contributions (392) (447) (839)

(37,790) (1,681) (39,471) Total within Cost of Services (39,070) (1,995) (41,065)

(1,305) - (1,305) Revenue Support Grant (887) - (887)

(40) - (40) LAA Performance Reward Grant - - -

(164) - (164) Housing and Planning Delivery Grant - - -

(23) - (23) Area Based Grant (36) - (36)

(69) - (69) Local Authority Business Growth Grant - - -

(17) - (17) Habitats Grant (8) - (8)

(172) (76) (248)

Grants and contributions towards capital expenditure - (283) (283)

(1,790) (76) (1,866)

Total within Taxation and non-specific grant income (931) (283) (1,214)

(39,580) (1,757) (41,337)

Total within Comprehensive Income and Expenditure Statement (40,001) (2,278) (42,279)

454 58 512 Adjust for variation in accruals (2,295) 45 (2,250)

(39,126) (1,699) (40,825) Total within Cash Flow Statement (42,296) (2,233) (44,529)

The Council has also received contributions under Section 106 of the Town and Country Planning Act 1990, which enables developers to make contributions in connection with the granting of planning permission. Where these contributions are to be used towards capital investment, and if the agreements contain a condition specifying a date by

30

which the contribution must be used for a specific purpose, this income is held on the balance sheet under the heading “capital grants receipts in advance”. Balances under “current liabilities” represent those expected to be used to finance capital in the next financial year, and other balances are held under “long term liabilities”.

7 Amounts reported for resource allocation decisions

Paragraph 3 of the Foreword to the Statement of Accounts compares net expenditure to the annual budget, analysed between the directorates into which the Council is organised. The table below breaks these totals down further into different types of income and expenditure, and reconciles the total to the Cost of Services and the Surplus or Deficit on the Provision of Services as shown in the Comprehensive Income and Expenditure Statement.

The Cost of Services in this table is the same figure as shown in the Comprehensive Income and Expenditure Account. It should be noted that the figures in the tables below (unlike the corresponding figures in the Comprehensive Income and Expenditure Account) are shown without any adjustments for the allocation of support services.

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£000 £000 £000 £000 £000 £000

Fees, Charges and other service income (157) (2,820) (9,311) (12,288) - (12,288)

Interest and Investment Income - - - - (1,105) (1,105)

Income from council tax - - - - (8,144) (8,144)

Government grants and contributions (256) (38,681) (2,128) (41,065) (7,322) (48,387)

Total Income (413) (41,501) (11,439) (53,353) (16,571) (69,924)

Employees 1,821 (1,193) 7,102 7,730 1,453 9,183

Other service expenses 1,460 42,749 8,134 52,343 - 52,343

Depreciation, etc 42 905 2,193 3,140 - 3,140

Interest payments - - - - 282 282

Precepts and levies - - - - 1,600 1,600

Gain or loss on disposal of fixed assets - - - - (387) (387)

Total operating expenses 3,323 42,461 17,429 63,213 2,948 66,161

Surplus or Deficit on provision of services 2,910 960 5,990 9,860 (13,623) (3,763)

The table below shows the corresponding figures for 2009/10.

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Fees, Charges and other service income (279) (2,750) (9,745) (12,774) - (12,774)

Interest and Investment Income - - - - (1,160) (1,160)

Income from council tax - - - - (7,801) (7,801)

Government grants and contributions (268) (37,476) (1,575) (39,319) (7,498) (46,817)

Total Income (547) (40,226) (11,320) (52,093) (16,459) (68,552)

Employees 1,799 5,957 6,442 14,198 2,203 16,401

Other service expenses 1,368 41,028 9,178 51,574 - 51,574

Depreciation, etc 31 614 (296) 349 - 349

Interest payments - - - - 83 83

31

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Precepts and levies - - - - 1,443 1,443

Gain or loss on disposal of fixed assets - - - - (80) (80)

Total operating expenses 3,198 47,599 15,324 66,121 3,649 69,770

Surplus or Deficit on provision of services 2,651 7,373 4,004 14,028 (12,810) 1,218

8 Summary of capital expenditure and financing

Capital expenditure was incurred and financed as follows:

2009/10

2010/11

£000 £000

£000 £000

301 Opening Capital Financing Requirement 262

842

Property Plant and Equipment 460

243

Intangible Assets 123

87

Assets held for sale -

1,442

Revenue Expenditure Funded from Capital under Statute (REFFCUS)

1,384

2,614 Total capital investment 1,967

Financed by:

(810)

Capital Receipts (405)

(141)

Government Grants and other contributions (312)

(946)

Grants and contributions towards REFFCUS (1,170)

(718)

Revenue financing (80)

(2,615) Total financing

(1,967)

(38) Movement in Long Term Debtors within CFR (13)

262 Closing Capital Financing Requirement 249

The Capital Financing Requirement (CFR) is the measure, taken from the Balance Sheet, of the capital expenditure incurred historically by the Council, that has yet to be financed at the end of the financial year. This Council‟s CFR is represented entirely by past capital expenditure on assistance to housing associations and a bowls club, which is being reimbursed annually by repayments of mortgages. As this balance is reduced by these repayments the Council does not otherwise need to set aside money from the General Fund to reduce the CFR. The Council has borrowed money for capital purposes during 2010/11, but, as the above table shows, all capital investment for the year has been financed from other resources, so this borrowing has not increased the Council‟s CFR.

The CFR is made up of the following balance sheet totals:

1 April 2009 1 April 2010

31 March 2011

£000 £000

£000

74,364 75,064 Property plant and equipment 73,942

858 991 Intangible assets 996

300 262 Long term debtors financed from capital 249

- 87 Assets available for sale -

(10,717) (9,265) Revaluation reserve (9,222)

(64,504) (66,877) Capital adjustment account (26,817)

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1 April 2009 1 April 2010

31 March 2011

£000 £000

£000

301 262 Total 39,148

9 Property Plant and Equipment

9.1 Analysis of carrying amounts

The following table shows the net carrying amounts of the categories of Property Plant and Equipment, as at 31 March 2011, split between the gross carrying amount and the accumulated depreciation and impairment:

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Balance at 1 April 2009:

Gross carrying amount 125,698 4,449 753 4,526 638 255 136,319

Cumulative depreciation & impairment (59,187) (1,970) (321) (179) (298) - (61,955)

Total 66,511 2,479 432 4,347 340 255 74,364

Balance at 1 April 2010:



Total 67,312 2,124 407 4,811 340 70 75,064

Balance at 31 March 2011:



Total 66,368 1,786 401 4,839 349 199 73,942

Note 2 (Accounting Policies) sets out the methods for measuring the gross carrying amounts, and of calculating depreciation and impairment.

9.2 Reconciliation of opening and closing balances

The table below shows the movements in the different categories for the year:

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Movements 2009/10:

Balance at 1 April 2009 66,511 2,479 432 4,347 340 255 74,364

Additions 243 273 - 304 - 22 842

Revaluations (1,316) - - - (30) - (1,346)

Impairment losses (689) - - - - - (689)

Impairment loss reversals 4,258 - - - 30 - 4,288

Depreciation (1,742) (628) (25) - - - (2,395)

Disposals - - - - - - -

Reclassifications 47 - - 160 - (207) -

Balance at 31 March 2010 67,312 2,124 407 4,811 340 70 75,064

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£000 £000 £000 £000 £000 £000 £000

Movements 2010/11

Balance at 1 April 2009 67,312 2,124 407 4,811 340 70 75,064

Additions 47 237 19 24 - 133 460

Revaluations 42 - - - 15 - 57

Impairment losses (432) - - - - - (432)

Impairment loss reversals 1,082 - - - - - 1,082

Depreciation (1,683) (575) (25) - (6) - (2,289)

Disposals - - - - - - -

Reclassifications - - - 4 - (4) -

Balance at 31 March 2011 66,368 1,786 401 4,839 349 199 73,942

9.3 Impairments

The great majority of impairment adjustments result from revaluations carried out by the valuers (see below). Most assets had been subject to downward valuations in previous year, and therefore, in the absence of a previous balance in the Revaluation Reserve, to an impairment charge. In 2009/10 the only material individual transaction was for the Royal Victoria Place shopping centre, where the valuation as at 31 March 2010 determined that the value had increased by £2,160,000 during the year, determined on the basis of market value in existing use. As this property had previously been subject to a total impairment of £3,160,000, this increase is accounted for as a reversal of a previous impairment. This amount appears in the “Cultural, environmental, regulatory and planning services” line in the Comprehensive Income and Expenditure Account.

9.4 Valuation of property

Two of the categories shown in the tables above (land and buildings and surplus assets) are subject to valuations. The Royal Victoria Place shopping centre is valued as at 31 March each year by Caxtons Commercial Ltd. All other properties in these categories were valued as at 1 April 2009 by NB Real Estate Ltd, and are subsequently revalued at 5-year intervals (20% as at 1 April each year). The valuers employed by both firms are members of the Royal institute of Chartered Surveyors. For the majority of assets the basis of valuation for fair value is market value in its existing use (EUV). For a minority of specialised properties the valuers are unable to identify market evidence of such a value, and these assets are instead measured on the basis of depreciated replacement cost (DRC).

The significant assumptions applied in estimating the fair value are:

A continuation of the existing use;

Mains services for built properties are connected to the properties and drainage is to the public sewer;

There is no environmental contamination;

Buildings being marketed for sale or let have an Energy Performance Certificate in place, which has not revealed any shortcomings impacting on the value;

Freehold interests are not subject to easements, restrictive covenants, encumbrances, leases or licences that would adversely affect their sale;

Accuracy and completeness of information provided by Council officers.

The table below analyses the gross carrying cost at 31 March for these two categories of assets according to the year of valuation. The total shown for valuations in 2010/11 includes £15,500,000 for the Royal Victoria Place, which was valued at 31 March, while all other assets were valued at the preceding 1 April. In the comparative figures for 2009/10 the valuations during 2009/10 included £14,800,000 for Royal Victoria Place, valued at 31 March 2010.

9.5 Capital Commitments

At 31 March 2011 the Council was contractually committed to the payment of £9,000 under its capital programme, compared to £10,000 at 31 March 2010.

10 Intangible Assets

34

As set out in the accounting policies (Note 2.12 above), the Council accounts for its software as intangible assets. The annual movements in the balance sheet figures for intangible assets are shown below:

2009/10

2010/11

Gross Amortised Impaired Net Total

Gross Amortised Impaired Net Total

£000 £000 £000 £000

£000 £000 £000 £000

996 (138) - 858 Balance 1 April 1,239 (248) - 991

Written down for the year:

- (17) - (17)

Cultural, environmental, regulatory and planning services - (17)

(17)

- (93) - (93) Support Services

(101)

(101)

- (110) - (110)

- (118) - (118)

243 - - 243 Added during year 123 - - 123

- - - - Impairments - - - -

1,239 (248) - 991 Balance at 31 March 1,362 (366) - 996

The annual charge appears in the following lines in the “Cost of Services” heading in the Income and Expenditure Account. The total for Support Services is recharged to other headings within the Cost of Services through the overall support services recharges.

11 Assets held for sale

The balance sheet total for this heading at the start and end of the financial year relates to one property purchased in March 2010, solely in order to make it habitable and then to sell it. In the event it was not possible to dispose of the asset during 2010/11, but was still being marketed at 31 March 2011.

12 Financial Instruments

12.1 Year-end balances compared to fair values

As noted under the heading of “Accounting Policies (Note 2.10 above), all of the Council‟s investments come within the category of “loans and receivables”. These are financial assets that have fixed or determinable payments, and are not quoted in an active market.

31 March 2010

31 March 2011 Book Value

Fair Value

Book Value Fair Value

£000 £000

£000 £000

10,284 10,727 Investments over one year 5,083 5,220

(284) - Less interest due within one year (83) -

10,000 10,727 Long term investments 5,000 5,220

8,072 8,120 Investments less than one year 34,365 34,557

284 -

Add accrued interest on long term investments 83 -

8,356 8,120 Short term investments 34,448 34,557

851 851 Trade accounts receivable 454 454

851 851 Short Term Debtors 454 454

3,700 3,703 Cash in bank call accounts 3,600 3,600

3,700 3,703 Cash and Cash Equivalents 3,600 3,600

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31 March 2010

31 March 2011 Book Value

Fair Value

Book Value Fair Value

£000 £000

£000 £000

22,908 23,401 Total Financial Assets 43,502 43,831

- - Borrowing over one year 17,000 16,218

- - Long Term Borrowing 17,000 16,218

- - Borrowing less than one year 2,000 1,908

Add accrued interest 90 90

- - Short Term Borrowing 2,090 1,998

- - Total Financial Liabilities 19,090 18,216

12.2 Interest Receivable

The table below sets out the interest receivable and payable for the year related to financial assets and liabilities, reconciled to the amounts included in the Comprehensive Income and Expenditure Statement:

2009/10

2010/11

£000

£000

Interest receivable

(904) Interest from loans and receivables (895)

(262) Interest on backdated VAT claim (175)

24 Prior year adjustment on soft loans (12)

(18) Other interest receivable (23)

(1,160) Total Interest receivable (1,105)

Interest payable

- Interest on long term borrowing 328

- Less capitalised interest -

83 Interest on Section 106 contributions (45)

83 Total Interest payable 283

12.3 Valuation Techniques for Fair Value

The fair values valuations have been provided by the Council‟s Treasury Management advisor, Sector. This uses the Net Present Value (NPV) approach, which provides an estimate of the value of payments in the future in today's terms. This is a widely accepted valuation technique commonly used by the private sector. The discount rate used in the NPV calculation should be equal to the current rate in relation to the same instrument from a comparable lender. This will be the rate applicable in the market on the date of valuation, for an instrument with the same duration i.e. equal to the outstanding period from valuation date to maturity. The structure and terms of the comparable instrument should be the same, although for complex structures it is sometimes difficult to obtain the rate for an instrument with identical features in an active market. In such cases, Sector has used the prevailing rate of a similar instrument with a published market rate, as the discount factor.

The purpose of the fair value disclosure is primarily to provide a comparison with the carrying value in the Balance Sheet. Since this will include accrued interest as at the Balance Sheet date, the calculations also include accrued interest in the fair value calculation. This figure is calculated up to and including the valuation date.

The rates quoted in this valuation were obtained by Sector from the market on 31st March, using bid prices where applicable.

12.4 Risk Management

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The Council‟s activities expose it to a variety of financial risks:

credit risk – the possibility that other parties might fail to pay amounts due to the authority

liquidity risk – the possibility that the authority might not have funds available to meet its commitments to make payments

market risk – the possibility that financial loss might arise for the authority as a result of changes in such measures as interest rates and stock market movements.

The Council‟s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund services. Risk management is carried out by the Accountancy Section, under policies approved by the Council in the annual Treasury Management Policy and Strategy. The Council provides written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk, and the investment of surplus cash.

Credit risk

Credit risk arises from deposits with banks and financial institutions. The risk is minimised through the Treasury Management Policy and Strategy, which specifies that deposits are not made with financial institutions unless they meet identified criteria, as assessed by its main agency, Fitch. It also reviews ratings from the other agencies, Moodys and Standard and Poors. The Policy and Strategy also imposes a maximum sum to be invested with a financial institution within each category, and the maximum period for a deposit. The credit criteria in respect of financial assets held by the Council are as detailed below:

Fitch Rating

Ma

xim

um

In

ve

stm

en

t

Ma

xim

um

Du

rati

on

Lo

ng

Te

rm

Sh

ort

Te

rm

Ind

ivid

ua

l R

ati

ng

Su

pp

ort

Rati

ng

Private Sector

1st tier institutions AA F1+ B 2 £20m 5 years

2nd tier institutions AA- F1+ B 2 £20m 3 years

3rd tier institutions A+ F1 B 2 £3m 1 year

4th tier institutions A F1 B 3 £3m 1 year

Money market funds

£5m 5 years

Nationalised banks AA- F1+ F 1 £5m 1 year

The Policy & Strategy also specifies that the Council can invest with other UK Local Authorities and the Government‟s Debt Management Office as detailed below:

Ma

xim

um

Inv

es

tme

nt

Ma

xim

um

Du

rati

on

Public Sector

Unitary Councils £5m 5 years County Councils £5m 5 years Police Authorities £5m 5 years Government‟s DMO

account £30m 5 years

The Council‟s maximum exposure to credit risk in relation to its investments in private sector financial institutions, amounting to £42.6m at 31 March 2011, cannot be assessed generally, as the risk of any institution failing to make interest payments or to repay the principal sum, will be specific to each individual institution. Recent experience indicates that it is rare for such entities to be able to meet their commitments. A risk of irrecoverability applies to all of the Council‟s deposits, but there was no evidence at 31 March 2011 that this was likely to crystallise. There has been no experience of default by

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any of the institutions holding the Council‟s financial instruments, other than for trade accounts receivable (see Note 13 below).

Liquidity risk

The Council has a comprehensive cash flow management system that seeks to ensure that cash is available as needed. If unexpected movements happen, the authority has ready access to borrowings from the money markets and the Public Works Loans Board. There is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments.

The maturity analysis of financial liabilities is as follows:

31 March 2011

31 March 2010

Less than one year £2m - Between 1 and 2 years £2m - Between 2 and 5 years £6m

More than five years £9m - Total Financial Liabilities £19m -

Market risk

Interest rate risk

The Council is exposed to risk in terms of its exposure to interest rate movements on its investments. Reductions in interest rates would reduce the interest income credited to the Income and Expenditure Account, while increases in interest rates would increase the income. The Council is minimising its exposure to this risk, however, by reducing the budget for anticipated interest income on an annual basis. Any excess income is used for one-off projects, rather than to meet recurring revenue budgets.

The treasury management team has an active strategy for assessing interest rate exposure that feeds into the setting of the annual budget and which is used to update the budget quarterly during the year. This allows any adverse changes to be accommodated.

According to this assessment strategy, at 31 March 2011, if interest rates had been 1% higher with all other variables held constant, the financial effect would have been to increase investment income by £443,000.

During 2010/11 the Council borrowed £20m from the Public Works Loan Board (PWLB), at a fixed interest rate of 2.38%, although this borrowing was not eventually required during the year to finance capital investment. If the interest at which this money was borrowed had been 1% lower with all other variables held constant, the financial effect would have been to decrease interest payable by £138,000.

Price risk

The Council does not generally invest in equity shares, and is not therefore exposed to losses arising from movements in the prices of the shares.

Foreign exchange risk

The Council has no financial assets or liabilities denominated in foreign currencies, and thus has no exposure to loss arising from movements in exchange rates.

13 Debtors

13.1 Groupings of Debt

The table below analyses the balance sheet figures between different types of debt.

31 3 2009 31 3 2010

31 3 2011

£000 £000

£000

533 851 Trade accounts receivable 454

623 717 Other trade debtors 726

1,477 4,717 Related parties (central government) 1,663

165 131 Prepayments 262

659 554 Other debtors 649

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31 3 2009 31 3 2010

31 3 2011

£000 £000

£000

3,457 6,970 Total Short Term Debtors 3,754

543 628 Long Term Debtors (all "other debtors") 575

4,000 7,598 Total Debtors 4,329

13.2 Trade Accounts Receivable

As explained in Note 2.10 above, the grouping of “Trade accounts receivable” comes within the definition of Financial Instruments. Invoices are sent to individuals and other entities, where money cannot be obtained in advance of the service being rendered, and where payment is required on the receipt of the invoice.

The Council gives priority to collecting this debt, taking action through collection agencies or legal processes where appropriate, but has to make a prudent provision for impairment for doubtful debts, based on previous experience of default and on assessment of individual outstanding balances. The table below shows the age profile of this debt.

31 March 2010

£000

31 March 2011

£000

Less than 3 months 783 409

3 to 6 months 10 11

6 to 12 months 15 12

More than 1 year 43 22

Total Debt 851 454

The Council has made a provision for impairment of £36,000 for doubtful debts in this category, compared to£46,000 as at 31 March 2010. The council has also made doubtful debt provisions of £1,154,000 at 31 March 2012, compared to £1,129,000 at 31 March 2011, covering debts for Housing Benefit overpayments, this Council‟s share of Council tax debts, rents and Penalty Charge Notices for parking. The approach to assessing this impairment provision is similar to those for trade debtors, as outlined above, although such debts do not fall within the definition of financial instruments.

13.3 Groupings of Debtor

The table below analyses the balance sheet total for short-term debtors into different groups of debtor. Long-term debtors all come within the “all other bodies” grouping.

31 3 2009 31 3 2010

31 3 2011

£000 £000

£000

1,497 4,717 Central government 1,663

381 495 Other local authorities 192

- 11 Public corporations -

1,579 1,747 All other bodies 1,899

3,457 6,970 Total Short Term Debtors 3,754

543 628 Long Term Debtors (other bodies) 575

4,000 7,598 Total Debtors 4,329

14 Liabilities

The table below analyses short-term creditors between different types of debtor. The figure for long-term creditors at 31 March 2010 is all payable to other local authorities.

31 3 2009 31 3 2010

31 3 2011

£000 £000

£000

(53) (301) Central government (742)

(1,466) (393) Other local authorities (1,115)

(2,848) (2,925) All other bodies (2,445)

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(4,367) (3,619) Total Short Term Creditors (4,302)

(229) (386) Other local authorities (54)

(96) (76) All other bodies (55)

(325) (462) Total Long Term Creditors (109)

(4,692) (4,081) Total Creditors (4,411)

15 Post Employment Benefits

15.1 Participation in defined liability pension plan

As part of the terms and conditions of employment of its employees, the Council makes contributions towards the cost of post-employment benefits. Although these will not actually be payable until employees retire, the Council has a commitment to make the payments, and this needs to be disclosed at the time that employees earn their future entitlement.

The Council participates in the Local Government Pension Scheme, and therefore in the Kent Pension Scheme, which is administered by Kent County Council. The Council also has liabilities for discretionary payments for added years, etc. These are charged directly to the accounts of the Council, as they are not a charge upon the Pension Fund.

Under the Local Government Pension Scheme retirement benefits are based on the employee‟s final salary, and are increased each year in line with the Consumer Price Index.

The accounting policy for this pension plan, including the recognition of actuarial gains and losses, is set out under Note 2 (Accounting Policies).

15.2 Annual movement in plan obligations and assets

The table below shows separately the movements in the obligations and assets relating to the accounting group:

2009/10

2010/11

Liabilities Assets Net

Liabilities Assets Net

£000 £000 £000

£000 £000 £000

(66,730) 37,027 (29,703) Asset / Liability at 1 April (101,253) 49,499 (51,754)

(935) - (935) Current Service Cost (2,092) - (2,092)

(4,534) - (4,534) Interest Cost (5,068) - (5,068)

- 2,332 2,332 Expected Return on Assets - 3,615 3,615

(604) 604 - Contributions by scheme participants (590) 590 -

- Actuarial gains and losses - -

- 10,487 10,487

Difference between expected and actual returns - 2,540 2,540

- - -

Movement in actuarial assumptions for liabilities - - -

(31,932) - (31,932)

Change in financial assumptions 15,018 - 15,018

3,601 (3,601) - Benefits paid 2,526 (2,526) -

- - - Past Service Cost 8,217 - 8,217

(119) - (119) Curtailments (417) - (417)

- - - Settlements - - -

- 2,650 2,650 Contributions by employer - 2,830 2,830

(101,253) 49,499 (51,754) Asset / Liability at 31 March (83,659) 56,548 (27,111)

15.3 Transactions relating to post-employment benefits

We recognise the cost of retirement benefits in the Comprehensive Income and Expenditure Account when they are earned by employees, rather than when the benefits are eventually paid as pensions. However the charge we are required to make against Council Tax is based on the contributions payable in the year. To adjust for this statutory requirement, the estimated cost of retirement benefits arising during the year is included in the Income and Expenditure Account, but the net effect is removed, as shown in the Movement in Reserves Statement. The following transactions have been made in

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the Comprehensive Income and Expenditure Statement (the charges to Support Services are included within the overall support service recharge to the other services):

2009/10

2010/11

£000

£000

Current Service Cost

80 Central services to the public 183

426 Cultural, environmental, regulatory and planning

services 940

49 Highways and transport services 102

60 Other housing services 122

11 Corporate and democratic core 57

- Non distributed costs -

309 Support services 688

935 Total Current Service Cost 2,092

Past Service Cost

- Non distributed costs (8,217)

- Total Past Service Cost (8,217)

Curtailments

119 Non distributed costs (417)

119 Total Curtailments (417)

1,054 Cost of Services (6,542)

4,534 Interest Cost 5,068

(2,332) Expected Return on Assets (3,615)

2,202 Financing and Investment Income and Expenditure 1,453

3,256 Surplus or Deficit on Provision of Services (5,089)

21,445 Actuarial Gains and Losses (17,558)

21,445 Other Comprehensive Income and Expenditure (17,558)

15.4 Cumulative Actuarial Gains and Losses

The cumulative amount of actuarial loss since 2004/05 recognised in this statement is £16,685,000. The equivalent figure for 2009/10 was £34,423,000.

15.5 Plan Assets

The plan‟s assets consist of the following categories, by proportion of the total assets held:

2010

2011

74% Equities 75%

1% Gilts 1%

14% Bonds 13%

7% Property 9%

4% Cash 2%

The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long term real rates of return experienced in the respective markets.

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The actual return on scheme assets in the year was a gain of £3,625,000, compared with a gain of £12,819,000 in 2009/10.

15.6 Actuarial Assumptions

Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on assumptions on mortality rates, salary levels, etc. The liabilities have been assessed by Barnett Waddingham, an independent firm of actuaries, being based on the latest full valuation of the scheme as at 31 March 2007. The main assumptions used in their calculations are:

2009/10

2010/11

Long term expected rate of return on scheme assets:

7.5% Equity Investments 7.4%

4.5% Gilts 4.4%

5.5% Bonds 5.5%

5.5% Property 5.4%

3.0% Cash 3.0%

Mortality assumptions:

Longevity at 65 for current pensioners:

21.5 Men 19.8

24.4 Women 23.9

Longevity at 65 for future pensioners:

22.6 Men 21.9

25.5 Women 25.8

3.9% Rate of inflation 2.7%

5.4% Rate of increase in salaries 5.0%

3.9% Rate of increase in pensions 2.7%

5.5% Rate for discounting scheme liabilities 5.5%

50.0%

Take-up of option to convert annual pension into retirement lump sum 50.0%

15.7 Comparison to Previous Years

The table below shows the liability for the current year compared to the previous four financial years:

2006/07 2007/08 2008/09 2009/10 2010/11

£000 £000 £000 £000 £000

Present value of liabilities (77,900) (69,040) (66,832) (101,355) (83,761)

Fair value of assets 50,150 46,590 37,282 49,502 56,551

Surplus / (Deficit) in the scheme (27,750) (22,450) (29,550) (51,853) (27,210)

The table below shows the experience adjustments arising over the past five years, on plan liabilities as a percentage of plan liabilities at the balance sheet date, and on plan assets as a percentage of plan assets at the balance sheet date:

2006/07 2007/08 2008/09 2009/10 2010/11

Differences between the expected

and actual return on assets 0.70% -15.40% -33.60% 21.10% 4.50%

Experience gains and losses on liabilities 5.90% 17.80% 8.90% -31.50% 18.00%

15.8 Annual Contributions to fund

The estimated contribution for 2010/11 is £2,346,000 compared with the actual contribution of £2,830,000 for 2009/10.

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16 Termination Benefits

In 2010/11 the Council incurred a cost of £764,000 on severance payments to 37 former members of staff. Most of this expenditure related to planned reductions in staffing levels, £572,000 being funded from the Phase 2 Restructuring Reserve set up in 2009/10, and £154,000 from the Invest to Save Reserve. None of these payments were made to the senior officers listed in Note 22.

The restructure achieved the targeted savings of over £1 million over the previous establishment. The restructure was implemented in 2 phases over an 18 month period with savings exceeding the one-off severance costs from the second year of full implementation.

This total expenditure of £764,000 for 2010/11 compares with £149,000 relating to 9 former members of staff payable for 2009/10.

17 Contingent Assets and Liabilities

Note 23.4 below sets out details of the Council‟s relationship with the regeneration company (TWRC Ltd), and explains that the reserves of a group containing the Council and its share in the company would be £190,000 lower than those of the Council by itself. This amount is a contingent liability for the Council, because as an investor it is severally liable for its share of the liabilities of the company.

Also in relation to the regeneration activities, the Council has signed indemnity agreements with John Laing for £105,000 for consultation work for projects relating to the Great Hall and the Civic Centre. These amounts would be payable if the Council decides not to progress to further stages of these projects.

18 Leasing

18.1 Finance leases – Council acting as lessee

The Council built the TN2 centre on land owned by the YMCA, and occupies the premises on a 30 year lease, signed in 2006. As the length of the lease is in line with the life expectancy of the building, the building element of this agreement is treated as a finance lease. The rent payable is a peppercorn, so there are no lease commitments.

The net book value of the TN2 building was £567,000 at 1 April 2009, £672,000 at 1 April 2010 and £xxx,000 at 31 March 2011.

The Council has sub-let accommodation within the centre back to the YMCA, also on a peppercorn rent, and to Kent County Council, for use as a library, for £12,000 per annum, under a sub-lease expiring on 16 March 2036.

18.2 Operating leases – Council acting as lessee

The Council makes payments under operating leases for the following:

Various photocopiers and printers

The Housing Leasing scheme, under which the Council obtained the use of various properties which are used for temporary accommodation

The Tourist Information Centre

Various car parks

The table below analyses future minimum lease payments and the equivalent present values between leases expiring during the periods shown below:

The table below shows the future minimum lease payments under non-cancellable leases:

31 March 2010

31 March 2011

£000

£000

Leases expiring:

Within one year

Between two and five years

Later than five years

- Total -

The following table shows the total payments recognised as an expense during the financial year.

2009/10

2010/11

£000

£000

Minimum lease payments

43

2009/10

2010/11

£000

£000

Contingent rents

Sublease payments

- Total -

18.3 Finance leases – Council acting as lessor

The Council has not leased out any property under finance leases.

18.4 Operating leases – Council acting as lessor

The Council leases out various properties that it does not directly occupy, for purposes such as housing, leisure and economic development, including the ground rent received for the Royal Victoria Place shopping centre.

31 March 2010

31 March 2011

£000

£000

Leases expiring:

Within one year

Between two and five years

Later than five years

- Total -

The following table shows the total payments recognised as income during the financial year.

2009/10

2010/11

£000

£000

Minimum lease payments

Contingent rents

Sublease payments

- Total -

19 Agency Income and Expenditure

The Council is responsible for the Collection of National Non-Domestic Rates, which it collects and passes on to the Government. It also collects Council Tax on behalf of Kent County Council, Kent Police Authority and Kent Fire and Rescue Service, as well as itself. While the element of Council Tax collected for this Council is accounted for in the Income and Expenditure Account, the remainder of the tax collection activity is excluded from this account and is accounted for as an agency service.

All amounts collected and paid over under these agency activities are excluded from the main accounting statements and the notes, other than the Cash Flow Statement, where the changes during the year are included in the “financing activities” heading.

The totals collected on this basis are shown below:

2009/10

2010/11

£000 £000

£000 £000

Council Tax collection: -

46,150

Kent County Council - 6,055

Kent Police Authority -

2,974

Kent Fire and Rescue Service -

55,179 Total agency council tax collection

-

44,308 NNDR collected for Government

-

44

2009/10

2010/11

£000 £000

£000 £000

99,487 Total agency income

-

20 External Audit Costs

The Council incurred the costs set out below in relation to the audit of the Statement of Accounts, certification of statutory inspections and grant claims, and to non-audit services provided by the Audit Commission, the Council‟s external auditors.

2009/10

2010/11

£000

£000

139 External Audit Services 117

39 Grant Claims 37

1 Other 1

179 Total 155

21 Members Allowances

The total amount of members‟ allowances paid in 2010/11 was £370,000, compared to £333,000 in 2009/10.

The Council produces a statement, in accordance with the Local Authorities Members‟ Allowance (England) Regulations 2003, giving details of the allowances paid. The statement may be seen on the Council‟s website or copies can be obtained by writing to the Democratic Services Manager, Town Hall, Royal Tunbridge Wells, Kent TN1 1RS. Telephone 01892 554179 or e-mail [email protected].

22 Officers Remuneration

22.1 Remuneration of Senior Management

The tables below set out in more detail the remuneration of the senior staff of the Council. Where appropriate the pay of the officers concerned is also included in the remuneration band table set out in 22.2 below.

Salary Severance Benefits

Pension Contribs.

Total Remun.

£ £ £ £ £

2010/11

Chief Executive 112,316 - - 15,211 127,527

Director of Change & Communities

55,165 - 3,553 7,855 66,573

Director of Regeneration & Sustainability

93,397 - - 12,616 106,013

Head of Finance and Governance

70,785 - - 9,073 79,858

Head of Legal (Monitoring Officer)

60,495 - - 8,045 68,540

392,158 - 3,553 52,800 448,511

2009/10

Chief Executive 115,644 - 367 15,845 131,856

Director of Change & Business Support

74,468 - 1,836 10,409 86,713

Director of Planning and Development

57,054 - - 7,703 64,757

Head of Finance and Governance

46,708 26,000 - 6,207 78,915

Head of Legal (Monitoring Officer)

46,233 - - 6,125 52,358

340,107 26,000 2,203 46,289 414,599

mailto:[email protected]

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It should be noted that:

The figures for the Chief Executive include fees payable for the role of Returning Officer for electoral purposes. The amounts fluctuate between years, depending on what elections fall due during the financial year. The amounts paid in 2010/11 was £8,375 in 2010/11 (£4,681 for borough elections and £3,694 for other elections) compared to £9,530 in 2009/10 (all of which was for borough elections).

The Director of Change and Communities took up his post in February 2011, but until August 2011 was employed on a part-time basis only, and was paid through Maidstone Borough Council. The table above only includes payments from August 2011.

The Director of Change and Business Support undertook the role of Monitoring Officer between July 2008 and June 2009.

22.2 Remuneration Bands

The table below shows the number of employees in the year whose remuneration was greater than £50,000. For this purpose remuneration means amounts paid to or receivable by an employee, and includes sums due by way of expenses allowance (so far as these sums are chargeable to United Kingdom income tax), and the estimated money value of any other benefits received by an employee otherwise than in cash. The table displays two columns for each year: the first column, in line with the Accounts and Audit Regulations, compares amounts paid to individuals including severance pay. As this can vary considerably between years a second column is also included which excludes severance pay completely.

The table below shows total remuneration paid to individual employees for the year, whereas the detailed tables above in 21.1 show remuneration against the relevant senior post. In some cases a particular post was held by more than one employee during the course of the year, and conversely an employee held more than one post.

2009/10

2010/11

Inc

. S

eve

ran

ce

Ex

c.

Se

ve

ran

ce

Remuneration Band

Inc

. S

eve

ran

ce

Ex

c.

Se

ve

ran

ce

1 2 £50,000 - £54,999 7 7

5 5 £55,000 - £59,999 5 3

1 1 £60,000 - £64,999 4 1

2 3 £65,000 - £69,999 4 3

- - £70,000 - £74,999 1 1

- - £75,000 - £79,999 1 -

2 1 £80,000 - £84,999 1 1

- - £85,000 - £89,999 - -

1 1 £90,000 - £94,999 1 1

1 1 £95,000 - £99,999 - -

- - £100,000 - £104,999 - -

- - £105,999 - £109,999 - -

1 - £110,000 - £114,999 1 1

- - £115,000 - £119,999 - -

- - £120,000 - £124,999 1 -

14 14 Total 26 18

23 Related Parties

23.1 Definition

The term “related party” covers relationships between the Council and body or individual where one of the parties can exercise significant influence over the policies and decisions of the other.

23.2 Central Government

The central government provides much of the Council‟s funding and determines its statutory framework. Details of transactions with central government are shown in the Comprehensive Income and Expenditure Statement, the Cash Flow Statement, and notes 6 (grants and contributions), 13 (debtors) and 14 (liabilities).

23.3 Kent Pension Scheme

46

The Council participates in the Kent Pension Scheme, making annual contributions to the Kent Pension Fund as set out in Note 15. Although the scheme is administered by Kent County Council, the pension fund is a separate entity, and Kent County Council is not in itself a related party.

23.4 TWRC Limited

This company (originally called the Tunbridge Wells Regeneration Company) was created on 23 September 2008, with the aims of:

Delivering regeneration and development projects in the Tunbridge Wells area with a view to securing the economic, social and environmental well being of the area;

Increasing the land value in the Tunbridge Wells area,

Establishing a long term capital programme;

Reviewing the masterplan and submitting proposals to the Council.

On 4 December 2008 the Council took a 50% holding in the company. The remaining 50% is held by John Laing plc. Up until 31 March 2011 the company had incurred £379,000 in costs (£113,000 to 31 March 2010 and £264,000 in 2010/11).

The nature of the Council‟s relationship with the company would necessitate the production of group accounts covering the Council itself and its 50% holding in the company, which would be treated as an associate. Group accounts have not, however, been produced for 2010/11, as the amount involved is immaterial, and the expenditure covers only preliminary costs, with no trading activities having been undertaken.. If group accounts had been produced they would show that the reserves of the group at 31 March 2011 were approximately £190,000 lower than the reserves of the Council by itself, reflecting the Council‟s share of the costs incurred to date.

23.5 Members and senior officers

All members and senior officers are required to complete an annual return, disclosing the details of any interest of themselves and their close family members, which might have an impact on their activities on behalf of the Council. There were no returns for either 2009/10 or 2010/11 that revealed any such interests. Members also disclose such interests in the Register of Members‟ Interests, which is held at the Town Hall, Tunbridge Wells, and is open to public inspection.

[review for 2010/11, re member and office representation on TWRC Limited]

Details of payments to members and officers are shown in notes 20 and 21.

47

The Collection Fund

The Collection Fund is an agent‟s statement that reflects the Council‟s statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority in relation to the collection from taxpayers and the distribution to local authorities and the Government of council tax and non-domestic rates.

2009/10

2010/11

£000

Note £000 £000

Income 57,228 Income from Council Tax

58,902 5,883 Transfers from General Fund: Council Tax Benefits

6,166

44,308 Income from Business Rates 1 41,438 107,419

106,506

Expenditure

Precepts:

46,022 Kent County Council 3 46,936 6,038 Kent Police Authority 3 6,212 2,962 Kent Fire and Rescue Service 3 3,044 7,790 Tunbridge Wells Borough Council 3 8,098

Business Rates:

44,123 Payments to national pool

41,255 185 Costs of Collection

184

Bad and Doubtful Debts:

107 Write Offs

113 25 Allowance for impairment

294

502 Contribution towards previous year's surplus 3 - 107,754

106,136

335 (Increase) / Reduction in fund balance

(370)

(777) Balance of fund at 1 April

(442)

335 (Increase) / Reduction in fund balance

-

(442) Balance of fund at 31 March

(812)

Notes to the Collection Fund

1 Non-Domestic Rates

Under the arrangements for uniform business rates, the Council collects non-domestic rates for its area which are based on local rateable values multiplied by a uniform rate. The total amount, less certain reliefs and other deductions, is paid into a central pool (the NNDR pool) managed by Central Government, which in turn pays back to authorities their share of the pool based on a standard amount per head of resident population.

The total non domestic rateable value at 31 March 2011 was £127.937m (£104.157m as at 31 March 2010). The national non-domestic multiplier for the year was 41.4p (48.5p for 2009/10). Revaluation takes place every 5 years to maintain fairness by ensuring that rateable values reflect changes in the property market. The most recent revaluation came into effect on 1 April 2010. At revaluation, the multipliers are revised so that the overall national business rates bill only changes in line with inflation. This is the reason why the rateable value has increased considerably but the multiplier has decreased.

48

2 Council Tax Base

The Council Tax base i.e. the number of chargeable dwellings in each valuation band (adjusted where discounts apply) converted to an equivalent number of band D dwellings, was calculated as follows:

2009/10 2010/11

Estimated No. Of

Properties Multiplier

Band D Equivalent Dwellings

Estimated No. Of

Properties Multiplier

Band D Equivalent Dwellings

A 2,531.60 6/9 1,687.73 2,560.35 6/9 1,706.51

B 4,196.80 7/9 3,264.18 4,102.20 7/9 3,190.60

C 11,599.45 8/9 10,310.62 11,489.20 8/9 10,212.62

D 8,480.00 9/9 8,480.00 8,542.95 9/9 8,542.95

E 5,855.25 11/9 7,156.42 5,850.25 11/9 7,150.31

F 4,129.25 13/9 5,964.47 4,136.65 13/9 5,975.16

G 4,568.85 15/9 7,614.75 4,579.95 15/9 7,633.25

H 409.60 18/9 819.20 418.35 18/9 836.70

TOTAL BAND D EQUIVALENTS 45,297.37 41,679.90 45,248.10

COLLECTION RATE 0.990 0.990

TAX BASE 44,844.4 44,795.62

3 Precepting Authorities

The demands on the fund by precepting authorities were as follows:

2009/10

2010/11

Precept for year

Adjust for previous

year Total

Precept for year

Adjust for previous

year Total

£000 £000 £000

£000 £000 £000

46,022 379 46,401 Kent County Council 46,936 - 46,936

6,038 48 6,086 Kent Police Authority 6,212 - 6,212

2,962 24 2,986 Kent Fire and Rescue Service 3,044 - 3,044

7,790 51 7,841 Tunbridge Wells Borough Council 8,097 - 8,097

62,812 502 63,314 Total 64,289 - 64,289

draft statement of accounts - borough of tunbridge wells statement of...draft statement of accounts...

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