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Statement of Accounts

2014-15

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Contents

Explanatory Foreword 5

Statement of Responsibilities 19

Independent Auditor’s Report 21

General Information 25

The Core Financial Statements 31

- Comprehensive Income and Expenditure Statement 32

- Balance Sheet 33

- Movement in Reserves Statement 34

- Cash Flow Statement 35

Notes to the Core Financial Statements 37

Group Accounts 87

The Annual Governance Statement (AGS) 97

Appendices 109

- Full set of Accounting Policies 110

- Nature and Extent of risks arising from Financial Instruments

131

Firefighters’ Pension Fund Statement 135

Northamptonshire Local Government Pension Scheme Accounts

139

Glossary 170

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Explanatory Foreword

INTRODUCTION

This document presents the statutory financial statements for Northamptonshire County Council (the Council) for the period 1 April 2014 to 31 March 2015 and gives a comprehensive summary of the overall financial position of the Council. The accounts are presented in the format recommended by the Chartered Institute of Public Finance and Accountancy (CIPFA), as set out in the Code of Practice on Local Authority Accounting in the United Kingdom 2014-15 (the Code). Under the CIPFA Service Reporting Code of Practice (SeRCOP), local authorities have to present their accounts in a standardised format to make sure that all authorities are consistent, and to make their accounts easier to compare. Our core financial statements use this format and meet the conditions of the Code. The core financial statements consist of the:

Comprehensive Income and Expenditure Statement

Balance Sheet

Movement in Reserves Statement

Cash Flow Statement

The core financial statements are explained in more detail in the notes to the accounts.

The Council is required by the Code to prepare Group accounts. These consolidate the financial statements of the Council together with those of organisations in which the Council has material financial interests and a significant level of control. The Group accounts contained in this document consolidate the accounts of Olympus Care Services Limited and Northamptonshire Trading Limited.

RECAP 2013-14

The Spending Review in 2013 and the lack of clear recovery and stability in the wider economy, meant that the focus for the Council during 2013-14 was to refresh and deliver the future years of the MTFP previously agreed in February 2012. Consequently, the overall Council budget plan was set to cover a three year period for 2013-14 through to 2015-16 with a total savings requirement of £33.6m

Whilst the Council faced challenges in meeting the demand within Adults and Childrens Social Care the final outturn reported that a total of £177.9m savings had been successfully achieved since 2009-10 with the level of the General Reserve sustained at approximately £13m and a balanced position during the financial year 2013-14. This demonstrates the strength of the Council’s financial management arrangements in relation to forecasting, and the successful collaborative approach between the Corporate Management Team (CMT) and Cabinet.

BUDGET 2014-15

The Council’s current Medium Term Financial Plan (MTFP) is driven by the need to address two conflicting pressures; a reduction in available funding and growing demand for services. The rate of increase in spending pressures coupled with reduced funding creates a funding “gap” resulting in the need to find ever increasing efficiencies.

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Over time, this will have a fundamental effect on the provision and delivery of services that the Council can afford to provide for its customers and service users, and means that the Council will increasingly be looking at radical and innovative ways of funding and delivering local services.

The gross revenue budget agreed by the Council for 2014-15 was £816.8m, as shown below.

£000 2014-15

£000 2013-14

Original Base Gross Budget (brought forward) 1,115,848 1,091,754

Technical adjustments (note a) (291,514) 37,150 Base Gross Budget 824,334 1,128,904

Unavoidable Service Pressures 24,036 19,990

Efficiencies, disinvestments and reductions (31,574) (33,047)

Gross Expenditure Budget 816,796 1,115,847

Income (388,476) (677,875)

Net Budget Requirement 428,320 437,972

Funded By:

Central Grants and Contributions (11,345) (16,523)

Govt Baseline Funding and Business Rates Retention (note b) (188,597) (203,719)

Collection Fund Balance (1,737) (348)

Council Tax Requirement (226,641) (217,382)

Funding of Net Budget Requirement (428,320) (437,972)

a) This reflects the movement in income in the current year and includes DSG recoupment, Public Health, Adoption Grant and other Schools Specific grants.

b) Base line funding now includes Council Tax freeze grant previously presented as Central Grants and Contributions.

c) The total 2014-15 planned savings were £33.4m consisting of £31.6m of savings and £1.8m of income generating proposals. This compares to the £33.6m savings for 2013-14 including income generating proposals.

Total gross expenditure for 2014-15 was £298m less than the previous year which is due to the changes in income. The 2014-15 Budget reflects the impact of schools transferring to academies during the year.

The gross budget was reduced in 2014-15 but it is important to recognise that whilst reductions in funding reduce the associated spending power of the Council, service spending pressures continue to add to the total costs of the Council. For 2014-15, these amounted to £24m, and included items such as £5.8m inflationary pressures, £2.6m investment in Adult Social Care to address demographic increases, and demand pressures on Children’s Care Services, amounting to £9.9m.

In order to deliver a balanced budget, taking both the funding reductions and increased expenditure pressures into account, the Council established a set of budget proposals to deliver £33.4m of savings, which were approved at Full Council in February 2014. This meeting also set the associated Band D Council Tax charge of £1,048.57, applying a 1.99% increase on the 2013-14 rate of £1,028.11. The level of Council Tax levied by the County continues to be the lowest of all County Councils in England when charges for Fire are included.

Once the budget is set, the Net Budget Requirement will generally remain unchanged throughout the year. However, the Gross Budget will be subject to movement for a number of reasons, mainly as a consequence of grant and other external sources of funding that would have been estimated at the start of the year, and subsequently revised in year. During the 2014-15 MTFP process, adjustments to gross expenditure and income were

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largely the result of realigning the DSG and school specific funding in line with schools transferring to Academy status.

The following charts are based on the 2014-15 budget figures.

Chart 1 - Where the money received comes from

Chart 2 - What we spend the money on

Of the money received, a third is spent on paying the staff who work for the Council. The remainder is spent on third party payments such as grants to voluntary organisations, contract payments, direct payments to supported living and joint arrangements; and on supplies and services including educational resources and materials, subscriptions, office supplies and communications. The Council also incurs borrowing costs to finance the assets owned by the Council. These assets include school buildings and the transport infrastructure.

Dedicated Schools Grant, 26.69%

Government Baseline Funding & Business Rates

Retention , 23.04%

Council Tax, 28.02%

Other Specific Grants, 5.77%

Fees and Charges, 3.62%

Assessed Client Contributions,

3.43%

Public Health Grant , 3.61%

Other Income, 2.63%

Central Grants and Reserves

Contributions , 1.44%

NHS Funding for Health Outcomes

Grant, 1.53% Income

Generating Proposals, 0.22%

Employees 32.64%

Premises 1.92%

Supplies and Services 17.52%

Transport 3.51%

Capital Financing 5.36%

Precepts 0.13% Third Party

Payments 38.92%

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OUTTURN SUMMARY

Revenue

Spending against the budget has been monitored regularly throughout the year, and reports from Chief Officers have been received at each of the Council’s Cabinet meetings. The final outturn position against budget, as reported to Cabinet on 2nd June 2015, is set out in the table below.

Table 1 Revenue Outturn Summary

Directorate

Gross Expenditure

Budget £000

Income Budget

£000

Net Budget

£000

Outturn

£000

Reported Variance

£000

Adult Social Care Services 198,546 (49,343) 149,203 161,073 11,870

Children, Families and Education 154,096 (71,431) 82,665 93,149 10,484

Environment, Development and Transport

104,765 (17,489) 87,276 84,627 (2,649)

Public Health and Wellbeing 60,839 (57,863) 2,976 1,143 (1,833)

Chief Executive 3,858 0 3,858 3,371 (487)

Corporate 50,011 23,854 73,865 57,260 (16,605)

Budgets Managed by LGSS 16,234 (1,128) 15,106 14,326 (780)

Total Net Expenditure 588,349 (173,400) 414,949 414,949 0

Memorandum Items

LGSS 32,193 (16,929) 15,264

DSG (Schools, Early Years, High Needs)

262,586 (264,479) (1,893)

Total Expenditure 883,128 (454,808) 428,320

Capital

In 2014-15 the Council undertook capital investments of £111m. This represents the sixth consecutive year of Council Capital Investment above £100m and confirms total capital investment of £716m over the period 2009-10 to 2014-15.

This investment in Northamptonshire has been achieved during a period of time when discretionary capital investment by the Council has become increasingly unaffordable due to on-going austerity. However, the Council is committed to growth, prosperity and acting as a catalyst (with partners) for the economic wellbeing of Northamptonshire and is forecasting to invest a further £612m over the next five years.

Success in attracting inward investment in Northamptonshire is a key strand in the delivery of major infrastructure. The Council has been committed to working with external partners such as the Department for Education, Education Funding Agency, Northamptonshire Enterprise Partnership, Department for Transport and other private and public sector partners to invest for Northamptonshire.

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Table 2 Capital Outturn Summary

Directorate Outturn

£000

Adult Social Care Services 87

Children, Families and Education 44,934

Environment, Development and Transport 57,530

Public Health and Wellbeing 2,471

IT Infrastructure / Development 2,576

Property Maintenance 2,079

Chief Executive 1,283

Total Capital Investment 110,960

Adult Social Care Services

The Directorate reported an overspend of £11.9m, which is 8% of the Directorate net budget. This significant pressure was mainly driven by increased client numbers during the last quarter of 2013-14. The increase was as a result of targeted Continuing Health Care (CHC) reviews initiated by health partners to clear three years backlog, where significant numbers of clients were no longer eligible for health funding. The Directorate have aimed to manage the £20.5m of care pressure by identifying contract efficiencies and vacancy savings across all divisions. Further in year demand pressure, specifically from the acute hospitals, has been carefully managed with closer working with Health partners and the introduction of placement panels to ensure the most appropriate and cost effective packages are sought for individual clients.

The Adults and Transitions division budget was also put under huge pressure from failure within the Residential and Nursing market where 10 care homes closed during 2014-15 and an increasing lack of EPR (Expected to pay rate) beds. This has driven up average Residential and Nursing unit prices across client groups. Alongside the care pressure, Legal and transport budgets increased the overall overspend by £0.9m. The £20.5m of care pressure was offset by £1.9m of additional client contributions over income budget and an underspend of £0.4m on staffing where budgets were carefully managed during the year. The drawdown of reserves mitigated some non deliverable savings (including a contract rationalisation saving) contributing an in year underspend of £1.8m.

The Quality and Contracts Division underspent by £3.9m in 2014-15. This was mainly driven by contract efficiencies and additional dividend from the Northamptonshire Trading Budget. The division secured further contract efficiencies from smaller block contracts of £0.7m, where clients were moved to spot framework arrangements within the Adults and Transitions division. In addition a £0.3m of underspend was achieved against staff budgets through careful vacancy management.

The Health Partnerships division achieved a £1.7m underspend to offset the significant pressures in the Adults and Transitions division. £1.8m of underspend was driven by additional contributions from CCG’s (Clinical Commissioning Groups) to the pooled Community Equipment and Adaptations budget. This was aligned to the Community Equipment activities specific to Health. A further £0.2m of underspend was as a result of staff vacancies within the division. These underspends have been offset by a £0.14m

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pressure on the Mental Health pool budget, that was specifically against the Supported Accommodation provision of the Pool. In addition an overspend of £0.17m against the Carers budget reduced the overall underspend for the division. This pressure arose from carer contract commitments and ongoing TUPE staff costs.

Public Health and Wellbeing

The Health and Wellbeing Directorate reported an under spend position of £1.8m. A significant part of this under spend (£1.1m) related to the Nourish Service, in the Customer, Culture & Place Division. This was driven by a number of factors, predominantly an increase in meal income following the introduction of Universal Infant Free School Meals (UIFSM) in September, and improved productivity decreasing the unit cost of each school meal.

In addition to this, further under spends in the Customer, Culture & Place division were reported on both the Customer Service Centre and Library Service. These under spends consisted of both staff related savings achieved through the introduction of improved technology, and a targeted reduction in spend within some service areas. This also enabled additional capital contributions to ensure the continuity of key IT systems such as the library self serve system.

The Public Health activities within the Directorate are funded by a ring-fenced grant of £29.5m. The Public Health ring fenced grant must only be spent on activities whose main or primary purpose is to improve the public health of local population (including restoring or protecting their health where appropriate) and reducing health inequalities. This funding has been utilised in line with grant conditions and a Public Health and Wellbeing reserve has been created to enable the continuity of committed Public Health programmes utilising the Public Health ring fenced grant.

Children, Families and Education

Throughout the year the Directorate aimed to manage the pressures created by the DfE direction for its Safeguarding and Children services. The final outturn is £10.5m overspent against budget which was supported by an injection of central reserves of £7.7m and savings in other divisions within the Directorate.

The re-commissioning of Children’s Centres meant that there was a number of one off costs that would be incurred during 2014-15. Funding to support these additional in year costs was utilised from contingency funding held by the centres. It was estimated that redundancy and associated costs would be in the region of £1.5m. In fact redundancy costs were far lower than expected at £0.28m as suppliers transferred more employees than expected and then reconfigured, during which staff “at risk” with their new employer found alternative employment. Additional funding was allocated to cater for additional costs through transition and consultation of £0.85m. Again costs were kept to a minimum by the providers and were significantly lower than anticipated at £0.17m. Figures could not be finalised until the provider led transition and restructuring was complete, which was completed towards the end of the financial year.

The Troubled Families programme released £2.7m against Directorate pressures from a programme review and through the achievement of outcomes resulting in £0.8m payment by results from central government.

A one off insurance rebate on the Northampton Schools PFI project of £1.3m has contributed to the Directorate pressures.

The SEN grant allocation was not all required in 2014-15 and therefore £0.5m was released with an equivalent amount factored into the Medium Term Financial Plan for future years.

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The Educational Psychology team has achieved additional income of £0.5m for its services to schools.

Safeguarding & Children’s Services has seen its overspend rise over the year to £25.2m. The overspend is in the main the result of receiving inadequate assessments from Ofsted for its Childrens Services and the Authority being given a DfE Direction to improve its services. This has resulted in rapid and continuous investment over the years to stabilise the social care system and improve services. The major concerns have been to find suitably qualified social workers and controlling the increasing costs for Looked After Children agency placements, both of which continue to create financial pressure for future years.

Initiatives have been put in place to address the shortage of suitably qualified social workers through an investment in the establishment of a Social Worker Academy to provide 12 months work experience before releasing staff into the service and also a recruitment drive to bring highly qualified international social workers to Northamptonshire. Although established in 2014-15, savings will not be seen until 2015-16 with a reduction in the use of agency workers.

As part of addressing the escalating costs in social care, invest to save initiatives have been started focussing on improving the ratio of in-house foster carers to independent foster carers and where suitable looking to move children from high cost placements to lower cost ones. A review has resulted in a rise in children being adopted which in 2015-16 should realise a saving of £0.3m.

To support the DfE Direction costs were set aside for the Children Services Improvement programme. The end of year position shows an overspend of £1.6m which is comprised mainly of escalating agency costs that were higher than expected in order to bring about and support the improvements required. Significant amount of capital investments were delivered by the Directorate during the year providing enhanced educational facilities with increased pupil places.

The following major capital schemes over £2m were delivered by the CFE Directorate during 2014-15:

Scheme Description Actual Expenditure

2014-15 £000

PFI Wave 2 expansions at Northampton schools *17,600

Oakley Vale / Corby Primary Academy 6,420

Loatlands Primary 3,260

Greenfields Primary 2,060

*PFI Wave2 includes 6 schools that became operational in 2014-15. A further 5 schools will be operational in 2015-16.

Environment, Development and Transport

During the year the Environment, Development and Transport (EDT) Directorate has delivered £7.5m of planned savings, including an additional corporate savings allocation of £1.2m which has resulted in a minor service managed underspend. The Directorate has also been allocated its share of the Council’s corporate use of reserves of £2.0m and there has been a £120k transfer back to revenue from the Directorate’s bad debt provision, which reflects the proactive approach to debt recovery by EDT service managers during 2014-15. These positive variances are offset by a further £0.74m spend on the winter maintenance corporate earmarked reserve budget, over and above the earmarked reserve of £0.86m, to give an overall outturn underspend variance of £2.6m.

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The Directorate has delivered significant savings during the year, and these have been successfully managed through a range of interventions including re-prioritisation and re-profiling of programmes, as well as robust financial monitoring processes which has enabled the achievement of a balanced outturn against the Directorate budget.

In 2014-15 the following main schemes over £2m were delivered to bring significant improvements in infrastructure in the County, allowing for improved road network access and linkages, to help enable and support growth and development:

Scheme Description Actual Expenditure

2014-15 £000

LTP Highways Maintenance 8,130

Highway Maintenance Investment Strategy 6,400

Highway Asset Management 5,000

Northampton Waterside Enterprise Zone Access Phase 1 3,960

Additional Pothole Funding 2014-15 3,320

A43 Northampton - Kettering Phase 1a 3,270

LTP Integrated Transport 3,060

Northampton Castle Station 3,010

Northamptonshire Superfast Broadband 2,950

Abington Street Public Realm 2,790

Chief Executive Services

The Directorate has achieved an underspend for the year of £0.49m, and included within this underspend is the Directorate’s £0.1m corporate allocation of reserves. The Business Intelligence and Performance Improvement (BIPI) Service has achieved an underspend for the year of £0.15m. These savings have been made primarily through proactive vacancy management. In addition to this the service has managed a pressure as a result of there being a statutory requirement for the Council to run a three stage complaints process in Children's Services, with stages two and three needing independent investigations. There has been a significant increase in the number of these investigations this year but the service has successfully mitigated this pressure within their budget envelope. The Executive Support service has also achieved an underspend through a planned reduction of expenditure throughout the service and vacancy management.

Budgets Managed by LGSS on behalf of Northamptonshire County Council

In total there was an underspend of £0.78m on these budgets.

The Finance Directorate achieved an underspend of £0.26m. Strategic Assets has a net underspend of £0.14m due to receipt of a payment from Children’s Services commissioners to cover rent for children’s centre premises during the 2014-15 consultation period. There is also an underspend of £0.12m in Finance due to a reduced number of audit days as a result of improved closedown processes and working papers.

There is an underspend of £0.25m within the People Transformation and Transactions Directorate. Policy and Strategy has an underspend of £0.15m. This is due to an underspend on the Medigold contract of £0.09m due to reduction in headcount and fewer placement referrals from schools due to the increase in the number of academies. There

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are further underspends due to reduced referrals on the Relate counselling contract, efficiencies in the way school audits are carried out, and the removal of a provision set aside for school audits that is no longer required as they will be covered by the team during 2015-16.

OWD has an underspend of £0.10m as in response to CMT’s request to reduce or restrict spending, there has been a planned delay in OWD development work.

In addition to the £0.60m target saving in IT, a further £0.05m has been achieved this year due in the main to the bulk purchase of handsets at a competitive price.

There is an underspend of £0.23m within the Law, Property and Governance (LP&G) Directorate. There is an overspend of £0.06m within Property Operations, as a result of a small overspend on the Catering and Cleaning Service contract and an under-delivery against the Leverage on Assets saving being partially mitigated by an underspend on utilities costs. Procurement has achieved a saving of £0.38m due to the negotiation for reimbursement of employment agency fees. Democratic Services has an overspend of £0.08m due to a £0.10m shortfall on the delivery of one saving proposal.

LGSS Summary

LGSS is the shared back office operation created by NCC and Cambridgeshire County Council (CCC) in October 2010. It provides a wide range of strategic, professional, operational and transactional services including finance, property, pensions, legal, procurement, audit, HR, IT and transactional financial services at lower cost.

It is governed by a Joint Committee with the financial transactions of each shareholder county included in the respective county’s statutory accounts. For the first time LGSS prepared its separate Annual Report (Statement of Accounts and Annual Governance Statement) for 2013-14, which received a clear audit.

The LGSS overall performance for 2014-15 is summarised below.

2014-15 2014-15 2014-15 Budget Expenditure Variance £000 £000 £000

Northampton Office 12,860 11,932 (928)

Cambridge Office 10,478 10,754 276

Total 23,337

22,686 (652)

All surpluses and deficits are shared on a 50:50 arrangement.

Corporate Budgets

The financial year has presented significant challenges and resulted in a number of reserves being utilised to support the position which were reported within the main Directorates leaving the reported underspend within the corporate services at £16.6m which is mainly due to the review that has taken place within the Treasury areas of the Budget which is detailed within the following section.

In addition, the historical liability element of the employer’s rate for the Northamptonshire Pension Fund was less than anticipated following the 2014-15 triennial review of the Fund and released £2.4m in the current year and has been reflected as a reduction in cost within the medium term financial plan for 2015-16.

Finally, it needs to be noted that there has been continuous review of reserves and carryforwards, including the employment costs reserve, with funds having been released to mitigate anticipated pressures where appropriate. The final year end position has enabled

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the replenishment of some reserves to continue to offer some resilience in order to meet potential risks in future costs and commitments.

Capital Financing and Other Services

The financial year saw the continued challenging investment environment of previous years, with low investment returns although levels of counterparty risk continued to subside. Strong economic growth in the UK continued during the year but inflation fell as oil prices collapsed. In turn this made it clear that the Monetary Policy Committee (MPC) would have great difficulty in raising the Bank Rate, so market expectations for the first increase receded back to quarter 3 of 2015. Gilt yields were on a falling trend for much of the last eight months of 2014-15 but were then pulled in different directions by increasing fears in the Eurozone that Greece could be heading for an exit from the euro.

The economic conditions meant that investments would be dominated by low counterparty risk considerations resulting in relatively low returns compared to borrowing rates. Borrowing was postponed and instead cash balances were utilised further, increasing internal borrowing.

Treasury Management expenditure was £14.5m under budget at the end of the year.

A piece of work was undertaken to review the minimum revenue provision (MRP) charges and the reconciliation of the Capital Financing Requirement over the period 2007-08 to 2013-14. This identified an opportunity to generate a base saving of £5.7m this year on top of £1.3m already identified at the beginning of the year.

In addition the work highlighted a significant retrospective saving of £22.0m; of which £6.9m has been used to mitigate the Council’s total overall overspend, with the balance used to improve the reserves position against known future commitments and risks. This retrospective adjustment, which in accounting terms constitutes a change in accounting estimate, is considered to be prudent given the Council’s overall financial position, and is in line with the existing MRP policy.

A strategic decision to defer borrowing and instead utilise cash balances generated a further £1.0m. These savings were partially offset by other pressures amounting to £0.4m, bringing the total underspend to £14.5m.

Investments and Borrowing

The level of investments held by the Council was £60.4m as at 31 March 2015. These investments are backed by the Council’s reserves and working capital surpluses. Short term investments have fallen throughout the course of the year following repayment of loans from the PWLB that have not been replaced.

The level of borrowing undertaken by the Council is £602.1m as at 31 March 2015. Of this, £261.7m (43%) is borrowed from the Public Works Loans Board (PWLB), £183.8m (31%) relates to Private Finance Initiative (PFI)/ Public Private Partnership (PPP) contracts, with the remainder being market borrowing.

The borrowing is used to finance capital investment (e.g. schools, highways & transportation) for the Council. During the year the Council has proactively managed its borrowing portfolio to deliver interest savings which are being re-invested in front line services. Total interest and similar charges payable during the year amounted to £35.3m. Of this, £18.1m relates to borrowing for external loans with the remaining £17.2m for PFI/PPP contracts.

The Council’s net borrowing, including PFI liabilities (borrowing less investments) is £539.9m.

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TECHNICAL ADJUSTMENTS

The net expenditure reported in the Final Outturn report to Cabinet (as shown in the table on page 8) does not include the amounts for the memorandum items, Schools and LGSS. The amounts spent on these services are included in the Comprehensive Income and Expenditure Statement (CIES); therefore the CIES will show higher expenditure in total.

In addition, after finalising the figures for the Outturn report, various technical accounting adjustments have been made to services expenditure as required by the Service Reporting Code of Practice (SeRCOP). These mainly relate to capital financing transactions, some reserve movements and treasury transactions.

Finally, the Outturn report includes all revenue expenditure, including those amounts which are presented in the Movements in Reserves Statement (MIRS), but does not include Council Tax precepts and base government funding.

A reconciliation of the figures reported in the Outturn report to those in the CIES can be seen in Note 2.

THE 2014-15 ACCOUNTS

The Core Financial Statements are set out on pages 31 to 36. They include:

Comprehensive Income and Expenditure Statement (CIES)

This statement shows the cost in the year of providing services in accordance with generally accepted accounting practices. The statement includes the impact of in year changes in asset values and future pension liabilities, both of which are prone to significant variation from one year to the next. They would also have a significant impact on Council Tax and for this reason are adjusted out, under regulation, in the Movement in Reserves Statement (MIRS).

Net Cost of Services reduced by £9.9m, from £406.4m in 2013-14 to £396.5m in 2014-15.

There has been a decrease of £60.8m in Other Operating Expenditure from 2013-14 to 2014-15. This reflects a decrease in losses on the disposal of non current assets. These disposals include schools that have transferred to academy status, and the figures reflect the fact that fewer schools transferred in 2014-15 compared to 2013-14.

Taxation and Non Specific Grant Income has reduced to reflect the amount of Revenue Support Grant, Council Tax, National Non Domestic Rates (NNDR), and grant income received. As a result of these movements there is a surplus on the Provision of Services of £3.2m in 2014-15, compared to a deficit of £57.8m in 2013-14.

When revaluations of Non Current Assets and Actuarial losses on Pension Assets are included, the Overall Total Comprehensive Income and Expenditure has moved from a deficit of £71.7m in 2013-14 to a deficit of £106.6m in 2014-15.

Balance Sheet

This statement presents the value of the assets and liabilities recognised by the Council as at 31st March 2015 with the bottom line effectively being the net worth of the organisation. 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 category of reserves are 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 (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or

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repay debt). The second category of Unusable Reserves is those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets were sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’.

The overall net worth of the business has decreased by £106.6m during the reporting period to an overall net liability of £252.7m.

The Council has reviewed how it accounts for School assets in light of revised guidance issued by CIPFA. The Council has assessed whether Voluntary Aided, Voluntary Controlled and Foundation Schools should be included within its balance sheet, based upon an assessment of ownership and control of the assets. This has led to a prior year adjustment in respect of eight Foundation Schools valued at £34.0m being recognised which were previously off balance sheet. For further details see the note on page 29.

The Pay and Benefits Provision has been adjusted to remove it from the accounts; based on the latest assessment of the potential liability and the likelihood of settlement. This is the predominant factor in the reduction of £29.4m in the value of provisions on the balance sheet.

Other Long Term Liabilities have increased, which has predominantly been due to an increase in the Pension Fund liability of £141.0m.

Movement in Reserves Statement (MIRS)

This 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 ‘unusable’ reserves. The ‘surplus or (deficit) on provision of services’ line shows the true economic cost of providing the Council’s services, more details of which are shown in the CIES. These are different from the statutory amounts required to be charged to the General Fund balance for Council Tax setting purposes. The ‘net’ increase/decrease before transfers to earmarked reserves’ line shows the statutory General Fund balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.

Total reserves have decreased by £106.6m during the reporting period.

The Capital Grants Unapplied Reserve has decreased by £4.5m, reflecting the net effect of capital grants that have been applied during the year. The Capital Receipts Reserve has increased by £7.5m, reflecting the net effect of capital receipts received during the year.

There has been a net transfer to earmarked reserves of £2.3m and details of these movements can be seen in Note 27.

The decrease in unusable reserves is predominantly due to an increase of £141.0m in the deficit on the Pensions Reserve. This is related to the latest assessment of the assets and liabilities of the Fund by the actuary.

Cash Flow Statement

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.

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The Council’s cash position decreased during 2014-15 by £8.0m, with a cash and cash equivalents balance (including overdrafts) of minus £2.0m at 31st March 2015, compared with £6.0m at 31st March 2014.

The first line of the Cash Flow Statement shows the net surplus figure of £3.2m taken from the CIES. This figure is then adjusted to remove any items such as depreciation and impairments that are non-cash movements. The remaining cash movement is broken down into cash flows from Operating Activities (such as interest paid and received), Investing Activities (such as purchases of property, plant and equipment, investments and proceeds from sales of assets), and Financing Activities (such as repayments of borrowing).

THE NEXT 12 MONTHS

The economic environment is improving but it remains very challenging as the level of Government funding continues to reduce and will inevitably do so into the next Parliament. Whilst unemployment is reducing and recovery is better than expected concerns remain for the coming years.

The existing Medium Term Financial Plan (MTFP) now presents a five year plan 2015-16 to 2019-20 with a particular focus on 2015-16. The budget approved incorporates a total of £148m savings and aims to manage the largest ever transformation required by the Council. It takes into consideration the announcements made during the Summer of 2013, subsequent Autumn Statement and Local Government Finance Settlement in December 2014. This information has been used to provide the latest indication of expected funding over the life of the MTFP period. Consequently, it has become very apparent that the Council will need to be more self determinant and less dependent on Government funding moving forward.

The budget approved in February 2015 takes account of the 13% reduction in Government Funding for the next three years with future years projected at a 7% reduction. These challenges are increased further by other internal pressures including continued demands within Adults and Children’s Social Care Services resulting in a savings requirement of £68m in total for 2015-16.

The funding pressures in the Safeguarding and Children’s Service Division are as a result of the continued DfE Direction placed on the Council. The main areas of pressures include the Social Care Workforce which continues to present a pressure, particularly due to the high number of agency social workers. Positive action has been taken to try to mitigate this through the setting up of a Social Worker Academy and other initiatives to attract experienced permanent qualified social workers to Northamptonshire. In addition the Looked After Children numbers continued to rise throughout 2014-15 and are likely to present an ongoing pressure in 2015-16. However, positive action has been initiated to reduce this pressure such as an initiative to increase the number of adopters and foster carers and also changing the mix of placements

The full year effect of significant demand pressure experienced in 2014-15 has also been reflected in the growth proposal for Adult Social Care. This was mainly driven by targeted CHC (Continuing Health Care) reviews contributing to the increase in Residential and nursing placements.

As set out in the approved Council Plan 2015-16 to 2019-20 the Council will evolve into a Next Generation Council (NGC) with a far smaller retained organisation, right sourcing and commissioning services and outcomes from a new set of accountable organisations and social enterprises. Work will be progressed on the NGC model during 2015-16 in respect of the smaller retained organisation and the development of a Wellbeing organisation.

VALUE FOR MONEY STATEMENT

The Council’s Value for Money (VfM) strategy continues to achieve:

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Services that are fit for purpose, meeting statutory requirements and satisfying local needs;

Expenditure on services which compares favourably with comparable local authorities regardless of whether services are provided directly, in partnership or commissioned through a third party;

An understanding of our costs and what drives them;

Investment directed at improving the efficiency and quality of services and the customer experience; and

Improved outcomes and value for money for local people through a framework of strategic and local partnerships which cooperate effectively to meet shared goals.

The Council has developed a range of integrated approaches and organisational processes which together help to drive the delivery of VfM. These are endorsed in our Statements of Required Practices (SORPs) which direct staff in how we must operate. The SORPs concentrate on different areas of the Council’s core activities and cover the following areas:

Integrated Service & Resource Planning

Performance Management

Project Management

Procurement

As the Government continues to deliver budget cuts to address the national deficit, the emphasis on VfM is more paramount as budgets are reduced in response to government funding reductions.

The Council will continue to maintain the focus on Value for Money whilst striving to achieve its key outcomes.

FURTHER INFORMATION

For information please contact:

LGSS Finance Northamptonshire County Council 8-10 The Lakes John Dryden House Northampton, NN4 7YD Phone: 0300 126 1000 E-mail: accountancy@northamptonshire.gov.uk

You have the right to inspect our accounts each year before the external audit is completed. We advertise the dates during which you can inspect the accounts in the local press. Our accounts are audited by KPMG LLP. They are the auditors appointed by the Audit Commission.

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Statement of

Responsibilities This is the statement by the Council’s Section 151 Officer, which states the accounts are presented fairly to reflect the financial position of the Council. Also in this section is the signature of the Audit Committee Chair when the Statement of Accounts were approved.

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Statement of Responsibilities

The 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 Section 151 Officer.

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

Approve the Statement of Accounts.

Following the delegation of responsibility by the Council to the Audit Committee, I confirm that the accounts were discussed by the Audit Committee at its meeting on 27th August 2015 which were approved. David Watson Chair of the Audit Committ 24 September 2015

Responsibilities of the Council’s Section 151 Officer

The Section 151 Officer is responsible for the preparation of the Council’s Statement of Accounts and the Northamptonshire Pension Fund’s Statement of Accounts, in accordance with proper practices as set out in The Chartered Institute of Public Finance and Accountancy (CIPFA)/Local Authority Scotland Accounts Advisory Committee (LASAAC) Code of Practice on Local Authority Accounting in the United Kingdom (‘the Code of Practice’), and is required to give a true and fair view of the financial position of the Council at the accounting date and its income and expenditure for the year ending 31 March 2015.

In preparing this Statement of Accounts, the Section 151 Officer has:

Selected appropriate accounting policies and then applied them consistently,

Made judgments and estimates that were reasonable and prudent, and

Complied with the Code of Practice.

The Section 151 Officer has also:

Kept proper accounting records that were up to date, and

Taken reasonable steps for the prevention and detection of fraud and other irregularities.

Certificate of the Section 151 Officer

I certify that the Statement of Accounts give a true and fair view of the financial position of Northamptonshire County Council and the Group at 31 March 2015 and the Authority’s and the Group’s income and expenditure for the year then ended.

I certify that the Statement of Accounts give a true and fair view of the financial transactions of the Northamptonshire Pension Fund during the year ended 31 March 2015 and the amount and disposition of the Fund’s assets and liabilities as at 31 March 2015. Matt Bowmer Section 151 Officer. 24 September 2015

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Independent auditor’s report to the members of Northamptonshire County Council

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General Information Summary of Accounting Concepts and Policies

Basis of preparation

The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit (England) Regulations 2011. These regulations require the Statement of Accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2014-15 (the Code) and the Service Reporting Code of Practice 2014-15 (SeRCOP), supported by International Financial Reporting Standards (IFRS).

Accounting developments and changes during 2014-15

Post Employment Benefits – Local Government Pension Scheme A reference to the interest rate used to discount liabilities has been removed from section 1.4.13 III c in the Accounting Policies (in Appendix 1) as it is no longer applicable. Liabilities are discounted by the appropriate discount rate as advised by the actuary in their IAS19 results schedule. The discount rate is stated within Note 36 of the Statement of Accounts.

Interests in Companies and Other Entities A paragraph has been added in section 1.4.29 of the Accounting Policies (in Appendix 1) to clarify the basis of consolidation of the accounts from the Council’s subsidiaries within the Group Accounts. Within the Group Accounts the financial statements of Northamptonshire Trading Limited and Olympus Care Services Limited have been consolidated on a line by line basis, eliminating in full balances, transactions, income and expenses between the Council and the subsidiaries

The remainder of the accounting policies are unchanged from those used in 2013-14.

Summary of Critical Accounting Policies

The accounts are prepared on an accruals basis. Income and expenditure is recognised in the accounts in the period in which it is earned or incurred, not as cash is received or paid.

Going Concern. The accounts have been prepared on the assumption that the Council will continue in existence for the foreseeable future.

Reserves. The Council sets aside specific amounts as reserves for future policy purposes or to protect against unexpected events. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service revenue account in that year, to be recorded against the Net Cost of Services in the Comprehensive Income and Expenditure Account. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against Council tax for the expenditure.

Government Grants and Contributions. Whether paid on account, in arrears or by instalments, Government grants and other contributions are accounted for on an accruals basis and recognised as income when there is reasonable assurance that the Council will comply with the conditions attached to the payments, and the grants or contributions will be received.

The Local Government Pensions Scheme.

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The Local Government Pension Scheme is accounted for as a defined benefits scheme. The liabilities of the Pension Fund attributable to the 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, and projections of projected earnings for current employees.

Overheads and Support Services The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA SeRCOP 2014-15.The total absorption costing principle is used, whereby the full cost of overheads and support services are shared between users in proportion to the benefits received.

Property, Plant and Equipment Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment. Assets are initially measured at cost, comprising the purchase price, any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The Council has adopted a policy of capitalising borrowing costs incurred whilst assets are under construction.

Financial Liabilities Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument.

Interests in Companies and Other Entities The Council is required to produce Group Accounts alongside its own financial statements where it has material interests in subsidiaries, associates and/or joint ventures. The Council has involvement with a number of companies, and has concluded that the requirement to produce Group Accounts applies in relation to its interest in Northamptonshire Trading Limited and Olympus Care Services Limited. In the Council’s

single‐entity accounts, the interests in companies and other entities are recorded as

financial assets at cost.

For a full set of the Council’s Accounting Policies please refer to Appendix 1.

Accounting standards that have been issued but have not yet been adopted The Code of Practice on Local Council Accounting in the United Kingdom 2015-16 (the Code) has introduced several changes in accounting policies which will be required from 1 April 2015, the following changes are not considered to have a significant impact on the Statement of Accounts:

IFRS 13 Fair Value Measurement (May 2011)

This standard provides a consistent definition of fair value, a single framework for measuring it, and enhanced disclosure requirements. It affects assets and liabilities which are covered by those IFRS standards that permit or require measurement at fair value. The standard will require surplus assets to be revalued to market value, rather

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than value in existing use as at present. At present a reliable estimate cannot be made of the movement in valuation of surplus assets as a result of this change. There will be no change to the measurement requirements for operational property, plant and equipment

IFRIC 21 Levies

This standard provides guidance on levies imposed by central government in the financial statements of entities paying the levy. It specifies the obligating event as the activity that triggers the timing of the payment of the levy. The amount payable may be based on information relating to a period before the obligation to pay arises or the levy is payable only if a threshold is reached, or both. This standard will not have a material impact on the Council’s Statement of Accounts.

Annual Improvements to IFRSs (2011 – 2013 cycle)

This relates to minor improvements and changes to IFRS 1 – meaning of effective IFRSs, IFRS 3 – scope exceptions for joint ventures, IFRS13 – fair value measurement (portfolio exception) and IAS 40 – investment properties, and will not have a material impact on the Council’s Statement of Accounts.

Critical judgements in applying accounting policies

In applying the accounting policies set out in Appendix 1 the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Statement of Accounts are:

Future levels of funding for local government

There is a high degree of uncertainty about future levels of funding for local government. However, the Council has judged that this uncertainty is not yet sufficient to provide an indication that the assets of the Council might be impaired as a result of a need to close facilities and reduce levels of service provision.

PFI and Similar Arrangements

The Council is deemed to control the services provided in its PFI arrangements and also to control the residual value of the assets at the end of the contract. The accounting policy for PFIs and similar contracts has been applied to these arrangements and the assets are recognised as Property, Plant and Equipment in the Council’s Balance Sheet.

In applying this PFI accounting policy, the Council has made the following judgements:

The operators’ models were examined to identify the service element of the unitary charge. Where that charge couldn’t be clearly separated the relevant costs were obtained from the models and a margin was applied to the costs to provide an amount for the service costs. The margin used was based on advice received from expert external advisors.

The service element of the unitary charge is inflated annually by an agreed indicator (e.g. Retail Price Index) as per the contract.

The implicit interest rate was calculated by discounting the non-service element of the unitary charge at a rate that brings it back to the fair value of the asset.

The fair value of the asset is taken as the construction or refurbishment costs of the scheme.

Accounting for leases

Judgements have been made regarding whether risks and rewards of ownership pass to the lessee under lease arrangements. Where risks and rewards are transferred, leases have been classified as finance leases.

Arrangements Containing a Lease

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The Council may enter into an arrangement, comprising a transaction or a series of related transactions, that does not take the legal form of a lease but conveys a right to use an asset (e.g. an item of property, plant or equipment) in return for a payment or series of payments. IFRIC 4 provides guidance for determining whether such arrangements are, or contain, leases that should be accounted for in accordance with IAS 17.

Judgements have been made regarding whether:

Fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and the arrangement conveys a right to use the asset.

An arrangement conveys the right to use the asset if the arrangement conveys to the purchaser (lessee) the right to control the use of the underlying asset. The right to control the use of the underlying asset is conveyed if any one of the following conditions is met:

The purchaser has the ability or right to operate the asset or direct others to operate the asset in a manner it determines while obtaining or controlling more than an insignificant amount of the output or other utility of the asset.

The purchaser has the ability or right to control physical access to the underlying asset while obtaining or controlling more than an insignificant amount of the output or other utility of the asset.

Facts and circumstances indicate that it is unlikely that one or more parties other than the purchaser will take more than an insignificant amount of the output or other utility that will be produced or generated by the asset during the term of the arrangement, and the price that the purchaser will pay for the output is neither contractually fixed per unit of output nor equal to the current market price per unit of output as of the time of delivery of the output.

The Council is deemed to control assets that fall within contractual and other arrangements which involve the provision of a service using specific underlying assets and which therefore are considered to contain a lease. Arrangements containing a finance lease have been added to the Balance Sheet as assets under Property, Plant and Equipment.

Legal Claims against the Council

In deciding whether to recognise material legal claims against the Council as an item of expenditure in the accounts, the Council has taken a judgement on:

The likelihood of an outflow of resources and,

The degree of certainty surrounding the amount of any outflow.

Where an outflow of resources is unlikely or the amount cannot be measured with sufficient reliability, the Council has judged the material legal claim to be a Contingent Liability and disclosed it as a note. Where an outflow of resources is probable and a reliable estimate can be made of the amount of the obligation, the Council has judged the legal claim against the Council to be a provision and recognised this in the accounts.

Accounting for Schools – Consolidation

In line with the Code requirements on group accounts and consolidation, maintained schools within the County are considered to be entities controlled by the Council. The income, expenditure, assets, liabilities, reserves and cash flows of these schools are recognised within the Council’s single entity accounts rather than the group accounts.

Accounting for Schools – Balance Sheet Recognition

The Council recognises the land and buildings used by schools in line with the requirements of the Code. It states that property used by local authority maintained schools should be recognised in accordance with the asset recognition tests relevant to the arrangements that prevail for the property. The Council recognises the schools land and buildings on its

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Balance Sheet where it directly owns the assets and/or the Council retains substantive rights over the assets and the future economic benefits/service potential of school assets flow to the Council or rights to use the assets have been transferred from another entity.

Accounting for Schools – Academies

Academies are not considered to be maintained schools in the Council’s control, so their assets are not included within the Council’s Balance Sheet. When a school held on the Council’s Balance Sheet transfers to Academy status this is treated as an asset disposal for nil consideration. The underlying ownership does however remain with the Council.

Assumptions made about the future and other major sources of estimation uncertainty

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

The items in the Council Balance Sheet at 31 March 2015 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:

Item Uncertainties Effect if Actual Results Differ from Assumptions

Property, Plant and Equipment

Assets are depreciated over useful lives that are dependent on assumptions about the level of repairs and maintenance that will be incurred in relation to individual assets. The current economic climate makes it uncertain that the Council will be able to sustain its current spending on repairs and maintenance, bringing into doubt the useful lives assigned to assets.

If the useful life of assets is reduced, depreciation increases and the carrying amount of the assets falls. It is estimated that the annual depreciation charge for buildings would increase by £1,145k for every year that useful lives had to be reduced.

Pensions Liability

Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension Fund assets. A firm of consulting actuaries is engaged to provide the Council with expert advice about the assumptions to be applied.

The effects on the net pensions liability of changes in individual assumptions can be measured. For instance, a 0.5% decrease in the discount rate assumption would result in a decrease in the pension liability of around £145m. However, the assumptions interact in complex ways. During 2014-15, the Council’s actuaries advised that the net pensions liability had increased by around £113m. Underlying this increase the asset value increased by around £90m, but this was outweighed by an increase in the liabilities of around £203m.

This list does not include assets and liabilities that are carried at fair value based on a recently observed market price.

Prior Period Adjustments Prior period adjustments have been made to the Council’s 2013-14 financial statements in relation to accounting for schools.

The 2014-15 Code includes increased guidance on accounting for schools and school assets. As a result the recognition of land and buildings assets in relation to each school has been reviewed by the Council to determine whether they should be included on the Council’s Balance Sheet. The Council has reviewed the arrangements that are in place in respect of ownership of these assets to determine the required accounting treatment.

Assets of Community and Community Special Schools are owned by the Council and are recognised on the Council’s Balance Sheet. This treatment is unchanged from prior years.

Assets of Voluntary Aided and Voluntary Controlled Schools are deemed to be owned by Religious Bodies referred to as Trusts. Upon applying the assessment criteria to these assets the Council has determined that they should not be recognised on its Balance Sheet. The playing fields for these schools continue to be recognised on the Council’s Balance Sheet as the underlying ownership of these fields is with the Council.

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Foundation and Foundation Special Schools (with assets not owned by religious bodies) have also been assessed in accordance with the requirements of the Code. Foundation Schools have their assets owned by the governing bodies and no other arrangements have been found to be in place. As a result eight Foundation Schools have been brought on to the Council’s Balance Sheet. This is a change to previous accounting treatment. The Council’s Core Statements and relevant notes have been restated to reflect these changes.

The effect of this prior period adjustment is as follows:

Restatement adjustment to opening balances as at 1

st April 2013

£000

Balance Sheet – Property Plant & Equipment 34,027

Unusable Reserves – Capital Adjustment Account (34,027)

Events after the Balance Sheet date

The Statement of Accounts were authorised for issue by the Section 151 Officer on 23rd June 2015. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31st March 2015, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.

The financial statements and notes have not been adjusted for the following events which took place after 31st March 2015 as they provide information that is relevant to an

understanding of the Council’s financial position but do not relate to conditions at that date.

Schools transferring to Academy status

Since 31 March 2015, information has been received from the Government that a number of schools have indicated an intention to transfer to Academy status. As a result, it is currently estimated that property assets to the value of £13m and school reserves to the value of £0.9m will transfer from the Council’s Balance Sheet in 2015-16. However these values are subject to further academy conversions that may arise during 2015-16.

LGSS Law

In August 2014 the LGSS Joint Committee approved the proposed conversion of LGSS Law into a trading unit operated as a limited company. The main reason for this conversion was to enable LGSS Law to grow, and meet its objectives of attracting new external clients in line with business case projections, continuing to improve quality of service to clients and making the company more cost efficient.

LGSS Law Ltd has now been incorporated and commenced trading on 1 April 2015. It is jointly owned by NCC and CCC, with each council owning 50 shares, and future surpluses will be distributed to NCC and CCC as dividends.

As an independent company regulated by the Solicitors Regulation Authority, LGSS Law Ltd is required to have separate accounts from those of its local authority owners and must employ a system of accounting processes which accords with the Solicitors Accounts Rules.

GAD (Government Actuary’s Department) vs Milne judgement

The Pensions Ombudsman released a decision on 15th May 2015 in the case of GAD vs Milne. This judgement agreed that the national guidance for calculating pension lump sums between 1st December 2001 and 30th November 2006 contained an error which resulted in underpayments. These payments are made by Fire Authorities and then reimbursed by the Home Office. An initial assessment for Northamptonshire indicates that 71 officers were affected. The total value of this is still to be determined as information becomes available from GAD. As the judgement arose after the reporting period the Statement of Accounts has not been adjusted to reflect this. No adjustments have been posted to the 2014-15 Accounts on the basis that the impact is still to be determined. Indications are that it is not expected to be material. Appropriate adjustments will be made in 2015-16.

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The Core Statements

Comprehensive Income and Expenditure Statement

Balance Sheet

Movement in Reserves Statement

Cash Flow Statement

The unaudited accounts were issued on 23rd June 2015 and the audited accounts were authorised for issue on 24th September 2015.

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Comprehensive Income and Expenditure Statement This statement shows the resources that have been generated and consumed in providing services and managing the Council in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. It includes all day to day expenses and related income on an accrual basis as well as transactions measuring the value of non-current assets actually consumed and the real projected value of retirement benefits earned by employees in the year.

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2013-14 2013-14 2013-14

2014-15 2014-15 2014-15

£000 £000 £000 £000 £000 £000

2,602 (1,512) 1,090 Central Services to the Public

1,953 (1,795) 158

844 0 844 Court Services

897 0 897

18,382 (4,898) 13,484 Cultural and Related Services

16,702 (4,223) 12,479

29,551 (1,618) 27,933 Environment and Regulatory Services

31,237 (1,296) 29,941

11,851 (2,019) 9,832 Planning Service

15,963 (9,285) 6,678

527,655 (398,354) 129,300 Children's and Education Services

482,836 (352,321) 130,515

28,972 (1,193) 27,779 Fire & Rescue Services

27,869 (646) 27,223

51,056 (13,718) 37,337 Highways and Transport Services

52,341 (13,954) 38,387

213,920 (48,543) 165,377 Adult Social Care

221,508 (55,709) 165,799

25,531 (26,839) (1,308) Public Health and Wellbeing 1 25,799 (38,780) (12,981)

4,534 (1,086) 3,448 Corporate and Democratic Core

8,407 (83) 8,324

355 (9,065) (8,710) Non Distributed Costs

-98 (10,811) (10,909)

915,254 (508,847) 406,407 Cost Of Services

885,414 (488,903) 396,511

98,453 (6,441) 92,012 Other Operating Expenditure 3 38,752 (7,491) 31,261

59,098 (2,331) 56,767 Financing and Investment Income and Expenditure

4 70,661 (15,879) 54,782

3 (497,362) (497,359) Taxation and Non-Specific Grant Income 5 0 (485,787) (485,787)

1,072,808 (1,014,981) 57,827 (Surplus) or Deficit on Provision of Services

994,827 (998,060) (3,233)

(16,235)

(Surplus) or Deficit on Revaluation of Non Current Assets

(14,281)

(4)

(Surplus) or Deficit on Revaluation of Available for Sale Financial Assets

(7)

30,159

Actuarial (gains) / losses on pension assets / liabilities

124,147

0 Other gains and losses

0

13,920 Other Comprehensive Income and Expenditure

109,859

71,747 Total Comprehensive Income and Expenditure

106,626

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Balance Sheet The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. The Balance sheet is fundamental to the understanding of the Council’s financial position at the end of the financial year. This statement reports on the Council’s balances on assets (non-current and current), liabilities (long and short term) and reserves.

31 March 2014 (Restated)

Notes

31 March 2015

£000 £000

1,035,889

Property, Plant & Equipment 11 1,058,602

2,099

Heritage Assets 11 2,099

6,122

Investment Property 11 8,550

7,249

Intangible Assets 11 5,763

450

Assets held for sale (>1 yr) 11 2,331

1

Long Term Investments

1

7,655

Long Term Debtors 17.1 9,360

1,059,465

Long Term Assets

1,086,706

121,798

Short Term Investments 16 60,423

4,269

Assets held for sale (<1yr) 11 18,033

636

Inventories

590

84,144

Short Term Debtors 17.2 88,791

8,263

Cash and Cash Equivalents 19 4,304

219,110

Current Assets

172,141

(2,232)

Bank Overdraft 19 (6,311)

(168,425)

Short Term Borrowing 16 (128,593)

(120,371)

Short Term Creditors 18 (118,858)

(14,365)

Revenue Grants Receipts in Advance 9 (2,736)

(5,897)

Capital Grants Receipts in Advance 9 (7,834)

(20,216)

Provisions (<1yr) 20 (4,521)

(331,506)

Current Liabilities

(268,853)

(9,701)

Capital Grants Receipts in Advance 9 (15,523)

(21,564)

Provisions (>1yr) 20 (7,866)

(279,771)

Long Term Borrowing 16 (289,771)

(782,148)

Other Long Term Liabilities 22 (929,575)

(1,093,183)

Long Term Liabilities

(1,242,734)

(146,114)

Net Assets

(252,740)

Represented by:

138,772

Usable reserves 25 143,268

(284,886)

Unusable Reserves 25 (396,007)

(146,114) Total Reserves (252,740)

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Movement in Reserves Statement This 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 Statement. These are different from the statutory amounts required to be charged to the General Fund Balance for Council Tax setting purposes. The Net Increase/Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.

General Earmarked Capital Capital Total Unusable Total

Fund & Schools Receipts Grants Usable Reserves Authority

Balance Reserves Reserve Unapplied Reserves

Reserves

£000 £000 £000 £000 £000 £000 £000

Balance at 31 March 2013 (Restated) 12,848 109,792 706 31,564 154,910 (229,271) (74,361)

Movement in Reserves during 2013-14

Surplus or (deficit) on the provision of services

(57,827) 0 0 0 (57,827) 0 (57,827)

Other Comprehensive Income and Expenditure

0 0 0 0 0 (13,920) (13,920)

Total Comprehensive Income and Expenditure

(57,827) 0 0 0 (57,827) (13,920) (71,747)

Adjustments between accounting basis & funding basis under regulations (Note 26)

48,832 0 (706) (6,434) 41,692 (41,692) 0

Net Increase/Decrease before Transfers to Earmarked Reserves

(8,995) 0 (706) (6,434) (16,135) (55,612) (71,747)

Transfers to/from Earmarked Reserves (Note 27)

8,960 (8,960) 0 0 0 0 0

Increase/Decrease in 2013-14 (35) (8,960) (706) (6,434) (16,135) (55,612) (71,747)

Balance at 31 March 2014 carried forward

12,813 100,832 (0) 25,130 138,775 (284,883) (146,108)

Movement in Reserves during 2014-15

Surplus or (deficit) on the provision of services

3,233 0 0 0 3,233 0 3,233

Other Comprehensive Income and Expenditure

0 0 0 0 0 (109,859) (109,859)

Total Comprehensive Income and Expenditure

3,233 0 0 0 3,233 (109,859) (106,626)

Adjustments between accounting basis & funding basis under regulations (Note 26)

(1,698) 0 7,491 (4,530) 1,263 (1,263) 0

Net Increase/Decrease before Transfers to Earmarked Reserves

1,535 0 7,491 (4,530) 4,496 (111,122) (106,626)

Transfers to/from Earmarked Reserves (Note 27)

(2,335) 2,335 0 0 0 0 0

Increase/Decrease in 2014-15 (800) 2,335 7,491 (4,530) 4,496 (111,122) (106,626)

Balance at 31 March 2015 carried forward

12,013 103,167 7,491 20,600 143,271 (396,005) (252,734)

35

Cash Flow Statement 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 services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council.

Cash figures are shown net of overdrafts.

2013-14 Notes 2014-15

£000

£000

(57,827) Net surplus or (deficit) on the provision of services

3,233

149,766 Adjust net surplus or deficit on the provision of services for non cash movements

a 39,588

85,398 Adjust for items included in the net surplus or deficit on the provision of services that are investing and financing activities

119,976

177,337 Net cash flows from Operating Activities

162,797

(187,939) Investing Activities b (147,401)

651 Financing Activities c (23,434)

(9,952) Net increase or (decrease) in cash and cash equivalents (8,038)

15,983 Cash and cash equivalents at the beginning of the reporting period

6,031

6,031 Cash and cash equivalents at the end of the reporting period (2,007)

Notes to the Cash Flow Statement

a) Cash flow statement - operating activities

The surplus/deficit on provision of services has been adjusted for the following non-cash movements:

2013-14 2014-15

£000

£000

38,194 Depreciation 32,898

5,017 Amortisation 3,432

(19,221) Increase/decrease in debtors (6,352)

28,915 Increase/decrease in creditors (14,242)

(124) Increase/decrease in inventory 46

11,382 Movement in pensions liability 16,882

96,739 Carrying amount of non-current assets sold or de-recognised 33,959

(10,810) Movement in provisions (29,393)

(325) Other non-cash movement 2,357

149,766 39,588

36

The cash flow for operating activities includes the following items:

2013-14 2014-15

£000

£000

2,040 Interest received 1,019

(19,132) Interest paid (18,111)

0 Dividend received 3,900

b) Cash flow statement - investing activities

2013-14 2014-15

£000

£000

(93,801) Purchase of property, plant and equipment, investment property and intangible assets

(96,566)

(306,882) Purchase of short-term and long-term investments (246,200)

6,441 Proceeds from the sale of property, plant and equipment, investment property and intangible assets

7,491

303,056 Proceeds from short-term and long-term investments 307,576

(96,754) Other receipts from investing activities (119,702)

(187,939) Net cash flows from investing activities (147,401)

c) Cash flow statement - financing activities

2013-14 2014-15

£000

£000

5,717 Cash payments for the reduction of the outstanding liabilities relating to finance leases and on-balance sheet PFI contracts (Principal)

6,398

(5,067) Repayments of short- and long-term borrowing (29,832)

0 Other payments for financing activities 0

651 Net cash flows from financing activities (23,434)

37

Notes to

the Core Financial

Statements

38

39

Notes to the Statement of Accounts

1 Material items of income and expense ........................................................................... 40

2 Amounts reported for resource allocation decisions ....................................................... 40

3 Other operating expenditure .......................................................................................... 42

4 Financing and investment income and expenditure ....................................................... 43

5 Taxation and non specific grant incomes ....................................................................... 43

6 Trading operations ......................................................................................................... 43

7 Pooled budgets .............................................................................................................. 44

8 Dedicated schools grant ................................................................................................ 45

9 Grant income ................................................................................................................. 46

10 Investment properties .................................................................................................... 47

11 Capital assets ................................................................................................................ 48

12 Property valuation .......................................................................................................... 52

13 Intangible Assets ........................................................................................................... 52

14 Capitalisation of borrowing costs ................................................................................... 52

15 Commitments under capital contracts ............................................................................ 53

16 Financial instruments ..................................................................................................... 54

17 Debtors and Payments in Advance ................................................................................ 56

18 Creditors and Receipts in Advance ................................................................................ 57

19 Cash and Cash Equivalents ........................................................................................... 58

20 Provisions ...................................................................................................................... 58

21 Contingent Liabilities and Contingent Assets ................................................................. 59

22 Other Long Term Liabilities ............................................................................................ 60

23 Private finance initiatives and similar contracts .............................................................. 60

24 Leases ........................................................................................................................... 61

25 Reserves ....................................................................................................................... 63

26 Adjustments between accounting basis and funding basis under regulations ................ 68

27 Transfers to/fom earmarked reserves ............................................................................ 70

28 Capital expenditure and capital financing ....................................................................... 71

29 Insurance ....................................................................................................................... 72

30 External audit costs ....................................................................................................... 73

31 Members’ Allowances .................................................................................................... 73

32 Officers’ remuneration ................................................................................................... 73

33 Termination Benefits ...................................................................................................... 75

34 Transactions with related parties ................................................................................... 75

35 Pension schemes accounted for as defined contribution schemes ................................ 78

36 Retirement Benefits – IAS19 Disclosures for defined benefit pension schemes ............. 79

40

1 Material items of income and expense

Education and Children’s Services includes a material item of income of £246.2m of Dedicated Schools Grant (2013-14 £287m). For further details please refer to Note 9.

Other Operating Gross Expenditure is £38.8m in 2014-15. (In 2013-14 this was £98.4m). Fewer schools were transferred to Academy status in 2014-15 reducing the charge to operating expenses compared to the previous year.

Taxation and Non-Specific Grant Income is £485.8m in 2014-15 (£497.4m 2013-14). The reduction is due in the main to an overall reduction in the Revenue Support Grant £17.2m which includes the loss of direct income for Council Tax Freeze Grant of £2.5m, which now forms part of the Settlement Funding Assessment (SFA), and a reduction in the Education Services Grant £1.2m, Adoption Reform Grant £1.3m, and Capital Grants £3m. For further details please refer to Note 9.

The Public Health and Wellbeing Directorate shows an increased level of income in 2014-15, this is due to the carry forward of ring fenced Public Health funding to enable the continuity of committed Public Health programmes utilising the grant. Public health ring fenced grant must only be spent on activities whose main or primary purpose is to improve the public health of the local population (including restoring or protecting their health where appropriate) and reducing health inequalities.

2 Amounts reported for resource allocation decisions

The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the Service Reporting Code of Practice (SeRCOP). However, decisions about resource allocation are taken by the Council’s Cabinet on the basis of budget reports analysed across directorates. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular:

No charges are made in relation to capital expenditure (whereas depreciation, revaluation and impairment losses in excess of the balance on the Revaluation Reserve and amortisations are charged to services in the Comprehensive Income and Expenditure Statement)

The cost of retirement benefits

Expenditure on support services is budgeted for centrally and not charged to directorates.

The income and expenditure of the Council’s directorates recorded in the budget reports for the year is as follows:

Directorate Income and Expenditure 2013-14 as per Outturn Budget 2013-14

Services

Ad

ult

s S

oc

ial

Care

Ch

ild

ren

’s

Fa

mil

ies

an

d

Ed

uc

ati

on

En

vir

on

men

t,

Dev

elo

pm

en

t

an

d T

ran

sp

ort

Ch

ief

Ex

ecu

tiv

e

Co

rpo

rate

LG

SS

Ma

na

ge

d

Pu

bli

c H

ea

l a

nd

We

ll b

ein

g

To

tal

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

Total Income (47,481) (94,029) (19,826) (93) 22,027 (1,176) (33,475) (174,053)

Total Expenditure

203,532 197,363 97,211 4,970 30,452 22,980 43,770 600,278

Net Expenditure 156,051 103,334 77,385 4,877 52,479 21,804 10,295 426,225

41

Directorate Income and Expenditure 2014-15 as per Outturn Budget 2014-15

Services Ad

ult

s S

oc

ial

Ca

re

Ch

ild

ren

’s

Fa

mil

ies

an

d

Ed

uc

ati

on

En

vir

on

men

t,

De

ve

lop

me

nt

an

d T

ran

sp

ort

Ch

ief

Ex

ecu

tiv

e

Co

rpo

rate

LG

SS

Ma

na

ge

d

Pu

bli

c H

ea

l a

nd

We

ll b

ein

g

To

tal

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

Total Income (59,602) (73,693) (22,375) (300) 13,315 (2,185) (56,106) (200,946)

Total Expenditure 220,675 166,842 107,002 3,671 43,945 16,511 57,249 615,895

Net Expenditure 161,073 93,149 84,627 3,371 57,260 14,326 1,143 414,949

The following reconciliations show how the figures in the analysis of directorate income and expenditure relate to the subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure.

2013-14 (Surplus)/deficit on the provision of services in Comprehensive Income and Expenditure Statement

Reconciliation by Subjective Analysis D

irec

tora

te

An

aly

sis

No

t re

po

rte

d

to

ma

na

ge

me

nt

Am

ou

nts

no

t

inc

lud

ed

in

Co

st

of

Se

rvic

es

Co

st

of

Se

rvic

es

Co

rpo

rate

Am

ou

nts

To

tal

£000 £000 £000 £000 £000 £000

Fees, charges & other service income

(81,607) (12,364) 0 (93,971) 0 (93,971)

Interest and investment income

(1,929) (402) 2,331 0 (2,331) (2,331)

IAS 19 Adjustments (9,065) 0 0 (9,065) 0 (9,065)

Income from council tax 0 (220,571) 220,571 0 (220,571) (220,571)

Gain or Loss on Disposal of non current assets

0 (6,444) 6,444 0 (6,444)

(6,444)

Government grants and contributions

(81,452) (601,148) 276,788 (405,812) (276,788) (682,600)

Total Income (174,053) (840,929) 506,134 (508,848) (506,134) (1,014,982)

Employee expenses 129,239 163,402 0 292,641 0 292,641

Other service expenses 425,090 166,016 0 591,106 0 591,106

Depreciation, amortisation and impairment

234 33,709 0

33,943

0 33,943

IAS 19 Adjustments (4,566) 2,130 0 (2,436) 0 (2,436)

Financing & Interest Investments

49,665 9,433 (59,098) 0 59,098 59,098

Precepts & Levies 616 0 (616) 0 616 616

Gain or Loss on Disposal of non current assets

97,840 (97,840) 0 97,840 97,840

Total operating expenses

600,278 472,531 (157,554) 915,254 157,554 1,072,808

(Surplus) or deficit on the provision of services

426,225 (368,398) 348,580 406,407 (348,580) 57,827

42

2014-15 (Surplus)/deficit on the provision of services in Comprehensive Income and Expenditure Statement

Reconciliation by Subjective Analysis

Dir

ec

tora

te

An

aly

sis

No

t re

po

rte

d t

o

ma

na

ge

me

nt

Am

ou

nts

no

t

inc

lud

ed

in

Co

st

of

Se

rvic

es

Co

st

of

Se

rvic

es

Co

rpo

rate

Am

ou

nts

To

tal

£000 £000 £000 £000 £000 £000

Fees, charges & other service income

(52,373) (11,976) 0 (64,349) 0 (64,349)

Interest and investment income

(4,863) (11,016) 15,879 0 (15,879) (15,879)

IAS 19 Adjustments (10,366) 0 0 (10,366) 0 (10,366)

Income from council tax 0 (232,701) 232,701 0 (232,701) (232,701)

Gain or Loss on Disposal of non current assets

(7,599) 108 7,491 0 (7,491) (7,491)

Government grants and contributions

(125,745) (541,529) 253,086 (414,188) (253,086) (667,274)

Total Income (200,946) (797,114) 509,157 (488,903) (509,157) (998,060)

Employee expenses 145,931 119,411 0 265,342 0 265,342

Other service expenses 428,030 164,398 0 592,428 0 592,428

Depreciation, amortisation and impairment

(28) 26,498 0 26,470 0 26,470

IAS 19 Adjustments (6,916) 8,090 0 1,174 0 1,174

Financing & Interest Investments

48,236 22,425 (70,661) 0 70,661 70,661

Precepts & Levies 642 0 (642) 0 642 642

Gain or Loss on Disposal of non current assets

0 38,110 (38,110) 0 38,110 38,110

Total operating expenses

615,895 378,932 (109,413) 885,414 109,413 994,827

Surplus) or deficit on the provision of services

414,949 (418,182) 399,744 396,511 (399,744) (3,233)

Note: The cost of support services have been apportioned across the service headings within the Comprehensive Income and Expenditure Statement, as prescribed in the Service Reporting Code of Practice (SeRCOP). Within the table above these support service costs are included within the ‘Other Service Expenses’ line. This includes £27,774k in respect of employee expenses for staff who work within those support services.

3 Other operating expenditure

2013-14 2014-15

£000

£000

616 Levies 642

91,396 (Gains)/losses on the disposal of non current assetsa

30,619

92,012 Total 31,261

a This represents the net book value (carrying value less accumulated depreciation) of assets that have been sold or derecognised during the year, less any proceeds from the sales.

This includes schools that converted to Academy status during the year which have been derecognised within the accounts.

43

4 Financing and Investment income and expenditure

2013-14 2014-15

£000

£000

34,154 Interest payable and similar charges 44,810

24,944 Net Pensions interest expense 25,851

(2,331) Interest receivable and similar income (11,979)

0 Dividend received from Northamptonshire Trading Limited (3,900)

56,767 Total 54,782

5 Taxation and non specific grant income

2013-14 2014-15

£000

£000

(220,571) Council tax income (232,701)

(81,126) Business Rate income (82,603)

(138,621) Non-ringfenced government grants (116,464)

(57,041) Capital grants and contributions (54,019)

(497,359) Total (485,787)

6 Trading Operations The Council has trading units where the service is required to operate in a commercial environment and balance their budget by generating income from other parts of the Council or other organisations.

2013-14 2014-15

£000

£000

Archaeologya

1,469 Turnover

n/a

(1,622) Expenditure

n/a

(153) Surplus/(Deficit)

n/a

Nourishb

5,963 Turnover

7,560

(7,351) Expenditure

(8,823)

(1,388) Surplus/(Deficit)

(1,263)

LGSS Traded Incomec

10,099 Turnover

11,858

(9,681) Expenditure

(10,694)

418 Surplus/(Deficit)

1,164

(1,123) Net Surplus/(Deficit) on trading operations (99)

a Archaeology. The Archaeology unit was sold to Museum of London Archaeology (MOLA) on 20th January 2014.

The deficit for the year to January includes the costs relating to the disposal of the business and archaeology provisions of £138k.

b Nourish. Nourish provides children and young people at school with access to sustainable, hot, healthy and nutritious meals, which would have a positive impact on their healthy development within the school environment.

c LGSS Traded Income. LGSS takes shared services work from new customers through the Delegation of Services Agreement method between other public bodies, based on a Partnership and Delegation Agreement model. Overall LGSS surplus/deficits are split on a 50:50 basis between NCC and CCC. The LGSS trading figures shown above represent the NCC element of the LGSS surplus from trading with external partners, prior to the 50:50 distribution.

44

The net deficit has been included in the net cost of services in the Comprehensive Income and Expenditure Statement.

7 Pooled Budgets

Section 75 of the National Health Service Act 2006, enables joint working arrangements between NHS bodies and local authorities. Pooled funds enable health bodies and local authorities to work collaboratively to address specific local health issues.

During the year the Council contributed to three pooled budgets:

Community Equipment Services within Northamptonshire – hosted by the Council, the equipment is allocated via an occupational therapy assessment to enable independent living.

Adult Mental Health Services – hosted by Northamptonshire Teaching Primary Care Trust, is used to provide high quality services to promote mental health, prevent mental distress and illness and to provide timely and holistic treatment of mental illness within the County.

Child Adolescent Mental Health Services Commissioning Pool – hosted by Northamptonshire Teaching Primary Care Trust, is used to provide high quality services to prevent mental distress and illness and to provide timely and holistic treatment of mental illness for children within the County.

2013-14 2014-15 £000

£000

Community Equipment Services within Northamptonshire

3,176 Funding Provided by the Council

1,937

1,385 Funding Provided by Other Partners

2,586

4,561 Total Funding

4,523

(4,561) Expenditure

(4,523)

0 Net Funding / (Expenditure)

0

Adult Mental Health Services Commissioning

13,803 Funding Provided by the Council

13,245

49,361 Funding Provided by Other Partners

51,326

63,164 Total Funding

64,571

(63,091) Expenditure

(64,310)

73 Net Funding / (Expenditure)

261

Child Adolescent Mental Health Services Commissioning Pool (CAMHS)

1,137 Funding Provided by the Council

1,137

5,335 Funding Provided by Other Partners

5,654

6,472 Total Funding

6,791

(6,446) Expenditure

(6,790)

26 Net Funding / (Expenditure)

1

99 Net Funding / (Expenditure) 262

Notes

Each partner funding and expenditure position is audited as part of each partner's annual audit.

45

Any under or overspends during the year are carried forward into the following year for use within each of the pooled budgets.

8 Dedicated Schools Grant

Disclosure of deployment of Dedicated Schools Grant.

The Council’s expenditure on schools is funded primarily by the Department for Education, through the Dedicated Schools Grant (DSG). An element of DSG is recouped by the Department to fund academy schools in the Council’s area.

DSG is ring fenced and can only be applied to meet expenditure properly included in the Schools Budget, as defined in the School Finance (England) Regulations. The Schools Budget includes elements for a range of educational services provided on an authoritywide basis and for the Individual Schools Budget (ISB), which is divided into a budget share for each maintained school.

Details of the deployment of DSG receivable for 2014-15 are as follows:

Central Expenditure

ISB Total

£000 £000 £000

Final DSG for 2014-15 before Academy recoupment

497,651

Academy figure recouped for 2014-15

250,512

Total DSG after Academy recoupment for 2014-15

247,139

plus: Figure brought forward from 2013-14 as agreed with the Department for Education.

12,812

less Carry-forward to 2015-16 agreed in advance

(5,100)

Agreed initial budgeted distribution in 2014-15

67,395 187,457 254,851

In year adjustments (17,119) 17,119 0

Final budgeted distribution for 2014-15 50,276 204,576 254,851

Less Actual central expenditure (43,182)

(43,182)

Less Actual ISB deployed to schools

(204,576) (204,576)

Plus Local authority contribution for 2014-15 0 0 0

Carry-forward to 2015-16 7,094 0 7,094

Notes:

1 The actual DSG payments for 2014-15 comprised the following: 2014-15 payments (as above) 247,139 Adjustments for 2013-14 paid in 2014-15 High Needs (1,164) Early years 550 Total 246,525

2 The above table excludes the DSG Early Years grant adjustment for 2014-15 of £263k that is

not announced until May 2015 and paid in the 2015-16 financial year.

46

9 Grant Income

The Council credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Account in 2014-15:

2013-14 2014-15

£000

£000

Credited to Taxation and Non Specific Grant Income

120,830 Revenue Support Grant (RSG)

103,606

17,791 Non Ring Fenced Grants 12,858

57,041 Capital Grants 54,019

220,571 Precepts on Council Tax billing authority (Districts & Borough Authorities)

232,701

81,126 Business Rate Income

82,603

497,359 Total 485,787

Credited to Services

286,984 Dedicated Schools (DSG) 246,525

17,921 Public Health 38,446

17,613 PFI Credits 6,514

5,997 Schools Sixth Form Funding (EFA) 4,185

9,501 Pupil Premium 11,804

7,407 Other Revenue Grants 14,781

1,866 Unaccompanied Asylum Seeking Children 2,658

2,822 Skills Funding Agency 2,773

2,654 Fire Fighters Pensions 3,614

1,574 Troubled Families 1,611

15,849 Capital - University Technical Colleges 747

0 Capital - Homes and Community Agency 27

121 Capital - Primary Capital 0

861 Capital - Culture Media & Sports- BDUK 2,954

1,956 Capital - DfE (New Build Academies) 0

11,676 Capital - DfE (Basic Need and Capital Maintenance) 16,059

2,701 Capital - DfE (Devolved Formula Capital) 1,268

681 Capital - Section 106 Developer Contributions 1,506

221 Capital - Other Local Authorities 0

136 Capital - School contributions 278

300 Capital - WNDC 0

200 Capital - University of Northampton 0

0 Capital – DfE – Universal Infant Free School Meals 1,217

0 Capital – DCLG Fire Capital Grant 53

0 Capital – DfE funding for Barrack Road school 318

96 Other Capital Grants 1,154

389,137

358,492

886,496 Total 844,279

The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that may require the monies or property to be returned to the awarding body. The balances at the Year end are as follows:

47

2013-14 2014-15

£000

£000

Capital Grants Receipts in Advance

9,269 Section 106 Developer Contributions 15,501

1,301 Department for Education - UTCs grant + Partners contribution 703

0 Department for Education - Basic Need + Maintenance 1,529

939 Department for Education - Early Learning for 2 Year Olds 325

576 Communities and Local Government Fire Capital Grant 493

1,585 Homes and Communities Agency 1,558

375 Growing Places Fund 0

637 Capitalisation Provision Redistribution Grant 184

485 Department for Transport S31 Pinch Point 915

12 Other Local Authorities 1,901

0 Department for Transport - maintenance 60

0 BDUK Superfast Broadband 29

0 Department for Education – funding for Barrack Rd school 16

419 Other Grants 142

15,598 Total 23,356

5,897 Current Liabilities 7,834 9,701 Long Term Liabilities 15,522

15,598 23,356

2013-14 2014-15

£000

£000

Revenue Grants Receipts in Advance

8,979 Public Health Grant 0

1,219 Local Welfare Provision (Social Welfare Fund) 0

978 Department for Transport - funding for flood damaged roads 0

758 Skills Funding Agency - Community Learning 578

623 DCLG - Partnership Reward Grant 337

358 DCLG - Fire Service Control Room Grant 358

272 Sport England 0

0 Department for Transport - Total Transport Fund Grant 750

0 Department for Education - Childrens Workforce Development 184

1,178 Other grants 528

14,365 Total 2,736

10 Investment Properties

The following items of income and expenditure have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

2013-14 2014-15

£000

£000

239

Rental income from investment property 204

(159)

Direct operating expenses arising from investment property

(31)

80

Net gain/(loss) 173

48

11 Capital Assets

2013-14

La

nd

an

d B

uil

din

gs

Ve

hic

les

, P

lan

t,

Fu

rnit

ure

&

Eq

uip

me

nt

Infr

as

tru

ctu

re

As

se

ts

Co

mm

un

ity A

ss

ets

Su

rplu

s A

sse

ts

£'000 £'000 £'000 £'000 £'000

Cost or Valuation

At 1 April 2013 (Restated) 590,479 96,075 549,081 573 23,535

Additions 25 0 15,142 0 0

Donations 180 0 0 0 19

Revaluation increases/(decreases) recognised in the Revaluation Reserve

7,315 0 0 0 (67)

Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of Services

5,411 0 0 0 (1,521)

Derecognition - Disposals (92,969) (3,817) 0 0 (124)

Derecognitions - Other (3,182) 0 0 0 (15)

Reclassifications: 0 0 0 0 0

Assets reclassified (to)/from Held for Sale 0 0 0 0 (5,445)

Assets reclassified (to)/from Investment 0 0 0 0 0

Assets reclassified (to)/from PPE (4,366) 424 (27) 0 3,969

Assets reclassified (to)/from Under Construction 17,879 4,262 34,088 0 718

Other Movements in Cost or Valuation 182 0 0 10 0

At 31 March 2014 520,954 96,944 598,284 583 21,069

Accumulated Depreciation and Impairment

At 1 April 2013 (39,040) (65,731) (115,560) (24) (665)

Depreciation Charge/Amortisation (15,980) (9,918) (13,727) (11) (885)

Depreciation written out to the Revaluation Reserve 7,421 0 0 0 417

Depreciation written out to the Surplus/Deficit on the Provision of Services

1,843 0 0 0 485

Impairment (losses)/reversals recognised in the Revaluation Reserve

0 0 0 0 0

Impairment (losses)/reversals recognised in the Surplus/Deficit on the Provision of Services

0 0 0 0 0

Derecognition - Disposals 5,984 1,942 0 0 3

Derecognition - Other 333 0 0 0 3

to/from PPE 266 (22) 0 0 (147)

Other movements in Depreciation and Impairment (192) 0 0 0 0

At 31 March 2014 (39,365) (73,729) (129,287) (35) (790)

Net Book Value

At 31 March 2014 481,589 23,215 468,997 548 20,279

At 31 March 2013 551,438 30,344 433,522 549 22,869

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27,961 1,287,704 29,410 2,099 5,796 450 960 1,326,419 138,672 18,366

79,246 94,413 0 0 0 0 0 94,413 0 15,142

0 199 0 0 0 0 0 199 0 0

0 7,248 0 0 0 0 3,953 11,200 156 0

0 3,890 0 0 326 0 0 4,216 5 0

0 (96,910) 0 0 0 0 (5,996) (102,906) (38,304) 0

(5,595) (8,792) 0 0 0 0 0 (8,792) (185) 0

0 0 0 0 0 0 0 0 0 0

0 (5,445) 0 0 0 0 5,353 (92) 0 0

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(60,348) (3,401) 3,401 0 0 0 0 0 4,082 0

0 192 0 0 0 0 0 192 62 0

41,264 1,279,098 32,811 2,099 6,122 450 4,269 1,324,849 104,488 33,508

(221,020) (20,545) (241,564) (10,814) (129)

(40,521) (5,017) (45,539) (2,472) (459)

7,838 0 7,838 5 0

2,328 0 2,328 295 0

0 0 0 0 0

0 0 0 0 0

7,929 0 7,929 3,334 0

336 0 336 35 0

97 0 97 0 0

(192) 0 (192) 0 0

0 (243,206) (25,562) 0 0 0 0 (268,767) (9,617) (588)

41,264 1,035,892 7,249 2,099 6,122 450 4,269 1,056,082 94,871 32,920

27,961 1,066,683 8,865 2,099 5,796 450 960 1,084,853 127,858 18,237

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Cost or Valuation

At 1 April 2014 520,953 96,944 598,286 583 21,068

Additions 0 0 15,558 0 0

Donations 99 0 0 0 0

Revaluation increases/(decreases) recognised in the Revaluation Reserve

(1,887) 0 0 0 83

Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of Services

3,186 0 0 0 (500)

Derecognition - Disposals (27,398) (23,665) 0 0 (1,054)

Derecognitions - Other (3,391) 50 0 0 0

Reclassifications:

0 0 0

Assets reclassified (to)/from Held for Sale 0 0 0 0 (15,124)

Assets reclassified (to)/from Investment (340) 0 0 0 (466)

Assets reclassified (to)/from PPE (5,550) 0 0 0 5,550

Assets reclassified (to)/from Under Construction 16,292 5,020 67,922 132 0

Other Movements in Cost or Valuation 0 0 2 0 0

At 31 March 2015 501,963 78,349 681,768 715 9,557

Accumulated Depreciation and Impairment

At 1 April 2014 (39,366) (73,729) (129,287) (35) (790)

Depreciation Charge/Amortisation (18,707) (6,183) (14,957) (11) (212)

Depreciation written out to the Revaluation Reserve 8,547 0 0 0 0

Depreciation written out to the Surplus/Deficit on the Provision of Services

7,149 0 0 0 23

Impairment (losses)/reversals recognised in the Revaluation Reserve

0 0 0 0 0

Impairment (losses)/reversals recognised in the Surplus/Deficit on the Provision of Services

0 0 0 0 0

Derecognition - Disposals 1,138 23,317 0 0 72

Derecognition - Other 380 0 0 0 0

to/from PPE 593 0 0 0 454

Other movements in Depreciation and Impairment 0 (16) 0 0 0

At 31 March 2015 (40,266) (56,613) (144,244) (46) (454)

Net Book Value

At 31 March 2015 461,697 21,737 537,525 669 9,103

At 31 March 2014 481,589 23,215 468,997 548 20,279

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41,263 1,279,097 32,811 2,099 6,122 450 4,269 1,324,849 104,463 33,508

82,008 97,566 0 0 0 0 0 97,566 0 15,558

0 99 0 0 0 0 0 99 80 0

0 (1,804) 0 0 0 10 7,528 5,734 (1,943) 0

0 2,686 0 0 1,744 6 1,460 5,896 4,646 0

0 (52,117) 0 0 0 (456) (7,103) (59,675) (8,103) 0

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0 (15,124) 0 0 0 2,321 11,877 (925) 0 0

0 -806 0 0 684 0 0 (122) 0 0

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(4,086) (4,084) 0 0 0 0 0 (4,084) 25 0

27,874 1,300,226 34,756 2,099 8,550 2,331 18,031 1,365,994 102,791 49,066

(243,207) (25,562) (268,767) (9,617) (588)

(40,070) (3,432) (43,503) (3,705) (838)

8,547 0 8,547 3,744 0

7,172 0 7,172 5,878 0

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24,527 0 24,526 217 0

380 0 380 373 0

1,047 0 1,046 0 0

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0 (241,623) (28,994) 0 0 0 0 (270,616) (3,110) (1,426)

27,874 1,058,605 5,763 2,099 8,550 2,331 18,031 1,095,378 99,681 47,640

41,264 1,035,892 7,249 2,099 6,122 450 4,269 1,056,082 94,871 32,920

52

12 Property Valuation

The following statement shows the progress of the Council's rolling programme for the revaluation of fixed assets. The basis for valuation is set out in the Statement of Accounting Policies. Assets valued for 2014-15 have been valued at 1 April 2014 for Property Plant and Equipment, 31st March 2015 for Investment Properties and Assets Held for Sale and operational dates for New Constructions and Heritage Assets. The first three years of the five year current rolling programme of valuations began in 2010-11, and was completed by strategic property partners DVS the commercial arm of the Valuation Office Agency. The current year valuations were carried out by NPS Property Consultants.

Property, Plant and Equipment

Valued at Historical

Cost 2010-11 2011-12 2012-13 2013-14 2014-15 Total

£000 £000 £000 £000 £000 £000 £000

Land & Buildings 25 17,393 71,382 110,285 79,675 83,255 362,015

PFI 0 0 0 0 7,120 92,561 99,681

Plant, Vehicle & Equipment 21,737 0 0 0 0 0 21,737

Infrastructure 537,523 0 0 0 0 0 537,523

Community 669 0 0 0 0 0 669

Surplus Assets 0 0 0 0 9,018 86 9,104

Intangible Assets 5,763 0 0 0 0 0 5,763

Assets Under Construction 27,874 0 0 0 0 0 27,874

593,590 17,393 71,382 110,285 95,813 175,902 1,064,365

Heritage Assets 1,526 105 0 468 0 0 2,099

Investment Properties 0 0 0 0 0 8,550 8,550

Assets Held for Sale 0 0 0 0 0 20,364 20,364

1,526 105 0 468 0 28,913 31,012

Total 595,116 17,498 71,382 110,753 95,813 204,815 1,095,377

Since the date of valuation, the Council has no information of any material change in value and therefore the valuations have not been updated.

13 Intangible Assets The five most significant items of capitalised software are:

Carrying Amount Remaining

Amortisation Period at 31 March 2015

March 2014 March 2015

£000 £000

Customer Service Centre Software 247 70 2 years

Enterprise Resource Planning Software 1,542 1,272 3 years

ERP Payroll Module 205 39 2 years

Customer Relationship Management system 30 20 1 year

N-Talk 476 123 2 years

14 Capitalisation of borrowing costs

The Council has capitalised borrowing costs of £560k during the financial period 2014-15. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation for financial period 2014-15, calculated using the weighted average interest rate on the Council’s loan payments, was 4.33%.

53

15 Commitments under Capital Contracts

The Council allocates and controls its available resources for capital expenditure via an ongoing capital programme. The total value of capital expenditure programmes to be completed in 2015-16 and later is £201m. This reflects all cabinet approved capital commitments that have been through the required governance process.

Schemes entered into during 2014-15 or earlier, where significant payments remain to be made, are identified below along with its purpose, approximate value and the period over which the investment will take place.

Project/ Scheme Name

Main Contractor

Purpose Expected

Completion

Approximate Contract

Value £000

Total Scheme

Value £000

Project Angel - Design &

Construction

Galliford Try Construction

Limited

This invest to save capital project enables the construction of a new Public Sector HQ office building in the centre of Northampton which will house current Council and LGSS staff based in 12 locations in Northampton and will be funded by the savings made on those 12 older less efficient buildings. The project is also being used as the catalyst to review the way the organisation operates and to drive further efficiencies.

2016-17 £40,066 £43,519

PFI Wave 2 expansions at Northampton

schools

Northampton Schools Limited Partnership (where the construction contractor is with Interserve Construction Limited)

PFI Wave 2 Expansions involves expansion at 11 'Wave II' batch of Northampton schools that are in the group PFI contract operated by Northampton Schools Ltd (NSL). 6 schools became operational in 2014-15 and further 5 schools are due for completion in the first quarter on 2015-16

Various during 2014-15 & 2015-

16

£16,254 £21,859

Barrack Road Educational

Facilities (Northampton International Academy)

Not appointed

Redevelopment of the former sorting office site on Barrack Road to create an all through 4-19 school with community spaces. The scope of the scheme is expected to include primary element of the scheme with a formal agreement by the Education Funding Agency (EFA) in the near future which will confirm the construction value of the scheme.

2017-18 To be

confirmed by the EFA

£20,152 which is expected

to change

54

16 Financial instruments

Financial Instrument Balances

The borrowings and investments disclosed in the Balance Sheet are made up of the following categories of financial instruments:

Long Term Current

31-Mar-13 31-Mar-14 31-Mar-15 31-Mar-13 31-Mar-14 31-Mar-15

£000 £000 £000 £000 £000 £000

Borrowings

Financial liabilities at amortised cost 334,772 279,771 289,771 118,491 168,425 128,593

Total borrowings 334,772 279,771 289,771 118,491 168,425 128,593

Current Creditors

Creditors less receipts in advance 0 0 0 98,448 111,669 109,719

Total Current Creditors 0 0 0 98,448 111,669 109,719

Other Long Term Liabilities

Leases 890 483 153 159 159 339

PPP/PFI Liabilities 162,117 168,241 174,969 9,113 9,017 8,801

Total Other Long Term Liabilities 163,007 168,724 175,122 9,272 9,176 9,140

Investments

Cash and Cash equivalents 0 0 0 15,983 6,031 (2,007)

Loans and Receivables 0 0 0 107,963 91,617 50,334

Available-for-sale financial assets 0 0 0 10,010 30,182 10,089

Total investments 0 0 0 133,956 127,830 58,416

Debtors

Financial assets carried out contract amount

9,778 6,941 7,548 48,142 84,144 88,791

Loans and Receivables 6,717 714 1,812 0 0 0

Total Debtors 16,495 7,655 9,360 48,142 84,144 88,791

Note 1 – Lender Option Borrower Option (LOBO) loans of £125.0m that have call date in the next 12 months have been included in current borrowings. Note 2 – The above long term figures are based on the CIPFA Code of Practice on Local Council Accounting 2014-15 which states that in undertaking Effective Interest Rate (EIR) calculations the maturity period for a LOBO should usually be taken as being the contractual period to maturity unless there is a specific identifiable reason to determine otherwise.

Gains and Losses on Financial Instruments

The gains and losses recognised in the CIES and Movement in Reserves Statement in relation to financial instruments are made up as follows:

55

31-Mar-14 31-Mar-15 31-Mar-14 31-Mar-15 31-Mar-14 31-Mar-15

Financial Liabilities Financial Assets

Measured at amortised

cost

Measured at amortised

cost

Loans and receivables

Loans and receivables

Available for Sale Assets

Available for Sale Assets

£000 £000 £000 £000 £000 £000

Interest expense (19,132) (18,111) 0 0 0 0

Losses on derecognition 0 0 0 0 0 0

PFI/PPP (16,053) (17,219) 0 0 0 0

Interest payable and similar charges

(35,185) (35,330) 0 0 0 0

Interest income 0 0 2,040 790 0 229

Gains on derecognition 0 0 0 0 0 0

Interest and investment income

0 0 2,040 790 0 229

Net gain/(loss) for the year

(35,185) (35,330) 2,040 790 0 229

Fair Value of Assets and Liabilities carried at Amortised Cost

Financial liabilities and financial assets represented by loans and receivable and long term debtors and creditors are carried on the balance sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that will take place over the remaining life of the instruments, using the following assumptions:

For PWLB debt, the discount rate used is the rate for new borrowing as at 31st March.

For other market debt and investments the discount rate used is the rates available for an instrument with the same terms from a comparable lender.

We have used interpolation techniques between available rates where the exact maturity period was not available.

No early repayment or impairment is recognised.

Where an instrument has a maturity of less than 12 months or is a trade or other receivable the fair value is taken to be the carrying amount or the billed amount.

The fair value of trade and other receivable is taken to be the invoiced or billed amount.

The fair values of liabilities carried at amortised cost are calculated as follows:

31 March 2014 31 March 2015

Total Carrying amount

Fair value Total

Carrying amount

Fair value

£000 £000 £000 £000

PWLB - maturity 296,953 305,907 261,737 331,163

PWLB - EIP 0 0 0 0

LOBOs 151,243 148,114 151,227 194,467

Market borrowing 0 0 5,400 5,400

Financial liabilities 448,197 454,021 418,364 531,030

The fair value of these liabilities is greater than the carrying amount because the Council’s portfolio of loans includes a number of fixed rate loans where the interest

56

rate payable is higher than the rates available for similar loans at the Balance Sheet date. This shows a notional future loss (based on economic conditions at the Balance Sheet date) arising from a commitment to pay interest to lenders above current market rates.

The fair values of assets carried at amortised cost are calculated as follows:

31 March 2014 31 March 2015

Carrying amount Fair value

Carrying amount Fair value

£000 £000 £000 £000

Loans & Receivables 91,617 91,638 50,334 50,333

Other loans 714 714 1,812 1,812

Financial assets 92,331 92,352 52,146 52,145

The fair value of these assets is marginally lower than the carrying amount because the Council’s portfolio of investments includes a number of fixed rate loans where the interest rate receivable is lower than the rates available for similar loans at the Balance Sheet date. This shows a notional future loss (based on economic conditions at the Balance Sheet date) attributable to the commitment to receive interest below current market rates.

The Council has made loans to two organisations at less than market rates, known as soft loans. These loans are recognised in the balance sheet at amortised cost.

A loan of £1m has been advanced to Northamptonshire County Cricket Club which was approved by Cabinet in November 2014. This loan was for a period of 5 years, ending February 2019.

A further £1m loan was agreed with Northamptonshire County Cricket Club in 2014-15 and at 31st March £578k of this had been drawn down. This loan was for a period of 6 years, ending October 2020.

A loan was made in respect of the transfer of Northamptonshire Archaeology, to the Museum of London Archaeology (MOLA) in January 2014 and at the balance sheet date the balance stood at £217k. This loan was for a period of 3 years and is due to be repaid in July 2017.

Nature and Extent of Risks Arising from Financial Instruments

For details on the Nature and Extent of Risks Arising from Financial Instruments please see Appendix 2.

17 Debtors and Payments in Advance

17.1 Long term debtors

57

The Other Entities and Individuals figure as at 31 March 2015 includes £3.4m of deferred accommodation charges. These relate to clients that own their own property and enter a residential care home. The Council will treat that customer as being liable for the full cost of their care charges due to the value of their assets. As the capital is tied up in the property the Council charges a contribution based on the client’s accessible income, with the remainder being deferred against the property until such time as the property sells. The debt is secured by way of Legal Charge and therefore is recoverable in most cases.

The remainder of the Other Entities and Individuals figure represents £1.8m of loans issued by the Council, as described in Note 16.

The £4.1m figure for Other Local Authorities represents lease premiums for long term leases of library buildings. These are being written down over the period of the lease.

17.2 Short term debtors

The short term debtors figure for Other Local Authorities is primarily comprised of precepts from Council Tax and Business Rates billing authorities, which are paid in the following financial year.

The NHS figure as at 31st March 2015 includes one high value debtor for £12.5m in respect of Section 256 funding for health objectives. This invoice was paid in May 2015.

18 Short Term Creditors and Receipts In Advance

58

19 Cash and Cash Equivalents

Cash figures are shown net of overdrafts.

20 Provisions

Provisions (<1 yr) Pay and

Benefits Insurance Redundancy Other

Provision Provision Provision Provisions Total

£000 £000 £000 £000 £000

Balance at April 2014 (12,800) (2,993) (1,330) (3,093) (20,216)

Additional Provisions made in 2014-15

0 0 (111) (849) (960)

Amounts used in 2014-15 0 967 361 2,196 3,523

Unused amounts reversed in 2014-15

12,800 0 0 333 13,133

Balance at March 2015 0 (2,026) (1,080) (1,413) (4,519)

Provisions (>1 yr) Pay and

Benefits Insurance Redundancy Other

Provision Provision Provision Provisions Total

£000 £000 £000 £000 £000

Balance at April 2014 (12,800) (4,066) 0 (4,698) (21,564)

Additional Provisions made in 2014-15

0 (219) 0 (1,125) (1,343)

Amounts used in 2014-15 0 0 0 1,500 1,500

Unused amounts reversed in 2014-15

12,800 0 0 739 13,539

Balance at March 2015 0 (4,285) 0 (3,583) (7,868)

20.1 Pay and Benefits

This provision was recognised by the Council within previous Statement of Accounts to reflect the Council’s assessment of potential pay liabilities arising from the implementation of the Council’s Pay and Benefits package on 1st April 2011.

8,263

4,304 (2,232)

(6,311)

(8,000)

(6,000)

(4,000)

(2,000)

0

2,000

4,000

6,000

8,000

10,000

Cash in Bank

Bank Current Accounts

6,031 Total Cash & Cash Equivalents (2,007)

2013-14 £000 2014-15 £000

59

In accordance with proper accounting practice and the requirements of the Code the level of the provision has been assessed annually since its inception and adjusted based on latest assessment of the potential liability and likelihood of settlement.

In keeping with this practice the provision has been reviewed during 2014-15. Based on the latest information and the time since implementation the Council has assessed that it is more likely that a settlement will not be required. As such this no longer meets the definition of a provision as set out within the Code and the Council’s accounting policies, so the provision has been adjusted to remove it from the 2014-15 Accounts. The associated entries on the Council’s balance sheet have also been adjusted out, as shown in Note 25.7 and Note 26.

20.2 Insurance Provision

The Insurance Provision is held to fund the payment of known estimated future insurance liabilities (public liability, employer’s liability and property) i.e. estimates against current open insurance claims.

Dependent on the type of claim claimants have up to six years to make a claim. The claim may then take a number of years to settle.

The balance held in the Insurance Provision is based on estimates of liability of known claims and therefore represents the liability that NCC will be required to pay impacting in future financial years.

20.3 Redundancy Provision

The Council's budget for 2015-16 was agreed by Council on 19th February 2015. Savings of £68m are required to be made as part of the Medium Term Financial Plan. Formal consultation has taken place although a section 188 notice was not required as the expected redundancies are less than 100. Proposals indicating staff savings were identified as part of the MTFP process and have been used to form the basis of the redundancy provision. As a result, the provision of £1.08m will fund the redundancy costs of the anticipated people related savings in the 2015-16 budget. The full costs will not be available until all pending redundancy dismissals have taken place. Consequently, the provision has been made in accordance with proper accounting practice.

20.4 Other Provisions

Of the remaining £1.41m of short term provisions £1.10m is in respect of schools with deficits transferring to academy status. The Finance team works with these schools to minimise their deficits, which are then charged to this provision.

Of the remaining £3.58m of long term provisions £1.91m has been provided in respect of Business Rates appeals. £0.90m is held within a decommissioning provision, to cover the cost of dilapidations of properties when they become vacant.

All other provisions are individually insignificant.

21 Contingent Liabilities and Contingents Assets

21.1 Contingent Liabilities

The Council has two civil cases currently outstanding, but is unable at this stage to measure the degree of likelihood of any liabilities or the amounts of any potential obligations with sufficient reliability. Hence no amounts have been recognised within the accounts. Based on historical experience and the number of cases, the estimated liability could be up to £50,000.

There are four judicial review cases being contemplated. No compensation payments would follow, but there is a potential cost liability of up to £15,000 per case.

60

21.2 Contingent Assets

The Council is currently pursuing twenty four civil claims, but is unable at this stage to measure the degree of likelihood of any assets or transfer of economic benefit with sufficient reliability. Hence no amounts have been recognised within the accounts. Based on historical experience the estimated assets could be up to £522,000.

22 Other Long Term Liabilities

2013-14 2014-15

£000

£000

(610,921) Net Pensions Liabilities (751.950)

(2,502) Deferred Liabilities (2,502)

(168,241) Long Term PFI Liabilities (174,969)

(483) Finance Lease Liabilities (153)

(782,147) (929,575)

23 Private Finance Initiatives (PFI) and similar contracts

The Council has entered into the following Private Finance Initiatives (PFI):

The Wooldale Centre

Residential Care Homes

The Northampton Town Learning Partnership

Shaw Elderly Persons Homes (EPH)

Street Lighting

The assets used to provide services under these PFI contracts are recognised in the Council’s Balance Sheet. Movements in their value over the year are detailed in the analysis of the movement on the Property, Plant and Equipment balance in Note 11.

The Council makes an agreed annual payment which is increased each year by inflation and can be reduced if the contractor fails to meet availability and performance standards in any year but which is otherwise fixed. Payments remaining to be made under these PFI contracts at 31 March 2015 (excluding any estimation of inflation and availability/performance deductions) are shown in the following table.

Payment for

services

Reimbursement of Capital

Expenditure Interest Total

£000 £000 £000 £000

Payable in 2015-16 29,194 8,892 18,134 56,219

Payable within two to five years 127,843 29,667 78,771 236,281

Payable within six to ten years 181,542 41,580 93,751 316,872

Payable within eleven to fifteen years

199,013 51,068 84,983 335,063

Payable within sixteen to twenty years

168,563 51,343 66,316 286,221

Payable within twenty one to twenty five years

72,590 24,842 26,908 124,339

778,744 207,390 368,862 1,354,996

The following paragraphs provide a high level summary of the individual PFI contracts.

61

Wooldale Centre – This agreement was entered into on the 28 March 2003 with Wooldale Partnerships Ltd to build and operate the ‘Wooldale Centre for Learning’. The contract is due to end on 31 August 2029 and the total remaining payments are £57.8m.

Residential Care Homes (Specialist Care Centres) – In January 2003 the Council entered into a PFI agreement with Shaw Healthcare to build and operate four specialist care centres. The centres are operational and will be operated until December 2029 with payments remaining totalling £146.4m.

Northampton Town Learning Partnership – On 31 December 2005 the Council entered into a PFI agreement with Northampton Schools Ltd Partnership to build/refurbish and operate 5 secondary schools and 36 primary schools in Northampton town. The PFI completion date is 1 January 2038 and the remaining payments total £726.4m. Some schools in the contract are being extended under the contract to meet the basic need provision for school places in Northampton town.

Shaw Elderly Persons Homes (EPH) – The Shaw EPH scheme is a Public Private Partnership (PPP) involving the transfer of 8 elderly person’s homes to Shaw Healthcare. The Council has a 25 year contract with Shaw Healthcare under which the developer provides a specified number of beds at each home at a specified price to the Council. The assets will be owned by the developer at the end of the contract. Payments to the end of the contract total £217.0m.

Street Lighting PFI Scheme – The Street Lighting PFI Contract is a partnership with Balfour Beatty running for 25 years from 1st October 2011 to 30th September 2036. The PFI element of the contract covers the maintenance of existing and new lighting units, and the replacement of current lighting units requiring replacement on a gradual basis over the first 5 years of the contract.

Outside of the PFI element of the contract but closely related, forming part of the wider contract and affecting the assets utilised is the energy consumption of the street lighting units. There are related performance targets to reduce energy consumption with the new units

The value of the contract will change over the period of the contract as new housing developments are built and the related street lighting stock adopted by the Council. The remaining payments total £207.5m.

24 Leases

24.1 Council as Lessee

I. Finance Leases

The Council has acquired a number of vehicles and Hot Meals PODs under finance leases. PODs are mobile units that contain kitchen facilities for use by Nourish in delivering hot meals to schools.

The assets acquired under these leases are carried as Property, Plant and Equipment in the Balance Sheet at the following net amounts.

2013-14 Cost of Finance Lease Assets 2014-15

£000

£000

3,945 Vehicles, Plant, Furniture, Equip – Vehicles 2,276

453 Vehicles, Plant, Furniture, Equip – Hot PODs 226

4,398 2,502

62

The Council is committed to making minimum payments under these leases comprising settlement of the long term liability for the interest element of the leases acquired by the Council, and finance costs that will be payable by the Council in future years while the liability remains outstanding. The minimum lease payments are made up of the following amounts:

2013-14 Finance lease liabilities (net present value of minimum lease payments) 2014-15

£000

£000

406 Current (payment in 14-15) 330

298 Non-Current (payment from 15-16 onwards) 12

164 Finance costs payable in future years 71

868 Minimum lease payments 412

The Minimum lease payments will be payable over the following periods:

Minimum Lease

Payments (with

interest)

Finance Lease

Liabilities (without interest)

Minimum Lease

Payments (with

interest)

Finance Lease

Liabilities (without interest)

2013-14 2013-14

2014-15 2014-15

£000 £000

£000 £000

500 406 Not later than one year 356 286

368 298 Later than one year and not later than five years

12 12

0 0 Later than five years 0 0

868 704

368 298

II. Operating Leases

The future minimum payments due under operating leases in future years are:

2013-14

2014-15

£000

£000

1,608 Not later than one year (payments) 1,517

3,265 Later than one year and not later than five years 3,748

11,678 Later than five years 11,567

16,551 16,832

The expenditure charged to various service lines in the Comprehensive Income and Expenditure Statement during the year in relation to minimum lease payments was £1.742m compared to £1.627m in 2013-14.

24.2 Council as Lessor

I. Finance Leases

The Council as a Lessor does not have any leases that have been classified as Finance Leases.

II. Operating Leases

The Council owns or leases a number of buildings that are leased or sub leased for various reasons, the larger elements of these being as follows:

63

Two depots for highways contractors are rented to a contractor for £134k per annum.

Fire Stations are leased for an amount of £128k per annum.

Leases of property to Olympus Care Services Limited of £803k per annum.

The future minimum lease payments receivable under operating leases in future years are:

2013-14

2014-15

£000

£000

(1,132) Not later than one year (1,172)

(2,424) Later than one year and not later than five years (1,761)

(1,211) Later than five years (1,259)

(4,766) (4,192)

Minimum lease receipts for current year

2013-14 2014-15

£000 Total amounts receivable in respect of leases £000

(1,161) (1,243)

25 Reserves

Usable Reserves

Summary

2013-14 2014-15

£000

£000

12,810 General Fund

12,009

46,963 Earmarked Reserves

58,036

53,870 Schools Reserves

45,132

(0) Capital Receipts Reserve

7,491

25,130 Capital Grants Unapplied

20,600

138,773 Total Usable Reserves 143,268

Movements in the Council’s usable reserves are detailed in the Movement in Reserves Statement, note 26 and note 27.

Unusable Reserves

Summary

2013-14 (Restated) 2014-15

£000

Note £000

97,789 Revaluation Reserve 25.1 102,934

4 Available for Sale Financial Instruments Reserve 25.2 11

233,745 Capital Adjustment Account 25.3 251,013

3,249 Financial Instruments Adjustment Account 25.4 2,379

(610,921) Pensions Reserve 25.5 (751,950)

1,854 Collection Fund Adjustment Account 25.6 4,238

(5,650) Unequal Pay Back Pay Account 25.7 0

(4,954) Accumulated Absences Account 25.8 (4,630)

(284,884) Total Unusable Reserves (396,005)

64

25.1 Revaluation Reserve

The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its Property, Plant and Equipment. The balance is reduced when assets with accumulated gains are:

Revalued downwards or impaired and the gains are lost

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

Disposed of and the gains are realised.

The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.

2013-14 2014-15

£000

£000

95,602 Balance at 1 April

97,789

20,188 Upward revaluation of assets 20,587

(3,953) Downward revaluation of assets and impairment losses not charged to the Surplus/Deficit on the Provision of Services

(6,306)

16,235 Surplus or deficit on revaluation of non-current assets not posted to the Surplus or Deficit on the provision of Services

14,281

(3,244) Difference between fair value depreciation and historical cost depreciation

(3,453)

(10,804) Accumulated gains on assets sold or scrapped (5,683)

(14,048) Amount written off to the Capital Adjustment Account

(9,137)

97,789 Balance at 31 March

102,934

25.2 Available for Sale Financial Instruments Reserve

The Available for Sale Financial Instruments Reserve contains the unrealised gains or losses made by the Council arising from increases or decreases in the value of its investments that have quoted market prices or otherwise do not have fixed of determinable payments. The balance in the reserve at the end of 2013-14 was £4k, which has increased to £11k at the end of 2014-15 due to an upward revaluation of investments.

25.3 Capital Adjustment Account

The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non current assets and for financing the acquisition, construction or enhancement of these assets under statutory provision. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement.

The Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Council.

65

The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 26 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.

2013-14

(Restated) 2014-15

£000

£000

261,445 Balance at 1 April

233,745

Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement:

(45,942) Charges for depreciation and impairment of non current assets

(44,174)

9,021 Revaluation losses on Property, Plant and Equipment 11,508

(5,017) Amortisation of intangible assets (3,432)

(43,798) Revenue expenditure funded from capital under statute

(29,512)

(97,836) Amounts of non current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

(38,110)

(183,573) Total (103,720)

14,048 Adjusting amounts written out of the Revaluation Reserve

9,136

(169,525) Net written out amount of the cost of non current assets consumed in the year

(94,584)

Capital financing applied in the year:

8,943 Use of the Capital Receipts Reserve to finance new capital expenditure

0

98,075 Application of grants to capital financing from the Capital Grants Unapplied Account

85,031

34,282 Statutory provision for the financing of capital investment charged against the General Fund balances

5,212

0 Reversal of previous capitalisation of Unequal Pay Back

Pay costs 19,950

141,300 Total 110,193

326 Movements in the market value of Investment Properties debited or credited to the Comprehensive Income and Expenditure Statement

1,560

199 Movement in the Donated Assets Account credited to the Comprehensive Income and Expenditure Statement

99

233,745 Balance at 31 March 251,013

25.4 Financial Instruments Adjustment Account

The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The Council uses the Account to manage premiums paid on the early redemption of loans.

66

Premiums are debited to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out of the General Fund Balance to the Account in the Movement in Reserves Statement. Over time, the expense is posted back to the General Fund Balance in accordance with statutory arrangements for spreading the burden on Council tax. In the Council’s case, this period is the unexpired term that was outstanding on the loans when they were redeemed.

2013-14 2014-15

£000

£000

3,897 Balance at 1 April

3,249

(648)

Amount by which finance costs charged to Comprehensive Income and Expenditure Statement are different from costs chargeable in the year in accordance with statutory requirements

(870)

3,249 Balance at 31 March 2,379

25.5 Pension Reserve

The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to Pension Funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve, therefore, shows a substantial shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

2013-14 2014-15

£000

£000

(569,380) Balance at 1 April

(610,921)

(30,159) Actuarial gains or losses on pensions assets and liabilities

(124,147)

(49,784)

Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement

(48,076)

38,402 Employer's pensions contributions and direct payments to pensioners payable in the year

31,194

(610,921) Balance at 31 March (751,950)

25.6 Collection Fund Adjustment Account

The Collection Fund Adjustment Account manages the differences arising from the recognition of Council tax and Business Rates income in the Comprehensive Income and Expenditure Statement as it falls due from Council tax and Business Rates payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.

67

2013-14 2014-15

£000

£000

1,014 Balance at 1 April

1,854

840

Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from Council Tax and Business Rates income calculated for the year in accordance with statutory arrangements

2,384

1,854 Balance at 31 March 4,238

25.7 Unequal Pay Back Pay Account

The Unequal Pay Back Pay Account compensates for the differences between the rate at which the Council provides for the potential costs of back pay settlements in relation to Equal Pay cases and the ability under statutory provisions to defer the impact on the General Fund Balance until such time as cash might be paid out to claimants. As set out in Note 20.1 this provision has now been removed so the associated reserve has also been removed as shown below. An element of these costs had previously been capitalised and this has also been adjusted out of the accounts as shown in Note 25.3 and Note 26.

2013-14 2014-15

£000

£000

(14,250) Balance at 1 April

(5,650)

8,600 Unequal Pay Back Pay Provision due to timing differences

5,650

(5,650) Balance at 31 March 0

25.8 Accumulated Absences Account

The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account.

2013-14 2014-15

£000

£000

(7,600) Balance at 1 April (4,954)

7,600 Settlement or cancellation of accrual made at the end of the preceding year

4,954

(4,954) Amounts accrued at the end of the current year (4,630)

2,646

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

324

(4,954) Balance at 31 March (4,630)

68

26 Adjustments between accounting basis and funding basis under regulations This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure.

2013-14

Gen

era

l F

un

d

Bala

nc

e

Cap

ital

Receip

ts

Reserv

e

Cap

ital

Gra

nts

Un

ap

plied

Mo

vem

en

t in

Un

us

ab

le

Reserv

es

£000 £000 £000 £000

Adjustments Involving the Capital Adjustment Account

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

Charges for depreciation and impairment of non current assets 45,942 0 0 (45,942)

Revaluation losses on Property Plant and Equipment (9,021) 0 0 9,021

Movements in the fair value of Investment Properties (326) 0 0 326

Amortisation of intangible assets 5,017 0 0 (5,017)

Capital grant and contributions applied (82,969) 0 0 82,969

Income in relation to donated assets (199) 0 0 199

Revenue Expenditure funded from Capital under Statute 43,798 0 0 (43,798)

Amounts of non current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

97,836 0 0 (97,836)

Gain/loss on available for sale financial assets 0 0 0 0

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

Statutory Provision for the Repayment of debt - Minimum Revenue Provision (MRP) (34,282) 0 0 34,282

Other Adjustments

Adjustments involving the Capital Grants Unapplied Account:

Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Statement

(8,672) 0 8,672 0

Application of grants to capital financing transferred to the Capital Adjustment Account 0 0 (15,106) 15,106

Adjustments involving the Capital Receipts Reserve:

Use of capital receipts reserve to finance new capital expenditure 0 (8,943) 0 8,943

Capital Receipts credited to Comprehensive Income & Expenditure Statement (8,237) 8,237 0 0

Adjustments involving the Financial Instruments Adjustment Account:

Amount by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements

648 0 0 (648)

Adjustments involving the Pensions Reserve:

Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement

49,784 0 0 (49,784)

Employer's pension contributions and direct payments to pensioners payable in the year (38,402) 0 0 38,402

Adjustments involving the Collection Fund Adjustment Account:

Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

(840) 0 0 840

Adjustment involving the Unequal Pay Back Pay Adjustment Account:

Amount by which amounts charged for Equal Pay claims to the Comprehensive Income and Expenditure are different from the cost of settlements chargeable in the year in accordance with statutory requirements

(8,600) 0 0 8,600

Adjustment involving the Accumulated Absences Account:

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

(2,646) 0 0 2,646

Total Adjustments 48,832 (706) (6,434) (41,692)

69

2014-15

Ge

ne

ral

Fu

nd

Ba

lan

ce

Ca

pit

al

Re

ce

ipts

Re

se

rve

Ca

pit

al

Gra

nts

Un

ap

pli

ed

Mo

vem

en

t

in

Un

us

ab

le

Re

se

rve

s

£000 £000 £000 £000

Adjustments Involving the Capital Adjustment Account

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

Charges for depreciation and impairment of non current assets 44,174 0 0 (44,174)

Revaluation losses on Property Plant and Equipment (11,508) 0 0 11,508

Movements in the fair value of Investment Properties (1,560) 0 0 1,560

Amortisation of intangible assets 3,432 0 0 (3,432)

Capital grant and contributions applied (80,501) 0 0 80,501

Income in relation to donated assets (99) 0 0 99

Revenue Expenditure funded from Capital under Statute 29,512 0 0 (29,512)

Amounts of non current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

38,110 0 0 (38,110)

Gain/loss on available for sale financial assets 0 0 0 0

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

Statutory Provision for the Repayment of debt - Minimum Revenue Provision (MRP)

(5,212) 0 0 5,212

Other Adjustments

Adjustments involving the Capital Grants Unapplied Account:

Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Statement

0 0 0 0

Application of grants to capital financing transferred to the Capital Adjustment Account

0 0 (4,530) 4,530

Adjustments involving the Capital Receipts Reserve:

Use of capital receipts reserve to finance new capital expenditure 0 0 0 0

Capital Receipts credited to Comprehensive Income & Expenditure Statement (7,491) 7,491 0 0

Adjustments involving the Financial Instruments Adjustment Account:

Amount by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements

870 0 0 (870)

Adjustments involving the Pensions Reserve:

Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement

48,076 0 0 (48,076)

Employer's pension contributions and direct payments to pensioners payable in the year

(31,194) 0 0 31,194

Adjustments involving the Collection Fund Adjustment Account:

Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

(2,384) 0 0 2,384

Adjustment involving the Unequal Pay Back Pay Adjustment Account:

Amount by which amounts charged for Equal Pay claims to the Comprehensive Income and Expenditure are different from the cost of settlements chargeable in the year in accordance with statutory requirements

(5,650) 0 0 5,650

Reversal of previous capitalisation of Unequal Pay Back Pay costs (19,950) 0 0 19,950

Adjustment involving the Accumulated Absences Account:

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

(324) 0 0 324

Total Adjustments (1,698) 7,491 (4,530) (1,263)

70

27 Transfers to/from Earmarked Reserves

This note sets out the amounts set aside from the General Fund in earmarked reserves and the amounts posted back from earmarked reserves to meet General Fund expenditure in 2014-15.

Opening Balance Apr 2014

Transfers to Reserve

Transfers from

Reserve

Closing Balance March

2015

£000 £000 £000 £000

Insurance reserve 4,325 500 0 4,825

PFI reserves 7,104 13,086 (2,732) 17,458

LGSS reserves 1,446 648 (1,091) 1,003

Service carry forwards and non-ringfenced grants

3,680 837 (3,489) 1,028

Future employee costs reserve 9,462 0 (9,462) 0

Second homes and LCTS Reserves 378 1,090 (234) 1,234

Budget delivery reserve 4,444 3,783 (4,444) 3,783

Demand management reserve 1,800 1,587 (3,387) 0

Asset disposal reserve 2,227 843 (21) 3,049

Education services reserve 1,028 0 (528) 500

Troubled families reserve 2,978 1,442 (2,827) 1,593

Winter Maintenance Reserve 856 1,934 (856) 1,934

Redundancy Reserve 4,432 889 0 5,321

Adult social care demography reserve 1,000 92 (450) 642

Capital financing reserve 604 0 (76) 528

Business Rates Reserve 684 3,200 (259) 3,625

Public Health Reserve 0 10,341 0 10,341

Other earmarked reserves 515 1,446 (789) 1,172

Total Earmarked Reserves 46,963 41,718 (30,645) 58,036

Schools Reserves

Opening Balance Apr 2014

Transfers to

Reserve

Transfers from

Reserve

Closing Balance March

2015

£000 £000 £000 £000

Dedicated schools grant 3,675 684 (2,700) 1,659

Schools future employee costs reserve 18,293 0 (7,180) 11,113

Schools balances reserves 32,821 31,716 (31,103) 33,434

Schools loan advances (919) 380 (535) (1,074)

Schools Reserves 53,870 32,780 (41,518) 45,132

a) The dedicated schools grant reserve represents the funding brought forward from previous financial years i.e. prior to the reformed school funding system.

71

b) The dedicated schools grant 2014-15 underspend is carried forward in either the schools, early years or high needs block in line with the reformed school funding system also reflecting where the underspends occurred.

The above table also includes the new reserve set aside for Public Health and Wellbeing which has been created to enable the continuity of committed Public health programmes utilising the Public Health ring fenced grant. The grant must only be spent on activities whose main or primary purpose is to improve the public health of the local population (including restoring or protecting their health where appropriate) and reducing health inequalities. Funding will be utilised in line with grant conditions.

28 Capital expenditure and Capital financing

The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases and PFI/PPP contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed in the second part of this note.

The 2013-14 opening Capital Financing Requirement has been restated, to reflect the inclusion of all unfinanced capital expenditure historically incurred by the Council.

2013-14 (Restated) 2014-15

£000

£000

737,807 Opening Capital Financing requirement 725,331

Capital Investment

94,143 Property, Plant and Equipment 97,566

43,798 Revenue Expenditure Funded From Capital Under Statute 29,512

Sources of Finance

(8,943) Capital receipts 0

(9,214) Capital debtors 1,063

(97,978) Government grants and other contributions applied (85,031)

(34,282) Sums set aside from revenue (includes direct revenue financing, MRP and any voluntary set aside)

(5,212)

0 Reversal of previous capitalisation of Unequal Pay Back Pay costs

(19,950)

725,331 Closing Capital Financing Requirement 743,279

Explanation of movements in year

(27,693) Increase/(Decrease) in underlying need to borrow – supported/(unsupported) by government financial assistance

1,960

75 Assets acquired under Finance Leases 430

15,142 Assets acquired under PFI/PPP contracts 15,558

(12,476) Increase / (decrease) in Capital Financing Requirement 17,948

72

29 Insurance Account

The Council is insured against risks through a combination of self insurance and insurance with other organisations. There is a total insurance fund of £11.14m to meet the estimated outstanding claims below the excesses of the Council's insurance policies.

Annual policy excesses are as follows:

Combined Liability (Public & Employers) £000

Individual excess (per claim)

100

Annual aggregate (total excess for year across all claims)

2,913

Property

£000

Individual excess educational properties

250

Individual excess other properties

150

Annual aggregate 875

The Council charges premiums, claims paid and management costs to the insurance account and then recharges these costs to services. The Council’s insurance brokers estimate the value of any outstanding claims and the Insurance Provision is adjusted accordingly. Details of Spending and Income are as follows:

2013-14 2014-15

£000

£000

Spending

1,127 External Premiums paid

1,222

74 Internal Premiums paid

67

380 Management costs

407

2,008 Claims paid

1,424

601 Adjustment to provision

(748)

4,190

2,372

Income

0 Received from insurers/third parties

0

(4,190) Charges to schools and services

(2,372)

(4,190)

(2,372)

0 Net (Income) / deficit 0

73

30 External Audit costs

2013-14

2014-15

£000 £000

184 KPMG LLP - audit services carried out by the appointed auditor 184

7 KPMG LLP - certification of grant claims and returns 0

191 184

31 Members’ Allowances The allowances paid to members of the Council were £0.92m (2013-14 £0.95m).

32 Officers’ Remuneration The numbers of employees whose remuneration, taxable expenses and severance pay (if applicable) was £50,000 or more during the year are detailed below:

Staff in Schools

Other staff

2013-14 Total

Pay Band Staff in

Schools Other staff

2014-15 Total

76 43 119 £50,000 - £54,999 89 37 126

54 20 74 £55,000 - £59,999 53 19 72

34 12 46 £60,000 - £64,999 28 6 34

12 15 27 £65,000 - £69,999 18 8 26

6 7 13 £70,000 - £74,999 7 5 12

3 3 6 £75,000 - £79,999 4 11 15

3 5 8 £80,000 - £84,999 4 6 10

1 4 5 £85,000 - £89,999 0 4 4

1 1 2 £90,000 - £94,999 0 0 0

1 7 8 £95,000 - £99,999 1 1 2

0 0 0 £100,000 - £104,999 0 3 3

0 1 1 £105,000 - £109,999 0 1 1

0 1 1 £110,000 - £114,999 0 1 1

0 0 0 £115,000 - £119,999 0 1 1

0 3 3 £120,000 - £124,999 0 1 1

0 2 2 £125,000 - £129,999 0 0 0

0 1 1 £130,000 - £134,999 0 1 1

0 1 1 £135,000 - £139,999 0 4 4

0 1 1 £170,000 - £174,999 0 0 0

0 0 0 £190,000 - £195,000 0 1 1

191 127 318 Totals 204 110 314

74

Disclosure of remuneration for senior employees. Senior employees are typically a Council’s Chief Executive (or equivalent) and their direct reports (other than administration staff).

Post holder information

Year

No

tes

Sala

ry

All

ow

an

ce &

Fe

es (

inc H

on

ora

ria

& S

RO

pa

ym

en

ts)

Exp

en

ses A

llo

wan

ces

To

tal

Rem

un

era

tio

n e

xclu

din

g

pe

nsio

n c

on

trib

uti

on

Pen

sio

n c

on

trib

uti

on

s

To

tal

Rem

un

era

tio

n in

clu

din

g

pe

nsio

n c

on

trib

uti

on

Senior Employees:

£000 £000 £000 £000 £000 £000

Chief Executive - Head of Paid Services - P Blantern

2014-15 191 0 1 192 24 216

2013-14 172 0 1 173 22 195

Director of Environment, Development and Transport

2014-15

138 0 0 138 3 141

2013-14 134 0 0 134 17 151

Director of Children, Families and Education 2014-15

136 0 0 136 17 153

2013-14 136 0 1 137 17 154

Director of Adult and Social Care Services 2014-15

135 0 1 136 0 136

2013-14 1 122 0 1 123 0 123

Director of Public Health and Wellbeing 2014-15

135 0 1 136 19 155

2013-14 2 123 0 2 125 17 142

Assistant Director Business Intelligence and Performance

2014-15

87 7 0 94 11 105

2013-14 89 0 0 89 11 100

Fire and Rescue Chief Fire Officer 2014-15

124 0 0 124 26 150

2013-14

122 0 0 122 26 148

LGSS Senior employees on Northamptonshire County Council payroll:

LGSS Managing Director 2014-15

132 0 3 135 16 151

2013-14 129 0 4 133 16 149

LGSS Director of Finance and Section 151 Officer NCC

2014-15

115 3 1 119 15 134

2013-14 113 0 1 114 14 128

LGSS Director of People, Transformation & Transactional Services

2014-15

120 2 1 123 16 139

2013-14

119 8 2 129 15 144

LGSS Senior employees on Cambridgeshire County Council payroll:

LGSS Head of Finance and Section 151 Officer CCC

2014-15

97 0 2 98 19 118

2013-14 93 0 1 94 18 112

LGSS Director of IT 2014-15

112 0 1 113 22 135

2013-14 3 89 0 2 91 17 108

LGSS Director of Law and Property and Governance

2014-15

96 0 2 98 19 118

2013-14 97 0 3 100 18 118

Notes:

1. The Director of Adult of Social Care Services was appointed to this role in June 2013.

2. The Director of Public Health and Wellbeing commenced this new role as an interim in June 2013 and was appointed permanently to the position on 1

st May 2014.

3. The LGSS Director of IT was appointed on 10th

June 2013.

75

4. LGSS Directors work across Cambridgeshire and Northamptonshire County Councils and with other LGSS customers as required.

33 Termination Benefits

Exit package cost band (including special payments)

Total number of exit packages by cost band

Total cost of exit packages in each band

2013-14 2014-15 2013-14 2014-15

£000 £000

£0 – £20,000 98 84 605 374

£20,001 - £40,000 38 7 1,267 195

£40,001 – £60,000 1 4 47 160

£60,001 – £80,000 0 0 0 0

£80,001 – £100,000 0 1 0 85

£100,001 - £120,000 0 0 0 0

£120,001 - £140,000 0 3 0 390

Total cost included in bandings

1,919 1,203

34 Transactions with Related Parties

The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council.

Central Government has effective control over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates and provides the majority of its funding in the form of grants. Details of specific Government grants can be found in Note 9.

a) Members

Members of the Council have direct control over the Council’s financial and operating policies.

The total of members’ allowances paid in 2014-15 is shown on page 73.

During 2014-15 the Council bought goods and services and gave grants to the value of £3,079k (2013-14 £733k) to organisations or companies in which 6 members (2013-14 two members) had an interest. Included within these figures are £2,105k paid to a community charity in respect on contracts to provide supporting services for Early Help and Prevention, for which one member is chairman. (2013-14 £604k). The Council entered into contracts in line with standard procedures and made grants with proper consideration of declarations of interest.

During 2014-15 the Council received £20k income (2013-14 nil) from organisations in which members had an interest.

b) Officers

During 2014-15 the Council bought goods and services and gave grants to the value of £0k (2013-14 £1.7k) to organisations or companies in which officers had an

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interest. The Council entered into contracts in line with standard procedures and made grants with proper consideration of declarations of interest.

During 2014-15 the Council received £0k (2013-14 £8.5k) from organisations in which officers had an interest.

c) Northamptonshire Connexions Partnership Ltd

Connexions Northamptonshire is an organisation that offers advice on education, careers, housing, money, health and relationships to 13-19 year olds in the County. Funding from the Department for Education is incorporated into the Early Intervention Grant and distributed to Connexions-Northamptonshire via the Council. The Council has a 100% share of the entity.

During 2014-15 the Council paid £3,689k (2013-14 £2,971k) to Connexions Northamptonshire.

During 2014-15 the Council received £73k (2013-14 £180k) from Connexions Northamptonshire for services provided.

d) NEA Properties Ltd

NEA Properties Ltd is a company set up many years ago by the Council to stimulate and promote the creation and growth of business enterprise in Northamptonshire, so as to increase employment opportunities in the County.

During 2014-15 the Council received £700k from NEA Properties Ltd, following the disposal of a property held by NEA Properties Ltd. During 2013-14 various council projects were funded to the value of £102k by NEA Properties Ltd.

e) Northamptonshire Enterprise Partnership

Northamptonshire Enterprise Partnership (NEP) was formed in April 2011 as the shadow Local Enterprise Partnership (LEP) for the county. It received formal LEP status from Government in September 2011. LEPs are the public/private economic partnership arrangements introduced by Government as successors to the Regional Development Agencies which were wound up in March 2012. The County Council is providing £1.4m to support NEP and the delivery of its action plan.

f) EMPSN Ltd (formally East Midlands Broadband Consortium)

EMPSN Ltd is supported through a membership scheme with each member paying a subscription of £5,000.The Council is a member of the board and as such can influence decisions that impact on the running of the organisation. The company delivers broadband connectivity services predominantly to schools in the East Midlands.

g) Northamptonshire Local Government Pension Scheme

Northamptonshire County Council (NCC) is responsible for managing the Pension Fund’s finances, and therefore is a related party. NCC made payments of £24.6m (2013-14 £27.8m) to and recovered costs of £1.9m (2013-14 £2.6m, including £366k Direct Fund Recharges) against the Pension Fund in the 2014-15 financial year. Payments relate to employer contributions into the Fund in respect of NCC and receipts relate to administration costs incurred by the NCC on behalf of the Pension Fund.

h) Nene Clinical Commissioning Group

Payments totalling £14,382k (2013-14 £14,940k) were made to Nene CCG as part of the pooled budget arrangements, as shown in Note 7:

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Adult Mental Health Services - £13,245k (2013-14 £13,803) Child Adolescent Mental Health Services - £1,137k (2013-14 £1,137k)

Receipts totalling £2,586k (2013-14 £1,385k) were received from Nene CCG as part of the Community Equipment pooled budget arrangements, as shown in Note 7.

i) LGSS

LGSS is the shared services venture set up by founding partners Cambridgeshire County Council (CCC) and Northamptonshire County Council (NCC), offering a full support service.

It seeks to reduce the cost of business services through the consolidation of resources, process redesign and exploitation of technology.

The Statement of Accounts for LGSS will be available on the LGSS website.

j) Related Parties with significant influence or dominant control

The Council has an interest in two companies (NEA Properties and EMPSN Ltd) limited by Guarantee through board membership and significant influence. However, the maximum amount of liability borne by the Council in the event of insolvency is limited to £1 as both companies are limited by guarantee.

The Council has considered that group accounts will not be required for these companies as the net worth and exposure to risk is not material. Users of the Council accounts will be able to see the complete activities of the Council and its exposure to risk without producing group accounts.

Copies of the Company Accounts are available from Companies House.

k) Northamptonshire Trading Limited and Olympus Care Service Limited

The Council has a controlling interest in two companies, Northamptonshire Trading Limited and Olympus Care Services Limited, which are incorporated in the group accounts. These companies both commenced trading on 1st April 2012. The group accounts are shown on page 87. The Council owns 100% of the share capital of Northamptonshire Trading Limited. Northamptonshire Trading Limited owns 100% of the share capital of Olympus Care Services Limited, and this gives the Council effective control of Olympus Care Services Limited.

During 2014-15 the Council made payments of £28.674m to Northamptonshire Trading Limited (2013-14 £28.861m). This included payments for the Care contract of £26.600m. During 2014-15 the Council received payments of £6.380m from Northamptonshire Trading Limited (2013-14 £2.835m). This included receipt of dividends of £3.900m. At 31st March 2015 there was a debtor balance of £0.218m (2013-14 £1.053m), and a creditor balance of £0.061m (2013-14 £1.300m) with Northamptonshire Trading Limited.

During 2014-15 the Council made payments of £0.250m to Olympus Care Services Limited (2013-14 £0.204m). During 2014-15 the Council received payments of £0.341m from Olympus Care Services Limited (2013-14 £0.425m). At 31st March 2015 there was a debtor balance of £0.822m (2013-14 £0.146m), and a creditor balance of £0.002m (2013-14 £0.052m) with Olympus Care Services Limited.

l) Debtors and Creditors balances

Apart from the above there were no significant balances due to or from related parties at 31 March 2015.

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35 Pension schemes accounted for as defined contribution schemes

Pension Interest costs and expected returns on pension assets.

2013-14 2014-15

£000

£000

(34,205) Expected return on Assets in NCC Pension Fund (34,428)

49,829 Interest on Pensions Liability (NCC) 50,809

9,320 Interest on Pensions Liability (Fire Pensions) 9,470

24,944 25,851

a) Teachers

In 2014-15 £5.7m was paid to the Teachers Pensions Agency for teachers’ pension costs, which represents 14.1% of teachers’ pensionable pay. We are also responsible for payments to the Teachers Pensions Agency in respect of the “Premature Retirement Compensation”, payable to those teachers that are made redundant and are pensionable, but below normal pension age. In 2014-15 these amounted to £2.0m.

b) Uniformed Firefighters

In 2014-15 the payments made into the Pension Fund for uniformed Firefighters’ was £1.7m. This represents 21.3% of pensionable pay in respect of employees in the 1992 scheme and 11% of pensionable pay in respect of employees in the 2006 scheme.

The Firefighter pension regulations exempt certain charges relating to ill health and injury awards from the Firefighters’ Pension Fund Account. In 2014-15 these costs totalled £1.1m.

c) Other employees

In 2014-15 the payments made into the Pension Fund for Council staff was £20.6m, which represents £13.5m deducted through payroll and a deficit payment of £7.1m.

We are also responsible for any pension payments relating to added years we have awarded together with the related increases. In 2014-15 these were £1.5m.

d) Public Health

Public Health staff transferred from the NHS to Northamptonshire County Council on April 1st 2013. These staff have maintained their membership of the NHS Pension Scheme. In 2014-15 the payments made into the NHS Pension Scheme totalled £54.7k, 14% of pensionable pay.

Capital cost of discretionary increases in pensions payments

The capital cost of discretionary increases in pensions payments that we agreed in 2014-15 was nil.

The Fund’s actuary bases our contribution rate on actuarial valuations every three years. The review relating to contributions in 2014-15 took place on 31 March 2013, the results of which were applied to pensions contributions from 1 April for the financial years 2014-15, 2015-16, and 2016-17. Under pension scheme regulations these contribution rates should cover all the Fund’s liabilities.

There are more details on pension assets and liabilities in the Note that follows.

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Further information can be found in the County Council’s Pension Fund’s Annual Report and Accounts.

36 Retirement Benefits – IAS19 Disclosures for defined benefit pension schemes

a) Participation in Pension Schemes

The Local Government Pension Scheme and Fire Fighters’ Pension Scheme are defined benefit schemes.

As part of the terms and conditions of employment of its officers and other employees, the Council offers retirement benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments that need to be disclosed at the time that employees earn their future entitlement.

The Council participates in two pension schemes that are subject to the requirements of IAS19:

The Local Government Pension Scheme for civilian employees, administered by Northamptonshire County Council – this is a funded scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets.

The Fire Fighters’ Pension Scheme for Fire Fighters’ – this is an unfunded scheme, meaning that there are no investment assets built up to meet actual pensions payments as they eventually fall due. Two pension schemes operate within the Fund, the 1992 scheme and the 2006 scheme.

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b) Reconciliation of present value of the scheme liabilities (defined benefit obligation)

Local Government Fire Fighters Total

Pension Scheme Pension Scheme

March 2014

March 2015

March 2014

March 2015

March 2014

March 2015

£000 £000 £000 £000 £000 £000

Opening Defined Benefit Obligation

1,103,713 1,204,914 216,430 215,530 1,320,143 1,420,444

Current Service Cost 26,925 26,891 6,980 5,700 33,905 32,591

Interest Cost 49,829 50,809 9,320 9,470 59,149 60,279

Contribution by Scheme Participants

7,598 7,151 0 0 7,598 7,151

Actuarial Gains and Losses:

Arising from changes in demographic assumptions

22,425 0 0 0 22,425 0

Arising from changes in financial assumptions

51,636 182,782 0 0 51,636 182,782

Other (23,900) (11,389) (10,710) 19,110 (34,610) 7,721

Curtailments, Settlements and past Service Costs

(13,203) (14,922) 0 0 (13,203) (14,922)

Liability assumed on entity Combinations

16,573 0 0 0 16,573 0

Benefits paid (36,682) (38,722) (6,490) (6,410) (43,172) (45,132)

Closing Defined Benefit Obligation

1,204,914 1,407,514 215,530 243,400 1,420,444 1,650,914

The liabilities show the underlying commitments that the Council has in the long run to pay post employment (retirement) benefits. The total liability of £1,651m has a substantial impact on the net worth of the Council as recorded in the Balance Sheet. However, statutory arrangements for funding the deficit mean that the financial position of the Council remains healthy:

The deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees (i.e. before payments fall due), as assessed by the scheme actuary.

Finance is only required to be raised to cover discretionary benefits when the pensions are actually paid.

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c) Pensions Assets and Liabilities Recognised in the Balance Sheet

Local Government Pension Scheme

Fire Fighters Pension Scheme

2013-14 2014-15 2013-14 2014-15

Present value of the defined benefit obligation

(1,204,914) (1,407,514) (215,530) (243,400)

Fair value of plan assets 809,524 898,965 0 0

Net Liability arising from defined benefit obligation

(395,390) (508,549) (215,530) (243,400)

d) Reconciliation of the Movements in the Fair Value of the Scheme (Plan) Assets

Pension Scheme

March 2014 March 2015

£000 £000

Opening Fair Value of Employer Assets 750,765 809,524

Return on Plan Assets, excluding the amount included in the net interest costs

12,487 66,356

Interest income on Plan assets 34,205 34,428

Changes in foreign exchange rates (4,138) (4,556)

Contributions from Employer 31,912 24,784

Contributions by scheme participants 7,598 7,151

Benefits Paid Asset assumed on entity combinations

(36,682) 13,377

(38,722) 0

Closing Fair Value of Employer Assets 809,524 898,965

e) Comprehensive Income and Expenditure Statement & Movement in Reserve Statement

The Council recognise the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge required to be made against Council Tax is based on the cash payable in the year, so the real cost of post employment and retirement benefits are reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year:

82

Local Government Pension Scheme

Fire Fighters Pension Scheme Total

2013-14 2014-15 2013-14 2014-15 2013-14 2014-15

£000 £000 £000 £000 £000 £000

Income and Expenditure Account

Cost of Services

Current Service Cost 26,925 26,891 6,980 5,700 33,905 32,591

Past Service Cost (including Settlements and Curtailments)

(9065) (10,366) 0 0 (9,065) (10,366)

Financing and Investment Income and Expenditure

Net Interest Expense 15,624 16,381 9,320 9,470 24,944 25,851

Total defined benefit cost recognised in Income and Expenditure Account

33,484 32,906 16,300 15,170 49,784 48,076

Return on plan assets (excluding the amount included in the net interest expense)

(12,487) 66,356 0 0 (12,487) 66,356

Actuarial gains and losses arising on changes in demographic assumptions

22,425 0 0 0 22,425 0

Actuarial gains and losses arising on changes in financial assumptions

51,636 (182,782) 0 0 51,636 (182,782)

Other (20,705) 11,389 (10,710) (19,110) (31,415) (7,721)

Total remeasurements recognised in Other Comprehensive Income (OCI)

40,869 (105,037) (10,710) (19,110) 30,159 (124,147)

Movement in Reserves Statement

Reversal of net charges made for retirement benefits in accordance with IAS19

(1,572) (8,122) (9,810) (8,760) (11,382) (16,882)

Actual amount charged against the General Fund Balance for pensions in the year:

Employers' contribution payable to scheme (LGPS)/Retirement Benefits payable to pensioners (FPS)

31,912 24,784 6,490 6,410 38,402 31,194

The cumulative amount of actuarial gains and losses recognised in the Comprehensive Income and Expenditure Statement to the 31 March 2015 is a gain of £124,147k, comprising a gain of £105,037k in relation to the Local Government Pension Scheme and a gain of £19,110k in relation to the Fire Fighters Pension Scheme.

83

f) The major categories of plan assets as a percentage of total plan assets

The Firefighters’ Pension Scheme has no assets to cover its liabilities. The fund balances to nil each year through the receipt or refund of a top up grant from the Central Government Sponsoring body.

The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:

Local Government Fire Fighters

Pension Scheme Pension Scheme

2013-14 2014-15 2013-14 2014-15

% % % %

Equities 75 72 N/A N/A Bonds 18 18 N/A N/A Property 5 8 N/A N/A Cash 2 2 N/A N/A

Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. The Fire Fighters Pension Scheme and the Local Government Pension Scheme liabilities have been assessed by the Government Actuary’s Department (GAD) and Hymans Robertson LLP respectively. The financial assumptions used for the Local Government Pension Scheme were those from the beginning of the year (i.e.1 April 2012) and have not been changed during the year.

The principal assumptions used by the actuary are outlined in the tables below:

g) The main assumptions used in their calculations have been:

Local Government Fire Fighters

Pension Scheme Pension Scheme

March March March March

2013-14 2014-15 2013-14 2014-15

% % % %

Rate of inflation 2.5 2.5 2.5 2.2

Rate of increase in salaries 4.6 4.3 4.5 4.2

Rate of increase in pensions 2.8 2.4 2.5 2.2

Rate for discounting scheme liabilities

4.3 3.2 4.4 3.3

Take up of option to convert annual pre April 2008 service

50 50 N/A N/A

Pension into retirement grant

Take up of option to convert annual post April 2008 service pension into retirement grant

75 75 N/A N/A

84

h) Mortality Assumptions

For the County Council and Fire Fighter’s Pension Funds the average future life expectancies at age 65 are summarised below.

Local Government Fire Fighters Pension Scheme Pension Scheme

2013-14 2014-15 2013-14 2014-15 Years Years Years Years

65 year old current pensioner

Male 22.3 22.3 23.5 22.5

Female 24.3 24.3 25.5 22.5

45 year old future pensioner at age 65

Male 24.0 24.0 26.6 24.8

Female 26.6 26.6 28.6 24.8

i) Local Government Pension Scheme assets comprised

2013-14 2014-15

£000 £000

Cash and Cash Equivalents 17,906 20,527

Equity Securities

Consumer 62,789 72,203

Manufacturing 38,880 0

Energy and Utilities 56,932 45,140

Financial Institutions 53,534 67,474

Health and Care 38,783 44,224

Information Technology 53,588 63,315

Other 17,355 50,056

Debt Securities Bonds

Corporate 80,695 0

Government 21,734 26,379

Other 43,851 0

Property

UK 36,006 63,169

Overseas 5,731 5,860

Private Equity

All 882 764

Investment Funds and Trust Units

Equities 276,234 302,938

Bonds 4,624 136,916

Derivatives

Other

Total Assets 809,524 898,965

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j) Impact on the Defined Benefit Obligation in the Scheme:

Increase/(Decrease) in Assumption

Increase/(Decrease) in Assumption

Local Government Pension scheme

Fire Fighters Pension Scheme

Longevity (increase in 1 year) 3.0% 2.3%

Rate of increase in salaries (increase by 0.5%) 3.0% 3.4%

Rate of increase in pensions (increase 0.5%) 7.0% 9.4%

Rate for discounting Scheme liabilities (decrease by 0.5%) 10.0% 13.4%

Early Retirement: To retire 1 year earlier than expected N/A 0.2%

86

87

GROUP ACCOUNTS

88

Foreword

In order to provide a full picture of the Council’s economic activities and financial position, the accounting statements of the Council, Northamptonshire Trading Limited and Olympus Care Services Limited have been consolidated. The Group Accounts are presented in addition to the Council’s ‘single entity’ financial statements and comprise:

Group Comprehensive Income and Expenditure Statement

Group Balance Sheet

Group Movement in Reserves Statement

Group Cash Flow Statement These statements are set out on the following pages, together with accompanying disclosure notes. Disclosure notes have only been restated in the group accounts section where they are materially different from those of the Council’s single entity accounts. Both Northamptonshire Trading Limited and Olympus Care Services Limited commenced trading on 1st April 2012. Northamptonshire County Council owns 100% of the share capital of Northamptonshire Trading Limited. Northamptonshire Trading Limited owns 100% of the share capital of Olympus Care Services Limited, and this gives the Council effective control of Olympus Care Services Limited. Northamptonshire Trading Limited is the principal contractor of Northamptonshire County Council, with both companies being principally engaged in the provision of social care and welfare services for vulnerable adults across Northamptonshire. The business plan approved by full Council on 19th May 2011 outlined a number of key reasons why the establishment of a company would bring clear benefits for the well being of the people of Northamptonshire. These being:

To accommodate the changing market place and demographic pressures the Council needed to become flexible and “commercial” in its social operations;

Responding to an underdeveloped market for good quality care, with suppliers unable to react to the rising need for personalised support in the community;

Preventing, for as long as possible, those that do not yet qualify for statutory social care provision from losing independence and becoming reliant on statutory services.

The business strategy adopted by the Directors of Northamptonshire Trading Limited, and Olympus Care Services Limited during the period was to continue to establish the companies in the marketplace. Northamptonshire Trading Limited and Olympus Care Services Limited measured a range of “Key Performance Indicators”, activity levels and quality measures which were monitored as part of the care services contract with Northamptonshire County Council. Performance in these was very good with the majority exceeding target levels. The future strategy aims to transform the services to respond to the rapidly changing social care market place as well as diversifying the customer base.

89

Group Comprehensive Income and Expenditure Statement The purpose of this statement is explained in the Core Statements section of the Council’s single entity accounts

2013-14 2014-15

Gro

ss

Ex

pe

nd

itu

re

Gro

ss

Inc

om

e

Ne

t

Ex

pe

nd

itu

re

Gro

ss

Ex

pe

nd

itu

re

Gro

ss

Inc

om

e

Ne

t

Ex

pe

nd

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re

Group Group

£000 £000 £000 £000 £000 £000

2,602 (1,512) 1,090 Central Services to the Public 1,953 (1,795) 158

844 0 844 Court Services 897 0 897

18,382 (4,898) 13,484 Cultural and Related Services 16,702 (4,223) 12,479

29,551 (1,618) 27,933 Environment and Regulatory Services 31,237 (1,296) 29,941

11,851 (2,019) 9,832 Planning Service 15,963 (9,285) 6,678

527,655 (398,354) 129,300 Education and Children’s Services 482,836 (352,321) 130,515

28,972 (1,193) 27,779 Fire & Rescue Services 27,869 (646) 27,223

51,056 (13,718) 37,337 Highways and Transport Services 52,341 (13,954) 38,387

210,899 (48,435) 162,464 Adult Social Care 219,062 (55,470) 163,592

25,531 (26,839) (1,308) Public Health and Wellbeing 25,799 (38,780) (12,981)

4,534 (1,086) 3,448 Corporate and Democratic Core 8,407 (83) 8,324

355 (9,065) (8,710) Non Distributed Costs (98) (10,811) (10,909)

912,233 (508,739) 403,494 Cost Of Services 882,968 (488,666) 394,304

98,453 (6,441) 92,012 Other Operating Expenditure 38,752 (7,491) 31,261

59,103 (2,374) 56,729 Financing and Investment Income and Expenditure

70,664 (12,006) 58,658

3 (497,362) (497,359) Taxation and Non-Specific Grant Income 0 (485,787) (485,787)

1,069,792 (1,014,916) 54,877 (Surplus) or Deficit on Provision of Services 992,384 (993,950) (1,564)

(552) Tax expenses of subsidiary 558

54,325 Group (Surplus)/Deficit

(1,006)

(16,235)

(Surplus) or Deficit on Revaluation of Non Current Assets

(14,281)

(4)

(Surplus) or Deficit on Revaluation of Available for Sale Financial Assets

(7)

30,159

Actuarial (gains) / losses on pension assets / liabilities

124,147

0 Other gains and losses

0

13,920 Other Comprehensive Income and Expenditure

109,859

68,245 Total Comprehensive Income and Expenditure

108,853

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Group Balance Sheet The purpose of this statement is explained in the Core Statements section of the Council’s single entity accounts.

31st March 2014 (Restated)

31st March 2015

Group

Group

£000 £000

1,036,832

Property, Plant & Equipment 1,059,673

2,099

Heritage Assets 2,099

6,122

Investment Property 8,550

7,249

Intangible Assets 5,763

450

Assets held for sale (>1 yr) 2,331

0

Long Term Investments 0

7,655

Long Term Debtors 9,360

1,060,407

Long Term Assets 1,087,776

121,798

Short Term Investments 60,423

4,269

Assets held for sale (<1yr) 18,033

650

Inventories 614

83,287

Short Term Debtors 90,852

15,584

Cash and Cash Equivalents 10,463

225,588

Current Assets 180,385

(2,232)

Bank Overdraft (6,311)

(168,425)

Short Term Borrowing (128,593)

(121,269)

Short Term Creditors (123,703)

(14,365)

Revenue Grants Receipts in Advance (2,736)

(5,724)

Capital Receipts in Advance (7,834)

(20,216)

Provisions (<1yr) (4,521)

(332,230)

Current Liabilities (273,697)

(9,701)

Capital Receipts in Advance (15,523)

(21,564)

Provisions (>1yr) (7,866)

(279,771)

Long Term Borrowing (289,771)

(782,148)

Other Long Term Liabilities (929,575)

(1,093,183)

Long Term Liabilities (1,242,734)

(139,418)

Net Assets (248,271)

Represented by:

145,469

Usable reserves 147,736

(284,886)

Unusable Reserves (396,007)

(139,418) Total Reserves (248,271)

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Group Movement in Reserves Statement The purpose of this statement is explained in the Core Statements section of the Council’s single entity accounts.

92

Group Cash Flow Statement The purpose of this statement is explained in the Core Statements section of the Council’s single entity accounts.

2013-14 2014-15

Group

Group

£000

£000

(54,324) Net surplus or (deficit) on the provision of services 1,006

151,333 Adjust net surplus or deficit on the provision of services for non cash movements (Note 5)

40,827

85,398 Adjust for items included in the net surplus or deficit on the provision of services that are investing and financing activities

119,977

182,406 Net cash flows from Operating Activities 161,810

(189,037) Investing Activities (Note 5) (147,577)

651 Financing Activities (Note 5) (23,434)

(5,980) Net increase or (decrease) in cash and cash equivalents (9,201)

19,332 Cash and cash equivalents at the beginning of the reporting period

13,353

13,352 Cash and cash equivalents at the end of the reporting period 4,152

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Notes to the Group Accounts

1. Group boundary

Northamptonshire Trading Limited was incorporated on 24th January 2012 and commenced trading on 1st April 2012. All the share capital of the company was acquired by Northamptonshire County Council on 30th March 2012.

Northamptonshire County Council owns 100% of the share capital of Northamptonshire Trading Limited.

Olympus Care Services Limited was incorporated on 21st October 2011 and commenced trading on 1st April 2012. All the share capital was transferred from Northamptonshire County Council to Northamptonshire Trading Limited on 30th March 2012.

Northamptonshire Trading Limited owns 100% of the share capital of Olympus Care Services Limited. As Northamptonshire County Council owns 100% of the share capital of Northamptonshire Trading Limited this gives the Council effective control of Olympus Care Services Limited.

Both Northamptonshire Trading Limited and Olympus Care Services Limited are subsidiaries for accounting purposes, and have been consolidated into the Council’s group accounts.

None of the other Trading Companies in which the Council has an interest are considered material enough to merit consolidation into the Council’s Group Accounts. Details of these can be seen within the Related Parties note in the Council’s single entity accounts (Note 34).

2. Basis of Consolidation

The financial statements of Northamptonshire Trading Limited and Olympus Care Services Limited have been consolidated with those of the Council on a line by line basis; which has eliminated in full balances, transactions, income and expenses between the Council and the subsidiaries.

3. Business Activities of the Subsidiaries

Northamptonshire Trading Limited is the principal contractor of Northamptonshire County Council, engaged in the provision of social care and welfare services for vulnerable adults across Northamptonshire. These activities are provided to Northamptonshire Trading Limited by Olympus Care Services Limited.

4. Accounting Policies

In preparing the Group Accounts the Council has aligned the accounting policies of the subsidiaries with those of the Council

The accounting policies of Northamptonshire Trading Limited and Olympus Care Services Limited are the same as those of Northamptonshire County Council (refer to Appendix 1), with the following addition for Olympus Care Services Limited:

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Deferred taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or right to pay less or to receive more, tax. Deferred tax is measured on a non discounted basis at the tax rates that are expected to apply in the years in which timing differences reverse, based on tax rates and laws enacted or subsequently enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that the Directors consider it is more likely than not that there will be suitable taxable profits which the underlying timing differences can be deducted.

5. Cash Flow Notes

Cash flow statement - operating activities

The surplus/deficit on provision of services has been adjusted for the following non-cash movements:

2013-14 2014-15

Group

Group

£000

£000

38,199 Depreciation 33,119

0 Impairments 0

5,017 Amortisation 3,432

(14,887) Increase/decrease in debtors (6,209)

26,142 Increase/decrease in creditors (13,355)

(123) Increase/decrease in inventory 36

11,382 Movement in pensions liability 16,882

96,739 Carrying amount of non-current assets sold or de-recognised

33,959

(10,810) Movement in provisions (29,393)

(325) Other non-cash movement 2,357

151,333 40,827

The cash flow for operating activities includes the following items:

2013-14 2014-15

Group

Group

£000

£000

2,083 Interest received 1,046

(19,133) Interest paid (18,111)

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Cash flow statement - investing activities

2013-14 2014-15

Group

Group

£000

£000

(94,725) Purchase of property, plant and equipment, investment property and intangible assets

(96,741)

(306,882) Purchase of short-term and long-term investments (246,200)

6,441 Proceeds from the sale of property, plant and equipment, investment property and intangible assets

7,491

303,056 Proceeds from short-term and long-term investments 307,576

(96,928) Other receipts from investing activities (119,702)

(189,037) Net cash flows from investing activities (147,577)

Cash flow statement - financing activities

2013-14 2014-15

Group

Group

£000

£000

5,717 Cash payments for the reduction of the outstanding liabilities relating to finance leases and on-balance sheet PFI contracts (Principal)

6,398

(5,067) Repayments of short- and long-term borrowing (29,832)

651 Net cash flows from financing activities (23,434)

6. External Audit costs

2013-14 2014-15

Group

Group

£000 £000

184 KPMG LLP - audit services carried out by the appointed auditor

184

7 KPMG LLP - certification of grant claims and returns 0

20 Grant Thornton UK LLP - audit services carried out by the appointed auditor

20

11 Grant Thornton UK LLP - taxation services 2

9 Grant Thornton UK LLP - all other services 1

231 207

The single entity accounts for Northamptonshire Trading Limited and Olympus Care Services Limited have been audited by Grant Thornton UK LLP.

7. Dividend

A dividend of £3.9m was paid by Northamptonshire Trading Limited to the Council during 2014-15. (£3,900 per ordinary share).

The dividend has been removed during the group consolidation along with other intergroup transactions, as set out in the Basis of Consolidation, so is not shown within the group accounts.

It can be seen within Note 4 of the Council’s single entity accounts.

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The Annual Governance

Statement 2014-15 (AGS)

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Scope of Responsibility

Northamptonshire County Council (the ‘Council’) is responsible for ensuring that its business is conducted in accordance with the law and proper standards. It is responsible for ensuring that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. The Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

In discharging this overall responsibility, the Council is responsible for putting in place proper arrangements for the governance of its affairs, facilitating the effective exercise of its functions, which includes arrangements for the management of risk.

The Council has approved and adopted a Code of Corporate Governance, which is consistent with the principles of the CIPFA/SOLACE Framework Delivering Good Governance in Local Government. This Code is subject to regular review. A copy of the Code of Corporate Governance is available on our website at

http://www.northamptonshire.gov.uk/en/councilservices/Council/performance/Pages/Code.aspx

or can be obtained from Laurie Gould, Monitoring Officer on 01604 367118.

This Annual Governance Statement explains how the Council has complied with the Code and also meets the requirements of regulation 4 (3) of the Accounts and Audit Regulations 2011 which requires all relevant bodies to prepare an annual governance statement.

This statement will further explain the progress that the Council has made towards the achievement of the improvement actions outlined in the 2013-14 Annual Governance Statement.

The Purpose of the Governance Framework

The governance framework comprises the systems and processes, culture and values, by which the Council is directed and controlled and through which it accounts to, engages with and leads the community. It enables the Council to monitor the achievement of its priority outcomes and to consider whether those have led to the delivery of appropriate, cost effective services.

The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve policies, core purpose and priority outcomes and can therefore only provide reasonable assurance of effectiveness. The system of internal control is based on an on-going process designed to:

a) Identify and prioritise the risks to the achievement of the Council’s policies, core purpose and customer outcomes.

b) Evaluate the likelihood of those risks occurring.

c) Evaluate the impact should they occur.

d) Manage the risks efficiently, effectively and economically.

The governance framework has been in place at The Council for the year ended 31st March 2015 and up to the date of approval of the annual report and statement of accounts.

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The Governance Framework

The key elements of the systems and processes that comprise the Council’s governance arrangements are described below:

Creating and Implementing a Vision

Good governance means developing and clearly communicating the Council’s purpose and vision and the outcomes it is seeking to deliver to the local area. The following describes how the Council achieves this:

Each year the Council undertakes detailed consultation with its communities to inform the production of the Council Plan.

The Council engages with other public services in Northamptonshire through the Northamptonshire Leadership which is the overarching partnership for the County providing leadership and direction for collaborative working, to ensure that it can best support the interests of the people and businesses of the County, and the Joint Chief Executives group that provides the delivery and advice mechanisms to Northamptonshire Leadership. Engagement also takes place through the Local Enterprise Partnership on prosperity and growth issues and the Northamptonshire Health & Wellbeing Board for public health and wellbeing matters, both of which have Council political and officer representation.

The Council has defined the goals it is seeking to achieve over the five year life of the Council Plan commencing 2015, as follows:

Increasing the wellbeing of your communities

Helping you to take charge of your life

Innovative Public Sector

Enterprising Public Sector

Democratic and Engaging

Trusted Brand

The Council has detailed how it will deliver these goals in the form of the Council ‘Cube’, each side of which represents a key aspect of the actions the Council plans to take to achieve these goals.

The Council Plan is a rolling five year plan which is reviewed and updated annually. The Plan is considered by Cabinet and formally approved by full Council. The Council Plan can be seen at:

https://cmis.northamptonshire.gov.uk/cmis5live/MeetingsCalendar/tabid/73/ctl/ViewMeetingPublic/mid/410/Meeting/2237/Committee/398/SelectedTab/Documents/Default.aspx

To ensure the Council delivers its plans, it operates a strong performance management framework which comprises:

The Council Plan

Personal performance and development plans for all staff

Statements of required practice, which govern management practice in the Council, including the management of performance against plans

Robust revenue and capital financial management and reporting

Clear programme gateway process and project management statement of required practice

The Council operates a Value for Money Strategy with the objective of delivering better public services in the best possible way in line with the priorities of local people using the

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resources available. Value for money is a key consideration in all of the Council’s key business processes.

On a monthly basis review of performance standards is undertaken at directorate and service levels. On a quarterly basis overall performance is reported to the Corporate Performance Board chaired by the Chief Executive, and the Cabinet. The details are in the public domain and published on the County Council’s website.

Communication of the Council’s intentions has been achieved through proactive coverage in the local media and through the Council’s website, e-newsletter and social media channel to seek to obtain the public’s view on the prioritisation of the Council budget and services. Regular internal communication with all staff has taken place, including the Chief Executive’s weekly blog, a monthly ‘core brief’ to reinforce the Council Vision and encourage employees to act as one council. This is backed up by direct interaction with senior staff and the Chief Executive at quarterly Chief Executive seminars and twice yearly with the Chief Executive and front line managers through the Front Line Forum.

Roles and Responsibilities of Members and Officers

Good governance means elected members and officers working together to achieve a common purpose with clearly defined functions and roles. The following describes how the Council achieves this:

The Council is composed of 57 members elected every four years. All members meet together as the Council. The Council operates a Cabinet and elected Leader model of decision making, supported by open and accountable working relationships between members and officers. The Council has an agreed Constitution which sets out how it operates, how decisions are made and the procedures which are to be followed to ensure that these are efficient, transparent and accountable to local people. This includes the defined responsibility for functions including the scheme of delegation, rules of procedure including financial regulations and contract procedure rules and Member and Officer codes of conduct. The full Council appoints a Leader of the Council for a four year term who then appoints a Cabinet as the Council’s Executive. Overview and Scrutiny committees hold the Cabinet to account.

The Council’s Corporate Management Team (CMT), includes the Chief Executive, Council directors and the LGSS Director of Finance (S151 Officer).

The Council has in place policies and procedures to ensure that, as far as possible, its elected members and officers understand their respective responsibilities. New members and employees receive induction and continued training on key policies and procedures as these are developed within the Council.

All Directors and Assistant Directors have responsibility for maintaining a sound system of internal control within their area of responsibility.

Standards of Conduct and Behaviour

Good governance means promoting appropriate values for the Council and demonstrating the values of good governance by upholding high standards of conduct and behaviour. The following describes how the Council achieves this:

A Standards Committee is in place to review any complaints regarding members and to promote high standards of conduct and observance of the Members’ Code of Conduct. Allegations of breaches of the Code of Conduct by individual councillors are considered by the Council’s Monitoring Officer in consultation with an independent person

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appointed by the Council. Where it is determined by the Monitoring Officer that there is evidence of a failure to comply with the Code of Conduct, the Standards Committee will hold a hearing into the allegation.

The Council has a local Code of Corporate Governance. This Code demonstrates a commitment to the principles of good governance and the importance of operating in an open and accountable manner while demonstrating high standards of conduct.

The Councillor Code of Conduct defines the standards of conduct expected of elected representatives including a requirement for members to declare any interests at the start of every meeting, which are recorded in a public register.

The Employee Code of Conduct sets out managers’ responsibilities to bring the Code to the attention of their staff (through induction, training and instruction) and their responsibility to take appropriate action if an employee fails to follow the Code. The Code includes a requirement for officers of the Council to declare any conflicts of interest and/or gifts or hospitality, which should be formally registered.

The Council has Anti Fraud and Corruption, Whistle-blowing, Money Laundering and Anti Bribery policies in place.

The LGSS (a shared services arrangement with Cambridgeshire County Council) Director of Law, Property and Governance is the Solicitor to the Council and the Interim Head of Corporate, Commercial and Litigation is the Council's Monitoring Officer. The Monitoring Officer has responsibility for maintaining the Constitution and supports the Standards Committee.

The Council’s financial management is conducted in accordance with the Budget and Policy Framework Procedure Rules, Financial Procedure Rules and Contract Procedure Rules. These rules set out the framework within which the Council conducts its financial affairs and ensures proper financial arrangements are in place.

Full Council approves a balanced budget before the start of each financial year. This includes the Medium Term Financial Plan. During the year, financial management information is reported to Directorate Management Teams, the CMT, Cabinet and Scrutiny.

The Chief Financial Officer role, required by Section 151 of the Local Government Act 1972 and other relevant legislation, is fulfilled by the LGSS Director of Finance, who is responsible for the preparation and publication of the Council’s Statement of Accounts and ensures that they conform to all statutory and professional requirements, codes of practice and deadlines. The S151 Officer is a member of CMT and has direct access to the Chief Executive as appropriate.

The S151 Officer is responsible for ensuring that there is an adequate and effective system of internal audit of the Council’s accounting records and of its systems of internal control.

Decision Making, Scrutiny and Risk Management

Good governance means taking informed and transparent decisions that are effectively scrutinised and manage risk. The following describes how the Council achieves this:

The Leader and Cabinet are responsible both individually and collectively for all executive decisions. Operational matters requiring a decision are delegated to council officers as outlined in Part Three of the Constitution – Responsibility for Functions.

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Forthcoming key decisions by the Cabinet are published in the Cabinet’s Forward Plan. The Forward Plan is reviewed on a monthly basis by the Corporate Leadership Team and the Scrutiny Management Committee.

Overview and Scrutiny committees have the power to review and/or scrutinise decisions made or actions taken in connection with the discharge of any of the Council’s functions.

The Council maintains an Internal Audit and Risk Management Service that operates in accordance with the Public Sector Internal Audit Standard. The Head of Internal Audit and Risk Management has direct access to the Chief Executive, the S151 Officer, CMT, Members and the independent Chair of the Audit Committee.

The independent Chair of the Audit Committee is a Chartered Accountant with considerable experience in finance/financial scrutiny. The Chair also attends as an observer and on occasions as an active participant at meetings of the Council, Cabinet and Overview and Scrutiny.

The Internal Audit and Risk Management Service plans and prioritises its work chiefly using a risk based auditing approach and seeks to programme work based on risk, strength of control and materiality. Internal Audit makes recommendations for improving the internal control environment and part of its work includes monitoring agreed action plans. The remit of Internal Audit also includes ensuring compliance with established policies and procedures, particularly financial and contract procedures. Reports, including an assessment of the adequacy of control and action plans to address weaknesses, are submitted to Directors, Headteachers, Chairs of Governors, the Council’s Audit Committee and the Chief Executive.

The Council operates a risk management process underpinned by an approved Risk Management Policy and a Risk Management Statement of Required Practice (SORP). The Council maintains both Strategic and Operational risk registers which are subject to regular formal review as outlined within the Risk Management SORP. Significant corporate risks faced by the Council are identified by CMT and are subject to quarterly review and annual refresh. The Audit Committee reviews significant corporate and directorate risks on a quarterly basis and will draw areas of specific concern to Cabinet where appropriate. Cabinet receives regular reports on corporate risk.

Developing Capacity and Capability of Members and Officers

Good governance means developing the capacity and capability of Members and Officers to be effective. The following describes how the Council achieves this:

The Councillor Services and Governance Working Group is a cross-party group that acts as a consultation forum for all matters affecting councillors and the services provided to councillors. Its specific responsibilities include giving guidance and advice on matters relating to councillor development and training, including those matters affecting new councillors.

A formal performance appraisal and development programme operates within the Council through which the development needs of staff are identified and met as appropriate. There is an induction programme for new staff and a full comprehensive workforce development programme delivered at all levels in the organisation.

Councillors’ right to training and development to support them in fulfilling their roles is specified in the Council’s Constitution. There is an induction process for new councillors. In-house training and development activities are organised for all councillors or for those in particular roles to meet identified needs. Councillors also have access to external training and development opportunities.

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Engaging with Local People and Stakeholders

Good governance means engaging with local people and other stakeholders to ensure robust public accountability which is achieved through continuously consulting with and engaging local people and communities in a wide range of ways on a wide range of important issues.

The Council is fully committed to being an open, accountable and transparent local authority, which we achieve through making key documentation publicly available via the Council’s Internet site. We also enable the public to view all of our public meetings by means of video link or though recordings of such meetings.

The Council operates to a partnership protocol which is designed to ensure effective governance arrangements operate in partnerships in which the Council is engaged. The Council also operates a Protocol for the Appointment of Councillors and Officers to Outside Bodies.

The Council’s website includes links to other local and national consultations so that local people can access as many details of consultations affecting the local area as possible from one place.

The council has a dedicated Freedom of Information team which ensures compliance with requests for information sought using that legislative tool.

Review of Effectiveness

The Council has responsibility for conducting at least annually a review of the effectiveness of its governance framework, including the system of internal control. This review is informed by the work of the executive managers within the Council who have responsibility for the development and maintenance of the governance environment, the Head of Internal Audit and Risk Management’s annual report and comments by the External Auditor and other review agencies and inspectorates.

Internal Audit and Risk Management staff have undertaken a full compliance review to ensure that the Council’s Code of Corporate Governance has been applied during 2014-15.

The key evidence to support the review of effectiveness is outlined below:

1. Planning

There is a clear vision of the outcomes which the Council wants to achieve for local people as a local Council, as set out in the Council Plan.

The Council operates a planning process which integrates all aspects of strategic, operational and financial planning which has the full involvement of the Cabinet and all senior managers of the Council. This ensures financial plans realistically support the delivery of the Council’s goals and strategy obligations in the short and medium terms.

The budget preparation process for 2015-16 was subject to robust challenge and involved extensive consultation with the people and businesses of Northamptonshire. The budget includes detailed plans for the five year programme allowing a degree of flexibility and resilience.

All major programmes of work (with the exception of asset programmes such as school building, road maintenance and street light replacement which have their own programmes) are tracked through a single system (PMPoint) managed by a central Programme Management Office.

2. Performance Management

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On a quarterly basis the Council produces a corporate performance report, reflective of the range of services that the Council provides and progress against delivery of our major change programmes. Spotlight reports are provided giving more detail on specific areas of under-performance. These reports are also presented to Cabinet which gives both Cabinet and the public an insight into the Council’s overall performance.

Additionally there is a workforce performance management process operating at all levels of the organisation. Staffing related matters are also reviewed by senior managers quarterly at the Performance Board in the Workforce Report. This holistic review is supplemented by the management of staff personal performance through the Personal Performance and Development Plan process.

Performance and business intelligence is produced by a corporate Business Intelligence and Performance Team that reports directly to the CEO to ensure a single version of the truth and independence of information and data.

3. The Cabinet

The Cabinet is responsible for key decisions. The Cabinet meets on a monthly basis and makes decisions that are in line with the Council’s overall policies and budget. Decisions Cabinet wishes to make outside of the budget or Policy Framework must be referred to full Council. The Cabinet receives regular monitoring reports on key aspects of control including performance and financial management.

4. Overview and Scrutiny Committees

The Council has appointed the Overview and Scrutiny committees (Scrutiny Committees) to discharge the functions conferred by section 21 of the Local Government Act 2000. Scrutiny committees oversee and scrutinise the decisions made by the Cabinet and Cabinet members under delegated powers. Scrutiny committees meet on a quarterly basis.

5. The Standards Committee

It has not been necessary for the Standards Committee to undertake any formal hearings into councillor conduct from April 2014 up until the end date covered by this Statement.

6. The Audit Committee

The Council has an Audit Committee that provides independent, effective assurance on the adequacy of the Council’s governance environment. All major political parties are represented on the Audit Committee and it has an independent Chair who is an experienced Chartered Accountant.

The Audit Committee met regularly during 2014-15, considering reports, including the annual Internal Audit Report from the Head of Internal Audit and Risk Management, the Council’s senior finance officers and the External Auditor. Additionally the Committee invited officers of the Council to attend the Committee on a number of occasions to assist the Committee in its work. The Minutes of the Audit Committee are presented at Council meetings which are attended by the Chair of the Audit Committee.

7. Statutory Officers

The statutory functions undertaken by the Head of Paid Service, Monitoring Officer, S151 Officer, and the directors of Adult’s and Children’s Service were effectively fulfilled during 2014-15 and up to the date of this report.

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The Council’s financial management arrangements during the period covered by this Annual Governance Statement conform to the requirements of the CIPFA Statement on the Role of the Chief Financial Officer.

The Chief Executive formally meets with his two statutory service directors, namely the Director of Adult Social Services and the Director of Children’s Services on a monthly basis where any issues specific to them fulfilling their statutory roles are discussed.

8. Management

Each director has provided a self assurance statement in respect of 2014-15, supported by assurances from their assistant directors, that:

They fully understand their roles and responsibilities

They are aware of the principal statutory obligations and key priorities of the Council which impact on their services

They have made an assessment of the significant risks to the successful discharge of the Council’s key priorities

They acknowledge the need to develop, maintain and operate effective control systems to manage risks

Directors have identified one significant control issue in respect of the Council’s continuing efforts to improve its Children’s Safeguarding practices through the implementation of an Improvement Plan. This is referred to below in the sections in respect of progress in implementing 2013-14 actions and significant governance issues.

9. Internal Audit

The Council takes assurance about the effectiveness of the governance environment from the work of Internal Audit which provides independent and objective assurance across the whole range of the Council’s activities. It is the duty of the Head of Internal Audit and Risk Management to give an opinion, at least annually, on the adequacy and effectiveness of internal control within the Council. This opinion has been used to inform the Annual Governance Statement.

The Head of Internal Audit and Risk Management provided his annual report to the Audit Committee on 28th May 2015. This report outlined the key findings of the audit work undertaken during 2014-15 including areas of significant weakness in the internal control environment.

An assurance scoring mechanism, based on five levels of assurance, is used to reflect the effectiveness of the Council’s internal control environment. The table below details the five levels of assurance:

Assurance Level

Assurance Criteria

Full There is a sound system of control designed to address the relevant risks with controls being consistently applied.

Substantial There is a sound system of control, designed to address the relevant risks, but there is evidence of non-compliance with some of the controls.

Moderate Whilst there is basically a sound system of control, designed to address the relevant risks, there are weaknesses in the system, that leaves some risks not addressed and there is evidence of non-compliance with some controls.

Limited The system of control is weak and there is evidence of non compliance with the controls that do exist which may result in the relevant risks not being managed.

None There is no system of internal control. Risks are not being managed.

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The opinion of the Head of Internal Audit and Risk Management was as follows:

“Substantial / Moderate assurance can be given that there is generally a sound system of internal control, designed to meet the organisation’s objectives and that controls are generally being applied consistently. The level of assurance, therefore, remains at a similar level from 2013/14.

Controls relating to key financial systems were concluded to be generally at a “Substantial Assurance” level. The majority of non-schools audits were generally assigned “Substantial” or “Moderate” classifications. The incidence of “Limited” and “Moderate” Assurance assigned to schools audits, however, is again a significant concern. However no system of control can give absolute assurance against material misstatement or loss, nor can internal audit give that assurance.”

10. Review of Internal Audit

The Council’s External Auditor stated in his ISA260 Report, as presented to the Audit Committee in September 2014 that:

“We reviewed Internal Audit’s work on the key financial systems and re-performed a sample of tests completed by them. We also reviewed Internal Audit’s self assessment against the United Kingdom Public Sector Internal Audit Standards (PSIAS), which have applied to local authorities since April 2013. The PSIAS require public sector organisations to commission an external review of Internal Audit; our work does not constitute an external review with respect to this requirement.

Based on the self-assessment performed by Internal Audit, our assessment of their files, attendance at Audit Committee and regular meetings during the course of the year, we have not identified any significant matters which would indicate Internal Audit are not compliant with the PSIAS. We did not identify any issues with Internal Audit’s work.

We are pleased to report that we are again able to place reliance on Internal Audit’s work on the key financial systems where this was relevant to our work.”

11. External Audit

KPMG LLP is currently the Council’s appointed External Auditor. As well as an examination of the Council’s financial statements, the work of the Council’s External Auditor includes an assessment of the degree to which the Council delivers value for money in its use of its resources. In its annual Report to those charged with governance (ISA260) 2013/14, KPMG concluded that the Authority has made proper arrangements to secure economy, efficiency and effectiveness in its use of resources.

12. Risk Management

The Council managed its risks during 2014-15 in accordance with the approved Risk Management Policy and the Risk Management Statement of Required Practice (SORP). The Corporate Management Team and directorate management teams formally considered risk on a quarterly basis. Details of corporate and directorate risks were considered as part of the Corporate Performance process. Quarterly risk management reports were submitted to both Cabinet and the Audit Committee.

The Internal Audit Plan for 2015-16 presented to the Audit Committee in February 2015 is chiefly based upon the key risks faced by the Council as identified in the Corporate and directorate risk registers, such that Internal Audit will provide assurance on the effectiveness of the internal control framework during 2015-16.

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13. Developing Capacity

The Council has operated procedures during the period covered by this Statement to ensure training needs of staff are assessed against core competencies and any key training needs met. Additionally the Council has provided appropriate training to councillors to enable them to effectively fulfil their duties as councillors of the Council.

14. Engagement

The Council has continued to make strenuous efforts to fully engage the community in the development of its plans and policies.

Significant Governance Issues

Based on the Council’s established risk management approach, the following issue has been assessed as being a significant governance issue. We will over the coming year take appropriate steps to address this matter and further enhance our governance arrangements. We are satisfied that this step will address the need for improvement that was identified in our review of effectiveness and will monitor its implementation and operation as part of our next annual review.

Identified From

Issue Action Responsible

Officer

Director Assurance Statement

There are financial implications of the care act which we will seek to mitigate through the grant but as for every other authority this is currently an unknown.

This will be addressed through the council budget and risk management processes

Carolyn Kus, Director of Adult Social Care Services

PROGRESS AGAINST ACTIONS IDENTIFIED IN THE 2013-14 ANNUAL GOVERNANCE STATEMENT

Northamptonshire County Council stated that it was committed to undertake action to improve its governance during the course of the 2015-15 financial year. The progress made by the Council against these actions is as identified in the following table:

ANNUAL GOVERNANCE STATEMENT ACTION

CURRENT STATUS

2012-13 ACTION

Children’s safeguarding and adoption processes - implementation of Improvement Plan

Good progress has been made in implementing the Plan, delivery of which will continue over the remaining months of the Plan. This has been confirmed by the Department of Education in its assessment on progress undertaken in November 2014.

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Conclusion and Evaluation

As Leader and Chief Executive, we have been advised of the implications of the results of the review of the effectiveness of the Council’s governance framework.

Our overall assessment is that this Annual Governance Statement is a balanced reflection of the governance environment and that an adequate framework exists within Northamptonshire County Council to ensure effective internal control is maintained.

We are also satisfied that there are appropriate plans in place to address the weaknesses and ensure continuous improvement in the system of internal control.

Councillor Jim Harker OBE Dr Paul Blantern Leader of the Council Chief Executive Date: 22 June 2015 Date: 22 June 2015

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Appendices

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1 Accounting Concepts and Policies

1.1 General Principles

The Statement of Accounts summarises the Council’s financial transactions for the 2014-15 financial year and its position at the year end of 31 March 2015.

The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2011. These regulations require the Statement of Accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2014-15 and the Service Reporting Code of Practice 2014-15, supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 12 of the 2003 Act.

As local authorities need to reflect statutory conditions, accounting standards are amended for specific statutory adjustments so that the Council’s accounts present a true and fair view of the financial position and transactions of the authority. All accounting policies are disclosed where they are material.

The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments.

1.2 Qualitative Characteristics of Financial Statements

1.2.1 Relevance

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

1.2.2 Reliability

The financial information is reliable as it has been prepared so as to reflect the reality or substance of the transaction, is free from deliberate or systematic bias, is free from material error and has been prudently prepared.

1.2.3 Comparability

In addition to complying with the Code, the accounts also comply with the Service Reporting Code of Practice (SeRCOP). This code establishes proper practice in relation to consistent financial reporting below statement of accounts level and aids comparability with other local authorities.

1.2.4 Understandability

These accounts are based on accounting concepts and terminology which require reasonable knowledge of accounting and local government. Every effort has been made to use plain language and where technical terms are unavoidable they have been explained in the glossary contained within the accounts.

1.2.5 Materiality

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

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1.3 Underlying Assumptions

1.3.1 Accrual Basis

The financial statements, other than the cash flow, are prepared on an accrual basis. Income and expenditure is recognised in the accounts in the period in which it is earned or incurred, not as cash is received or paid. In particular:

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

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

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

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

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

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

1.3.2 Going Concern

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

1.4 Accounting Policies

1.4.1 Acquired operations

When necessary, income and expenditure directly related to other acquired operations will be shown separately within the Comprehensive Income and Expenditure Statement under the heading of acquired operations.

1.4.2 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 and investments whose maturity date is three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management.

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1.4.3 Exceptional Items

When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance.

1.4.4 Contingent Liabilities

A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.

1.4.5 Contingent Assets

A contingent asset arises where an event has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council.

Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential.

1.4.6 Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment.

Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council’s financial position or financial performance.

Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.

Where items of income and expenditure are material, their nature and amount is disclosed separately either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Councils financial Performance.

1.4.7 Provisions

Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential and a reliable estimate can be made of the amount of the obligation.

Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Council becomes aware of the obligation, and are measured at the best estimate at the

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balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service.

Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Council settles the obligation.

1.4.8 Provision for Back Pay Arising from Unequal Pay Claims

The Council has made a provision based on the experiences of other local authorities which have implemented single status and who have incurred equal pay liabilities. Statutory arrangements allow successful claims to be financed from the General Fund in the year that payments actually take place, not when the provision is established. The provision is therefore balanced by an Equal Pay Back Pay Account created from amounts credited to the General Fund balance in the year the provision was made or modified. The balance on the Equal Pay Back Pay Account will be debited back to the General Fund balance in the Movement in Reserves Statement in future financial years as payments are made.

1.4.9 Reserves

The Council sets aside specific amounts as reserves for future policy purposes or to protect against unexpected events. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service revenue account in that year, to be recorded against the Net Cost of Services in the Comprehensive Income and Expenditure Account. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against Council tax for the expenditure.

County Council Reserves include:

Earmarked reserves, which are set aside for specific purposes.

General reserves, which are set aside for unexpected events and cash flow management.

Revaluation Reserve, which records unrealised gains arising (since 1 April 2007) from holding fixed assets, and a

Capital Adjustment Account, which provides a balancing mechanism between the different rates at which assets are depreciated.

Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments and retirement and employee benefits, and do not represent usable resources for the Council – these reserves are explained in the relevant policies.

1.4.10 Government Grants and Contributions

Whether paid on account, in arrears or by instalments, Government grants and other contributions are accounted for on an accruals basis and recognised as income when there is reasonable assurance that:

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

The grants or contributions will be received.

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1.4.11 Revenue Grants and Contributions:

Revenue grants and contributions are matched in the Comprehensive Income and Expenditure Statement to the service expenditure to which they relate. Revenue grants received in advance of entitlement or meeting of conditions are treated as creditors (receipt in advance) until such time as they can be justifiably recognised as income and credited to the Comprehensive Income and Expenditure Statement. Grants to cover general expenditure, such as the Revenue Support Grant, are credited to the Comprehensive Income and Expenditure Statement after Net Cost of Services. For the Public Health ringfenced grant from Department of Health the treatment in line with 1.4.9 (Reserves) will be that the unspent grant will be transferred to an earmarked reserve, with the funding to be utilised in line with grant conditions.

1.4.12 Capital Grants and Contributions:

Capital grants or contributions and donated assets are to be accounted for through the Comprehensive Income and Expenditure Statement once any conditions have been met and the expenditure has been incurred. The grant or contribution is then transferred from the General Fund to the Capital Adjustment Account (CAA), reflecting the application of capital resources to finance expenditure. The transfer is reported in the Movement in Reserves Statement.

Where a capital grant or contribution is received and conditions remain outstanding at the balance sheet date, the grant or contribution is to be recognised in Capital Grants Receipts in Advance. Once conditions are met, the grant or contribution will be transferred from the Capital Grants Receipts in Advance and recognised in the Comprehensive Income and Expenditure Statement.

Where a capital grant or contribution is received and there are no conditions, but the expenditure has not been incurred at the balance sheet date, the grant or contribution shall be recognised in the Comprehensive Income and Expenditure Statement and then transferred to the Capital Grants Unapplied account, reflecting its status as a capital resource available to finance expenditure. When the expenditure to be financed from the grant or contribution is incurred, the grant or contribution shall be transferred from the Capital Grants Unapplied account to the Capital Adjustment Account.

1.4.13 Employment Benefits

I Benefits payable during employment

Short term employee benefits are those due to be settled within 12 months of the year end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees and are recognised as an expense for services in the year in which employees render service to the Council. An accrual is made for the cost of holiday entitlements (or any form of leave e.g. time off in lieu) earned by employees but not taken before the year end which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs.

II Termination Benefits

Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy and are charged on an accruals

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basis to the relevant service line (or in discontinued operations) in the Comprehensive Income and Expenditure Statement when the Council is demonstrably committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the Pension Fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for the cash paid to the Pension Fund and pensioners and any such amounts payable but unpaid at the year end.

III Post Employment Benefits

Northamptonshire County Council participates in three different pension schemes that meet the needs of employees in particular services. All the schemes provide members with defined benefits related to pay and service. The schemes are as follows:

a. Teachers

This is an unfunded scheme, administered by Capita Teachers’ Pensions on behalf of the Department for Education. In an unfunded defined benefit scheme, no assets are set aside and the benefits are paid for by the employer or other pension sponsor as and when they are paid. It is classified as a ‘single-employer defined benefit scheme’ in which the assets and liabilities are not identifiable at individual employer level on a consistent and reasonable basis. However, the individual employer has to pay for the unfunded discretionary benefits awarded. The pension cost shown in our accounts is:

The contribution rate set by the DCSF paid to a notional fund; plus the cost of paying early retirement pensions (excluding ill health) after September 1997.

b. Uniformed Firefighters

Two pension schemes exist for uniformed firefighters. The 1992 scheme for whole-time uniformed staff who were eligible to join pre April 2006 and the 2006 scheme, for whole-time staff joining after 1 April 2006 and retained firefighters who were previously not eligible to join a firefighter pension scheme. The charge shown in the accounts represents the cost to the Council of employer contributions based on a nationally set percentage of pensionable pay.

c. The Local Government Pension Scheme

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

The liabilities of the Pension Fund attributable to the 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, and projections of projected earnings for current employees.

The assets of the Pension Fund attributable to the Council are included in the Balance Sheet at their fair value:

Quoted securities – current bid price.

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Unquoted securities – professional estimate.

Unitised securities – current bid price.

Property – market value.

The change in the net pension’s liability is analysed into service cost and remeasurement components.

The service cost element comprises:

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

Past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs.

Net interest on the net defined benefit liability (i.e. the net interest expense for the authority) – the change during the period in the net defined benefit liability (asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement. This is calculated by applying the discount rate used to measure the defined benefit liability at the beginning of the period, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments.

Remeasurements comprise:

The return on plan assets – excluding amounts included in the net interest on the net defined benefit liability. These are charged to the Pensions Reserve as Other Comprehensive Income and Expenditure; and

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. These are charged to the Pensions Reserve as Other Comprehensive Income and Expenditure.

Contributions paid to the LGPS Pension Fund – cash paid as employer’s contributions to the Pension Fund in settlement of liabilities; not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the Pension Fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards.

In the Movement in Reserves Statement, this means that there are 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 pensioners and any such amounts payable 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 cash flows rather than as benefits are earned by employees.

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1.4.14 Discretionary Benefits

The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.

1.4.15 Value Added Tax (VAT)

The Comprehensive Income and Expenditure Statement excludes any amounts related to VAT, as all VAT collected is payable to HM Revenue & Customs and all VAT paid is recoverable from them.

1.4.16 Overheads and Support Services

The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2013-14.The total absorption costing principle is used, whereby the full cost of overheads and support services are shared between users in proportion to the benefits received.

Where practical, support services have been allocated to capital schemes, where it can be shown that these support costs directly contribute to the delivery of these schemes.

The full cost of overheads and support services to be charged to the Comprehensive Income and Expenditure Statement is shared between users in proportion to the benefits received with the exception of:

Corporate and Democratic Core: which represent costs relating to the Council’s status as a multi-functional democratic organisation.

Non-distributed costs: which include the cost of discretionary benefits awarded to employees who are taking early retirement.

1.4.17 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 are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase.

Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services. Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. In practice, no intangible asset held by the Council meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the Comprehensive

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Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement.

Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.

The Council’s Intangible Assets consist of purchased software licences and any directly attributable costs of preparing the software for its intended use. The useful economic life of recognised intangible assets is at least three years. All Intangible Assets are included at historic cost and written down on a straight line basis over their economic lives from the year following acquisition. The useful economic lives are reviewed at the end of each reporting period and revised if necessary.

1.4.18 Property, Plant and Equipment

Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment.

I Measurement

Assets are initially measured at cost, comprising:

The purchase price.

Any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The Council has adopted a policy of capitalising borrowing costs incurred whilst assets are under construction.

The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council.

II Recognition

Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment with a value over £10,000 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, provided it yields benefits to the Council and the services that it provides exceed one financial year. This applies to either single item over £10,000 or to groups of similar items whose value collectively exceeds £10,000. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e., repairs and maintenance) is charged as an expense when it is incurred.

Assets are recorded in the Balance Sheet using the following measurement bases:

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Land and buildings, vehicles, plant and equipment, furniture and equipment- lower of net current replacement cost or net realisable value in existing use.

Infrastructure assets (i.e. roads, roundabouts and bridges) – depreciated historical cost.

Community assets – depreciated historical cost.

Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value.

Where non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value.

Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. (Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service).

Where decreases in value are identified, they are accounted for by:

Where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains).

Where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

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

III Impairment

Assets are assessed at each year end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall.

Where impairment losses are identified, they are accounted for by:

Where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains)

Where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

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.

Expenditure and income relating to capital projects is accounted for on an accruals basis.

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IV Depreciation

Depreciation is provided for on all assets with a determinable finite life (except for land, investment properties and heritage assets), by allocating the value of the asset in the Balance Sheet over the periods expected to benefit from their use. We do not provide reductions in value for new assets in their first year or for assets being made or built until they are brought into use.

Depreciation is calculated on a straight line basis over the length of useful life:

Category Useful Life in Years

IT Equipment 3

Infrastructure 40

Buildings 1 to 60

Vehicles - Cars 5

- Vans and Lorries 7

- Buses 10

- Fire Appliances 13

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.

V Component accounting for Property Assets

Where a building has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately over the useful life of that component. The table below identifies the significant components and useful life.

Component Typical maximum useful life

Building Structure = substructure + superstructure including internal walls, windows and doors, but excludes roof, finishes and fittings.

60 years

Roof = flat roof types and non traditional pitched, pitched/tiled (excluding thatch).

50 years

Mechanical & Electrical (services) = water, heat, ventilation, electrics, lifts, fire, communications.

20 years

External Works = hard surfaces, below ground services (excludes fences).

45 years

The Council has applied a phased approach for its property assets to meet the Code’s prospective requirements. The application in the first year will be to:

Enhancement expenditure incurred over £500k,

Acquisition expenditure incurred over £500k, and

Revaluations carried out as part of the Council’s five year rolling programme of property valuations with a value over £500k.

As part of the rolling programme of building and land valuations, each valuation provides a value and remaining life for each significant component. Each year the Asset Register will be updated with this information. Therefore, all buildings above the de minimis of £500k will have been recorded on a component basis at the end of the five year programme.

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VI Disposals and Non-Current Assets Held for Sale

When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before 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 in fair value are recognised only up to the amount of any previous losses 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 non current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as Held for Sale, and their recoverable amount at the date of the decision not to sell.

Assets that are to be abandoned or scrapped continue to be classified as Surplus Assets until they are removed from the Balance Sheet.

When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account.

Amounts received for a disposal in excess of £10,000 are categorised as capital receipts credited to the Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow (the Capital Financing Requirement). Receipts are appropriated to the Reserve from the General Fund Balance in the Movement in Reserves Statement. The written off value of disposals is not a charge against Council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

VII Investment Property

Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale. Investment properties are measured initially at cost and subsequently at fair value, based on the amount at which the asset could be exchanged between knowledgeable parties at arm’s length. Properties are not depreciated but are revalued annually according to market conditions at the Year end. Gains and losses on revaluation are posted to the Financing and Investment Income and expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the

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Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.

VIII Charges to Revenue for Non Current Assets

The Council’s services revenue accounts, support services and trading accounts 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

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 recovered.

Amortisation of intangible fixed assets attributable to the service.

The Council is not required to raise Council tax to fund depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the Council in accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance via the annual Minimum Revenue Provision (MRP) charge, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

IX Revenue Expenditure Funded from Capital Under Statute

This represents expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of fixed assets belonging to the Council. This amount is charged to the relevant service revenue account in the year. This may include expenditure on assets not belonging to the Council such as service user homes and foundation schools. Where the Council has determined to meet the cost of this expenditure from existing capital resources or borrowings, a transfer to the Capital Adjustment Account is made to reverse out the amount charged so there is no impact on the level of Council tax.

1.4.19 Leases

Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the Property, Plant or Equipment from the lessor to the lessee. All other leases are classified as operating leases.

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification.

Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.

I The Council as Lessee: Finance Leases

Property, Plant and Equipment held under finance leases are recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred.

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Lease payments are apportioned between:

A charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability, and

A finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

Property, Plant and Equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Council at the end of the lease period).

The Council is not required to raise Council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

Operating Leases

Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g., there is a rent-free period at the commencement of the lease).

II The Council as Lessor: Finance Leases

Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. A gain, representing the Council’s net investment in the lease, is credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal), matched by a lease (long term debtor) asset in the Balance Sheet.

Lease rentals receivable are apportioned between:

A charge for the acquisition of the interest in the property – applied to write down the lease debtor (together with any premiums received), and

Finance income (credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement)

The gain credited to the Comprehensive Income and Expenditure Statement on disposal is not permitted by statute to increase the General Fund Balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the General Fund Balance to the Capital Receipts Reserve in the Movement in Reserves Statement. Where the amount due in relation to the lease asset is to be settled by the payment of rentals in future financial years, this is posted out of the General Fund Balance to the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. When the future rentals are received, the

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element for the capital receipt for the disposal of the asset is used to write down the lease debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts Reserve.

The written off value of disposals is not a charge against Council tax, as the cost of non current assets is fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

Operating Leases

Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g., there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income.

1.4.20 Heritage Assets

Heritage Assets are a distinct class of asset which are reported separately from property, plant and equipment and intangible assets. The Council holds these assets principally for future generations because of their contribution to knowledge, environment or culture. The code requires authorities to recognise heritage assets where the authority has information on the cost or value of the asset. Where information on cost or value is not available, and the cost of obtaining this information outweighs the benefits to the users of the financial statements, the asset is not recognised on the Council’s Balance Sheet. However, the Council makes appropriate disclosure in the accounts where heritage assets are not recognised on the Balance Sheet. Where valuations are made an appropriate method is adopted; this may include, for example, insurance valuations of museum collections. The Council reviews the carrying amounts of heritage assets carried at valuation on a yearly basis to ensure they remain current. Depreciation is not charged on heritage assets which have indefinite lives. However, an impairment review is carried out where there is physical deterioration or new doubts as to the authenticity of the Heritage Asset exist.

1.4.21 Financial Instruments

I Financial Liabilities

Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised.

For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement.

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Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate.

Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

II Financial Assets

Financial assets are classified into two types:

Loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market.

Available-for-sale assets – assets that have a quoted market price and/or do not have fixed or determinable payments.

Loans and Receivables

Loans and receivables are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement.

However, the Council has made a number of loans to voluntary organisations at less than market rates (soft loans). When soft loans are made, a loss is recorded in the Comprehensive Income and Expenditure Statement (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. Interest is credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement at a marginally higher effective rate of interest than the rate receivable from the voluntary organisations, with the difference serving to increase the amortised cost of the loan in the Balance Sheet. Statutory provisions require that the impact of soft loans on the General Fund Balance is the interest receivable for the financial year – the reconciliation of amounts debited and credited to the Comprehensive Income and Expenditure Statement to the net gain required against the General Fund Balance is managed

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by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate.

Any gains and losses that arise on the derecognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

Available for Sale Assets

Available-for-sale assets are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Where the asset has fixed or determinable payments, annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g., dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the Council.

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

Instruments with quoted market prices – the market price.

Other instruments with fixed and determinable payments – discounted cash flow analysis.

Equity shares with no quoted market prices – independent appraisal of company valuations.

Changes in fair value are balanced by an entry in the Available for Sale Reserve and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available for Sale Financial Assets. The exception is where impairment losses have been incurred – these are debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any net gain or loss for the asset accumulated in the Available for Sale Reserve.

Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made (fixed or determinable payments) or fair value falls below cost, the asset is written down and a charge made to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. If the asset has fixed or determinable payments, the impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Otherwise, the impairment loss is measured as any shortfall of fair value against the acquisition cost of the instrument (net of any principal repayment and amortisation).

Any gains and losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the

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Comprehensive Income and Expenditure Statement, along with any accumulated gains or losses previously recognised in the Available for Sale Reserve.

Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses).

1.4.22 Inventories and Work in Progress

Inventories are included in the Balance Sheet at the lower of cost or net realisable value. Work in progress is recognised at cost and held in the Balance Sheet until the work has been completed.

1.4.23 Landfill Allowance Trading Scheme (LATS)

LATS became a statutory requirement on Waste Disposal authorities at the start of 2005-06. Authorities are granted annual allowances which can be traded.

Allowances granted are recorded in investments, waste disposal usage is recorded in creditors and the surplus is held in Earmarked Reserves the authority will measure the value of landfill allowances at the lower of cost or net realisable value. Where there is no evidence of an active market for landfill allowances the fair value and the net realisable value is likely to be nil.

1.4.24 Private Finance Initiative (PFI) transactions and similar contracts

The Code requires these contracts to be accounted for in a manner consistent with the adoption of International Financial Reporting Interpretations Committee (IFRIC) 12 Service Concession Arrangements as contained in the Government’s Financial Reporting Manual (FreM). The Code has determined that the Council shall account for PFI schemes where the Council controls the use of the Tangible Fixed Assets and the residual interest in the asset at the end of the arrangement as service concession arrangements, following the principles of the requirements of IFRIC 12. The Council therefore recognises the PFI assets as Tangible Fixed Assets together with a liability to pay for it. The services received under the contract are recorded as operating expenses.

The annual unitary payment is separated into the following component parts, using appropriate estimation techniques where necessary:

Payment for the value of services received;

Payment for the PFI asset, including finance costs; and

Payment for the replacement of components of the asset during the contract ‘lifecycle replacement’.

I Services received

The value of services received in the year is recorded under the relevant expenditure headings within ‘operating expenses’.

II PFI Asset

The PFI assets are recognised as Tangible Fixed Assets, when they come into use. The assets are measured at the lower of net current replacement cost or net realisable value in existing use.

III PFI liability

A PFI liability is recognised at the same time as the PFI assets are recognised. It is measured initially at the same amount as the value of the PFI assets and is subsequently measured as a finance lease liability in accordance with IFRIC12.

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An annual finance cost is calculated by applying the implicit interest rate in the lease to the opening lease liability for the period, and is included in Interest Payable and similar charges within the Comprehensive Income and Expenditure Statement.

The element of the annual unitary payment that is allocated as a finance lease rental is applied to meet the annual finance cost and to repay the lease liability over the contract term.

An element of the annual unitary payment increase due to cumulative indexation is allocated to the finance lease. In accordance with IFRIC12, this amount is not included in the minimum lease payments, but is instead treated as contingent rent and is expensed as incurred. In substance, this amount is a finance cost in respect of the liability and the expense is included in Interest Payable and similar charges within the Comprehensive Income and Expenditure Statement.

IV Lifecycle replacement

Components of the asset replaced by the operator during the contract (‘lifecycle replacement’) are capitalised where they meet the Council’s criteria for capital expenditure. They are capitalised at the time they are provided by the operator and are measured initially at the lower of net current replacement cost or net realisable value in existing use.

The element of the annual unitary payment allocated to lifecycle replacement is pre-determined for each year of the contract from the operator’s planned programme of lifecycle replacement. Where the lifecycle component is provided earlier or later than expected, a reserve is recognised respectively.

Where the value of the lifecycle component is less than the amount determined in the contract, the difference is recognised as an expense when the replacement is provided.

V Assets contributed by the Council to the operator for use in the scheme

Assets contributed for use in the scheme continue to be recognised as Tangible Fixed Assets.

VI PFI credits

Government Grants received for PFI schemes, in excess of current levels of expenditure, are carried forward as an earmarked reserve to fund future contract expenditure and will be drawn down as required.

1.4.25 Minimum Revenue Provision (MRP)

The Council is required to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement. This provision is known as the Minimum Revenue Provision (MRP).The Council assess it’s MRP in accordance with the main recommendations contained within the Guidance issued by the Secretary of State under section 21(1A) of the Local Government Act 2003.

The major proportion of the MRP will relate to the historic debt liability up to 31 March 2007 that will continue to be charged at the rate of 4%, in accordance with option 1 of the Guidance. This ‘base’ Capital Financing Requirement (CFR) position will be reduced by the MRP charged against it annually

From 2007-08 onwards expenditure on completed assets only will be subject to MRP charges. This is under option 3 of the guidance and will be based on the estimated useful life of the assets created, using the equal annual instalment method. For example, capital expenditure on new buildings, or on the refurbishment or enhancement of a building, will be related to the estimated life of the building.

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Estimated life periods will be determined under delegated powers. To the extent that expenditures do not create an asset, and are of a type that are subject to estimated life periods that are referred to in the Guidance, these estimated life periods will generally be adopted by the Council. However, in the case of long term debtors arising from loans or other types of capital expenditure made by the Council which will be repaid under separate credit arrangements such as leasing and PFI, there will be no Minimum Revenue Provision made.

The Council is satisfied that a prudent provision will be achieved after exclusion of capital expenditure.

In view of the variety of different types of capital expenditure incurred by the Council, which is not in all cases capable of being related to an individual asset, asset lives will be assessed on a basis which most reasonably reflects the anticipated period of benefit that arises from the expenditure. Also, whatever type of expenditure is involved, it will be grouped together in a manner which reflects the nature of the main component of expenditure, and will only be divided up in cases where there are two or more major components with substantially different useful economic lives. The determination as to which schemes shall be deemed to be financed from available resources, and those which will remain as an outstanding debt liability to be financed by borrowing or other means will be assessed under delegated powers.

The policy will be reviewed annually to ensure prudence is achieved from using the options available.

The option to delay charges until the year after the asset comes into operation (the MRP holiday) will be used where applicable.

Where it is considered prudent to do so, non-operational assets will be excluded from the MRP calculation.

Any under or over provisions that are identified for previous years will be taken into consideration in the calculation of the current year’s provisions and adjusted accordingly.

1.4.26 Borrowing Costs

Borrowing costs that are:

Directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset;

When it is probable that they will result in future economic benefits or service potential to the Council; and

The costs can be measured reliably;

shall be capitalised and form part of the cost of that non current asset.

Borrowing costs form part of the cost of the non current asset and are charged to revenue over the life of the asset in accordance with Minimum Revenue Provision (MRP) policy.

Where the Council borrows funds specifically for the purpose of obtaining a qualifying asset, the Council shall determine the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings.

Where the Council borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Council shall apply a capitalisation rate to the

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expenditures on that asset. The capitalisation rate shall be the weighted average of the borrowing costs that are outstanding during the period.

The amount of borrowing costs capitalised shall not exceed the amount of borrowing costs incurred during the period.

Capitalisation

The commencement of capitalisation begins when all of the following are met:

Expenditure in respect of the asset are incurred;

Finance costs in respect of the asset are incurred; and

Activities that are necessary to develop an asset are in progress.

Capitalisation ceases when substantially all of the activities necessary to prepare the asset for its intended use or sale are complete.

Capitalisation should be suspended during periods in which active development is interrupted.

1.4.27 Events after the Reporting Period

Events after the balance sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:

Those that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts is adjusted to reflect such events.

Those that are indicative of conditions that arose after the reporting period – the Statement of Accounts are not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect.

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

1.4.28 Foreign Currency Translation

Payments made in any other currency other than sterling are translated at the rate applicable on that date.

1.4.29 Interests in Companies and Other Entities

The Council is required to produce Group Accounts alongside its own financial statements where it has material interests in subsidiaries, associates and/or joint ventures. The Council has involvement with a number of companies, and has concluded that the requirement to produce Group Accounts applies in relation to its interest in Northamptonshire Trading Limited and Olympus Care Services Limited. In the Council’s single‐entity accounts, the interests in companies and other entities are recorded as financial assets at cost.

Within the Group Accounts the financial statements of Northamptonshire Trading Limited and Olympus Care Services Limited have been consolidated on a line by line basis, eliminating in full balances, transactions, income and expenses between the Council and the subsidiaries.

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2 Nature and Extent of Risks Arising from Financial Instruments

Key risks

The Councils 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 Council

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

Refinancing risk – the possibility that the Council might be requiring to renew a financial instrument on maturity at disadvantageous interest rates or terms

Market risk – the possibility that financial loss might arise for the Council as a result of changes in such measurers as interest rates or 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 a central treasury team within LGSS, under policies approved by the Council in the annual treasury management 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, as well as credit exposures to the Council’s customers.

This risk is minimised through the Annual Investment Strategy, which requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria, in accordance with the Fitch, Moody’s and Standard & Poor’s Credit Ratings Services. The Annual Investment Strategy also considers maximum amounts and time limits with a financial institution located in each category.

The credit criteria in respect of financial assets held by the Council are detailed below:

This Council uses the creditworthiness service provided by Capita Asset Services. This service uses a sophisticated modelling approach with credit ratings from all three rating agencies - Fitch, Moody’s and Standard and Poor’s, forming the core element. However, it does not rely solely on the current credit ratings of counterparties but also uses the following as overlays:

credit watches and credit outlooks from credit rating agencies

CDS spreads to give early warning of likely changes in credit ratings

Sovereign rating to select counterparties from only the most creditworthy countries

Customers for goods and services are assessed, taking into account their financial position, past experience and other factors, with individual credit limits being set in accordance with internal ratings in accordance with parameters set by the Council.

The Authority’s maximum exposure to credit risk in relation to its investments in of £60.4m cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual

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institution. Recent experience has shown that it is rare for such entities to be unable to meet their commitments. A risk of irrecoverability applies to all of the Authority’s deposits, but there was no evidence at the 31 March 2015 that this was likely to crystallise.

No credit limits were exceeded during the reporting period and the Council des not expect any losses from non-performance by any of its counterparties in relation to deposits and bonds.

Liquidity risk

The Council manages its liquidity position through the risk management procedures above (the setting and approval of prudential indicators and the approval of the treasury and investment strategy reports), as well as through a comprehensive cash flow management system, as required by the CIPFA Code of Practice. This seeks to ensure that cash is available when needed.

The Council has ready access to borrowings from the money markets to cover any day to day cash flow need, and the PWLB and money markets for access to longer term funds. The Council is also required to provide a balanced budget through the Local Government Finance Act 1992, which ensures sufficient monies are raised to cover annual expenditure. There is therefore no significant risk that it will be unable to raise finance to meet its commitments under financial instruments.

The maturity analysis of financial assets, excluding sums due from customers, is as follows:

Investments 31-Mar-15

£000

Less than three months 24,766

Three to six months 18,055

Six months to one year 17,552

More than one year 50

Total 60,422

Refinancing and Maturity risk

The Council maintains a significant debt and investment portfolio. Whilst the cash flow procedures above are considered against the refinancing risk procedures, longer-term risk to the Council relates to managing the exposure to replacing financial instruments as they mature. This risk relates to both the maturing of longer term financial liabilities and longer term financial assets.

The Council has safeguards in place to ensure that a significant proportion of its borrowing does not mature for repayment at any one time in the future to reduce the financial impact of re-borrowing at a time of unfavourable interest rates. The Council’s policy is to ensure that not more than 70% of loans are due to mature within any financial year.

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The maturity structure of financial liabilities is as follows:

31-Mar-14 31-Mar-15

£000 £000

Public Works Loans Board 296,953 261,737

Market debt / LOBOs 151,243 151,227

Temporary borrowing 0 5,400

Total Borrowing 448,197 418,364

PPP/PFI 177,258 183,770

Total PFI 177,258 183,770

Grand Total 625,455 602,134

Less than 1 year 177,442 137,394

Between 1 and 2 years 0 5,067

Between 2 and 5 years 10,000 45,269

Between 5 and 10 years 27,030 22,145

More than 10 years 410,983 392,260

Total 625,455 602,134

Market risk

Interest rate risk - The Council is exposed to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the Council, depending on how variable and fixed interest rates move across differing financial instrument periods. For instance, a rise in variable and fixed interest rates would have the following effects:

borrowings at variable rates – the interest expense charged to the Surplus or Deficit on the Provision of Services will rise

borrowings at fixed rates – the fair value of the liabilities borrowings will fall

investments at variable rates – the interest income credited to the Surplus or Deficit on the Provision of Services will rise

investments at fixed rates – the fair value of the assets will fall

Borrowings are not carried at fair value, so nominal gains and losses on fixed rate borrowings would not impact on the Surplus of Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in Other Comprehensive Income and Expenditure.

The Council has a number of strategies for managing interest rate risk. The Annual Treasury Management Strategy draws together Council’s prudential and treasury indicators and its expected treasury operations, including an expectation of interest rate movements. From this Strategy a treasury indicator is set which provides maximum limits for fixed and variable interest rate exposure. The central treasury team will monitor market and forecast interest rates within the year to adjust exposures appropriately. For instance during periods of falling interest rates, and where economic circumstances make it favourable, fixed rate investments may be taken for longer periods to secure better long term returns, similarly the drawing of longer term fixed rates borrowing would be postponed.

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According to this assessment strategy, at 31 March, if interest rates had been 1% higher with all other variables held constant, the financial effect would be:

£000

Increase in interest payable on variable rate borrowings (100)

Increase in interest receivable on variable rate investments (1,447)

Impact on Surplus or Deficit on the Provision of Services (1,547)

Decrease in fair value of fixed rate investment assets 105

Impact on other Comprehensive Income and Expenditure 105

Decrease in fair value of fixed rate borrowings liabilities (no impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure)

(85,758)

The impact of a 1% fall in interest rates would be as above but with the movements being reversed.

Price risk – The Council, excluding the pension fund, does not generally invest in equity shares or marketable bonds.

Foreign exchange risk – The Council has not financial assets or liabilities denominated in foreign currencies. It therefore has no exposure to loss arising from movements in exchange rates.

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Northamptonshire

Fire & Rescue Services

Firefighters’ Pension

Fund

Statement

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Northamptonshire Fire & Rescue Service Firefighters Pension Fund Statement for year ended 31 March 2015

Fund Account

March 2014

March 2015

£000

Note £000

Income to the Fund:-

Contributions receivable:-

From Employer

2,000

Normal 7 1,766

0

Early Retirements

0

0

Ill Health 8 0

1,313 From Members

9 1,288

Transfers in:-

0 Individual transfers in from other schemes

0

Benefits payable:-

(4,875) Pensions including ill health

(4,794)

(1,621) Commutations and lump sum retirement benefits

(1,621)

Payments to and on account of leavers:-

0 Individual transfers out to other schemes

0

(3,183) Net amount payable for the year (3,361)

3,183 Top up grant receivable from Central Government 10 3,361

0

0

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1 This statement has been prepared in accordance with the Code of Practice on Local Authority Accounting in Great Britain.

2 Two pension schemes operate within the Fund, the 1992 scheme and the 2006

scheme.

3 The Fund is administered and managed according to the statutory requirements set out in the 1992 and 2006 scheme legislation.

4 The Firefighters Pension Schemes are unfunded and as such have no investment

assets. They are funded through employee and employer contributions and Government grant.

5 All firefighter pension related benefits are charged to the Firefighters Pension Fund Account with the exception of costs relating to non member retirement on ill health grounds and all costs relating to injury pensions, which are charged to the Fire Service Operating Account (revenue). The exceptions are shown in the note on page 78. “Pension Costs”.

6 The Fund Account captures income and liabilities relevant to the period shown

and therefore does not take account of liabilities to pay pensions and other benefits after the period end.

7 Normal Employer contributions are made as follows: 1992 scheme 21.3% of pensionable pay. 2006 scheme 11% of pensionable pay

8 For any retirement on ill health grounds the Fire Service is required to make a payment to the Pension Fund from its revenue account. This is payable over 3 years. There were 0 retirements of scheme members on ill health grounds in 2014-15 therefore no charge applies.

Net Assets Statement

March 2014

March 2015

£000

Note

£000

Net current assets and liabilities:-

1,912 Top up grant receivable from Central Government 10

1,018

0 Unpaid pension benefits

0

0 Amount payable to Central Government

0

(1,912) Amount owing to NCC General Fund

(1,018)

0

0

Notes to the Firefighters Pension Fund Statement

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9 Members contributions, for both the 1992 scheme and also the 2006 scheme,

changed to having banded contributions in 2013-14. The bandings are as follows:

FPS

Rates from 01/04/2014 (%) Pensionable pay band

1992 Scheme 2006 Scheme

Up to and including £15,000 11.00 8.50

More than £15,000 and up to and including £21,000 12.20 9.40

More than £21,000 and up to and including £30,000 14.20 10.40 More than £30,000 and up to and including £40,000 14.70 10.90 More than £40,000 and up to and including £50,000 15.20 11.20

More than £50,000 and up to and including £60,000 15.50 11.30

More than £60,000 and up to and including £100,000 16.00 11.70

More than £100,000 and up to and including £120,000 16.50 12.10

More than £120,000 17.00 12.50

10 The balance of £1,018,408 in respect of 2014-15 is due to be paid in July 2015.

11 These accounts have been prepared on an accruals basis.

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Northamptonshire

Local Government Pension Scheme

Accounts

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FUND ACCOUNT AND NET ASSETS STATEMENT

Introduction to the accounts The following comprises the Statement of Accounts for the Northamptonshire Local Government Pension Scheme (The Fund). The accounts cover the financial year from 1 April 2014 to 31 March 2015. These accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting (‘Code of Practice’) in the United Kingdom 2014-15 based on International Financial Reporting Standards (IFRS) as published by the Chartered Institute of Public Finance and Accountancy. The accounts have been prepared on an accruals basis. They do not take account of liabilities to pay pensions and other benefits in the future. The accounts are set out in the following order: Fund Account which discloses the size and nature of financial additions to and withdrawals from the Fund during the accounting period and reconciles the movements in the net assets to the Fund Account. Net Assets Statement which discloses the size and disposition of the net assets of the Fund at the end of the accounting period. Notes to the Accounts which gives supporting accounting policies, detail and analysis concerning the contents of the accounts, together with information on the establishment of the Fund, its membership and actuarial position.

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Fund Account for the year ended 31 March 2015

2013-14 2014-15

£000 Notes £000

Dealings with members, employers and others directly involved in the Fund

(96,163) Contributions 7 (91,846)

(3,180) Transfers in from other Pension Funds 8 (3,634)

(99,343) (95,480)

79,218 Benefits 9 76,785 3,540 Payments to and on account of leavers 10 38,684

82,758 115,469

(16,585) 19,989

5,472 Management expenses 11 7,596 Returns on investments

(29,017) Investment income 12 (30,502) 198 Taxes on income 13 56

(100,539) Profit and losses on disposal of investments and changes in the market value of investments

15a (178,163)

(129,358) Net return on investments (208,609)

(140,471) Net (increase)/decrease in the net assets available for benefits during the year

(181,024)

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Net Assets Statement as at 31 March 2015

2013-14

2014-15

£000

Notes £000

1,633,127 Investment assets 15 1,832,628 31,471 Cash deposits 15 19,409

1,664,598

1,852,037

(4,751) Investment liabilities 15 (2,297) 27,829 Current assets 20 16,551 (4,066) Current liabilities 21 (1,657)

19,012 Net Current Assets 12,597

1,683,610 Net assets of the Fund available to Fund benefits at the period end

1,864,634

1,543,139 Opening net assets as at 1 April 1,683,610

140,471 Net increase/decrease in the net assets available for benefits during the year

181,024

1,683,610 Closing net assets as at 31 March 1,864,634

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Notes to the Accounts

1 Description of the Fund

The Northamptonshire Pension Fund (“the Fund”) is part of the Local Government Pension Scheme and is administered by Northamptonshire County Council. The County Council is the reporting entity for this Pension Fund.

The following description of the Fund is a summary only. For more detail, reference should be made to the Northamptonshire Pension Fund Annual Report 2014-15 and the underlying statutory powers underpinning the scheme, namely the Public Services Pensions Act 2013 and the Local Government Pension Scheme (LGPS) Regulations.

a) General

The Fund is governed by the Public Services Pensions Act 2013. The Fund is administered in accordance with the following secondary legislation:

- the LGPS Regulations 2013 (as amended);

- the LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 (as amended);

- the LGPS (Management and Investment of Funds) Regulations 2009.

It is a contributory defined benefit pension scheme administered by Northamptonshire County Council to provide pensions and other benefits for pensionable employees of Northamptonshire County Council, the district councils in Northamptonshire County and a range of other scheduled and admitted bodies within the county area. Teachers, police officers and firefighters are not included as they come within other national pension schemes.

The Fund is overseen by the Northamptonshire Pensions Committee which is a committee of Northamptonshire County Council.

b) Membership

Membership of the LGPS is voluntary and employees are free to choose whether to join the scheme, remain in the scheme or make their own personal arrangements outside the scheme.

Organisations participating in the Northamptonshire Pension Fund include:

- Scheduled bodies, which are local authorities and similar bodies whose staff are automatically entitled to be members of the Fund.

- Admitted bodies, which are other organisations that participate in the Fund under an admission agreement between the Fund and the relevant organisation. Admitted bodies include voluntary, charitable and similar bodies or private contractors undertaking a local authority function following outsourcing to the private sector.

As at 31 March 2015 there are 218 (2014: 181) employer organisations within Northamptonshire Pension Fund including the County Council itself, an increase of 37,as detailed over the page:

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31 March 2014 31 March 2015 Number of employers with active members 181 218

Number of employees in scheme County Council 8,077 8,123 Other Employers 10,257 11,284

Total 18,334 19,407

Number of Pensioners County Council 7,678 7,790 Other Employers 6,477 6,631

Total 14,155 14,421

Deferred Pensioners County Council 13,937 15,103 Other Employers 6,950 8,274

Total 20,887 23,377

c) Funding

Benefits are funded by contributions and investment earnings. Currently the level of contribution income is sufficient to fund regular benefit payments. Contributions are made by active members of the Fund in accordance with the LGPS Regulations 2013 (as amended) and range from 5.5% to 12.5% of pensionable pay for the financial year ended 31 March 2015. Employee contributions are matched by employers’ contributions which are set based on triennial actuarial funding valuations. The last such valuation was at 31 March 2013. Employers’ contributions comprise a percentage rate on active payroll between 11% and 25.1% and deficit payments of fixed cash amounts set for each employer, as part of the triennial funding valuation.

d) Benefits

Pension benefits under the LGPS are based on final pensionable pay and length of pensionable service, summarised below:

Service pre 1 April 2008 Service from 1 April 2008 to 31 March 2014

Pension Each year worked is worth 1/80

x final pensionable salary. Each year worked is worth 1/60 x final pensionable salary

Lump Sum Automatic lump sum of 3 x

Salary. In addition, part of the annual pension can be exchanged for a one off tax free cash payment. A lump sum of £12 is paid for each £1 of pension given up.

No automatic lump sum. Part of the annual pension can be exchanged for a one off tax free cash payment. A lump sum of £12 is paid for each £1 of pension given up.

e) Career Average Revalued Earnings (CARE) scheme

From 1 April, the scheme became a career average scheme, whereby members accrue benefits based upon 1/49th of each year’s pensionable pay which creates a pension pot which is revalued annually by CPI until retirement.

There are a range of other benefits provided under the Scheme including early retirement, disability pensions and death benefits.

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For more details, please refer to the Northamptonshire Pension Fund scheme handbook available from LGSS Pension Services based at John Dryden House, Northampton or online at pensions.northamptonshire.gov.uk

Benefits are index linked in order to keep pace with inflation. In June 2010, the Government announced that the method of indexation would change from the Retail Prices Index to the Consumer Prices Index. This change took effect from 1 April 2011.

2 Basis of Preparation

The Statement of Accounts summarises the Fund’s transactions for the 2014-15 financial year and its position at year end as at 31 March 2015. The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2014-15 which is based upon International Financial Reporting Standards (IFRS), as amended for the UK public sector.

The accounts summarise the transactions of the Fund and report on the net assets available to pay pension benefits. The accounts do not take account of obligations to pay pensions and benefits which fall due after the end of the financial year. The actuarial present value of promised retirement benefits, valued on an International Accounting Standard (IAS) 19 basis, is disclosed at Note 19 of these accounts.

3 Summary of Significant Accounting Policies

Fund account – revenue recognition

a) Contribution income

Normal contributions, both from the members and from the employer, are accounted for on an accruals basis at the percentage rate recommended by the Fund actuary in the payroll period to which they relate.

Employers’ augmentation contributions and pensions strain contributions are accounted for in the period in which the liability arises. Any amount due in year but unpaid will be classed as a current financial asset. Amounts not due until future years are classed as long term financial assets.

b) Transfers to and from other schemes

Transfer values represent the amounts received and paid during the year for members who have either joined or left the Fund during the financial year are calculated in accordance with the Local Government Pension Scheme Regulations (see notes 8 and 10).

Individual transfers in/out are accounted for on an accruals basis, which is normally when the member liability is accepted or discharged.

Transfers in from members wishing to use the proceeds of their additional voluntary contributions (see below) to purchase scheme benefits are accounted for on a receipts basis and are included in Transfers In (see Note 8).

Bulk (group) transfers are accounted for on an accruals basis in accordance with the terms of the transfer agreement.

146

c) Investment income

i) Interest income

Interest income is recognised in the Fund Account as it accrues, using the coupon rate of the financial instrument as at the date of acquisition or origination. Income includes the amortisation of any discount or premium, transaction costs or other differences between the initial carrying amount of the instrument and its amount at maturity calculated on an effective interest rate basis.

ii) Dividend income

Dividend income is recognised on the date the shares are quoted ex dividend. Any amount not received by the end of the reporting period is disclosed in the Net Assets Statement as a current financial asset.

iii) Distributions from pooled funds

Distributions from pooled funds are recognised at the date of issue. Any amount not received by the end of the reporting period is disclosed in the net assets statement as a current financial asset. This process may vary according to the type of pooled funds.

iv) Movement in the net market value of investments

Changes in the net market value of investments (including investment properties) are recognised as income and comprise all realised and unrealised profits/losses during the year.

Fund account – expense items

d) Benefits payable

Pensions and lump sum benefits payable include all amounts known to be due as at the end of the financial year. Any amounts due but unpaid are disclosed in the net assets statement as current liabilities.

e) Taxation

The Fund is a registered public service scheme under section 1(1) of Schedule 36 of the Finance Act 2004 and as such is exempt from UK income tax on interest received and from capital gains tax on the proceeds of investments sold. Income from overseas investments suffers withholding tax in the country of origin, unless exemption is permitted. Irrecoverable tax is accounted for as a Fund expense as it arises.

f) Management expenses

All administrative expenses are accounted for on an accruals basis. All staff and associated costs of the pension’s administration team are charged to the Fund. Management, accommodation and other overheads are apportioned to the Fund in accordance with Council policy.

g) Investment management expenses

All investment management expenses are accounted for on an accruals basis.

Fees of the external investment managers and custodian are agreed in the respective mandates governing their appointments. Broadly, these are based on the market value of the investments under their management and therefore increase or reduce as the value of these investments change.

In addition the Fund has negotiated with the following managers that an element of their fee be performance related:

- Wellington Management International Limited

147

- Baillie Gifford & Co - Skagen Funds - CBRE Global Investment Partners Limited - Majedie Asset Management Limited - Newton Investment Management Limited

Performance related fees incurred in the year are shown in Note 14.

Where an investment manager’s fee note has not been received by the balance sheet date, an estimate based upon the market value of their mandate as at the end of the year is used for inclusion in the Fund account.

The cost of obtaining investment advice from external consultants is included in investment support costs.

A proportion of the Council’s costs representing management time spent by officers on investment management are also charged to the Fund.

h) Financial assets

Financial assets are included in the Net Assets Statements on a fair value basis as at the reporting date. A financial asset is recognised in the net assets statement on the date the Fund becomes party to the contractual acquisition of the asset. From this date any gains or losses arising from changes in the fair value of asset are recognised by the Fund.

The values of investments as shown in the Net Assets Statement have been determined as follows:

Market quoted investments

The value of an investment for which there is a readily available market price is determined by the bid market price ruling on the final day of the accounting period.

Fixed interest securities

Fixed interest securities are recorded at net market value based on their current yields.

Unquoted investments

The fair value of investments for which market quotations are not readily available is determined as follows:

- Valuations of delisted securities are based on the last sale price prior to delisting, or where subject to liquidation, the amount the Council expects to receive on wind up, less estimated realisation costs.

- Securities subject to takeover offer – the value of the consideration offered under the offer, less estimated realisation costs.

- Investments in unquoted property and infrastructure pooled funds are valued at the net asset value or a single price advised by the Fund manager.

- Investments in private equity funds and unquoted listed partnerships are valued based on the Fund’s share of the net assets in the private equity fund or limited partnership using the latest financial statements published by the respective Fund Managers in accordance with the guidelines set out by the British Venture Capital Association.

Limited partnerships

Fair value is based on the net asset value ascertained from periodic valuations provided by those controlling the partnership.

148

Pooled investment vehicles

Pooled investment vehicles are valued at closing bid price if both bid and offer prices are published; or if single priced, at the closing single price. In the case of pooled investment vehicles that are accumulation funds, change in market value also includes income which is reinvested in the Fund, net of applicable withholding tax.

i) Foreign currency transactions

Dividends, interest and purchases and sales of investments in foreign currencies have been accounted for at the spot market rates at the date of transaction. End of year spot market exchange rates are used to value cash balances held in foreign currency bank accounts, market values of overseas investments and purchases and sales outstanding at the end of the reporting period.

j) Derivatives

The Fund uses derivative financial instruments to manage its exposure to specific risks arising from its investment activities. The Fund does not hold derivatives for speculative purposes.

Derivative contract assets are fair valued at bid prices and liabilities are fair valued at offer prices. Changes in the fair value of derivative contracts are included in change in market value.

The value of futures contracts is determined using exchange prices at the reporting date. Amounts due from or owed to the broker are the amounts outstanding in respect of the initial margin and variation margin.

The future value of forward currency contracts is based on market forward exchange rates at the year end date and determined as the gain or loss that would arise if the outstanding contract were matched at the year end with an equal and opposite contract.

k) Cash and cash equivalents

Cash comprises cash in hand and demand deposits.

Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to minimal risk of changes in value.

l) Financial liabilities

The Fund recognises financial liabilities at fair value as at the reporting date. A financial liability is recognised in the Net Assets Statement on the date the Fund becomes party to the liability. From this date any gains or losses arising from changes in the fair value of the liability are recognised by the Fund.

m) Contingent Liabilities

Provisions are measured at the best estimate (including risks and uncertainties) of the expenditure required to settle the present obligation, and reflects the present value of expenditures required to settle the obligation where the time value of money is material.

n) Actuarial present value of promised retirement benefits

The actuarial present value of promised retirement benefits is assessed on a triennial basis by the scheme actuary in accordance with the requirements of IAS 19 and relevant actuarial standards.

As permitted under IAS 26, the Fund has opted to disclose the actuarial present value of promised retirement benefits by way of a note to the net assets statement (Note 19).

149

o) Additional voluntary contributions

Northamptonshire Pension Fund provides an additional voluntary contributions (AVC) scheme option for scheme members, the assets of which are invested separately from those of the Pension Fund by the AVC provider. The Fund has appointed Prudential and Standard Life as its AVC providers. AVCs are paid to the AVC provider by employers and are specifically for providing additional benefits for individual contributors. Each AVC contributor receives an annual statement showing the amount held in their account and the movements in the year.

AVCs are not included in the accounts in accordance with section 4(2)(b) of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 (SI 2009/3093) but are disclosed as a note only (Note 22).

4 Critical Judgements in applying Accounting Policies

Unquoted private equity investments

It is important to recognise the highly subjective nature of determining the fair value of private equity investments. They are inherently based on forward looking estimates and judgements involving many factors. Unquoted private equities are valued by the investment managers using guidelines set out by the British Venture Capital Association. The value of unquoted private equities at 31 March 2015 was £1.4m (£1.5m at 31 March 2014).

Pension Fund liability

The Pension Fund liability is calculated every three years by the Fund’s appointed actuary, with annual updates in the intervening years. The methodology used is in line with accepted guidelines and in accordance with IAS 19. Assumptions underpinning the valuations are agreed with the actuary and are summarised in Note 18. This estimate is subject to significant variances based on changes to the underlying assumptions.

150

5 Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty

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

The items in the Net Assets Statement at 31 March 2015 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:

Item Uncertainties Effect if actual results differ from assumptions

Actuarial present value of promised retirement benefits

Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rates at which salaries and pensions are projected to increase, changes in retirement ages, mortality rates and expected returns on Pension Fund assets. An independent firm of consulting actuaries is engaged to provide the Fund with expert advice about the assumptions to be applied.

The effects on the net pension liability of changes in individual assumptions can be measured. For instance, a 0.5% increase in the discount rate assumption would result in a decrease in the pension liability of £185 million. A 0.25% increase in assumed earnings inflation would increase the value of liabilities by approximately £25m, and a one year increase in assumed life expectancy would increase the liability by approximately £61m.

Private equity Private equity investments are valued at fair value in accordance with British Venture Capital Association guidelines. These investments are not publicly listed and as such there is a degree of estimation involved in the valuation.

The total private equity investments in the financial statements are £1.4 million. There is a risk that this investment may be under or overstated in the accounts.

Investment Assets Different pricing methods can be used by the Custodian compared to the Fund Manager, which can result in different valuations of the assets.

The Custodian reconciles to the Fund Manager to 20 basis points.

6 Events After the Balance Sheet Date

There have been no events since 31 March 2015, and up to the date when these accounts were authorised that require any adjustments to these accounts.

151

7 Contributions Receivable

By category

2013-14 2014-15 £000 £000

76,012 Employers 73,100 20,151 Members 18,746

96,163 Total 91,846

By authority

2013-14 2014-15 £000 £000

31,557 Northamptonshire County Council 31,702 53,536 Scheduled Bodies * 52,259 11,070 Admitted Bodies 7,885

96,163 Total 91,846

* Schools included under Scheduled Bodies

8 Transfers In From Other Pension Funds

2013-14 2014-15 £000 £000

0 Group transfers 0 3,180 Individual transfers 3,634

3,180 Total 3,634

Transfers in from other Pension Funds are contingent on positive transfer elections from new employees with previous pension rights available to transfer. In the current financial climate there is an ongoing restriction on new employees within public sector employers and therefore transfer applications. Significantly, LGSS also introduced a new Transfer In business process in the 2012-13 year with certain self service aspects, passing specific responsibilities from the administering authority to the member. This was predicted to reduce the volume of transfer in elections.

9 Benefits Payable

By category

2013-14 2014-15 £000 £000

63,823 Pensions 62,538 13,478 Commutation and lump sum retirement benefits 11,746 1,917 Lump sum death benefits 2,501

79,218 Total 76,785

By authority

2013-14 2014-15 £000 £000

32,560 Northamptonshire County Council 34,746 42,681 Scheduled Bodies * 37,407 3,977 Admitted Bodies 4,632

79,218 Total 76,785

* Schools included under Scheduled Bodies

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10 Payments To and On Account of Leavers

2013-14 2014-15 £000 £000

11 Refunds to members leaving service 80 0 Payments for members joining state scheme 42 0 Group transfers 30,450

3,529 Individual transfers 8,112

3,540 Total 38,684

Individual transfers are dependent on individuals having an approved pension arrangement to transfer their LGPS benefits to after leaving the Northamptonshire Fund and also the relative merits of that destination arrangement in comparison with the LGPS. The current financial climate reduces the opportunity for individuals to join secure pension schemes to which they may wish to transfer their accrued LGPS benefits.

Refunds to members leaving services are extremely sensitive to fluctuations as a result of the small relative value. A lack of new staff would contribute to a reduced figure as would the raising of general pensions awareness through the automatic enrolment campaign.

Group transfers in 2014-15 represent a payment in March 2015 in connection with the transfer of the administration of pensions for the Probation Service to the Greater Manchester Pension Fund.

11 Management Expenses

2013-14 2014-15 £000 £000

1,805 Administrative costs 1,934 3,301 Investment expenses (Note 14) 5,331

366 Oversight and governance costs 331

5,472 Total 7,596

12 Investment Income

2013-14 2014-15 £000 £000

478 Fixed interest securities 491 19,855 Equities 20,774 4,719 Pooled investments 3,535 3,495 Pooled property investments 5,408

154 Interest on cash deposits 117

316 Other (includes stock lending and commission recapture)

177

29,017 Total 30,502

In 2014-15 investment income has been reclassified to be consistent with the classification of investments in Note 15. Prior period values have been re-presented accordingly.

13 Taxes on Income

2013-14 2014-15 £000 £000 198 Withholding tax – equities 56

198 Total 56

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14 Investment Expenses

2013-14 2014-15 £000 £000

3,058 Management fees 5,212 243 Investment support costs 239

3,301 Total 5,451

Management fees include performance related fees of £2.2m in 2014-15 (2013-14: £1.6m).

15 Investments

Market value Market value 31 March 2014 31 March 2015

£000 £000 Investment assets

45,678 Index linked securities 54,147 646,422 Equities 704,743 821,361 Pooled investments 916,894 113,051 Pooled property investments 150,173

1,523 Private equity/infrastructure 1,432 Derivative contracts:

20 Futures 0

58 Forward currency contracts 249

31,471 Cash deposits 19,409 2,787 Investment income due 3,515 1,397 Amounts receivable for sales 1,475

830 Amounts receivable for pending spot FX 0

1,664,598 Total investment assets 1,852,037

Investment liabilities Derivative contracts:

(7) Forward currency contracts (221)

(3,916) Amounts payable for purchases (2,074)

(828) Amounts payable for pending spot FX (2)

(4,751) Total investment liabilities (2,297)

1,659,847 Net investment assets 1,849,740

During 2014-15 investments in Fixed Interest Securities were reclassified to Pooled Investments. Values at 31 March 2014 have been re-presented accordingly.

154

15a: Reconciliation of movements in investments and derivatives

Market value

1 April 2014

Purchases during the

year and derivative payments

Sales during the

year and derivative

receipts

Change in market

value during the

year

Market value

31 March 2015

£000 £000 £000 £000 £000 Index linked securities 45,678 2,978 (2,544) 8,035 54,147 Equities 646,422 215,304 (215,014) 58,031 704,743 Pooled investments 821,361 37,631 (35,552) 93,454 916,894 Pooled property

investments 113,051 32,228 (12,839) 17,733 150,173

Private equity/ infrastructure

1,523 121 (63) (149) 1,432

1,628,035 288,262 (266,012) 177,104 1,827,389

Derivative contracts:

Futures 20 0 (129) 109 0

Forward currency contracts

51 312 (1,514) 1,179 28

Spot currency contracts

0 35 0 (37) (2)

1,628,106 288,609 (267,655) 178,355 1,827,415

Other investment balances:

Cash deposits 31,471 (190) 19,409

Amounts receivable for sales of investments

1,397 5 1,475

Investment income due

2,787 0 3,515

Amounts payable for purchases of investments

(3,914) (7) (2,074)

Net investment assets 1,659,847 178,163 1,849,740

During 2014-15 investments in Fixed Interest Securities were reclassified to Pooled Investments. Values at 31 March 2014 have been re-presented accordingly.

Transaction costs are included in the cost of purchases and in sale proceeds. They include costs charged directly to the Fund, such as fees, commissions, stamp duty and other fees.

Transaction costs incurred during the year total £896k (£1,083k in 2013-14). In addition to these costs, indirect costs are incurred through the bid offer spread on investments within pooled investments.

155

Market value

1 April 2013

Purchases during the

year and derivative payments

Sales during the

year and derivative

receipts

Change in market

value during the

year

Market value

31 March 2014

£000 £000 £000 £000 £000 Index linked securities 42,950 11,103 (6,194) (2,181) 45,678 Equities 595,072 222,842 (240,748) 69,256 646,422 Pooled investments 768,606 75,714 (50,638) 27,679 821,361 Pooled property

investments 78,475 56,617 (29,023) 6,982 113,051

Private equity/infrastructure

1,798 60 0 (335) 1,523

1,486,901 366,336 (326,603) 101,401 1,628,035

Derivative contracts:

Futures (44) 0 (36) 100 20

Forward currency contracts

818 2,720 (3,586) 98 51

1,487,675 369,056 (330,225) 101,600 1,628,106

Other investment balances:

Cash deposits 31,035 (62) 31,471

Amounts receivable for sales of investments

879 (3) 1,397

Investment income due 2,855 (43) 2,787

Amounts payable for purchases of investments

(1,074) 0 (3,914)

Net investment assets 1,521,370 101,492 1,659,847

Payments to managers: 54 (953) (9,501)

1,521,424 100,539 1,650,346

During 2014-15 investments in Fixed Interest Securities were reclassified to Pooled Investments. Movements during 2013-14 have been re-presented accordingly.

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15b: Analysis of investments (excluding derivative contracts)

31 March 2014 31 March 2015 £000 £000

Index linked securities UK

45,678 Public sector quoted 54,147 0 Corporate quoted 0

45,678 54,147

Equities UK

379,407 Quoted 395,956 Overseas

267,015 Quoted 308,787 0 Unquoted 0

646,422 704,743

Pooled funds – additional analysis UK

179,517 Equity 160,832

179,517 160,832

Overseas

257,131 Fixed income unit trust 276,515 384,712 Equity 479,497

641,844 756,012

113,051 Pooled Property Investments 150,173

1,523 Venture Capital 1,432 0 Cash funds 50

114,574 151,655

1,628,035 Total 1,827,389

During 2014-15 investments in Fixed Interest Securities were reclassified to Pooled Investments and certain equity pooled funds were reclassified from UK to Overseas. Values at 31 March 2014 have been re-presented accordingly.

157

Analysis of derivatives

Objectives and policies for holding derivatives

Most of the holding in derivatives is to hedge liabilities or hedge exposures to reduce risk in the Fund. Derivatives maybe used to gain exposure to an asset more efficiently than holding the underlying asset. The use of derivatives is managed in line with the investment management agreement between the Fund and the various investment managers.

Forward foreign currency

In order to maintain appropriate diversification and to take advantage of overseas investment returns, a portion of the Funds quoted equity portfolio is in overseas stock markets. To reduce the volatility associated with fluctuating currency rates, the Fund has a passive currency programme in place managed by the Fund managers.

There is no specified requirement to use currency hedging within the Fund’s Investment Management Agreements. Instead, the Fund managers use their discretion as to whether or not any currency hedging should be used to mitigate any potential risk.

Settlement Currency bought

Local Value Currency

sold Local Value

Asset Value

Liability Value

Currency 000s

Currency

000s £000 £000

Up to one month GBP 3,072 EUR (4,005) 173 0

Up to one month JPY 1,428,778 USD (12,061) 0 (98)

Up to one month USD 12,029 JPY (1,428,778) 76 0

One to six months GBP 2,130 EUR (2,951) 0 (9)

One to six months GBP 13,057 JPY (1,584,536) 0 (114)

Total

249

(221)

Net forward currency contracts at 31 March 2015 28

Prior Year Comparative

Open forward currency contracts at 31 March 2014

58 (7)

Net forward currency contracts at 31 March 2014 51

Futures

Type Expires Economic Exposure

Market Value 31 March 2014

Economic Exposure

Market Value 31 March 2015

£000 £000 £000 £000

UK Equity Futures

Less than one year

3,403 20 0 0

Total Assets

20 0

Liabilities

UK Equity Futures

Less than one year

0 0 0 0

Total Liabilities

0 0

Net Futures

20 0

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Investments analysis by Fund manager

Market value 31 March 2014 Market value 31 March 2015

£000 % £000 %

532,943 32.2 UBS 603,451 32.6

303,298 18.3 Wellington 331,208 17.9

257,632 15.5 Newton 301,308 16.3

236,176 14.2 Majedie 231,685 12.5

131,550 7.9 Baillie Gifford 142,161 7.7

113,417 6.8 CBRE 147,852 8.0

83,190 5.0 Skagen 88,780 4.8

1,523 0.1 Catapult 1,432 0.1

118 Cash 1,863 0.1

1,659,847 100.0 1,849,740 100.0

All the above companies are registered in the United Kingdom.

The following investments represent more than 5% of the net assets of the scheme

Security

Market value 31

March 2014 £000

% of total Fund

Market value 31

March 2015 £000

% of total Fund

UBS Life World Equity Tracker 301,522 18.2 355,364 19.2

Baillie Gifford Diversified Growth Fund

131,550 7.9 142,160 7.7

Wellington Sterling Core Bond Plus Portfolio GBP

91,398 5.5 105,101 5.7

Wellington Management Port (Cayman) - Global Strategic Class GBP-A Dist (GBP)

89,084 5.4 92,034 5.0

Skagen Funds Global II

83,190 5.0 88,880 4.8

15c: Stock lending

The Fund strategy statement sets the parameters for the Fund’s stock lending programme. At the year end, the value of quoted equities on loan was £67.7m (31 March 2014: £52.2m). These equities continue to be recognised in the Fund’s financial statements.

Counterparty risk is managed through holding collateral at the Fund’s Custodian. As at 31 March 2015, the Custodian held collateral at fair value of £74.6m (31 March 2014: £55.7m). Collateral consists of acceptable securities and Government debt.

Stock lending commissions are remitted to the Fund via the Custodian. During the period the stock is on loan, the voting rights of the loaned stock pass to the borrower.

There are no liabilities associated with the loaned assets.

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16 Financial Instruments

16a: Classification of financial instruments

Accounting policies describe how different asset classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying amounts of financial assets and liabilities (excluding cash) by category and Net Assets Statement heading. No financial assets were reclassified during the accounting period.

Market value 31 March 2014 Market value 31 March 2015

Designated as fair value through profit

and loss

Loans and receivables

Financial liabilities at amortised

cost

Designated as fair value

through profit and

loss

Loans and receivables

Financial liabilities at

amortised cost

£000 £000 £000 £000 £000 £000

Financial assets

45,678 Index linked securities

54,147

646,422 Equities 704,743

821,361 Pooled investments

916,894

113,051 Pooled property investments

150,173

1,523 Private Equity/ infrastructure

1,432

78 Derivative contracts

249

31,471 Cash 19,409

2,227 Other investment balances

1,475

2,787 Debtors 3,515

1,630,340 34,258 1,829,113 22,924

Financial Liabilities

(7) Derivative contracts

(223)

(4,744) Creditors (2,074)

(7) (4,744) (223) (2,074)

1,630,333 34,258 (4,744) 1,828,890 22,924 (2,074)

During 2014-15 investments in Fixed Interest Securities were reclassified to Pooled Investments. Values at 31 March 2014 have been represented accordingly. In addition, creditors have been re-categorised as Financial Liabilities at Amortised Cost and the prior period presentation amended accordingly.

160

16b: Net gains and losses on financial instruments

Market value 31 March 2014

Market value 31 March 2015

£000 £000

Financial Assets 101,400 Fair value through profit and loss 177,104

5 Loans and receivables 5 Financial liabilities

199 Fair value through profit and loss 1,288 (113) Loans and receivables (234)

101,491 Total 178,163

16c: Fair value of financial instruments and liabilities

The following table summarises the carrying values of financial assets and liabilities by class of instrument compared with their fair values.

Market value

31 March 2014 Market value

31 March 2015 Carrying

value Fair value

Carrying value

Fair value

£000 £000 £000 £000 Financial Assets

1,630,340 1,630,340 Fair value through profit and loss 1,829,113 1,829,113 34,258 34,258 Loans and receivables 22,924 22,924

1,664,598 1,664,598 Total financial assets 1,852,037 1,852,037

Financial liabilities

(7) (7) Fair value through profit and loss (223) (223)

(4,744)

(4,744) Financial liabilities measured at amortised cost

(2,074)

(2,074)

(4,751) (4,751) Total financial liabilities (2,297) (2,297)

The Authority has not entered into any financial guarantees that are required to be accounted for as financial instruments.

16d: Valuation of financial instruments carried at fair value

The valuation of financial instruments has been classified into three levels, according to the quantity and reliability of information used to determine fair values.

Level 1

Financial instruments at Level 1 are those where the fair values are derived from unadjusted quoted prices in active markets for identical assets and liabilities. Products classified as level 1 comprise of quoted equities, quoted fixed securities, quoted index linked securities and unit trusts.

Listed investments are shown as bid prices. The bid value of the investment is based on the bid market quotation of the relevant stock exchange.

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Level 2

Financial instruments at Level 2 are those where quoted market prices are not available; for example, where an instrument is traded in a market that is not considered to be active, or where the valuation techniques are used to determine fair value and where techniques use inputs that are based significantly on observable market data.

Level 3

Financial instruments at Level 3 are those where at least one input that could have a significant effect on the instrument’s valuation is not based on observable market data.

Such instruments would include unquoted equity investments and hedge fund of funds, which are valued using various valuation techniques that require significant judgement in determining appropriate assumptions.

The values of the investment in private equity are based on valuations provided by the general partners to the private equity funds in which the Northamptonshire County Pension Fund has invested.

These valuations are prepared in accordance with the International Private Equity and Venture Capital Valuation Guidelines, which follow the valuation principles of IFRS and US GAAP. Valuations are usually undertaken annually at the end of December. Cash flow adjustments are used to roll forward the valuations to 31 March as appropriate.

The values of the investment in hedge funds are based on the net asset value provided by the Fund manager. Assurances over the valuation are gained from the independent audit of the value.

The following table provides an analysis of the financial assets and liabilities of the Pension Fund grouped into Levels 1 to 3, based on the level at which the fair value is observable.

Quoted

Market Price

Using observable

inputs

With significant unobservable

inputs

Values at 31 March 2015 Level 1 Level 2 Level 3 Total £000 £000 £000 £000 Financial assets Financial assets at fair value through profit and loss

827,046 847,353 154,714 1,829,113

Loans and receivables 22,924 0 0 22,924

Total financial assets 849,970 847,353 154,714 1,852,037

Financial Liabilities Financial liabilities at fair value through profit and loss

(223) 0 0 (223)

Financial liabilities at amortised cost

(2,074) 0 0 (2,074)

Total financial liabilities (2,297) 0 0 (2,297)

Net financial assets 847,673 847,353 154,714 1,849,740

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Quoted

Market Price

Using observable

inputs

With significant unobservable

inputs

Values at 31 March 2014 Level 1 Level 2 Level 3 Total £000 £000 £000 £000 Financial assets Financial assets at fair value through profit and loss

755,728 753,905 120,707 1,630,340

Loans and receivables 34,258 0 0 34,258

Total financial assets 789,986 753,905 120,707 1,664,598

Financial Liabilities Financial liabilities at fair value through profit and loss

(7) 0 0 (7)

Financial liabilities at amortised cost

(4,744) 0 0 (4,744)

Total financial liabilities (4,751) 0 0 (4,751)

Net financial assets 785,235 753,905 120,707 1,659,847

17 Nature and Extent of Risks Arising From Financial Instruments

Risk and risk management

The Fund’s primary long term risk is that the Fund’s assets will fall short of its liabilities (i.e. promised benefits payable to members). Therefore the aim of investment risk management is to minimise the risk of an overall reduction in the value of the Fund and to maximise the opportunity for gains across the whole Fund portfolio. The Fund achieves this through asset diversification to reduce exposure to market risk (price risk, currency risk and interest rate risk) and credit risk to an acceptable level. In addition, the Fund manages its liquidity risk to ensure there is sufficient liquidity to meet the Fund’s forecast cash flows. The Council manages these investment risks as part of its overall Pension Fund risk management programme.

Responsibility for the Fund’s risk management strategy rests with the Pensions Committee. Risk management policies are established to identify and analyse the risks faced by the Council’s pensions operations. Policies are reviewed regularly to reflect changes in activity and in market conditions.

a) Market risk

Market risk is the risk of loss from fluctuations in equity and commodity prices, interest and foreign exchange rates and credit spreads. The Fund is exposed to market risk from its investment activities, particularly through its equity holdings. The level of risk exposure depends on market conditions, expectations of future price and yield movements and the asset mix.

The objective of the Fund’s risk management strategy is to identify, manage and control market risk exposure within acceptable parameters, whilst optimising the return on risk.

In general, excessive volatility in market risk is managed through the diversification of the portfolio in terms of geographical and industry sectors and individual securities. To mitigate market risk, the Council and its investment advisors undertake appropriate monitoring of market conditions and benchmark analysis.

The Fund manages these risks in two ways:

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- the exposure of the Fund to market risk is monitored through a factor risk analysis, to ensure that risk remains within tolerable level;

- Specific risk exposure is limited by applying risk weighted maximum exposures to individual investments.

Equity futures contracts and exchange traded option contracts on individual securities may also be used to manage market risk on equity investments. It is possible for over-the-counter equity derivative contracts to be used in exceptional circumstances to manage specific aspects of market risk.

Other price risk

Other price risk represents the risk that the value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or foreign exchange risk), whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all such instruments in the market.

The Fund is exposed to share and derivative price risk. This arises from investments held by the Fund for which the future price is uncertain. All securities investments present a risk of loss of capital. Except for shares sold short, the maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. Possible losses from shares sold short are unlimited. The Fund’s investment managers mitigate this price risk through diversification and the selection of securities and other financial instruments is monitored by the council to ensure it is within limits specified in the Fund investment strategy.

Other price risk – sensitivity analysis

Potential price changes are determined based on the observed historical volatility of asset class returns. ‘Riskier’ assets such as equities will display greater potential volatility than bonds as an example, so the overall outcome will depend largely on the Fund’s asset allocations.

The potential volatilities are consistent with a one standard deviation movement in the change in value of the assets over the last three years. This can then be applied to the period end asset mix as follows:

Asset Type Final Market

Value £000

Percentage Change

%

Value on Increase

£000

Value on Decrease

£000

UK Equities 414,627 10.6 458,660 370,594 Global Equities 788,284 9.2 860,727 715,841 Bonds & Index-linked 330,662 3.7 342,930 318,394 Diversified Growth 142,161 4.0 147,847 136,475 Alternatives 1,432 8.0 1,546 1,318 Property 150,173 3.4 155,204 145,142 Net derivative assets 26 0.0 26 26 Investment income due 3,515 0.0 3,515 3,515

Cash 19,459 0.0 19,459 19,459

Amounts receivable for sales of investments

1,475

0.0

1,475

1,475

Amounts payable for purchases of investments

(2,074)

0.0

(2,074)

(2,074) Total Assets 1,849,740 6.35 1,967,198 1,732,282

Note: The percentage change for Total Assets includes the impact of correlation across asset classes

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Interest rate risk

The Fund invests in financial assets for the primary purpose of obtaining a return on investments. These investments are subject to interest rate risks, which represent the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Fund’s interest rate risk is routinely monitored by the Council and its investment consultant in accordance with the Fund’s risk management strategy, including monitoring the exposure to interest rates and assessment of actual interest rates against the relevant benchmarks.

The Fund’s direct exposure to interest rate movements as at 31 March 2015 and 31 March 2014 is set out below. These disclosures present interest rate risk based on the underlying financial assets at fair value:

Asset type As at 31 March 2015 As at 31 March 2014

£000 £000

Cash and cash equivalents 19,409 31,471

Cash balances 8,252 19,817

Fixed interest securities 54,147 45,678

Total 81,808 96,966

Interest rate risk sensitivity analysis

The Council recognises that interest rates can vary and can affect both income to the Fund and the value of the net assets available to pay benefits. An 80 basis point (BPS) movement in interest rates is consistent with the level of sensitivity applied as part of the Fund’s risk management strategy.

The Fund’s investment consultant has advised that long-term average rates are expected to move less than 80 basis points from one year to the next and experience suggests that such movements are likely.

The analysis that follows assumes that all other variables, in particular exchange rates, remain constant, and shows the effect in the year on the net assets available to pay benefits of a +/- 100 BPS change in interest rates:

Asset type Carrying amount as at 31 March 2015

Change in year in the net assets available to pay benefits

£000

+100 BPS £000

-100 BPS £000

Cash and cash equivalents 19,409 194 (194)

Cash balances 8,252 83 (83)

Fixed interest securities 54,147 541 (541)

Total change in assets available 81,808 818 (818)

Asset type Carrying amount as at 31 March 2014

Change in year in the net assets available to pay benefits

£000

+100 BPS £000

-100 BPS £000

Cash and cash equivalents 31,471 315 (315)

Cash balances 19,817 198 (198)

Fixed interest securities 45,678 457 (457)

Total change in assets available 96,966 970 (970)

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Currency risk

There are two approaches to determining potential currency risk.

The first method determines the potential volatility of the aggregate currency exposure within the Fund at the period end and applies this single outcome to all non UK assets. In order to calculate this, a currency basket is created based on the Fund’s currency mix.

Repeating this for all of the months in our measurement period allows a measurement of the observed volatility of this unique currency basket’s changes relative to GBP. In the Northamptonshire Fund, the result is 5.71% p.a. This change is applied to the Fund’s overseas assets as follows;

Asset Type Value

£000

Percentage Change

%

Value on Increase

£000

Value on Decrease

£000

Overseas Equities 791,380 5.71 836,538 746,222 Overseas Fixed Interest 276,515 5.71 292,293 260,736

Total overseas assets 1,067,895 1,128,831 1,006,958

b) Liquidity risk

Liquidity risk represents the risk that the Fund will not be able to meet its financial obligations as they fall due. The Council therefore takes steps to ensure that the Pension Fund has adequate cash resources to meet its commitments. This will particularly be the case for cash from the cash flow matching mandates from the main investment strategy to meet the pensioner payroll costs and also cash to meet investment commitments.

The Council has immediate access to its Pension Fund cash holdings, with the exception of holdings that are fixed when the deposit is placed.

The Fund currently generates surplus cash from its normal activities and therefore does not have access to an overdraft facility. The surplus cash position of the Fund is reviewed periodically and a forecast is also provided as part of its cash management strategy.

The Fund defines liquid assets as assets that can be converted to cash within three months. Illiquid assets are those assets which will take longer than three months to convert into cash. As at 31 March 2015 the value of illiquid assets was £151.6m, which represented 8.2% of the total Fund assets (31 March 2014: £113.4m, which represented 6.8% of the total Fund assets).

Management prepares periodic cash flow forecasts to understand and manage the timing of the Fund’s cash flows. The appropriate strategic level of cash balances to be held forms part of the Fund’s investment strategy.

All financial liabilities at 31 March 2015 are due within one year.

c) Refinancing risk

The key risk is that the Council will be bound to replenish a significant proportion of its Pension Fund financial instruments at a time of unfavourable interest rates. The council does not have any financial instruments that have a refinancing risk as part of its treasury management and investment strategies.

18 Funding Arrangements

In line with the Local Government Pension Scheme Regulations 2013, the Fund’s actuary undertakes a funding valuation every three years for the purpose of setting employer contribution rates for the forthcoming triennial period. The last such valuation took place as at 31 March 2013. The next valuation will be based on Fund information as at 31 March 2016.

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The objectives of the Fund’s funding policy are:

To ensure the long term solvency of the Fund as a whole and the solvency of each of the national sub funds allocated to each individual employer.

To ensure that sufficient funds are available to meet all pension liabilities as they fall due for payment;

To help employers recognise and manage pension liabilities as they accrue with consideration to the effect on the operation of their business;

To minimise the degree of short term change in the level of each employer’s contributions;

Not to restrain unnecessary the investment strategy of the Fund so that the administrating Authority can seek to maximise investment returns (and hence minimise the cost of the benefits) for an appropriate level of risk;

To address the different characteristics of the disparate employers and ultimately to the council tax payer from an employer ceasing participation or defaulting on its pension obligations;

To use reasonable measures to reduce the risk to other employers and ultimately to the council tax payer from an employer defaulting on its pension obligations.

To maintain the affordability of the Funds employers as far as is reasonable over the long term.

The aim is to achieve 100% solvency over a period the next 20 years and to provide stability in employer contribution rates by spreading any increases in rates over a period of time. Solvency is achieved when the funds held, plus future expected investment returns and future contributions are sufficient to meet expected future pension benefits payable. When an employer’s funding level is less than 10% of the 100% funding target, then a deficit recovery plan will be put in place requiring additional contributions from the employer to meet the shortfall.

At the March 2013 actuarial valuation the Fund was assessed as 70.5% funded (73.0% at the March 2010 valuation), with a deficit of £646m (2010 valuation deficit of £445m).

Contribution increases are phased in over the three year duration of the valuation period with specific rates per employer, including a deficit cash figure to protect recovery of employer deficits. The Fund has a common contribution rate (i.e. the average fund rate) which as at March 2013 is 32.1% (2010 24.7%).

Individual employers’ rates will vary from the common contribution rate depending on the demographic and actuarial factors particular to each employer. Full details of the contribution rates payable can be found in the 2013 actuarial valuation report and the funding strategy statement on the Funds website.

The valuation of the Fund has been undertaken using the projected unit method under which the salary increase for each member is assumed to increase until they leave active service by death, retirement or withdrawal from service. The principal assumptions were:

Financial assumptions

Investment return (discount rate) 1.6% Based on 25 year bond returns extrapolated to reflect the duration of the Fund’s liabilities

Inflation Assumed to be RPI

Salary Increases 1.8% pa over CPI

Pension Increases In line with CPI Assumed to be 0.8% less than RPI

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Mortality assumptions

Future life expectancy based on the actuary’s Fund specific mortality review was:

Mortality assumptions at age of 65 Male Female

Current Pensioners 22.3 24.3

Future Pensioners (assumed current age 45) 24.0 26.6

Historical mortality assumptions

Life expectancy for the year ended 31 March 2013 is based on PFA92 and PMA92 actuarial tables. The allowances for future life expectancy are:

Prospective Pensioners Current Pensioners

Year of birth, medium cohort with 1% minimum improvements from 2007

Year of birth, medium cohort with 1% minimum improvements from 2007

Commutation assumption

It is assumed that future retirees will take 50% of the maximum additional tax-free lump sum up to HMRC limits for pre April 2008 and 75% of the maximum for post April 2008 service.

19 Actuarial Present Value of Promised Retirement Benefits

In addition to the triennial funding valuation, the Fund’s actuary also undertakes a valuation of the Pension Fund liabilities, on an IAS 19 basis, every year using the same base data as the funding valuation rolled forward to the current financial year, updating assumptions to the current year.

In order to assess the value of the benefits on this basis, the actuary has updated the actuarial assumptions (set out below) from those used for funding purposes (see Note 18). The actuary has also valued ill health and death benefits in line with IAS19.

The actuarial present value of promised retirement benefits at 31 March 2015 was £3.09bn (31 March 2014 £2.57bn). The Funds accounts do not take account of liabilities to pay pensions and other benefits in the future.

The liabilities above are calculated on an IAS 19 basis and therefore differ from the results of 2013 triennial funding valuation (see Note 18) because IAS 19 stipulates a discount rate rather than a rate which reflects market rates.

Assumptions used

Inflation/pension increase rate assumption 2.4%

Salary increase rate 4.3%

Discount rate 3.2%

20 Current Assets

31 March 2014 31 March 2015 £000 £000

6,309 Contributions due – employers 5,626 982 Contributions due – employees 522 721 Other debtors 824

0 Funds due from the County Council 1,327 19,817 Cash balances 8,252

27,829 Total 16,551

The significant majority of other debtors are employers in the Fund.

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21 Current Liabilities

31 March 2014 31 March 2015 £000 £000 364 Benefits payable 242

2,529 Sundry creditors 1,415 1,173 Funds due to the County Council 0

4,066 Total 1,657

The £0.6m due to the County Council at 31st March 2014 represented the amount payable to the County Council for the administration of the Pension Fund; the amount was paid over in April 2014.

22 Additional Voluntary Contributions

Market value at 31 March 2014

Market value at 31 March 2015

£000 £000

2,727 Prudential 3,113 678 Standard Life 713

3,405 Total 3,826

Total contributions of £751k were paid directly to Prudential during the year (2013-14: £713k).

Total contributions of £14k were paid directly to Standard Life during the year (2013-14: £26k).

23 Related Party Transactions

Northamptonshire County Council

The Northamptonshire Pension Fund is administered by Northamptonshire County Council.

The Council incurred costs of £1.9m (2013-14: £2.2m) in relation to the administration of the Fund and was consequently reimbursed by the Fund for these expenses. The Council is also the single largest employer of members of the Pension Fund and paid employer’s contributions of £24.6m to the Fund in 2014-15 (2013-14: £27.8m). All monies owing to and issued from the Fund were paid in year.

Governance

There is one member of the Pensions Committee who is in receipt of pension benefits from the Northamptonshire Pension Fund. In addition, there are six committee members who are active members and one deferred member of the Pension Fund.

County Council Members Cllr Graham Lawman (Chairman) Cllr Jim Hakewill (Vice Chairman) Cllr Michael Brown Cllr Matthew Golby (resigned on 27 April 2014) Cllr Malcolm Longley (appointed on 27 April 2014) Cllr Dennis Meredith Cllr Russell Roberts Cllr Bob Scott Cllr Mick Scrimshaw (Substitute Member) Cllr Bill Parker (Substitute Member) District/Borough Councils’ Representatives Cllr Malcolm Ward (Wellingborough Borough Council) Cllr Martin Wilson (South Northants District Council)

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Cllr Richard Lewis (East Northants District Council) (Substitute Member) Universities and Colleges Representative Roger Morris Other Employers’ Representatives Alicia Bruce Robert Austin (Substitute Member) Employees’ Representatives Peter Borley-Cox Josie Mason Andy Langford (Substitute Representative) County Council members have declared their interests in their register of members’ interests. Other members of the Pensions Committee are required to declare their interests at each meeting.

24 Contingent Liabilities and Contractual Commitments

Outstanding capital commitments (investments) at 31 March 2015 totalled £0.3m (31 March 2014: £0.4m).

These commitments relate to outstanding call payments due on unquoted limited partnership funds held in the private equity and infrastructure parts of the portfolio. The amounts ‘called’ by these funds are irregular in both size and timing over a period of between 10 and 12 years from the date of the original commitment.

25 Contingent Assets

Four admitted body employers in the Northamptonshire Pension Fund hold insurance bonds to guard the possibility of being unable to meet their pension obligations. These bonds are drawn in favour of the Pension Fund and payment will only be triggered in the event of employer default.

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Glossary Accrual An accrual is a sum included in our accounts to cover income or expenditure which belongs to the period covered by our accounts, but which was unpaid at the accounting date. Accrued liabilities This is a sum entered in our accounts for a liability relating to and charged for in the current accounting period but unpaid at the accounting date. Actuarial valuation An actuary undertakes valuations by checking what a pension scheme’s assets are worth compared to its liabilities. The actuary then works out how much needs to be paid into the scheme by the employer and the members to make sure that there will be enough money to pay the pensions when they are due. Actuary An actuary is an expert on pension scheme assets and liabilities. Agency services These are services we provide for other organisations, or services other organisations provide for us. Amortisation Spreading the value of an asset or liability over its useful life. Available for Sale Financial Instruments Reserve This reserve holds gains on revaluation of investments not yet realised through sales. Balance sheet A balance sheet is a summary of an organisation’s financial position. It lists the values, in the books of account on a particular date, of all the organisation’s assets and liabilities. Capital Adjustment Account This account accumulates the write down of the historical cost of fixed assets as they are consumed by depreciation and impairment, or written off on disposal. It also accumulates the resources that have been set aside to finance capital expenditure. Capital receipts These are the proceeds from selling fixed assets such as land or vehicles. Capital receipts unapplied These are proceeds from selling fixed assets which we can use for capital spending or to repay loans, but which we cannot use for revenue (day to day) spending. Carry forward Amounts that are to be carried forward into the new financial year. Cash equivalents Assets that are readily convertible into cash. CIPFA Chartered Institute of Public Finance and Accountancy Creditor This is someone we owe money to. Current assets These are short-term assets, which constantly change in value such as stocks, debtors and bank balances. Current liabilities These are short-term liabilities which are due to be paid in less than one year such as bank overdrafts, PAYE and money owed to suppliers. Debtor This is someone who owes us money.

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Delegated (budgets) Budgets for which schools have complete autonomy in spending decisions. Depreciation Spreading the cost of wear and tear of an asset over its useful life. Devolved (budgets) Budgets transferred to schools that have total responsibility for their spending within defined limits / scope / range. Earmarked reserve An earmarked reserve is money set aside for a specific purpose. Equities Equities are ordinary shares in companies. Financial Instruments Financial instruments are contracts which give rise to a financial asset of one entity and a financial liability or equity instrument of another. Financial Instruments Adjustment Account This account acts as a balancing mechanism for differences in statutory requirements and proper accounting practices for borrowings and investments. Finance lease When we lease goods using a finance lease we have most of the rights of ownership and take any profits and suffer any losses of ownership. Fixed asset A fixed asset is an asset which is intended to be in use for several years such as a building or a vehicle. General reserves These are amounts set aside for use in future years, not earmarked for any specific purpose. Heritage asset An asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture. IFRIC The International Financial Reporting Interpretations Committee. International Financial Reporting Standards (IFRS) Accounting Standards, Interpretations and the Framework adopted by the International Accounting Standards Board (IASB). Impairment A reduction in the value of an asset from its previous value in the accounts. Infrastructure The infrastructure is made up of fixed assets such as roads and bridges. Intangible Assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset. Inventories This is a term used for goods bought but which have not yet been used. Investment Property This is a separate class of property (land or a building, or part of a building, or both) that is held solely to earn rentals or for capital appreciation, or both. ISB Individual school budget. LASAAC Local Authority Scotland Accounts Advisory Committee. LOBO Lender Option Borrower Option (Loans at market rates).

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Member A Councillor, a member of the Council. Minimum Revenue Provision (MRP) This is the amount we have to set aside out of our revenue to repay loans. Net Book Value (NBV) The value of an asset after depreciation. Net Operating Expenditure The net costs of services less net surplus on statutory direct-service organisations (organisations that have to follow special rules to provide our services), interest and investment income and transfers to and from the asset management revenue account. Non Operational Assets These are assets we hold but do not use to provide services. Examples are investments, and assets which are not yet in use. Non Distributable Costs Costs that cannot be specifically applied to a service or services and so are held centrally. Notional Fund This is where amounts that are transferred into a fund are done so for illustration only and do not actually involve incurring expenditure. Officer Employee of the Council. Operating lease When we lease goods using this type of lease, ownership of the goods remains with the lessor (the company leasing the goods to us) and the lessor takes the profits and suffers the risks of ownership. Operational asset These are assets we use to run our services such as buildings and vehicles. Payment in advance A charge taken into account when preparing the financial statements, which are for benefits to be received in a period after the accounting date. Precept This is an amount we receive from district and borough Councils in Northamptonshire (for Council Tax collected on our behalf) so that we can cover our expenses less our income. We also pay precepts to authorities such as the Environment Agency. Private Finance Initiative (PFI) A means of securing new assets and associated services, such as a new school or care home, from the private sector. Property, Plant and Equipment (PPE) Also known as a non-current asset or as Fixed Assets is a term used in accounting for assets and property which cannot easily be converted into cash. Provision Money set aside in a set of accounts for liabilities, which are known to exist, but which cannot be measured accurately at the date of the accounts. Public Private Partnership (PPP) A government service or private business venture funded and operated through a partnership of government and one or more private sector companies. Public Works Loan Board (PWLB) A government body set up specifically to lend money to local authorities.

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PVEQ Plant, Vehicles and Equipment. Related Party/Parties This is a person or an organisation which has influence over another person or organisation. Reserves These are amounts set aside in one year’s accounts, which can be spent in later years. Some types of reserve can only be spent if certain conditions are met. Residual Pension Liabilities The outstanding cost of pension liabilities for employees that have left the Council. Revaluation Reserve This reserve records the accumulated gains on the fixed assets held by the authority arising from increases in value. Revenue Ongoing spending or income relating to the day to day activities of the organisation. SeRCOP Service Reporting Code of Practice. Issued by CIPFA. Local authorities are required to prepare their accounts in accordance with this. Service revenue account These are the services’ individual revenue accounts. SORP Statement of Required Practice. Straight line basis The reduction in the value of assets by an equal amount each year applied over the assumed life of the asset. Surplus The remainder after taking away all expenses from income. Transfer value When a pension scheme member moves their pension to another scheme, the transfer value is the amount of money transferred to the new scheme. The Code The Code of Practice on Local Authority Accounting in the United Kingdom (the Code) defines proper accounting practices for local authorities. Unitising Applying to the individual units (relating to members of the Pension Fund). Unrealised profit This is the anticipated profit that would be generated from selling the asset.