www.eden.gov.uk

Statement of Accounts for the Year Ended 31 March 2014

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Contact Details

Telephone: 01768 817817

Fax: 01768 890470

Write To: Financial Services Manager, Eden District Council, Town Hall, Penrith, Cumbria, CA11 7QF

E-Mail: finman@eden.gov.uk

Web Site: Information on all of our services is available on our website at www.eden.gov.uk

Accessibility Information

Information contained in the Statement of Accounts is available, on request, in alternative languages and formats. If you have any concerns, or queries, contact Eden District Council’s Communication Officer: Telephone: 01768 212137.

ALL RIGHTS RESERVED - Reproduction in whole or in part is prohibited without prior permission of the copyright owner. No responsibility will be accepted for any errors, or omissions, or comments, made by writers or interviewees.

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Content

Explanatory Foreword .................................................................................................. 5

Statement of Responsibilities for the Statement of Accounts ....................................... 9

Statement of Accounting Policies ............................................................................... 10

Movement in Reserves Statement .............................................................................. 31

Comprehensive Income and Expenditure Statement ................................................. 32

Balance Sheet as at 31 March 2014 ........................................................................... 33

Cash Flow Statement ................................................................................................. 35

Notes to the Financial Statements .............................................................................. 36

Collection Fund for the Year Ending 31 March 2014 .................................................. 87

Notes to the Collection Fund ...................................................................................... 88

Independent Auditor’s Report to the Members of Eden District Council ..................... 89

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Intentionally Blank

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Explanatory Foreword

1. Introduction

The 2013-2014 accounts have been prepared in compliance with the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom 2013-2014, based on International Financial Reporting Standards (the Code) and consist of:

The Statement of Responsibilities for the Statement of Accounts – This outlines the respective responsibilities of the Council and the Director of Finance for preparing the accounts.

The Statement of Accounting Policies – This shows the accounting rules used in the preparation of the accounts

The Movement in Reserves Statement - This shows the movement in the reserves held by the Council during the year. It is analysed by usable and non-usable reserves.

The Comprehensive Income and Expenditure Statement - This Statement summarises the accounting cost of providing services during the year, rather than the amount to be funded from Council Tax. The Council charges Council Tax to cover this expenditure incurred in accordance with regulations. The expenditure funded by Council Tax is shown in the Movement in Reserves Statement.

The Balance Sheet - This is the summary financial position of the Council as at 31 March 2014. It shows balances and reserves held, any indebtedness, and the value of assets held by the Council.

The Cash Flow Statement - This summarises cash movements in and out of the Council arising from transactions with third parties for revenue and capital purposes.

Notes to the Financial Statements – These provide further detail on entries included in the Financial Statements.

The Collection Fund - The Collection Fund account shows the income and expenditure on Council Tax and National Non-Domestic Rates (NNDR).

This Foreword highlights some of the main features of the accounts and how they reflect the key financial issues facing the Council. By convention, figures prefixed with a minus sign (-) are either negatives, or income.

2. Net Assets of the Council

The Council has net assets of £38.6m (see the Balance Sheet on page 33). This is the difference between its assets and liabilities. In simple terms, this shows the cash balance that would have been left if the Council was to have realised its assets (selling its land and buildings etc) and settled its liabilities (paid its creditors etc). There was an increase in the opening net assets of the Council from £34.2m to £38.6m: this was largely attributable to the decrease of the pension liability from £9.6m to £6.2m (see Note 8 below).

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3. General Fund Outturn

The table below shows how actual spending compared with the revised budget:

Revised Budget

£'000

Actual

£'000

Variance

£'000 Expenditure on Services 22,860 22,751 -109 Income on Services -14,236 -14,917 -681

Net Expenditure on Services 8,624 7,834 -790 Add Parish Precepts 457 457 0

9,081 8,291 -790 Less:

Adjustment re Capital Accounting Charges and Pensions -102 146 248 Interest Payable 9 9 0 Interest Receivable -105 -132 -27 Grant from Council Tax on Second Homes -192 -190 2 Revenue Support Grant -2,253 -2,253 0 Non-Domestic Rates Income -1,851 -1,838 13 New Homes Bonus -332 -332 0 Other Government Grant -80 -80 0 Deficit on the Council Tax Collection Fund 0 0 0 Eden's Precept on the Collection Fund -3,877 -3,877 0

Contributions to (-)/from the General Fund Balance 298 -256 -554

The figures above are included in the Movement in Reserves Statement on page 31 and the Comprehensive Income and Expenditure Statement on page 32. The main factors in explaining the variance on the contribution to the General Fund Balance are as follows:

£’000 Budgets carried forward to 2014-2015 299 Slippage on capital spend funded from revenue 268

Other variances occurred across a range of budgets and represented unused contingencies, savings and efficiencies. A detailed analysis of the variance was presented to the Council’s Executive on 1 July 2014. A copy of that report can be found at:

http://www.eden.gov.uk/democracy/meetings/committee-meeting-agenda-and-minutes/agendas-and-minutes-2014/executive/01-exec-1jul14-agenda/ (the report is

item 8 on the agenda).

4. Revenue Reserves

The Council held the following reserves during 2013-2014:

1 April 13 £’000

31 March 14 £’000

5,899 General Fund 6,155 417 Repairs and Renewals Fund 620 654 Other Earmarked Reserves 1,337

6,970 8,112

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5. Capital Expenditure and Borrowing

At 1 April 2013, the Council had the following funding available for capital expenditure:

£’000 Capital Receipts 1,299 Capital Grants 108

1,407

During 2013-2014, the Council spent £609,000 on capital projects, against an original estimate of £933,000 (revised estimate £1,447,000). The main items of expenditure were Renovation Grants (£255,000), Redevelopment of Land at the Town Hall, Penrith (£98,000) and Replacement of the Bower at Castle Park, Penrith (£153,000). Outturn differed from the revised estimate due to slippages on a number of schemes. Where permitted, unused funding was rolled forward to 2014-2015.

The Council has power to borrow money for capital purposes under Section 1 of the Local Government Act 2003. Borrowing of £550,000 was undertaken in 2009-2010 to fund capital spending over a period of ten years. At 31 March 2014, £303,000 was outstanding on this loan. The Council’s policy is that no further borrowing will be undertaken unless a Council resolution is made authorising further borrowing. The position is regularly reviewed.

6. Accounting Policies

The Council's Accounting Policies are explained fully in the section starting on page 10. As stated earlier, these accounts have been prepared following CIPFA's Code. There have been changes to the way Information on Pensions (IAS 19) is presented in the Accounts in 2013-2014. Where required, statements have been restated for 2012-2013 along with supporting notes. Further information is available at note 52 on page 81.

7. Treasury Management

The Council managed its cash and investments (cash deposits maturing three months after the Balance Sheet date) balances in-house during 2013-2014. As at 31 March 2014, £5.7m of investments and cash of £3.2m were managed in-house. The Council had one long term loan outstanding at 31 March 2014. The balance outstanding was £303,000, £55,000 is repayable in 2014-2015, £248,000 is repayable thereafter. These items complied with the Council’s Treasury Management Strategy and Plan for 2013, which was approved by Council on 7 February 2013 (Ref F5/13) and reviewed on 10 October 2013 (Ref F66/13).

8. Pensions Reserve

International Accounting Standard (IAS) 19 requires the Council to account for its liability under the pension (defined benefits) scheme as it arises. The Council is a member of the Cumbria Local Government Pension Scheme Fund. At 31 March 2014, the actuarial valuation showed a net liability of £6.194m (2012-2013: £9.661m). This is explained in detail at Note 47 of the Financial Statements (page 73). Part of the Council’s employer contributions to the Fund is to recover this deficit. The deficit on the pension scheme has varied substantially in recent years and reflects the volatile nature of financial markets after 2000. The deficit in 2013-2014 has reduced from that in 2012-2013.

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9. Collection Fund

The Collection Fund balance was a surplus of £363,000 at 31 March 2014 made up of £307,000 Council Tax and £56,000 NNDR. This is payable to all precepting authorities, which are Cumbria County Council, Cumbria Police and Crime Commissioner, Eden District Council for Council Tax, and from 1 April 2013, Central Government, Cumbria County Council and Eden District Council for NNDR. This is dealt with by precepting arrangements.

10. Business Rates Retention Scheme

From 1 April 2013, a national Business Rates Retention Scheme (BRRS) was in place. Whilst this did not impact on businesses paying business rates, it is a fundamental change to local authority funding. In essence, national funding from Revenue Support Grant has been reduced and replaced with funding from BRRS. BRRS is reflected in these accounts principally in the Collection Fund and Comprehensive Income and Expenditure Statement.

11. Financial Resilience

Like all local authorities, the Council has faced significant challenges since the continuing world-wide financial and economic difficulties which began in 2008. A key pressure has been the unprecedented reductions in local authority funding by Central Government. These are part of the national deficit reduction programme and further cuts are likely for the foreseeable future. The Council has taken a number of major steps to ensure it is financially resilient. The main ones are:

letting a long lease for the Penrith New Squares retail scheme – this will generate an annual income of £0.8m from 2015-2016 onwards (£0.7m 2013-2014). The Council is reviewing options to increase the rental income;

the Council joined a Business Rates Retention Scheme pool for 2014-2015 with Cumbria County Council and four other District Councils in Cumbria. It is expected this will realise additional income of 0.170m in 2014-2015;

the Council’s Medium Term Financial Plan shows a deficit arising from 2016-2017. The Council has initiated plans to offset this deficit by raising additional income from new sources; and

New Homes Bonus is not used to support the General Fund. If Members chose to use New Homes Bonus in this way, the General Fund deficit would be more than covered.

At the end of 2013-2014, the Council held usable General Fund reserves of £6.155m, which are considered strong reserves for a local authority of Eden’s size. The Council’s Medium Term Financial Plan, agreed as part of setting the 2014-2015 budget, is broadly balanced for the period 2014-2016.

For further information on the Council, or its accounts, please write to Mr Clive Howey, Financial Services Manager, Department of Finance, Eden District Council, Town Hall, Penrith, Cumbria, CA11 7QF, or e-mail: clive.howey@eden.gov.uk).

D J Rawsthorn MA CPFA Director of Finance

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Statement of Responsibilities for the Statement of Accounts

The Council's Responsibilities:

The Council is required to:

make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this Council, that officer is the Director of Finance;

manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; and

approve the Statement of Accounts.

The Director of Finance's Responsibilities:

The Director of Finance is responsible for the preparation of the Council's Statement of Accounts which, in terms of the CIPFA (2013) Code of Practice on Local Authority Accounting in the United Kingdom 2013-2014 ('the Code'), is required to present a true and fair view of the financial position of the Council at the accounting date and its income and expenditure for the year ended 31 March 2014.

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

selected suitable accounting policies and then applied them consistently;

made judgements and estimates that were reasonable and prudent; and

complied with the Code.

The Director of Finance has also:

kept proper accounting records which were up-to-date;

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

considered whether, up to the issue date, there have been any events occurring after the date of the Balance Sheet requiring disclosure.

The Statement of Accounts presents a true and fair view of the financial position of the Council as at 31 March 2014 and its income and expenditure for the year then ended.

D J Rawsthorn MA CPFA Director of Finance

Date: 25 September 2014

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Statement of Accounting Policies

1. General Principles

The Statement of Accounts summarises the Council’s transactions for the 2013-2014 financial year and its position at the year-end of 31 March 2014. The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit (England) Regulations 2011, which should be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2013-2014 and the Service Reporting Code of Practice 2013-2014, supported by International Financial Reporting Standards (IFRS) and statutory guidance.

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.

2. Accruals of Income and Expenditure

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

revenue from the sale of 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; and

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

3. Cash and Cash Equivalents

Cash comprises cash in hand, deposits held with financial institutions repayable without penalty on notice of not more than twenty-four hours and bank overdrafts. Cash equivalents are short term, highly liquid investments, with original maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

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In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management.

4. Exceptional Items

When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement, or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance.

5. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors

Prior period adjustments may arise as a result of a change in accounting policies, or to correct a material error. Changes in accounting estimates are accounted for prospectively, ie 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.

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

6. Charges to Revenue for Non-Current Assets

Services, 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 losses can be written off; and

amortisation of intangible 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 (Minimum Revenue Provision (MRP) or loans fund principal), by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

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7. Employee Benefits

Benefits Payable During Employment

Short term employee benefits are those due to be settled within twelve 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 (eg leased 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, eg 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.

Termination Benefits

Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date, or an officer’s decision to accept voluntary redundancy, and are charged on an accruals basis to the appropriate service 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.

Post Employment Benefits

Employees of the Council may join the Local Government Pension Scheme administered by Cumbria County Council. The Scheme provides defined benefits to members (retirement lump sums and pensions) earned as employees work for the Council. The Scheme is therefore accounted for as a ‘defined benefit scheme’.

The Local Government Pension Scheme

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

the liabilities of the Cumbria County Council Pension Scheme attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method – ie an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates etc and projections of projected earnings for current employees;

liabilities are discounted to their value at current prices, using a discount rate of 4.4% (based on the indicative rate of return on high quality corporate bond);

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the assets of the Cumbria County Council Pension Scheme attributable to the Council are included in the Balance Sheet at their fair value:

⊳ quoted securities – current bid price;

⊳ unquoted securities – professional estimate;

⊳ unitised securities – current bid price; and

⊳ property – market value

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

⊳ 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 as a result of a scheme amendment or curtailment 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 liability (asset), ie net interest cost for the Council – 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 in the Comprehensive Income and Expenditure Statement – this is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability (asset) at the beginning of the period – taking into account any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payments;

re-measurements comprising:

⊳ the return on plan assets – excluding amounts included in the net interest on the net defined benefit liability (asset) – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure;

⊳ 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 actuary has updated their assumptions – charged to the Pensions reserve as Other Comprehensive Income and Expenditure; and

⊳ contributions paid to the Cumbria County Council pension fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund, or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are 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 that are earned by employees.

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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 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.

8. Events After the Balance Sheet Date

Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. These events are considered up to the date that the financial statements are 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; and

those that are indicative of conditions that arose after the reporting period – the Statement of Accounts is not adjusted to reflect such events, but where 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.

9. Financial Instruments

Financial Liabilities

Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument 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 borrowing 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.

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.

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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.

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; and

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.

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 Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement at a marginally higher effective rate of interest that 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 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 is 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 or 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.

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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 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; and

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 or losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any accumulated gains or losses previously recognised in the Available-for-Sale Reserve.

Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses).

Instruments Entered into Before 1 April 2006

The Council entered into a number of financial guarantees that are not required to be accounted for as financial instruments. These guarantees are reflected in the Statement of Accounts, to the extent that provisions might be required, or a contingent liability note is needed under the policies set out in the section on Provisions, Contingent Liabilities and Contingent Assets.

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10. Government Grants and Contributions

Whether paid on account, by instalments, or in arrears, Government grants and third party contributions and donations are recognised as due to the Council when there is reasonable assurance that:

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

the grants or contributions will be received.

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

Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. Where conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants and contributions) or Taxation and Non-Specific Grant Income (non-ring-fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement.

Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Reserve. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Reserve are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure.

11. Business Improvement District

With effect from 1 April 2013, a Business Improvement District (BID) scheme applies in Penrith. The scheme is funded by a BID levy paid by non-domestic ratepayers in the area. The Council acts as agent under the scheme and accounts for income and expenditure incurred within its Collection Fund.

12. Heritage Assets

Tangible and Intangible Heritage Assets are described in this summary of significant accounting policies as Heritage Assets.

The Council’s Heritage Assets are held in the Council’s Museum. The Museum has a collection of Heritage Assets which are held in support of the primary objective of the Council’s Museum, ie increasing the knowledge, understanding and appreciation of the Council’s history and local area. Heritage Assets are recognised and measured (including the treatment of revaluation gains and losses) in accordance with the Council’s accounting policies on property, plant and equipment. However, some of the measurement rules are relaxed in relation to Heritage Assets, as detailed below. The accounting policies in relation to Heritage Assets that are deemed to include elements of intangible Heritage Assets are also presented below. The Council’s collection of Heritage Assets is accounted for as follows:

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ceramics and porcelain work

▷ the collection includes ceramics and porcelain works. These items are reported in the Balance Sheet at insurance valuation which is based on market values. These insurance valuations are updated on an annual basis. Additionally, the items are sampled periodically and reviewed against the relevant antique and ceramic trade press to ensure the adequacy of the valuation. The ceramics and porcelain works are deemed to have indeterminate lives and a high residual value; hence the Council does not consider it appropriate to charge depreciation; and

▷ the collection is relatively static and acquisitions and donations are rare. Where they do occur, acquisitions are initially recognised at cost and donations are recognised at valuation ascertained by the Museum’s curators in accordance with the Council’s policy on valuations of ceramics, porcelain work and figurines.

pottery

▷ the Council’s Museum holds a collection of pottery ephemera which is not recognised on the Balance Sheet as cost information is not readily available and the Council believes that the benefits of obtaining the valuation for these items would not justify the cost. Nearly all the items in the collection are believed to have a value of less than £50 and, as far as the Council is aware, no individual item is worth more than £500. The majority of the collection was acquired by donation during the preceding 50 years;

art collection

▷ the art collection includes paintings (both oil and watercolour) and sketches and is reported in the Balance Sheet at insurance value. There is an annual programme of valuations and the items in the collection are valued by an external valuer. The assets within the art collection are deemed to have indeterminate lives and a high residual value; hence the Council does not consider it appropriate to charge depreciation; and

▷ acquisitions are made by purchase or donation. Acquisitions are initially recognised at cost and donations are recognised at valuation, with valuations provided by the external valuers and with reference to appropriate commercial markets for the paintings using the most relevant and recent information from sales at auctions.

other

▷ in addition, there is a collection of recordings of both sound and amateur film of local life. Again, the Council considers that, due to the lack of any comparable market values, it is not possible to provide either cost or valuation information for either the intangible or the tangible element of these assets. Consequently, the Council does not recognise the assets on the Balance Sheet; and

▷ acquisitions are again initially recognised at cost or, if bequeathed or donated, at nil consideration, at valuation;

archaeology

▷ the Council does not consider that reliable cost or valuation information can be obtained for the items held in its archaeological collection. This is because of the diverse nature of the assets held and lack of comparable market values. Consequently, the Council does not recognise these assets on the Balance Sheet; and

▷ the Council’s acquisitions principally relate to the collection donated in the early twentieth century. The Council does not (normally) make any purchase of archaeological items.

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Heritage Assets General

The carrying amounts of Heritage Assets are reviewed where there is evidence of impairment for Heritage Assets, eg where an item has suffered physical deterioration or breakage, or where doubts arise as to its authenticity. Any impairment is recognised and measured in accordance with the Council’s general policies on impairment.

13. 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 (eg 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 (research expenditure cannot be capitalised).

Expenditure on the development of web sites 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 Income and Expenditure Statement. Any gains or losses arising on the disposal or abandonment on an intangible asset are 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.

14. Inventories and Long Term Contracts

Inventories are included in the Balance Sheet at the lower of cost and net realisable value. These are shown as ‘Current Assets’ and relate to items held for resale in the Council’s Tourist Information Centres.

Long term contracts are accounted for on the basis of charging the surplus or deficit on the Provision of Services, with the value of works and services received under the contract during the financial year.

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15. Investment Property

Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services, or 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 Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal.

Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) Capital Receipts Reserve.

16. 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 classed as operating leases.

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Prima facie, a lease of land is an operating lease.

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.

The Council as Lessee

Finance Leases

Property, plant and equipment held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred.

Lease payments are apportioned between:

a charge for the acquisition of the interest in the property, plant or equipment - applied to write down the lease liability; and

a finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

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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 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 submitted 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 (eg there is a rent-free period at the commencement of the lease).

The Council as Lessor

When 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 (ie 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 years, this is posted out of the General Fund Balance to the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. When the future rentals are received, the element for the capital receipt for the disposal of the asset is used to write down the lease debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts Reserve.

The written-off value of disposals is not a charge against Council Tax, as the cost of 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.

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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 (eg 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.

17. Overheads and Support Services

Cost of Staff Overheads

In accordance with CIPFA’s Service Reporting Code of Practice 2012-2013 (SeRCOP) guidance, the policy of fully allocating support services to other service and accounts of the Council is followed. Corporate costs, Chairman’s and Members’ Allowances, civic hospitality and non-distributed costs are charged directly to the Income and Expenditure Account in compliance with SeRCOP.

The basis of allocation for the cost of support services are outlined below:

Cost Basis of Allocation

Employees Actual Time Spent

Administrative Buildings Area Occupied

Computing Number of personal computers as proxy for actual use

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.

Recognition

Expenditure on the acquisition, creation, or enhancement of property, plant and equipment has been capitalised. A de-minimis level of £10,000 has been set. Below this level, expenditure is treated as revenue.

In accordance with CIPFA's and the Royal Institute of Chartered Surveyors’ guidance, a full revaluation is undertaken every five years of the Council’s tangible non-current assets. A full revaluation was undertaken as at 31 March 2010.

Given its significance to the Statement of Accounts, a valuation of the Penrith New Squares lease was undertaken as at 31 March 2014.

Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (ie repairs and maintenance) is charged as an expense when it is incurred.

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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; and

the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

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

The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (ie it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is required via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council.

Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-Specific Grant Income line of the Comprehensive Income and Expenditure Statement, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Account. Where gains are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund to the Capital Adjustment Account in the Movement in Reserves Statement.

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

Assets Property, Plant and Equipment Basis of Valuation

Operational Other Land and Buildings

Specialised Properties Depreciated Replacement Cost

Non-Specialised Properties Existing Use Value

Vehicles, Plant and Equipment Historical Cost

Infrastructure Assets Depreciated Historical Cost

Community Assets Historical Cost

Non-Operational Surplus Assets Open Market Value

Investment Assets Open Market Value

Assets Under Construction Historical Cost

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 when they arise from the reversal of a loss previously charged to a service.

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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); and

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.

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); and

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.

Depreciation

Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (ie freehold land and certain Community Assets) and assets that are not yet available for use (ie assets under construction).

Depreciation is calculated on the following bases:

buildings – straight-line allocation over the useful life of the property as estimated by the valuer;

vehicles, plant, furniture and equipment – straight-line allocation over the useful life of the item; and

infrastructure – straight-line allocation over twenty-five years.

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 charged based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

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Componentisation

The Council has set a componentisation policy whereby any asset with a gross value of more than £500,000 and is subject to depreciation will be considered for componentisation where a component is deemed to be greater than 20% of the asset’s value. Componentisation is required where the value of a component is material to the value of the whole asset and has a different useful life. This applies primarily to buildings and components to be considered will be:

Heating and ventilation systems;

Windows;

Electrical works and installations;

Water systems;

Roofing;

Lifts.

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 classed 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 are not reclassified as Assets Held for Sale.

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 (ie 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. The receipt is 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.

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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 appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

19. Provisions, Contingent Liabilities and Contingent Assets

Provisions

Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. For instance, the Council may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation.

Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Council becomes aware of the obligation, and are measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will 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 (eg 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.

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.

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.

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20. Reserves

The Council sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against Council Tax for the expenditure.

Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments, retirement and employee benefits and do not represent usable resources for the Council – these reserves are explained in the relevant policies.

21. Revenue Expenditure Funded from Capital under Statute

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

22. VAT

VAT payable is included as an expense only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income.

23. Group Accounts

Local authorities are required to consider all their interests and to prepare a full set of group financial statements where they have material interest in subsidiaries, associates, or joint ventures.

The Council's analysis has concluded it has no significant material interest in any such body and there is therefore no requirement to produce a set of group accounts.

24. Agency Arrangements

The Council is a billing authority and, as such, acts as agent in collecting and distributing Council Tax and NNDR on behalf of major preceptors and itself. The financial statements therefore only include the Council’s share of Council Tax and NNDR. Only the income received in NNDR relating to the Council is recognised in the Income and Expenditure Account and a debtor or creditor for cash collected from NNDR debtors but not paid to preceptors, or overpaid to preceptors is recognised in the Balance Sheet.

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25. Collection Fund Income

The Council is a billing authority and as such is required to bill residents and businesses in its area for Council Tax and National Non-Domestic (Business) Rates (NNDR). The Council acts as agent on behalf of the major precepting authorities, Cumbria County Council and the Police and Crime Commissioner for Cumbria for Council Tax and the Government and Cumbria County Council for NNDR.

The accounts only show the amounts owed by and to taxpayers in respect of this Council’s Council Tax and NNDR. Major precepting authorities are shown as net debtors or creditors on the balance sheet.

The amounts included in the Comprehensive Income and Expenditure Statement include the accrued amount of Council Tax and NNDR collected as well as amounts from previous years’ estimates. This adjustment is reversed in the Movement in Reserves Statement and Collection Fund Adjustment Account.

26. Prior Period Adjustments

There is one adjustment to accounting policies adopted by the Council requiring significant changes to the accounts. There have been changes to the way Information on Pensions (IAS 19) is presented in the Accounts in 2013-2014. Where required, statements have been restated for 2012-2013 along with supporting notes. Further information is available at note 52 on page 81

27. Accounting Estimates

Financial statements’ preparation requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Information regarding significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in the notes for:

non-current assets;

provisions;

contingent assets and liabilities;

accruals of income and expenditure; and

pension scheme liabilities.

28. Carbon Reduction Commitment Allowances

The Council is required to participate in the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. This scheme is currently in its introductory phase which will last until 31 March 2014. The Council is required to purchase and surrender allowances, currently retrospectively, on the basis of emissions, ie carbon dioxide produced as energy is used. As carbon dioxide is emitted (ie as energy is used), a liability and an expense are recognised. The liability will be discharged by surrendering allowances. The liabilities is measured at the best estimate of the expenditure required to meet the obligation, normally at the current market price of the number of allowances required to meet the liability at the reporting date. The cost to the Council is recognised and reported in the cost of the Council’s services and is apportioned to services on the basis of energy consumption.

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Financial Statements

30

Intentionally Blank

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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’ (those that can be applied to fund expenditure or reduce Council Tax) and ‘other reserves’. The surplus/deficit shown against Provision of Services 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 differ from the statutory amounts required to be charges to the General Fund Balance for Council Tax setting purposes. The net increase/decrease before transfers to the Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to, or from, earmarked reserves undertaken by the Council.

Note General Fund

Balance £’000

Earmarked Reserves

£’000

Capital Receipts Reserve

£’000

Capital Grants

Unapplied £’000

Total Usable

Reserves £’000

Unusable Reserves

£’000

Total Authority Reserves

£’000

Balance at 31.3.13 5,899 1,071 1,299 108 8,377 25,827 34,204

Surplus/deficit on provision of services (accounting basis)

244 0 0 0 244 0 244

Other Comprehensive Expenditure and Income

0 0 0 0 0 4,112 4,112

Total Comprehensive Expenditure and Income

244 0 0 0 244 4,112 4,356

Adjustments between accounting basis and funding basis under regulations

6 898 0 305 -5 1,198 -1,198 0

Net increase/decrease before transfers to Earmarked Reserves

1,142 0 305 -5 1,442 2,914 4,356

Transfers to/from Earmarked Reserves

7 -886 886 0 0 0 0 0

Increase/decrease in year 256 886 305 -5 1,442 2,914 4,356

Balance at 31.3.14 6,155 1,957 1,604 103 9,819 28,741 38,560

The comparative figures from 2012-2013 are below:

Note General Fund

Balance £’000

Earmarked Reserves

£’000

Capital Receipts Reserve

£’000

Capital Grants

Unapplied £’000

Total Usable

Reserves £’000

Unusable Reserves

£’000

Total Authority Reserves

£’000

Balance at 31.3.12 5,579 1,029 1,435 692 8,735 27,834 36,569

Surplus/deficit on provision of services (accounting basis) restated

-276 0 0 0 -276 0 -276

Other Comprehensive Expenditure and Income restated

0 0 0 0 0 -2,089 -2,089

Total Comprehensive Expenditure and Income

-276 0 0 0 -276 -2,089 -2,365

Adjustments between accounting basis and funding basis under regulations restated

6 638 0 -136 -584 -82 82 0

Net increase/decrease before transfers to Earmarked Reserves

362 0 -136 -584 -358 -2,007 -2,365

Transfers to/from Earmarked Reserves

7 -42 42 0 0 0 0 0

Increase/decrease in year 320 42 -136 -584 -358 -2,007 -2,365

Balance at 31.3.13 5,899 1,071 1,299 108 8,377 25,827 34,204

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Comprehensive Income and Expenditure Statement

This Statement shows the accounting cost in the year of providing services, in accordance with generally accepted accounting practices, rather than the amount to be funded from Council Tax. Councils charge Council Tax to cover expenditure in accordance with regulations which may differ from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

2012-13 Restated

Gross Expend

£’000

2012-13 Restated

Gross Income

£’000

2012-13 Restated

Net Expend

£’000 Expenditure on Services

2013-14

Gross Expend

£’000

2013-14

Gross Income

£’000

2013-14

Net Expend

£’000

Notes

3,681 -3,077 604 Central Services to the Public 1,086 -430 656

1,370 -287 1,083 Cultural and Related Services 1,463 -183 1,280

3,547 -986 2,561 Environmental and Regulatory Services 3,370 -827 2,543

1,684 -735 949 Planning Services 1,638 -682 956

519 -457 62 Highways, Roads and Transport Services 593 -438 155

11,378 -10,197 1,181 Housing Services 11,396 -10,544 852

2,212 -101 2,111 Corporate and Democratic Core Costs 3,021 -824 2,197

53 -48 5 Non-Distributed Costs 70 0 70

24,444 -15,888 8,556 Cost of Services 22,637 -13,928 8,709 33, 34

461 -134 327 Other Operating Expenditure 175 0 175 8

1,9002 -2,559 -659 Financing and Investment Income and Expenditure

1,917 -2,442 -525 9

0 -7,948 -7,948 Taxation and Non-Specific Grant Income

6,174 -14,777 -8,603 10

26,805 -26,529 276 Deficit on the Provision of Services 30,903 -31,147 -244

14 0 14 Deficit on Revaluation of Land and Buildings

0 0 0 11

3 0 3 Impairment of Non-Current Assets Charged to Revaluation Reserve

33 0 33 11

0 0 0 Surplus on Revaluation of Available for Sale Financial Assets

0 -39 -39 28

2,072 0 2,072 Remeasurement of the Net Defined Benefit Liability

0 -4,106 -4,106 47

2,089 0 2,089 Other Comprehensive Income and 33 -4,145 -4,112

Expenditure

28,894 -26,529 2,365 Total Comprehensive Income and 30,936 -35,292 -4,356

Expenditure

33

Balance Sheet as at 31 March 2014

The Balance Sheet shows the value of assets and liabilities held by the Council as at the Balance Sheet date. The Council’s net assets (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. Usable reserves are those that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and statutory limitations on use. Unusable reserves hold unrealised gains and losses and cannot be used to provide services. Examples of these are the Revaluation Reserve, Capital Adjustment Account, and Pensions Reserve.

31 March 13 £’000

31 March 14 £’000

Notes

20,530 Property, Plant and Equipment 19,757 11 663 Heritage Assets 663 12

13,990 Investment Property 13,990 13 201 Intangible Assets 190 14

0 Long Term Investments 1,930 18 553 Long Term Debtors 535 16, 45

35,937 Total Long Term Assets 37,065

10 Inventories 12

1,199 Short Term Debtors 2,104 17 3,731 Short Term Investments 5,700 18 5,739 Cash and Cash Equivalents 3,220 19

0 Assets Held for Sale 140 20

10,679 Total Current Assets 11,176

-1,868 Short Term Creditors -2,849 21, 24

-210 Provisions -316 22 -55 Borrowing Repayable in 12 months -55 23

-2,133 Total Current Liabilities -3,220

-288 Long Term Creditors 0 24 -303 Long Term Borrowing -248 23 -27 Deferred Liabilities -19 45

-9,661 Pension Liability -6,194 47

-10,279 Total Long Term Liabilities -6,461

34,204 Net Assets 38,560

8,377 Usable Reserves 9,819 26

25,827 Unusable Reserves 28,741 28

34,204 Total Reserves 38,560

34

I certify that the Statement of Accounts presents a true and fair view of the financial position of the Council as at 31 March 2014 and its income and expenditure for the year then ended.

Signed: D J Rawsthorn MA CPFA Director of Finance Date: 25 September 2014

Signed: Councillor D Huxley Chairman of the Accounts and Governance Committee Date: 25 September 2014

35

Cash Flow Statement

The Cash Flow Statement shows changes in cash and cash equivalents of the Council during the year. 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 from Council Tax and grant income, or from the recipients of services provided by the Council. Investing activities show the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service provision. Cash flows arising from financing activities are useful in predicting claims on future cash flows due to borrowing.

2012-13 Restated

2013-14

Notes

£’000 £’000 -276 Net surplus or deficit (-) on service provision 244 29 657 Adjust net surplus or deficit on the provision of services for non cash

movements 1,644 29

-134 Adjust for items included in the net surplus or deficit on the provision of services that are investing and financing activities

-739 29

247 Net Cash Flow from Operating Activities 1,149 29, 30 -672 Net Cash Flows from Investing Activities -3,655 31 -72 Net Cash Flows from Financing Activities -13 32

-497 Net Increase/ Decrease in Cash and Cash Equivalents -2,519

6,236 Cash and Cash Equivalents at 1 April 5,739 19 5,739 Cash and Cash Equivalents at 31 March 3,220 19

-497 Net Increase/(-) Decrease in Cash and Cash Equivalents -2,519 19

36

Notes to the Financial Statements Page

1. Accounting Standards That Have Been Issued But Have Not yet Been Adopted 37

2. Critical Judgements in Applying Accounting Policies 37

3. Assumptions Made about the Future and Other Major Sources of Estimation Uncertainty 37

4. Major Items of Income and Expense 39

5. Events After the Balance Sheet Date 39 6. Adjustment Between Accounting Basis and Funding Basis Under Regulations 23 and 24 39 7. Transfer To/From Earmarked Reserves 43

8. Other Operating Expenditure 43

9. Financing and Investment Income and Expenditure 44

10. Taxation and Non Specific Grant Income 44

11. Property, Plant and Equipment 44

12. Heritage Assets 47

13. Investment Property 48

14. Intangible Assets 49

15. Financial Instruments 50

16. Long Term Debtors 53

17. Short Term Debtors 53

18. Temporary Lending – Short Term Investments 54 19. Cash and Cash Equivalents 54 20. Assets Held for Sale 54 21. Short Term Creditors 54

22. Provisions 55

23. Long Term Borrowing 55 24. Homes and Communities Agency 56 25. Trust Funds 56 26. Usable Reserves 56 27. Usable Capital Reserves 56

28. Unusable Reserves 57

29. Reconciliation of Income and Expenditure Deficit to Revenue Activities Net Cash Flow 61

30. Cash Flow Statement – Operating Activities 62 31. Cash Flow Statement – Investing Activities 62 32. Cash Flow Statement – Financing Activities 62 33. Amounts Reported for Resource Allocation Decisions 62

34. Reconciliation of Net Cost of Services in the Comprehensive Income and Expenditure Statement 64

35. Reconciliation to Subjective Analysis 64

36. Agency Income and Expenditure 65

37. Members’ Allowances 65

38. Officers’ Remuneration 66

39. External Audit Fees 67

40. Grants and Contributions 67

41. Related Party Transactions 68

42. Capital Expenditure and Capital Financing 69

43. Revenue Provision for Payment of External Debt 70 44. Impairment Losses 70 45. Leases 70

46. Termination Benefits 73

47. Retirement Benefits 73

48. Contingent Liabilities 78 49. Commitments Under Capital Contracts 79

50. Heritage Assets: Summary of Transactions 79

51. Heritage Assets: Further Information on the Collections 80

52. Prior Period Adjustment – IAS 19 Retirement Benefits 81

37

1. Accounting Standards That Have Been Issued But Have Not Yet Been Adopted

For 2013-2014, the following accounting policy changes need to be reported relating to:

amendments to IFRS 10 Consolidated Financial Statements May 2011);

IFRS 11 Joint Arrangements (May 2011);

IFRS 12 Disclosure of Interests in Other Entities (May 2011);

IAS 27 Separate Financial Statements (as amended in May 2011);

IAS 28 Investments in Associates and Joint Ventures (as amended in May 2011)

IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities (as amended in December 2011) and

IAS 1 Presentation of Financial Statements (as amended in May 2011).

In the Financial Statements for 2014-2015, the effect of these changes will be assessed and , where necessary, comparative figures restated.

2. Critical Judgements in Applying Accounting Policies

In applying the Accounting Policies, set out in pages 10 to 28, the Council has had to make judgements about complex transactions, or those involving uncertainty about future events. The critical judgements made in the Statement of Accounts are:

there is uncertainty around future funding levels for local Government. However, the Council has determined that this uncertainty is not sufficient to impair assets resulting from closure of facilities or services. Section 11 of the Explanatory Foreword sets out the basis for concluding that the Council is financially resilient; and

a revised valuation of the Penrith New Squares Scheme was obtained as at 31 March 2014 to take account of further work completed on site during 2013-2014, in recognition of the completion of Phase 1 of the development and housing and retail lettings during 2013-2014.

3. Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty

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

The items in the Balance Sheet at 31 March 2014, for which there is a risk of adjustment in the forthcoming financial year, are as follows:

38

Item Uncertainties Effect if Actual Results Differ

from Assumptions

Property, Plant and Equipment

Where appropriate, assets are depreciated over useful lives, dependent on assumptions about the level of repairs and maintenance incurred in relation to individual assets. The Council may not sustain current spending levels on repairs and maintenance, bringing the useful lives assigned into doubt.

If useful lives reduce, depreciation charges increase and the carrying amount of assets decrease. It is estimated that the annual depreciation charge for buildings would increase by £6,000 for every year that useful lives are reduced by.

Investment Properties The main Investment Property held by the Council is Penrith New Squares. As the lessor is a major national company and trading has now commenced on the site, the risk to future income is seen as low.

As this is a low risk, the effect is not quantified.

Provisions The Council has three provisions in its accounts at 31 March 2014:

£163,000 for unresolved Business Rates appeals;

£132,000 for items requiring rectification at its Leisure Facilities following a change of Contractor from April 2013; and

and £22,000 for the Municipal Mutual Insurance Limited liability.

It is not certain that the total amount of the provisions will be required.

Should the whole amount of the provisions not be required, then the unused balance will be credited to General Fund Reserves or Collection Fund, thereby decreasing revenue expenditure in 2014-2015.

Pensions Liability Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the projected rate of salary increase, changes in retirement age, mortality rates and expected return on pension fund assets. The pension fund actuaries provide the Council with expert advice regarding the assumptions to be applied.

The effects on the net pensions liability of changes in individual assumptions can be measured. For instance, a 0.1% increase in discount rate assumption would result in a decrease in the liability of £724,000.

39

Item Uncertainties Effect if Actual Results Differ from Assumptions

Arrears In the Balance Sheet at 31 March 2014, the Council included debtor balances for Council Tax, NNDR and Sundry Debtors totalling £606,000. An impairment of doubtful debts of £109,000 has been calculated as appropriate. Such allowance may not be sufficient in future and may require reassessment.

If collection rates deteriorate, the impairment allowance for doubtful debts would increase. If it were determined that the allowance should increase by 10%, an extra £11,000 would need to be set aside.

4. Major Items of Income and Expense

The following are the major items appearing in the Comprehensive Income and Expenditure Statement:

contract payment for Refuse Collection of £740,000;

Recycling credits income of £542,000;

Housing Benefit paid to claimants of £9,745,000, subsidised by Government Grant of £9,685,000;

Rental Income from the Penrith New Squares Scheme of £719,000; and

the actuarial valuation of the Pension Fund decreased the liability by £3,467,000.

5. Events After the Balance Sheet Date

The Statement of Accounts was certified by the Director of Finance, D J Rawsthorn, MA, CPFA, on 26 June 2014 and recertified after amendment on 25 September 2014. Events taking place after this date are not reflected in the Statements, or Notes. Where an event taking place before this date provided information about conditions existing at 31 March 2014, the figures in the Statements, or Notes, have been adjusted in all material aspects to reflect the impact of this information as appropriate. From 31 March 2014, until the release of these accounts, the Council has considered whether any significant events require disclosure. No events have been identified.

6. Adjustments Between Accounting Basis and Funding Basis Under Regulations 23 and 24

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. The following sets out a description of the reserves that the adjustments are made against:

40

General Fund Balance - The General Fund is the statutory fund into which all the receipts of an authority are required to be paid and out of which all liabilities of the authority are to be met, except to the extent that statutory rules might provide otherwise. These rules can also specify the financial year in which liabilities and payments should impact on the General Fund Balance, which is not necessarily in accordance with proper accounting practice. The General Fund Balance therefore summarises the resources that the Council is statutorily empowered to spend on its services or on capital investment (or the deficit of resources that the Council is required to recover) at the end of the financial year.

Capital Receipts Reserve - The Capital Receipts Reserve holds the proceeds from the disposal of land or other assets, which are restricted by statute from being used other than to fund new capital expenditure, or to be set aside to finance historical capital expenditure. The balance on the reserve shows the resources that have yet to be applied for these purposes at the year-end.

Capital Grants Unapplied - The Capital Grants Unapplied Account (Reserve) holds the grant and contributions received towards capital projects for which the Council has met the conditions that would otherwise require repayment of the monies but which have yet to be applied to meet expenditure. The balance is restricted by grant terms as to the capital expenditure against which it can be applied and/or the financial year in which this can take place.

2013-2014 General Fund

Balance £’000

Capital Receipts Reserve

£’000

Capital Grants

Unapplied £’000

Movement in Unusable Reserves

£’000

Adjustments Primarily 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

691 0 0 -691

Revaluation losses on Property, Plant and Equipment

13 0 0 -13

Movements in the market value of investment properties

0 0 0 0

Amortisation of intangible assets 43 0 0 -43

Capital grants and contributions applied 0 0

Revenue expenditure funded from capital under statute

288 0 0 -288

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

-282 0 0 282

41

2013-2014 (continued) General

Fund Balance

£’000

Capital Receipts Reserve

£’000

Capital Grants

Unapplied £’000

Movement in Unusable Reserves

£’000

Insertion of Items not Debited or Credited to the Comprehensive Income and Expenditure Statement

Statutory provision for the financing of capital investment

-20 0 0 20

Capital expenditure charged against the General Fund balances

-169 0 0 169

Adjustments Primarily Involving the Capital Grants Unapplied Account

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

-272 0 272 0

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

0 0 -277 277

Adjustments Primarily Involving the Capital Receipts Reserve

Transfer of cash sale proceeds credited as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

0 468 0 -468

Use of the Capital Receipts Reserve to finance new capital expenditure

0 -163 0 163

Adjustment primarily 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

2 0 0 -2

Adjustments Primarily Involving the Pensions Reserve

Reversal of items relating to retirement benefits, or credited to the Comprehensive Income and Expenditure Statement (see Note 47)

1,243 0 0 -1,243

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

-604 0 0 604

Adjustments Primarily Involving the Collection Fund Adjustment Account

Amount by which Council Tax and non-domestic rating income credited to the Comprehensive Income and Expenditure Statement is different from Council Tax income calculated for the year in accordance with statutory requirements

-33 0 0 33

Adjustment primarily 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 0 0 2

Total Adjustments 898 305 -5 -1,198

42

2012-2013 General

Fund Balance

£’000

Capital Receipts Reserve

£’000

Capital Grants

Unapplied £’000

Movement in Unusable

Reserves £’000

Adjustments Primarily 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

593 0 0 -593

Revaluation losses on Property, Plant and Equipment

0 0 0 0

Movements in the market value of investment properties

-300 0 0 300

Amortisation of intangible assets 41 0 0 -41

Capital grants and contributions applied -385 0 0 385

Revenue expenditure funded from capital under statute

898 0 0 -898

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

0 0 0 0

Insertion of Items not Debited or Credited to the Comprehensive Income and Expenditure Statement

Statutory provision for the financing of capital investment

-22 0 0 22

Capital expenditure charged against the General Fund balances

-428 0 0 428

Adjustments Primarily Involving the Capital Grants Unapplied Account

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

0 0 0

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

0 0 -584 584

Adjustments Primarily Involving the Capital Receipts Reserve

Transfer of cash sale proceeds credited as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

-134 134 0 0

Use of the Capital Receipts Reserve to finance new capital expenditure

0 -270 0 270

Adjustment primarily 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

0 0 0 0

Adjustments Primarily Involving the Pensions Reserve

Reversal of items relating to retirement benefits, or credited to the Comprehensive Income and Expenditure Statement (see Note 47)

1,006 0 0 -1,006

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

-617 0 0 617

43

2012-2013 (continued) General

Fund Balance

£’000

Capital Receipts Reserve

£’000

Capital Grants

Unapplied £’000

Movement in Unusable

Reserves £’000

Adjustments Primarily 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

-17 0 0 17

Adjustment primarily 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

3 0 0 -3

Total Adjustments 638 -136 -584 82

7. Transfers To/From Earmarked Reserves

These earmarked reserves are sums set aside from the General Fund to finance future capital or revenue expenditure. The movements are detailed below:

1 Apr 12

£'000

Transfer Out

£'000

Transfer In

£'000

31 Mar 13

£’000

Transfer Out

£'000

Transfer In

£'000

31 Mar 14

£'000

Renewals Fund 247 -220 390 417 -32 210 595

IT Renewals Fund 0 0 0 0 0 25 25

Capital Funding Reserve 0 0 0 0 0 403 403

Leisure Centre Renewals 178 -178 0 0 0 0 0

Homelessness 185 0 102 287 0 73 360

Repossession Prevention Fund 0 0 0 0 0 30 30

Building Regulations Surplus/Deficit 48 -38 0 10 -9 0 1

Special Projects Fund 70 -78 48 40 -193 238 85

Rural Infrastructure Fund 230 -142 15 103 -164 150 89

Community Fund 2 -94 100 8 -89 100 19

Affordable Housing Fund 0 0 132 132 0 146 278

Other earmarked reserves less than £20,000

69 0 5 74 -13 11 72

1,029 -750 792 1,071 -500 1,386 1,957

8. Other Operating Expenditure

2012-13 £’000

2013-14 £’000

461 Parish Council Precepts 457 -134 Gain (-)/Loss on Disposal of Non-Current Assets -282

327 Total 175

44

9. Financing and Investment Income and Expenditure

2012-13 Restated

£’000

2013-14

£’000 21 Interest Payable and Similar Charges 19

350 Net Interest on the Pension Net Defined Liability 409 -174 Interest Receivable and Similar Income -132 -856 Income and Expenditure in relation to Investment Property and

Changes in Fair Value -821

0 Other Investment Income 0

-659 Total -525

10. Taxation and Non-Specific Grant Incomes

2012-13 £’000

2013-14 £’000

-4,071 Council Tax Income -3,889 0 Non-Domestic Rates Income (Local Share) -1,463 Non-Ring-Fenced Government Grants:

-3,268 Distribution from National Non Domestic Rate Pool

0

0 NNDR Top Up Grant -396 -63 Revenue Support Grant -2,253

-343 Non-Ring-Fenced Government Grants -332 0 Capital Grants and Contributions 0

-203 Other -270

-7,948 Total -8,603

11. Property, Plant and Equipment

The table below sets out the transactions relating to Property, Plant and Equipment in 2013-2014:

Land and Buildings

£’000

Vehicles, Plant and

Equipment £’000

Infrastructure Assets

£’000

Community Assets

£’000

Surplus Assets

£’000

Assets Under

Construction £’000

Total

£’000

Cost/Valuation at 1.4.13 18,130 1,153 1,587 177 1,709 9 22,765

Additions 14 0 29 0 0 251 294

Revaluations – Revaluation Reserve

0 0 0 0 0 0 0

Revaluations – Cost of Services 0 0 0 0 0 0 0

Disposals 0 0 0 0 -185 0 -185

Other 163 0 0 -5 -460 157 -145

Cost/ Valuation at 31.3.14 18,307 1,153 1,616 172 1,064 417 22,729

45

Land and Buildings

£’000

Vehicles, Plant and

Equipment £’000

Infrastructure Assets

£’000

Community Assets

£’000

Surplus Assets

£’000

Assets Under

Construction £’000

Total

£’000

Accumulated Depreciation and Impairment

At 1.4.13 -1,290 -670 -275 0 0 0 -2,235

Depreciation charge -289 -196 -75 0 0 0 -560

Depreciation written out to Revaluation Reserve

0 0 0 0 0 0 0

Depreciation written out to Surplus/ Deficit on Provision of Services

0 0 0 0 0 0 0

Impairments – Revaluation Reserve

-13 0 0 0 -20 0 -33

Impairments – Cost of Services

-64 0 0 0 -80 0 -144

Disposals 0 0 0 0 0 0 0

Other 0 0 0 0 0 0 0

As at 31.3.14 -1,656 -866 -350 0 -100 0 -2,972

Net Book Value

At 31.3.14 16,651 287 1,266 172 964 417 19,757

At 31.3.13 16,840 483 1,312 177 1,709 9 20,530

Nature of Asset Holding

Owned 16,651 268 1,266 172 964 417 19,738

Finance Lease 0 19 0 0 0 0 19

PFI 0 0 0 0 0 0 0

Total 16,651 287 1,266 172 964 417 19,757

Comparative movements in 2012-2013 were:

Land and Buildings

£’000

Vehicles, Plant and

Equipment £’000

Infrastructure Assets

£’000

Community Assets

£’000

Surplus Assets

£’000

Assets Under

Construction £’000

Total

£’000

Cost/Valuation at 1.4.12 18,484 936 1,418 19 1,334 0 22,191

Additions 10 217 169 158 200 9 763

Revaluations – Revaluation Reserve

-14 0 0 0 0 0 -14

Revaluations – Cost of Services

0 0 0 0 0 0 0

Disposals 0 0 0 0 0 0 0

Other -350 0 0 0 175 0 -175

Cost/Valuation at 31.3.13 18,130 1,153 1,587 177 1,709 9 22,765

46

Land and

Buildings

£’000

Vehicles, Plant and

Equipment £’000

Infrastructure Assets

£’000

Community Assets

£’000

Surplus Assets

£’000

Assets Under

Construction £’000

Total

£’000

Accumulated Depreciation and Impairment

At 1.4.12 -990 -448 -201 0 0 0 -1,639

Depreciation Charge -290 -222 -74 0 0 0 -586

Depreciation written out to Revaluation Reserve

0 0 0 0 0 0 0

Depreciation written out to Surplus/ Deficit on Provision of Services

0 0 0 0 0 0 0

Impairments – Revaluation Reserve

-3 0 0 0 0 0 -3

Impairments – Cost of Services

-7 0 0 0 0 0 -7

Disposals 0 0 0 0 0 0 0

Other 0 0 0 0 0 0 0

At 31.3.13 -1,290 -670 -275 0 0 0 -2,235

Net Book Value

At 31.3.13 16,840 483 1,312 177 1,709 9 20,530

At 31.3.12 17,494 488 1,217 19 1,334 0 20,552

Nature of Asset Holding

Owned 16,840 455 1,312 177 1,709 9 20,502

Finance Lease 0 28 0 0 0 0 28

PFI 0 0 0 0 0 0 0

Total 16,840 483 1,312 177 1,709 9 20,530

Basis of Valuation of Property, Plant and Equipment

In accordance with CIPFA guidance, assets are valued on the following bases:

Basis of Valuation Depreciation Asset Lives in Years

Land Existing Use and Depreciated Replacement

No depreciation

Buildings Existing Use and Depreciated Replacement

Straight-Line 15-50

Vehicles, Plant and Equipment Historical Cost Straight-Line 3-10

Community Assets Historical Cost Not applicable N/A

Surplus Assets Open Market Value Not applicable N/A

Infrastructure Assets Historical Cost Straight-Line 25

Assets Under Construction Historical Cost Not applicable N/A

Valuations were carried out by Walton Goodland, an independent firm of chartered surveyors. These were undertaken at 31 March 2010 and reviewed at 31 March 2013 and 31 March 2014. This firm also undertook an impairment review at 31 March 2014. The firm is independent, has recent knowledge of the local area and experience of this valuation work.

47

The following table shows the Council's programme for valuation of non-current assets:

Land and Buildings

£’000

Vehicles, Plant and

Equipment £’000

Community Assets

£’000

Infrastructure Assets

£’000

Assets Under

Construction £’000

Surplus Assets

£’000

Valued at historical cost 1,153 172 1,616 417

Valued at current value at:

31 March 2014 99 0 0 0 0 0

31 March 2013 0 0 0 0 0 0

31 March 2012 0 0 0 0 0 0

31 March 2011 307 0 0 0 0 520

31 March 2010 17,596 0 0 0 0 444

Total 18,002 1,153 172 1,616 417 964

Vehicles, plant and equipment are valued at depreciated historical cost as a proxy for current value.

The major assets of the Council are as follows:

Number at 31 March 2013

Number at 31 March 2014

2* Administrative Buildings 2 4 Sports Centres/Swimming Pools 4

15 Car Parks 15 13 Public Conveniences 13 20 Parks and Areas of Open Space 20 6 Cemeteries 6 2** Other 0

*Corney Square Building leased from January 2013 to a third party now shown in Investment Property.

**Former Penrith Magistrates’ Court Building acquired March 2012 and Bakery Site acquired October 2012. Both buildings were demolished during 2013-2014.

12. Heritage Assets

Reconciliation of the Carrying Value of Heritage Assets held by the Council:

Human History

£’000

Art Collection

£’000

Other

£’000

Total Assets

£’000 Cost or Valuation 1 April 2013 108 510 45 663 Additions 0 0 0 0 Disposals 0 0 0 0 Revaluations 0 0 0 0 Impairment Losses/(reversals) recognised in the

Revaluation Reserve 0 0 0 0

Impairment Losses (reversals) recognised in Surplus or Deficit on the Provision of Services

0 0 0 0

Depreciation 0 0 0 0

31 March 2014 108 510 45 663

48

Human History

£’000

Art Collection

£’000

Other

£’000

Total Assets

£’000 Cost or Valuation 1 April 2012 108 510 45 663 Additions 0 0 0 0 Disposals 0 0 0 0 Revaluations 0 0 0 0 Impairment Losses/(reversals) recognised in the

Revaluation Reserve 0 0 0 0

Impairment Losses (reversals) recognised in Surplus or Deficit on the Provision of Services

0 0 0 0

Depreciation 0 0 0 0

31 March 2013 108 510 45 663

The Council’s Human History Collection includes ceramics, pottery and other items of value held at its Museum. The collection was valued by Penrith, Farmers’ and Kidd’s Limited, who have specialist knowledge of these items. The items are reported in the Balance Sheet at insurance valuation based on market values. The insurance valuations are updated annually. In addition, items will be periodically sampled and reviewed against relevant antique and ceramic trade press information annually to ensure the adequacy of the valuations. The Seal of Penrith is included in the Human History Collection and is valued at £27,000. It is an item of particular interest and is used on important Council documents.

The Council’s external valuer for its art collection (Christie’s of London) undertook a full valuation of the collection of paintings as at 31 March 2012, which was updated at 31 March 2014. The valuations are published using an insurance valuation. In accordance with the valuer’s advice, no increase was required for 2013-2014. The most significant piece of work in the collection is a work by Jacob Thompson entitled ‘The Hope Beyond’, valued at £160,000. Other items include a geology collection, a photographic collection and various ceremonial items, including the Chairman’s and Vice-Chairman’s ceremonial regalia and Colleges of Arms held at the Council Chamber at the Town Hall in Penrith.

The Council has also identified various War Memorials in the District and the gates at the entrance to Castle Park, Penrith as Heritage Assets. These items were assessed by Walton Goodland Limited as being de minimis and, as such, no valuation has been assigned to these for accounting purposes. The Council’s records show there were no disposals or acquisitions of Heritage Assets between 2010 and 2014.

13. Investment Property

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

2012-13 £’000

2013-14 £’000

582 Rental Income from Investment Property 866 -26 Direct Operating Expenses Arising from Investment Property -45

556 Net Gain/(-) Loss 821

49

There are no restrictions on the Council’s ability to realise the value inherent in its investment property or on the Council’s right to the remittance of income and the proceeds of disposal. The Council has no contractual obligations to purchase, construct, or develop investment property, or repairs, maintenance, or enhancement. A valuation of the lease of the Penrith New Squares site, which is included in investment property, was undertaken by Penrith Farmers’ and Kidd’s, at 31 March 2014. The firm is independent, has recent knowledge of the local area and experience of this valuation work. Penrith New Squares is a phased development. The valuation at 31 March 2014 reflects the work completed to date and the planned timing of the completion of the remaining phases. The following table summarises the movement in the fair value of investment properties during the year.

2012-13 £’000

2013-14 £’000

13,515 Balance at the start of the year 13,990 175 Additions 0 300 Net gain/loss from Fair Value adjustment 0

0 Other 0

13,990 Balance at year end 13,990

The most significant Investment Property is Penrith New Squares, which was valued at £12m at 31 March 2014. The balance of these properties was mostly Industrial Units. All these properties are held for the purposes of realising rental income and are leased to third parties. Information on leases is shown at Note 45 on page 70.

14. Intangible Assets

Intangible Fixed Assets mainly comprise licences to use software. These are amortised to revenue over their expected useful economic lives on a straight-line basis, ranging from five to ten years. A summary of spending and other movements during the year is shown below:

2012-13 £’000

2013-14 £’000

280 Cost/Value at 1 April 287 -45 Accumulated Depreciation -86

235 Net Book Value 1 April 201 Movement

7 Expenditure 31 -41 Depreciation -42

201 Net Book Value 31 March 190 86 Add Depreciation 128

287 Cost/Valuation 31 March 318

Nature of Asset Holdings 287 Owned 318

0 Finance Lease 0 0 PFI 0

287 318

50

15. Financial Instruments

The following categories of financial instrument are carried in the Balance Sheet

Long Term Current

2012-13 2013-14 2012-13 2013-14 Investments £000 £000 £000 £000

Loans and Receivables 0 1,930 3,731 5,700

Total Investments 0 1,930 3,731 5,700

Cash and Cash Equivalents

Loans and Receivables 0 0 5,739 3,220

Total Cash and Cash Equivalents 0 0 5,739 3,220

Debtors Loans and Receivables 31 13 309 688

Total Included in Debtors 31 0 309 688

Borrowings Financial Liabilities at amortised cost -303 -248 -59 -59

Total Included in Borrowings -303 -248 -59 -59

Other Long Term Liabilities Financial Liabilities at amortised cost -288 0 0 0

Total Other Long Term Liabilities -288 0 0 0

Creditors Financial Liabilities at amortised cost 0 0 -1,077 -1,188

Total Creditors 0 0 -1,077 -1,188

Gains and Losses on Financial Instruments

The gains and losses recognised in the Comprehensive Income and Expenditure Statement in 2013-2014 in relation to financial instruments are made up as follows:

Financial Assets Loans and

Receivables 2012-13 £’000

Financial Assets Loans and

Receivables 2013-14 £’000

10 Interest Costs 9 75 Impairment Losses -34

85 Interest Payable and Similar Charges -25

174 Interest Income 132

174 Interest and Investment Income 132

259 Net Gain/(Loss) for the year 107

Fair Value of Assets and Liabilities Carried at Amortised Cost

Financial liabilities and financial assets represented by loans and receivables are carried in 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 term of the instruments, using the following assumptions:

interest rate at 31 March 2014 of 2.75% for a loan from the Public Works Loans Board, based on new lending rates for equivalent loans at that date;

51

early repayment or impairment is not recognised;

where an instrument matures within twelve months, the carrying value is assumed to approximate to fair value; and

the fair value of operational liabilities and receivables is taken to be the invoiced or billed amount.

31 March 2013 31 March 2014

Carrying Amount

£’000

Fair Value £’000

Carrying Amount

£’000

Fair Value £’000

1,782 1,813 Financial Liabilities 1,550 1,566 9,747 9,747 Loans and Receivables 11,483 11,348

The fair value of loans and receivables is the same as the carrying amount at 31 March 2013 because the Council’s investment portfolio included fixed rate investments where the interest receivable was identical to the rates available for similar loans at the Balance Sheet date. In 2013-14, a long term investment was made for which a redemption penalty is applicable, making the fair value different from the carrying amount.

Risks Arising from Financial Instruments

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

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

liquidity risk – the possibility that the Council might not have funds available to meet its payment commitments;

market risk – the possibility that a financial gain or loss might arise for the Council as a result of movements in interest rates;

price risk – the possibility that a financial gain or loss might arise as a result of movements in the price of equity investments; and

foreign exchange risk – the possibility that a financial gain or loss might arise as a result of fluctuations in foreign exchange rates.

The Council’s annual Treasury Management Strategy focuses on these risks and seeks to minimise potential adverse effects on the resources available to fund services. The Council provides written principles for overall risk management, as well as written policies within its Treasury Management Strategy, covering interest rate risk, credit risk and the investment of surplus cash balances as follows:

a. Credit Risk

Credit risk arises from deposits with banks and financial institutions, as well as credit exposure to the Council’s customers. Investments are not placed with banks and financial institutions unless they have an A- rating or higher. The Council has a policy of not lending more than £2m of its cash balances to any one institution. Customers are assessed, taking into account their financial position, past experience and other factors.

The following analysis summarises the Council’s potential maximum exposure to credit risk, based on the experience gathered over the last three financial years, on the level of default on loans and receivables and adjusted for current market conditions:

52

Value at 31 March 2014

Default Based on Previous

Experience

Default Adjusted

for Current Market

Conditions

Estimated Maximum Exposure to Default

£’000 % % % Deposits with banks and financial institutions

10,859 Nil Nil 0

Customers (Debtors) 688 10 15 104

104

The Council does not expect any losses in respect of non-performance by counter-parties in relation to cash deposits with banks and financial institutions. The Council generally expects its customers to settle outstanding accounts within thirty-one days, so £212,000 of the amount owed by customers at 31 March 2014 of £687,000 is past its due date for payment. The aged-debt analysis of this sum is as follows:

2012-13 £’000

2013-14 £’000

213 Less than 1 month 475 -19 2 – 3 months 184 90 3 – 6 months 9 7 6 –12 months 8

18 Over 12 months 11

309 Total 687

b. Liquidity Risk

As the Council has ready access to borrowing from the Public Works Loans Board, there is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. The Council borrowed during 2009-2010 to fund a capital scheme, as agreed by Council. All operational liabilities are due to be repaid within one year.

c. Market Risk

The Council is only exposed to limited risk due to movements in interest rates on its investments. This is because it is Council policy only to invest in fixed rate investments. Nevertheless, there remain some risks:

an increase in interest rates may result in the fair value of borrowings and investments falling;

a decrease in interest rates may result in the fair value of borrowings and investments increasing; and

the value of interest received from investments will rise and fall depending on increases and decreases in interest rates and will impact on the Income and Expenditure Account.

Investments are not carried in the Balance Sheet at fair value, so nominal gains and losses on fixed rate financial instruments have no impact on the Comprehensive Income and Expenditure Statement.

53

The Council carries out its borrowing and investment function within parameters set out in its Treasury Management Strategy, which assesses interest rate exposure to feed into the budget process. Forecasts are updated regularly throughout the year, which allows any significant changes to interest rates to be reflected in current budget projections. The Treasury Management Strategy also advises on the limits for new variable and fixed-rate borrowing for the year, although in 2013-2014 there were no proposals to take out any new borrowing. As at 31 March 2014, any movement in interest rates on investments would not change the fair value as interest rates on investments are fixed.

d. Price Risk

The Council does not hold any investments in equity shares and therefore is not exposed to any losses arising from movements in the price of shares.

e. Foreign Exchange Risk

The Council does not hold any financial assets or liabilities held in foreign currency and therefore is not exposed to any losses arising from movements in exchange rates.

16. Long Term Debtors

Long term debtors comprise car loans for staff and finance lease debtors. Finance leases are shown in Note 45. Transactions during 2013-2014 for car loans were:

2012-13 £’000

2013-14 £’000

76 Balance at the start of the year 31 13 Advances 0

-58 Advances Repaid -18 0 Other 0

31 Balance at Year End 13

17. Short Term Debtors

Most sums due to the Council are raised in the accounts at the time that they are due. Significant items due for the year, but not raised at 31 March 2014, are accrued on an estimated basis. Amounts due from Government departments are often not settled conclusively for some time and are, therefore, brought into the accounts on the basis of the latest available information. An analysis is shown below:

31 March 2013 £'000

31 March 2014 £'000

370 Government Departments 435 18 Other Local Authorities 213

891 Other Debtors 1,570 -80 Impairment Bad Debt -114

1,199 2,104

54

18. Investments

At 31 March 2014, the Council held long term and short term investments, further details are:

Long Term Investment

The Council invested in the Local Authority Mutual Investment Trust during 2013-2014 (Ref F4/14; Council, 20 February 2014). This is viewed as a long term investment for an anticipated period of five years. Dividends are credited to the Comprehensive Income and Expenditure Statement. Growth in the value of the fund is shown in the Available for Sale Financial Instruments Reserve until the investment is redeemed. At that stage, the growth will be realised by the Council. If the investment is sold, then there is a fee of 2% of the value at the time of sale applicable. The following table shows the movement in the investment:

£’000 Cash paid to Fund 2,000 Less fees payable on investment -109 Add fund growth to 31 March 2014 39

Fund Valuation as at 31 March 2014 1,930

Dividend Receivable at 31 March 2014 8

Temporary Lending – Short Term Investments

This item represents the short term investment of surpluses and funds in cash deposits. All lending is in accordance with the Council's agreed Treasury Management Policy Statement, which complies with the CIPFA Code of Practice on Treasury Management. The Council invests in a large number of institutions to reduce the risk of significant loss.

19. Cash and Cash Equivalents

The actual bank balance at 31 March 2014 was £105,647 (£130,099 at 31 March 2013). This is adjusted for items that have gone through the Council's accounts prior to 31 March 2014, but not through the bank account, to give the figure shown in the Balance Sheet. The figure in the Balance Sheet is made up of the following elements:

31 March 2013 £'000

31 March 2014 £'000

2 Cash held by the Council 2 28 Bank Current Accounts -11

5,709 Short Term Deposits with Third Parties 3,229

5,739 Total Cash and Cash Equivalents 3,220

20. Assets Held for Sale

2012-13 £’000

2013-14 £’000

0 Balance at 1 April 0 0 Revaluation Losses 0 0 Revaluation Gains 140 0 Impairment Losses 0 0 Assets Declassified as Held for Sale 0 0 Assets Sold 0

0 Balance at 31 March 140

55

21. Short Term Creditors

All payments made for goods and services on or before 31 March 2014 are included in the expenditure for the year. Payments made during the two weeks following the end of the financial year are also included, as they will relate to goods and services received before 31 March 2014. Significant creditors unpaid at the expiration of the two weeks are included in the accounts on an estimated basis. An analysis is shown below:

31 March 2013 £'000

31 March 2014 £'000

299 Government Departments 996 125 Other Local Authorities 282

1,444 Other Creditors (primarily suppliers) 1,571

1,868 2,849

22. Provisions

Contract Provisions

£’000

Insurance Provision

£’000

NNDR Appeals

£’000

Total

£’000 Balance at 1 April 2013 184 26 0 210 Provisions made in 2013-2014 0 0 162 162 Amounts used in 2013-2014 -52 -4 0 -56 Unused amounts reversed in 2013-2014 0 0 0 0 Unwinding of discounts in 2013-2014 0 0 0 0

Balance at 31 March 2014 132 22 162 316

The Council has one provision relating to contract, one relating to Municipal Mutual Insurance Ltd outstanding and a provision for outstanding NNDR appeals as at 31 March 2014:

a provision of £132,000 to correct defects at the Council’s Leisure Centres following the letting of its leisure management contract from 1 April 2012;

a provision of £22,000 for claims liability from Municipal Mutual Insurance Limited; and

a provision of £162,000 for its portion of outstanding NNDR valuation appeals; required under revised accounting rules from 1 April 2013 in relation to the BRRS.

23. Long Term Borrowing

No borrowing was undertaken in 2013-2014. In May 2009, borrowing was undertaken. £550,000 was borrowed from the Public Works Loans Board, repayable over ten years. At 31 March 2014, £303,000 was outstanding on this loan. The maturity profile for this loan is:

31 March 2013 £'000

31 March 2014 £’000

Maturing within: 55 One year 55 55 One year, but less than two years 55

165 Over two years, but less than five years 165 83 Over five years, but less than ten years 28

358 303

56

24. Homes and Communities Agency

The North West Development Agency, now replaced by Homes and Communities Agency, made a payment to the Council to assist with the development of Eden Business Park. This is treated as a soft loan, as the Council does not pay interest on this at prevailing market rates. The liability at 31 March 2014 was estimated at £228,000 (31 March 2013: £288,000). This payment will become repayable when the Council realises capital receipts in respect of this development. If the site is not disposed of by 31 December 2014, repayment must be made based on the value of the residual site. Because of this, the liability is included in short term creditors at 31 March 2014. The Council’s aim is to sell the site by that date. This is included in Financial Instruments (Note 15).

25. Trust Funds

The Council acts as trustee for twelve trust funds, arising from bequests to the Council for specific purposes, none of which represent assets of the Council. These are not included in the Balance Sheet. The total value of these funds at 31 March 2014 was £43,000 (2012-2013: £45,000). The Council is the sole trustee of these trust funds.

26. Usable Reserves

Movements in the Council’s Usable Reserves are detailed in the Movement in Reserves Statement. Usable Reserves comprise:

31 March 2013 £'000

31 March 2014 £’000

5,899 General Fund Balance 6,155 1,071 Earmarked Reserves 1,957 1,299 Capital Receipts Reserve 1,604

108 Capital Grants Unapplied 103

8,377 Total Usable Reserves 9,819

27. Usable Capital Reserves

Capital Receipts Reserve

2012-13 £’000

2013-14 £’000

1,435 Balance at 1 April 1,299 134 Receipts from disposal of Non-Current Assets 467

-270 Receipts used to fund Capital Spending -163 0 Deferred Capital Receipts arising 1

1,299 Balance at 31 March 1,604

Capital Grants Unapplied

2012-13 £’000

2013-14 £’000

692 Balance at 1 April 108 385 Capital Grant Receipts 272

-969 Grants used to fund Capital Spending -277

108 Balance at 31 March 103

57

28. Unusable Reserves

31 March 13 Restated

£'000

31 March 14

£’000 4,516 Revaluation Reserve 4,451

30,448 Capital Adjustment Account 29,889 10 Financial Instruments Adjustment Account 8 0 Available for Sale Financial Instruments Reserve 39

-9,661 Pensions Reserve -6,194 522 Deferred Capital Receipts 521 28 Collection Fund Adjustment Account 61

-36 Accumulated Absences Account -34

25,827 Total Unusable Reserves 28,741

Revaluation Reserve

The Revaluation Reserve contains 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 gains are lost;

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

disposed of, and gains realised.

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

2012-13 £’000

2013-14 £’000

4,621 Balance at 1 April 4,516 0 Upward revaluation of assets 0

-17 Downward revaluation of assets and impairment losses not charged to Surplus/Deficit on Provision of Services

-33

-88 Difference between Fair Value Depreciation and Historical Cost Depreciation

-32

0 Accumulated Gains on Assets Sold or Scrapped 0

4,516 Balance at 31 March 4,451

58

Capital Adjustment Account

The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction, or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction, or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Capital Adjustment Account is credited with the amounts set aside as finance for the costs of acquisition, construction and enhancement. The Capital Adjustment Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Council. The Capital Adjustment Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, on which the Revaluation Reserve was created to hold such gains. Note 6 provides details of the source of all the transactions posted to the Capital Adjustment Account, apart from those involving the Revaluation Reserve.

2012-13 £’000

2013-14 £’000

29,903 Balance at 1 April 30,448 Reversal of Items relating to Capital Expenditure debited or credited to the

Comprehensive Income and Expenditure Statement

-593 Depreciation and Impairment of Non-Current Assets -705 0 Revaluation Losses on Property, Plant and Equipment 0

-41 Amortisation of Intangible Assets -42 -898 Revenue Expenditure Funded from Capital Under Statute -288

0 Amounts on Non-Current Assets written off on Disposal as part of gain/loss on disposal to the Comprehensive Income and Expenditure Statement

-185

88 Adjusting amounts Written Out of Revaluation Reserve 32 Capital Financing Applied in the Year

270 Use of the Capital Receipts Reserve to finance Capital Expenditure 163 385 Capital Grants Credited to the Comprehensive Income and Expenditure Statement

applied to Capital Financing 277

584 Application of Grants to Capital Financing from the Capital Grants Unapplied Account

22 Statutory Provision for the Financing of Capital Investment charged to the General Fund

20

428 Capital Expenditure charged against the General Fund Balance 169 300 Movement in the Market Value of Investment Properties debited or credited to the

Comprehensive Income and Expenditure Statement 0

30,448 Balance at 31 March 29,889

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 provision. The Authority uses the Account to manage premiums paid on the early redemption of loans. 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. There were no transactions on this account during 2013-2014.

59

2012-13

£’000 2013-14

£’000 2013-14

£’000 10 Balance at 1 April 10 0 Premiums incurred in the year and charged to the

Comprehensive Income and Expenditure Account -2

0 Proportion of premiums incurred in previous financial years to be charged against the General Fund Balance in accordance with statutory requirements

0

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

-2

10 Balance at 31 March 8

Available-for-Sale Financial Instruments Reserve

The Available for Sale Financial Instruments Reserve contains the gains made by the Council arising from increases in the value of its investments that have quoted market prices or otherwise do not have fixed or determinable payments. The balance is reduced when investments with accumulated gains are:

revalued downwards or impaired and the gains lost; and

disposed of and the gains are realised.

2012-13 £’000

2013-14 £’000

0 Balance at 1 April 0 0 Upward revaluation of investments 39 0 Downward revaluation of investments not charged to Surplus/Deficit on

Provision of Services 0

0 Accumulated gains on assets sold and maturing assets written out to the Comprehensive Income and Expenditure Statement as part of Other Investment Income

0

0 Balance at 31 March 39

Pensions Reserve

The Pensions Reserve includes the timing differences arising from the different arrangements for accounting for post employment benefits and the 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.

60

2012-13

Restated £’000

2013-14

£’000 -7,200 Balance at 1 April -9,661 -2,072 Actuarial gains or losses on pensions assets and liabilities 4,106 -1,006 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

-1,243

617 Employer’s pensions contributions and direct payments to pensioners payable in the year

604

-9,661 Balance at 31 March -6,194

Deferred Capital Receipts

The Deferred Capital Receipts Reserve holds the gains recognised on the disposal of non-current assets but for which cash settlement has yet to take place. Under statutory arrangements, the Council does not treat these gains as usable for financing new capital expenditure until they are backed by cash receipts. When the deferred cash settlement eventually takes place, amounts are transferred to the Capital Receipts Reserve.

2012-13 £’000

2013-14 £’000

522 Balance at 1 April 522 0 Transfer of deferred sale proceeds credited as part of the gain/loss on

disposal to the Comprehensive Income and Expenditure Statement 0

0 Transfer to the Capital Receipts Reserve upon receipt of cash -1

522 Balance at 31 March 521

Collection Fund Adjustment Account

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

2012-13 £’000

2013-14 £’000

11 Balance at 1 April 28 17 Amount by which Council Tax and NNDR income credited to the

Comprehensive Income and Expenditure Statement is different from Council Tax and NNDR income calculated for the year in accordance with statutory requirements

33

28 Balance at 31 March 61

61

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, eg 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.

2012-13 £’000

£’000

2013-14 £’000

-33 Balance at 1 April -36 33 Settlement or cancellation of accrual made at the end of the

preceding year 36

-36 Amounts accrued at the end of the current year -34

-3 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

-36 Balance at 31 March -34

29. Reconciliation of Income and Expenditure Deficit to Revenue Activities Net Cash Flow

The Cash Flow Statement for 2013-2014 (see page 35) summarises the inflows and outflows of cash to and from the Council arising from transactions with third parties for both revenue and capital. This note provides an analysis of the Net Cash Flow from Operating Activities shown in the Statement.

2012-13 £’000

2013-14 £’000

-276 Surplus/ (-)Deficit on the Provision of Services 244

Adjustments to the net surplus or deficit on the provision of services for non cash movements

634 Depreciation and Impairment Charges 747 389 Pension Costs 638

0 Carrying amount of non-current assets for sale sold 185 10 Transfers to/from (-) Provisions -2

282 Decrease (-)/Increase in Inventories and Debtors -691 -358 Decrease/Increase (-) in Creditors 767 -300 Restate Fair Value of Investment Property 0

657 1,644

Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities

0 Capital Grants Receivable -272 -134 Proceeds from sale of property plant and equipment, investment

property and intangible assets -467

247 Net Cash Flow from Operating Activities 1,149

62

30. Cash Flow Statement – Operating Activities

The cash flows for operating activities include the following items:

2012-13 £’000

2013-14 £’000

220 Interest Received 116 -22 Interest Paid -20

31. Cash Flow Statement – Investing Activities

2012-13 £’000

2013-14 £’000

-745 Purchase of Property, Plant and Equipment, Investment Property and Intangible Assets

-353

-3,731 Purchase of Short and Long Term Investments -4,864 0 Other Payments for Investing Activities 0 0 Proceeds from the sale of Property, Plant and Equipment,

Investment Property and Intangible Assets 0

3,800 Proceeds from Short and Long Term Investments 1,004 4 Other Receipts from Investing Activities 558

-672 Net Cash Flows from Investing Activities -3,655

32. Cash Flow Statement – Financing Activities

2012-13 £’000

2013-14 £’000

0 Cash Receipts of Short and Long term Borrowing 0 0 Other Receipts from Financing Activities 50

-6 Other Payments for Financing Activities 0 -55 Repayment of Short and Long Term Borrowing -55 -11 Other Payments for Financing Activities -8

-72 Net Cash Flows from Financing Activities -13

33. Amounts Reported for Resource Allocation Decisions

The analysis of income and expenditure by service in the Comprehensive Income and Expenditure Statement is that specified by the Best Value Accounting Code of Practice. However, decisions regarding resource allocation are taken by the Executive on the basis of budget reports analysed across portfolios. These reports are prepared on a different basis from the Accounting Policies used in the Financial Statements. In particular:

the cost of retirement benefits is based on cash flows (payment of employer’s pension contributions), rather than current service cost of benefits accrued in the year;

finance lease payments and receipts were included as revenue income; and

contributions to/from specified reserves were not budgeted for.

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

63

2013-2014 Leader Resources Environment Planning and Economy

Housing Communities Organisation and External

Relations

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Fees, Charges and Other Service Income

0 -2,066 -1,034 -724 -93 -188 0 -4,105

Government Grants

0 -10,140 0 -23 0 -14 0 -10,177

Total Income 0 -12,206 -1,034 -747 -93 -202 0 -14,282

Employee Expenses

8 131 12 23 0 0 1 175

Other Operating Expenses

21 11,052 2,424 314 253 1,129 12 15,205

Staff and Overheads

13 2,801 1,038 1,409 374 393 10 6,038

Capital Financing Charges

0 124 65 119 97 225 0 630

Total Operating Expenses

42 14,108 3,539 1,865 724 1,747 23 22,048

Cost of Services 42 1,902 2,505 1,118 631 1,545 23 7,766

Comparative figures were:

2012-2013 Restated

Leader Resources Environment Planning and Economy

Housing Communities Organisation and External

Relations

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Fees, Charges and Other Service Income

-2 -1,191 -1,202 -654 -37 -147 0 -3,233

Government Grants

0 -12,565 -1 -90 -157 0 0 -12,813

Total Income -2 -13,756 -1,203 -744 -194 -147 0 -16,046

Employee Expenses

10 74 5 20 1 0 1 111

Other Operating Expenses

20 13,121 2,508 372 132 871 11 17,035

Staff and Overheads

18 2,620 1,051 1,426 326 289 6 5,736

Capital Financing Charges

0 75 81 16 708 120 0 1,000

Total Operating Expenses

48 15,890 3,645 1,834 1,167 1,280 18 23,882

Cost of Services 46 2,134 2,442 1,090 973 1,133 18 7,836

64

34. Reconciliation of Net Cost of Services in the Comprehensive Income and Expenditure Statement

2012-13 £’000

2013-14 £’000

Cost of services in service analysis 7,836 7,766 Add services not included in main analysis 0 0 Add amounts not reported to Management 0 0 Remove amounts reported to Management not included in the

Comprehensive Income and Expenditure Statement 720 943

Net Cost of Services in the Comprehensive Income and Expenditure Statement

8,556 8,709

35. Reconciliation to Subjective Analysis

2013-2014 Service Analysis

Services not in

Analysis

Not Reported to

Management

Not included in I and E

Allocation of Recharges

Net Cost of Services

Corporate Amounts

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Fees, charges and other service income

-4,105 -115 0 866 0 -3,354 -866 -4,220

Interest and Investment Income

0 0 0 132 0 132 -132 0

Income from Council Tax

0 0 0 0 0 0 -3,889 -3,889

Government Grants and Contributions

-10,177 -60 0 0 0 -10,237 -4,714 -14,951

Total Income -14,282 -175 0 998 0 -13,459 -9,601 -23,060

Employee Expenses 175 4,740 0 0 0 4,915 409 5,324

Other Service Expenses 15,205 1,343 0 -45 0 16,503 45 16,548

Staff and Overheads 6,038 0 0 0 -6,049 -11 0 -11

Depreciation, Amortisation and Impairment

630 141 0 0 0 771 0 771

Interest Payable 0 0 0 -10 0 -10 19 9

Precepts and Levies 0 0 0 0 0 0 457 457

Payment to Housing Capital Receipts Pool

0 0 0 0 0 0 0 0

Gain or Loss on Non Current Asset Disposals

0 0 0 0 0 0 -282 -282

Total Operating Expenses

22,048 6,224 0 -55 -6,049 22,168 648 22,816

Surplus/ Deficit on Service Provision

7,766 6,049 0 943 -6,049 8,709 -8,953 -244

65

Comparative figures were:

2012-2013 Restated Service Analysis

Services not in

Analysis

Not Reported to

Management

Not included in I & E

Allocation of Recharges

Net Cost of Services

Corporate Amounts

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Fees, charges and other service income

-3,369 -153 0 582 0 -2,940 -581 -3,521

Interest and Investment Income

0 0 0 174 0 174 -174 0

Income from Council Tax

0 0 0 0 0 0 -4,071 -4,071

Government Grants and Contributions

-12,813 0 0 0 0 -12,813 -3,877 -16,690

Total Income -16,182 -153 0 756 0 -15,579 -8,703 -24,282

Employee Expenses 110 4,024 0 0 0 4,134 350 4,484

Other Service Expenses 17,178 1,129 0 -25 0 18,282 25 18,307

Staff and Overheads 5,733 7 0 0 -5,168 572 0 572

Depreciation, Amortisation and Impairment

997 161 0 0 0 1,158 -300 858

Interest Payable 0 0 0 -11 0 -11 21 10

Precepts and Levies 0 0 0 0 0 0 461 461

Payment to Housing Capital Receipts Pool

0 0 0 0 0 0 0 0

Gain or Loss on Non Current Asset Disposals

0 0 0 0 0 0 -134 -134

Total Operating Expenses

24,018 5,321 0 -36 -5,168 24,135 423 24,558

Surplus/ Deficit on Service Provision

7,836 5,168 0 720 -5,168 8,556 -8,280 276

36. Agency Income and Expenditure

The Council acts as an agent as Billing Authority collecting and distributing Council Tax income on behalf of major preceptors and itself. Only the Council’s share of the income and expenditure is shown in the Comprehensive Income and Expenditure Statement. The Council also acts as an agent in collecting NNDR on behalf of Central Government. NNDR is also known as Business Rates. Part of the Government grant paid to local authorities is Formula Grant. . This is the only NNDR income shown in the Comprehensive Income and Expenditure Statement. The Council is required to keep a separate fund for the collection and distribution of amounts due in respect of Council Tax and NNDR. The Collection Fund is included as a supplementary statement; see page 87.

37. Members' Allowances

The total cost of the Members' Allowances Scheme during the year was £234,000 (2012-2013: £202,000). This was made up as follows.

2012-13 £’000

2013-14 £’000

179 Allowances 183 23 Car Mileage 51

202 Total 234

Note: 2013-2014 figures include an expected liability for taxation on Members’ travel allowances.

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38. Officers' Remuneration

a. Senior Employees

The Accounts and Audit Regulations 2011 requires that local authorities disclose the individual remuneration details of senior employees by job title for a number of categories if their annual salary is above £50,000. For the purpose of disclosure, senior employees are defined by the Council as Director level and above.

Post Title Year Salary

Expenses and

Allowances *

Total Remuneration

Excluding Pension

Contributions

Pension Contributions

**

Total Remuneration

Including Pension

£ £ £ £ £

Director of Corporate and Legal Services

2013-14 64,274 1,916 66,190 11,737 77,927

2012-13 63,343 4,112 67,455 12,038 79,493

Director of Finance 2013-14 61,212 377 61,589 11,178 72,767

2012-13 60,807 1,116 61,923 11,067 72,990

Communities Director 2013-14 61,212 324 61,536 11,178 72,714

2012-13 60,807 1,246 62,053 11,067 73,120

* This is car allowances. In 2013-2014, the Director of Corporate and Legal Services received election expenses of £1,620 (2012-2013 £2,850).

** All Local Government employees are entitled to join the Local Government Pension Scheme. The Council’s pension contributions are calculated by applying the employer contribution, as determined by the Scheme actuary, to each individual’s salary.

b. Officers Earning more than £50,000

The Council is required to show the numbers of employees whose remuneration exceeded £50,000 during the year in addition to those shown in (a) above. Remuneration includes all amounts paid to, or receivable by an employee, including sums due by way of expenses allowance and the estimated money value of any other benefits received otherwise than in cash. It excludes pension contributions by the employer. Excepting those officers identified above, there were no officers whose remuneration was affected by this employed by the Council in 2012-2013 or 2013-2014.

c. Chief Executive

The post of Chief Executive was filled under a contract for services with Enterprise Prospects Limited. Payments to this company totalled £65,664 for 2013-2014 (£65,817 2012-2013). As the Chief Executive was not an employee during 2012-2013 or 2013-2014, payments in relation to this post are not included in either of (a) or (b) above.

d. Redundancy Payments

There were no redundancies in 2012-2013 or 2013-2014.

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39. External Audit Fees

In 2013-2014, the Council incurred the following fees relating to external audit, inspection and the certification of grant claims:

2012-13 £’000

2013-14 £’000

50 Fees payable in respect of audit and performance services 49 13 Fees payable for the certification of grant claims and returns 12

63 61

40. Grants and Contributions – Credited to Services

The grants and contributions in the table below were recognised as income credited to services in the Comprehensive Income and Expenditure Statement.

2012-13 £’000

2013-14 £’000

Credited to Services 203 Disabled Facilities Grants 163 99 Council Tax Benefit Administration Subsidy 89

143 Housing Benefit Administration Subsidy 129 2,666 Council Tax Benefit Subsidy 0

0 Council Tax Reduction Scheme Transitiion 8 9,580 Housing Benefit Subsidy 9,685

0 Electoral Registration 11 15 Housing Benefit Atlas Grant 35 42 Implementation of Local Council Tax Reduction 30

127 Homelessness Prevention Grant 0 30 Housing Repossessions Prevention Funding 0 30 Rural Development Programme Funding 15 30 Neighbourhood Planning Grant 1 38 Economic Regeneration Funding 7

148 Coronation Gardens Grant Funding 0 0 Castle Park Bower Replacement 113

30 Town Teams Initiative Funding 0 16 Discretionary Housing Payments 142

Community Right to Bid/Challenge 14 3 Other Grants 7

13,200 Total 10,449

13,200 Total Grants 10,449

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All grants received during the year were recognised as income as the Council had reasonable assurance that it would meet the conditions attached so reclaim is unlikely. There were no donated assets during the reporting period.

41. Related Party Transactions

The Council is required to disclose material transactions with related parties. Related parties are 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

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, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties. Details of transactions with Government departments are set out below.

Members

Members of the Council have direct control over the Council’s financial and operating policies. The total of Members’ Allowances paid in 2013-2014 is shown in Note 37. During 2013-2014 no works and services (2012-2013: £0) were commissioned from organisations in which (2012-2013: 0) Members had an interest. All contracts are entered into in full compliance with the Council’s Procurement Rules. All interests are recorded in the Register of Members’ Interests. The interests of serving Councillors are recorded in the Register of Members’ Interests, which can be viewed on the Council’s web site from the Home Page under: http://www.eden.gov.uk/democracy/councillors-in-eden-district/ (click on a Councillor’s name to view interests).

Officers

From 1 January 2012 onwards, Enterprise Prospects Limited has provided the services of Mr Robin Hooper to fill the post of Chief Executive. This arrangement was agreed by the Council on 29 September 2011. The Council’s Director of Corporate and Legal Services oversees the agreement. Mr Hooper is a Director of Enterprise Prospects Limited. In 2013-2014, the Council paid Enterprise Prospects Limited £65,664 (2012-2013 £65,817). During the year other transactions with related parties arose as follows:

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2012-2013 2013-2014

Income £'000

Expend £'000

DR/CR (-) £’000

Income £'000

Expend £'000

DR/CR (-) £’000

Central Government

3,268 NNDR Income 7,637 -361

NNDR Transition Grant 49 -132

NNDR Safety Net Grant 396 54

0 NNDR Tariff 6,174

63 Revenue Support Grant 2,253

0 Other Government Grants 80

2,666 Council Tax Benefit Subsidy 0

9,580 261 Housing Benefit Subsidy 9,685 311

99 Council Tax Benefit Administration Subsidy

89

143 Housing Benefit Administration Subsidy 129

127 Homelessness Prevention 0

241 Capital Grants 163

NNDR Share Payable 9,970 -15

Precepting Authorities

23,907 -11 Cumbria County Council - Precepts 24,312 -85

4,133 -1 Cumbria Police and Crime Commissioner - Precept

3,932 -14

Other

Cumbria County Council Superannuation Fund

617 -66 Payment of employer's superannuation contributions in respect of employees Cumbria County Council

604 -71

660 96 Other – mainly recycling subsidy 566 214

203 Payment of grant in respect of Council Tax on Second Homes

190

42. Capital Expenditure and Capital Financing

2012-13 £'000

2013-14 £'000

481 Opening Capital Financing Requirement 460 Capital Investment in Year:

763 Property, Plant and Equipment 290 0 Investment Properties 0 7 Intangible Assets 31

898 Revenue Spending funded from Capital Under Statute 288

2,149 1,069

Financed by: 220 Repairs and Renewals Fund 31 208 Revenue Contribution 138 270 Capital Receipts 163 969 Capital Grants 277 22 Minimum Revenue Provision 20

460 Closing Capital Financing Requirement 440

Explanation of Movements in Year 0 Increase in underlying need to borrow (supported by

Government financial assistance) 0

-22 Increase in underlying need to borrow (unsupported by Government financial assistance)

-20

0 Assets acquired under finance leases 0

-22 Increase/ (-)Decrease in Capital Financing Requirement -20

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43. Revenue Provision for Payment of External Debt

The Council is required under the Local Authorities (Capital Finance and Accounting) Regulations 2003 to set aside a minimum revenue provision for the redemption of external debt based on a prescribed formula. Amounts chargeable to the Comprehensive Income and Expenditure Statement in 2013-2014 were £20,000 (2012-2013: £22,000). Under CIPFA's guidance, any provision made is not charged to individual service revenue accounts.

44. Impairment Losses

Paragraph 4.7.4.2(1) of the Code requires disclosure by class of assets of the amounts for impairment losses and impairment reversals charged to the Surplus or Deficit on the Provision of Services and to Other Comprehensive Income and Expenditure. These disclosures are consolidated in Note 11, reconciling the movement over the year in the Property, Plant and Equipment and Intangible Asset balances.

During 2013-2014, the Council recognised impairment losses of £77,000 in relation to its Land and Buildings and £100,000 in relation to Surplus Assets. £77,000 of this relates to capital expenditure on properties which has been assessed as not increasing the carrying value of the properties on which the spending was incurred; £45,000 relates to property which was revalued as it was declared as Assets held for Sale and £55,000 relates to property on which buildings were demolished. The impairment losses have been charged to Cultural and Related Services and Corporate and Democratic Core Costs in the Comprehensive Income and Expenditure Statement and, where appropriate, the Revaluation Reserve. The value of the properties was determined as part of the annual review undertaken by the Council’s independent valuer.

45. Leases

Authority as Lessee

Finance Leases

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

31 Mar 13 £’000

31 Mar 14 £’000

27 Vehicles, Plant and Equipment 18

27 18

The Council is committed to making minimum payments under these leases comprising settlement of the long term liability for the interest in the property acquired 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:

31 Mar 13 £’000

31 Mar 14 £’000

Finance lease liabilities (net present value of minimum lease payments): 0 Current 0 8 Non-Current (Long Term Creditor) 8

19 Finance costs payable in future years 11

27 Minimum lease payments 19

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

Minimum Lease Payments

Finance Lease Liabilities

31 Mar 13 £’000

31 Mar 14 £’000

31 Mar 13 £’000

31 Mar 14 £’000

Not later than one year 8 8 8 8 Later than one year and not later than 5 years 19 11 19 11 Later than 5 years 0 0 0 0

27 19 27 19

The minimum lease payments do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. This is not applicable for these leases.

Operating Leases

The Council leases three properties by operating lease over varying terms. The future minimum lease payments due under non-cancellable leases in future years are:

31 March 13 £’000

31 March 14 £’000

Not later than one year 12 11 Later than one year and not later than 5 years 4 3 Later than five years 0 0

16 14

The expenditure charged to the Cultural and Related Services line in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was:

31 March 13 £’000

31 March 14 £’000

Minimum lease payments 12 11 Contingent rents 0 0 Sub-lease payments receivable 0 0

12 11

Authority as Lessor

Finance Leases

The Authority has leased out property at Devonshire Arcade, Penrith on a finance lease, with 126 years remaining at 31 March 2014. The Authority has a gross investment in the lease, made up of the minimum lease payments expected to be received over the remaining term and the residual value anticipated for the property when the lease comes to an end. The minimum lease payments comprise settlement of the long term debtor for the interest in the property acquired by the lessee and finance income that will be earned by the Authority in future years whilst the debtor remains outstanding. The gross investment is made up of the following amounts:

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31 March 13

£’000 31 March 14

£’000 Finance lease debtor (net present value of minimum

lease payments):

0 Current 0 522 Non-Current (Long Term Debtor) 521

2,187 Unearned finance income 2,167 315 Unguaranteed residual value of property 315

3,024 Gross investment in the lease 3,003

The gross investment in the lease and the minimum lease payments will be received over the following periods:

Gross Investment in the Lease

Minimum Lease Payments

31 Mar 13 £’000

31 Mar 14 £’000

31 Mar 13 £’000

31 Mar 14 £’000

Not later than one year 21 21 21 21 Later than one year and not later than 5 years 84 84 84 84 Later than five years 2,919 2,898 2,082 2,062

3,024 3,003 2,187 2,167

As there is a possibility that worsening financial circumstances might result in lease payments not being made, the Authority has set aside an allowance for uncollectible amounts of £54,000 (£43,000 at 31 March 2013). The minimum lease payments do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2013-2014 no contingent rents were receivable by the Authority (2012-2013: £0).

Operating Leases

The Council leases out property and equipment under operating leases for the following purposes:

for the provision of community services, such as sports facilities, tourism services and community centres;

investment purposes; ie to raise rental income; and

for economic development purposes to promote the economic vitality of the district.

The future minimum lease payments receivable under non-cancellable leases in future years are:

31 March 13 £’000

31 March 14 £’000

949 Not later than one year 962 3,642 Later than one year and not later than five years 3,711

116,081 Later than five years 117,587

120,672 122,260

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The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2013-2014 no contingent rents were receivable by the Council (2012-2013: £0). The lease payments at 31 March 2014 include £116m relating to the lease of the Penrith New Squares Scheme.

46. Termination Benefits

The Council terminated no employees’ contracts in 2013-2014 (0 in 2012-2013), so no related liabilities were incurred in either year.

47. Retirement Benefits

a. The Council’s Share of the Pension Fund

The Council offers membership of the Local Government Pension Scheme to its officers as part of their employment terms and conditions. Although the retirement benefits from the scheme do not become payable until employees retire, the Council makes payments that match the future entitlement earned by employees. The Council participates in the Cumbria Local Government Pension Scheme administered by Cumbria County Council. This is a funded defined benefit scheme. The Council and its employees pay contributions into a fund, calculated at a level intended to balance previous liabilities with investment assets. For 2013-2014, the employer contributions were 18.2%. Staff contributions ranged from 5.5% to 7.5% of pensionable pay depending on salary levels.

Under IAS19, the Council is required to recognise the cost of retirement benefits in the Net Cost of Services when they are earned by employees, rather than when the benefits are paid as pensions. However, the charge the Council is required to make against Council Tax is based on the cash paid in the year, so the real cost of retirement benefits is removed in the Statement of Movement of General Fund Balance.

The following transactions have been made to the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during 2013-2014:

74

2012-13

Restated £'000

2013-14

£'000

Comprehensive Income and Expenditure Statement

Net Cost of Services: 627 Current Service Cost 796 29 Curtailments 23 0 Past Service Cost/ (-)Gain 15 Financing and Investment Income and Expenditure:

350 Net Interest Cost 409

1,006 Net Charge to the Provision of Services 1,243

Other Benefits Charged to the Comprehensive Income and Expenditure Statement

Remeasurement of the Net Defined Benefit Liability Comprising:

-2,666 Experience Gain on Assets -1,264 Remeasurement of Assets -732

4,303 Loss /(-)Gain on Financial Assumptions -2,897 435 Loss on Demographic Assumptions 787

3,078 Total Benefits Charged to the Comprehensive Income and -2,863

Expenditure Statement Movement in Reserves Statement

-1,006 Reverse charges made for retirement benefits re IAS 19 -1,243 Amounts charged against General Fund for Pensions

617 Employer's Contributions payable 604

Pensions Assets an Liabilities Recognised in the Balance Sheet

The amount included in the Balance Sheet arising from the Council’s obligation in respect of its Pensions is as follows:

2012-13 £'000

2013-14 £'000

-44,398 Present Value of Defined Benefit Obligation -42,371 34,737 Fair Value of Plan Assets 36,177

-9,661 Net Liability -6,194

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Assets and Liabilities in Relation to Retirement Benefits

Reconciliation of present value of the scheme liabilities:

2012-13 £'000

2013-14 £'000

-37,971 1 April -44,398 -612 Current Service Cost -796

-1,855 Interest on Scheme Liabilities -1,836 -219 Employee Contributions -219

Remeasurements: Gain/Loss (-) on Financial Assumptions 2,897 Gain/Loss (-) on Demographic Assumptions -787

-4,738 Experience Gains/ Losses (-) 1,264 1,026 Benefits Paid 1,542

-29 Curtailments -23 0 Past Service Costs (-)/Gains -15

-44,398 31 March -42,371

Reconciliation of fair value of the scheme assets:

2012-13 £'000

2013-14 £'000

30,771 1 April 34,737 1,503 Interest Income 1,444 2,666 Remeasurements 732

-13 Administration Expenses -17 617 Employer Contributions 604 219 Employee Contributions 219

-1,026 Benefits Paid -1,542

34,737 31 March 36,177

The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yield on fixed interest investments are based on gross redemption yields at the Balance Sheet date. Expected returns on equity investments reflect long term real rates of return experienced in the respective markets. The actual return on scheme assets in the year was £2,509,000 (2012-2013: £4,157,000).

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Scheme Assets Comprised

2012-13 £'000

2013-14 £'000

Equities 5,282 UK quoted 5,066

0 UK unquoted 36 4,273 Global quoted 5,861 4,169 UK equity pooled 4,378 6,252 Overseas equity pooled 5,571

Bonds 2,640 UK corporate bonds 2,496

104 Overseas corporate bonds 145 2,744 UK corporate bonds pooled 1,411 5,488 UK Government index pooled 5,643

Property 1,944 UK 2,495

208 Property funds 72 Alternatives

486 Hedge funds 72 591 Private equity funds 579

0 Infrastructure funds 217 Cash

104 Cash instruments 36 278 Cash accounts 1,954 174 Net current assets 145

34,737 Total 36,177

b. Basis for Estimating Assets and Liabilities

Liabilities have been assessed by the scheme actuary (Mercer Human Resource Consulting Limited), an independent firm of actuaries on an actuarial basis. The actuary has made an estimate of the pensions that will be payable in future years, dependent on assumptions about mortality rates, salary levels and other factors. The liabilities were assessed in the last full valuation of the scheme as at 31 March 2013. The principal assumptions used by the actuary have been:

77

31 March 13 31 March 14

% Long Term Expected Rate of Return on Scheme Assets

%

7.0 Equities 7.0 2.8 Government Bonds 3.4 3.9 Other Bonds 4.3 5.7 Property 6.2 0.5 Cash/Liquidity 0.5 7.0 Other Dependent on Asset 2.4 Rate of CPI inflation 2.4

4.15 Rate of increase in salaries 3.9 2.4 Rate of increase in pensions 2.4 4.2 Discount rate 4.4 50 Proportion of employees opting to take a

commuted lump sum 50

Mortality Assumptions Longevity at 65 for current pensioners:

22.2 Male 23 24.9 Female 25.5

Longevity at 65 for future pensioners: 24.1 Male 25.7 26.9 Female 28.7

The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analyses below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the other assumptions remain constant. The assumptions in longevity, for example, assume that life expectancy increases or decreases for men and women. In practice, this is unlikely to occur, and changes in some of the assumptions may be iterrelated. The estimations in the sensitivity analysis have followed the accounting policies for the scheme. The methods and types of assumptions used in preparing the sensitivity analysis below did not change from those used in the previous period.

Increase in Assumption

£’000

Decrease in Assumption

£’000 1 year increase in life expectancy 801 0.1% increase in inflation 733 0.1% increase in salaries 153 0.1% increase in discount rate -727

c. Impact on the Council’s Cash Flows

The objectives of the scheme are to keep employers’ contributions at as constant a rate as possible. Cumbria County Council has agreed a strategy with the actuary to achieve a funding level of 100%. The current deficit is to be recovered over the next 19 years. Funding levels are monitored annually. An actuarial valuation was undertaken in 2013 with new contribution rates being payable from 1 April 2014. A revaluation is undertaken every 3 years

78

The scheme will need to take account of the national changes to the scheme under the Public Pensions Services Act 2013. Under the Act, the Local Government Pension Scheme in England and Wales and the other main existing public service schemes may not provide benefits in relation to service after 31 March 2014 (or service after 31 March 2015 for other main existing publc service pension schemes in England and Wales). The Act provides for scheme regulations to be made within a common framework, to establish new career average revalued earnings schemes to pay pensions and other benefits to certain public servants.

The Council expects to pay £606,000 contributions to the scheme in 2014-2015.

The weighted average duration of the defined benefit obligation for scheme members is 17 years.

48. Contingent Liabilities

Following the transfer of the Council’s housing stock in October 1997 to Eden Housing Association, a number of warranties and covenants were given to both the Housing Association and their funders. These cover a range of potential liabilities which would require the Council to indemnify either the Housing Association, or the funders, in the event of a number of eventualities in title arising. The likelihood of any liabilities crystallising decreases as the time from transfer increases. Neither the Housing Association, nor their funders, have indicated in any way that they intend making a claim under any of these guarantees and indemnities. This situation is unchanged from 1997.

The Council received a grant award from Sport England in connection with the Southend Road Sports Project, which has certain conditions included. The funding could be clawed back if the conditions of the award are not met. The maximum unprovided liability is estimated at £244,000 (31 March 2013: £212,000).

A number of Companies have searched Land Charges Registers and been charged a fee determined by a Statutory Instrument. Part of the fee related to environmental information and has since been determined as not chargeable by Environmental Information Regulations. Some companies have made claims against local authorities to recover this element of the charge. The Council had not received any claim at 31 March 2013. Although Central Government has made a payment to the Council of £34,000 in recognition of these claims the Council expects any claim would be substantially more than this. The potential liability cannot be accurately assessed When an accurate assessment can be made, provision will be made in the Financial Statements.

Under the provisions of the Localism Act community groups can apply to the relevant local authority for specific assets within that local authority’s area to be designated as ‘Assets of Community Value’. Such a designation puts in a place a moratorium on the sale of the asset. Where such designations are agreed regulations under the Act enable the owner to claim costs incurred because of the moratorium. Compensation on any asset up to £20,000 is payable by the local authority. The Government has indicated that if compensation on any asset exceeds £20,000 then the amount over £20,000 is paid by them.

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Following applications there are six parcels of land which have been accepted as Assets of Community Value. The six parcels are:

1. Land at Pategill, Back Field

2. Land at Brent Road, Scaws

3. The Crown Inn, Blencow

4 George and Dragon Inn, Garrigill

5. The Crown Inn, Morland

6. The Three Greyhounds Inn, Great Asby

As yet there have been no requests for payment of compensation. It is not known if requests will be made or the likely level of any compensation claims. If all the designations were to lead to a claim in excess of £20,000, the total compensation payment would be £120,000. This is considered to be very remote.

The Local Government Finance Act 2012 introduced a business rates retention scheme that enables local authorities to retain a proportion of the business rates generated in their area. The new arrangements came into effect on 1 April 2013. The Council, acting as agent on behalf of the major preceptors, central government and themselves, is required to make provision for refunding ratepayers who successfully appeal to the Valuation Office Agency against the rateable value of their properties on the rating list. The overall provision for appeals outstanding at 31 March 2014 has been assessed as £406,000, of which the Council’s share is £163,000. However, local businesses can still appeal against the rateable value on the 2010 Rating List until 31 March 2017. It is difficult to estimate the likelihood of businesses both submitting and being successful for an appeal that is yet to be made and therefore the Council has made no provision in its accounts for future appeals.

49. Commitments Under Capital Contracts

At 31 March 2014, there were no commitments under Capital Contracts. At 31 March 2013, the Council was committed to a capital contract of £146,000 to replace the Bowling Bower in Castle Park, Penrith.

50. Heritage Assets: Summary of Transactions

There have been no transactions relating to Heritage Assets. As there have been no significant transactions, the Council has published this information from 1 April 2010. There is no benefit in publishing information from earlier periods.

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51. Heritage Assets: Further Information on the Collections

Human History Collection

The Human History Collection includes some 10,000 pieces of ceramics, pottery and other items held at Penrith Museum all of local interest. The collection was mostly donated to the Council. The collection includes some important nationally significant archaeological material, especially prehistoric rock art and Neolithic artefacts, and Roman finds from Borrowbridge, Brougham and Plumpton Roman forts.

The collection also includes Stone and Bronze Age items including Neolithic axes, flint arrowheads, microliths and examples of local rock art. As mentioned previously, there are various items from Roman times including pottery and coins, oil lamps and various artefacts from local forts. Medieval items include the Penrith town seal, coins, chalices, cauldrons, and jugs and all related to Penrith and the local area.

The collection also includes social history items from Penrith and Eden pertaining to local trades and occupations. It includes notices, bottles, photographs, bill heads: large collection wooden pattens, documents and photographs from Stalkers Castlegate iron foundry: clocks, including Porthouse of Penrith: tailoring – tailor’s tools and requisites: military and other uniforms including medals, eg Westmorland and Cumberland Yeomanry and Inglewood Rifles: Penrith Town Band and Eden Valley Band of Hope uniforms and regalia: medals of Penrith Crimean hero Trooper Pearson and other Pearson memorabilia: William Jameson wrestling trophies: Wetheriggs and other potteries, including commemorative and souvenir wares: items relating to school education, including attendance medals and toys: railway memorabilia.

The markets – measures, seals, multure dishes, town crier’s bells.

Civil law, order and administration – key and handcuffs from Penrith Gaol, policing material from former County Constabulary Museum at Carleton Hall, Lord Whitelaw memorabilia, Percy Toplis monocle and other associated items, civil defence and home guard material.

Domestic items – including lighting, cookware, clogs and other items of dress.

Art Collection

The collection consists of 60 paintings. Of these, 30 are considered of significant importance to be valued and included in the Council’s Balance Sheet. The works are by a selection of artists, the most notable being Jacob Thompson, John Thompson, Edward Hobley, Fred Lawson, Emma Watson and Lorna Graves.

Other

Other items include a photographic collection of 1,200 prints, negatives and glass plates of local views. There is also a geology and natural history collection of local minerals, rocks and fossils. This includes herbaria and insect collections.

There are also three silver gilt and enamel shield engraved medallions which are worn by the Chairman and Vice-Chairman of the Council on ceremonial occasions. The Council Chamber has three colleges of arms on display which were donated to the Council’s predecessor organisations.

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Heritage Assets of Particular Importance

As in Note 12, the Council holds one painting which is regarded as particularly important. ‘The Hope Beyond’, an oil painting on canvass dated 1879, is valued at £160,000. This value was provided by Christie’s of London as part of their valuation of the Council’s art collection undertaken for 31 March 2013, updated as at 31 March 2014.

The Council holds other noteworthy items but, in the Council’s opinion, their rarity makes them impractical to value accurately.

Preservation and Management

The collections are managed by two part time Museum Curators who report to the Council’s Communities Director. Relevant reports are presented to the Communities Portfolio Holder. The Curators manage the collection in accordance with policies approved by the Council. Further information is available in the Penrith and Eden Museum Forward Plan and Penrith and Eden Museum Acquisition and Disposal Policy. These have been produced in accordance with national guidelines and are due for review during 2014. Under the policy, the Council will consider disposal of items only where there are sound curatorial reasons to do so and the Council is legally able to do so. Acquisitions are only undertaken when the Museum can acquire valid title to the item in question. Also, the Museum will satisfy itself that the item has not been illegally procured by the party offering it to the Museum. Where rare and relevant items become available, a report will be presented to the Communities Portfolio Holder seeking approval for acquisition and requesting funding be approved to do so. Assets are collated, preserved and managed in accordance with the approved policies. Its register records the nature, provenance, condition and location of each asset.

52. Prior Period Adjustment – IAS 19 Retirement Benefits

The adoption of the 2011 amendments to IAS19 Employee Benefits by the Code has resulted in a change in accounting policy that requires disclosure. The change in accounting policy will come into effect on 1 April 2013.

Under IAS19 the expected return on assets is replaced with “Interest on Assets”. This is the interest on assets held at the start of the period and cashflows occurring during the period, calculated using the discount rate at the start of the year. The pension cost recognised in the Comprehensive Income and Expenditure Statement under IAS19 sees the interest cost and expected return on assets replaced with the “net interest cost”. This is calculated as interest on pension liabilities (substantially the old interest cost) less the interest on assets.

The new IAS19 requires that all actuarial gains and losses be recognised in the year of occurrence via the Comprehensive Income and Expenditure Statement. Also, actuarial gains and losses on liabilities due to changes in actuarial assumptions need to be split between the effect of changes in financial assumptions and changes in demographic assumptions.

In order to reflect these changes correctly, a restatement of the 2012-2013 figures has been included in the 2013-2014 Statement of Accounts and results in an increase in the total pension cost recognised in the Comprehensive Income and Expenditure Statement and Balance Sheet from £0.842m to £1.006m, and a reduction in the actuarial losses from £2.236m to £2.072m. These changes affect the Movement in Reserves Statement, Comprehensive Income and Expenditure Statement and Cash Flow Statement, as well as the Pension Notes.

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A summary of the changes made to the 2012-2013 figures and their effect in each core statement is shown below.

Effect on Movement in Reserves Statement 2012-2013

General Fund Balance As Previously Stated

2012-13

As Restated

2012-13

Restatement

2012-13 £’000 £’000 £’000 Surplus/deficit on provision of services

(accounting basis) -112 -276 -164

Total Comprehensive Expenditure and Income

-112 -276 -164

Adjustments between accounting basis and funding basis under regulations

474 638 164

Total Usable Reserves As Previously Stated

2012-13

As Restated

2012-13

Restatement

2012-13 £’000 £’000 £’000

Surplus/deficit on provision of services (accounting basis)

-112 -276 -164

Total Comprehensive Expenditure and Income

-112 -276 -164

Adjustments between accounting basis and funding basis under regulations

-246 -82 164

Unusable Reserves As Previously Stated

2012-13

As Restated

2012-13

Restatement

2012-13 £’000 £’000 £’000

Other Comprehensive Expenditure and Income

-2,253 -2,089 164

Total Comprehensive Expenditure and Income

-2,253 -2,089 164

Adjustments between accounting basis and funding basis under regulations

246 82 -164

Total Authority Reserves As Previously Stated

2012-13

As Restated

2012-13

Restatement

2012-13 £’000 £’000 £’000 Surplus/deficit on provision of services

(accounting basis) -112 -276 -164

Other Comprehensive Expenditure and Income

-2,253 -2,089 164

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Effect on Comprehensive Income and Expenditure Statement 2012-2013

As Previously Stated

2012-13

As Restated

2012-13

Restatement

2012-13 £’000 £’000 £’000

Corporate and Democratic Core Costs Gross Expenditure 2,197 2,212 15 Net Expenditure 2,096 2,111 15 Financing and Investment Income and Expenditure Gross Expenditure 1,902 1,900 -2 Gross Income -2,710 -2,559 151 Net Expenditure -808 -659 149 Deficit on the Provision of Services Gross Expenditure 26,792 26,805 13 Gross Income -26,680 -26,529 151 Net Expenditure 112 76 -36 Remeasurement of the Net Defined Benefit Liability Gross Expenditure 2,236 2,072 -164 Net Expenditure 2,236 2,072 -164 Other Comprehensive Income and Expenditure Gross Expenditure 2,253 2,089 -164 Net Expenditure 2,253 2,089 -164 Total Comprehensive Income and Expenditure Gross Expenditure 29,045 28,894 -151 Gross Income -26,680 -26,529 151

Effect on Cash Flow Statement 2012-2013 As Previously Stated

2012-13

As Restated

2012-13

Restatement

2012-13 £’000 £’000 £’000 Net surplus or deficit (-) on service provision -112 -276 -164 Adjust net surplus or deficit on the provision

of services for non cash movements 493 657 164

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Intentionally Blank

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Collection Fund Account

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Intentionally Blank

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Collection Fund for the Year Ending 31 March 2014

The Collection Fund is an agent’s statement reflecting the statutory requirement for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the Council in relation to National Non-Domestic Rates (NNDR), also known as Business Rates, and the Council Tax, and illustrates the way in which these have been distributed to preceptors, the Government and the General Fund.

2012-13 2012-13 2013-14 2013-14 2013-14 Notes Business

Rates £’000

Council Tax

£’000

Business Rates £’000

Council Tax

£’000

Total

£’000

Income 29,593 Income from Council Tax 0 30,259 30,259 4 Transfers from General Fund 2,638 Council Tax Benefits 0 Business Rates Supplement Receivable 104 0 104

19,056 Income Collectable from Business Ratepayers 20,524 0 20,524 1 Transitional Protection Payment 49 49

19,056 32,231 Total Income 20,677 30,259 50,936

Expenditure

Preceptsand Demands Central Government 0 3 4,054 Eden District Council 3,877 3,877 3 23,907 Cumbria County Council 22,318 22,318 3 4,133 Cumbria Police and Crime Commissioner 3,932 3,932

Business Rates 18,928 Payment to National Pool

Central Government 9,970 9,970 Eden District Council 7,976 7,976 Cumbria County Council 1,994 1,994

Charges to Collection Fund 20 Write-Offs of Uncollectable Amounts 22 22 44 -17 Increase/ (-)Decrease in Bad Debt Provision 21 27 48 0 Increase/ (-)Decrease in Provision for Appeals 406 0 406

128 Cost of Collection Allowance 128 0 128 0 Business Rates Supplement Paid to Levying Body 104 0 104

19,056 32,097 Total Expenditure 20,621 30,176 50,797

0 134 Surplus/Deficit (-) Arising During the Year 56 83 139

0 90 Surplus/Deficit (-) Brought Forward 1 April 0 224 224

0 224 Surplus/Deficit (-) Carried Forward 31 March 56 307 363

Distribution of Surplus/Deficit 167 Cumbria County Council 6 227 233 29 Cumbria Police and Crime Commissioner 40 40 28 Eden District Council (including parishes) 22 40 62 Central Government 28 28

0 224 56 307 363

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Notes to the Collection Fund

1. Business Rate Income

National Non-Domestic Rates (NNDR), also known as Business Rates, are collected by Charging Authorities. Non-Domestic Rates are then redistributed by the Government on the basis of criteria established nationally. The total non-domestic rateable value for Eden District was £53.5m at 31 March 2014, compared with £52.3m at 31 March 2013. The NNDR multiplier for the year was 47.1p in the pound (45.8p in 2012-2013). The multiplier is set nationally by the Government.

2. Council Tax Base

To calculate the Council Tax payable per property requires the tax base (the number of properties against which the tax can be collected) to be calculated. Every property has been valued by the Valuation Office and placed into one of eight valuation bands (Bands A, B, C, D, E, F, G and H). Each band is then multiplied by a factor to bring it to a Band D equivalent. The total of the Band D equivalent after allowing for discounts etc is then multiplied by the estimated collection rate which, for Eden, is 98.75%, to give the Council Tax Base. The Base for Eden for the year was 19,214.38.

The expenditure requirement of the Collection Fund (net of parish precepts and Special Expenses) of £29,496,838 is divided by the Tax Base of 19,214.38 to give the Band D tax of £1,535.14. Each valuation band is then calculated as a proportion of Band D as follows:

Band A B C D E F G H

Proportion 6/9 7/9 8/9 9/9 11/9 13/9 15/9 18/9

£ £ £ £ £ £ £ £

Tax (£) 1,023.43 1,194.00 1,364.57 1,535.14 1,876.28 2,217.42 2,558.57 3,070.58

Parish precepts and Special Expenses are then charged to the particular parish or area to which they relate. The Council Tax bill covers the cost of Cumbria County Council, Cumbria Police and Crime Commissioner, Eden District Council and Parish/Town Council services.

3. Impact of the Business Rates Retention Scheme

The Scheme, introduced by the Government on 1 April 2013, changed the way NNDR is accounted for. Previously, the Council acted as agent for the Government and paid sums due to the national pool. From 1 April 2013, NNDR was apportioned among the Council, Cumbria County Council and Government. Surplus/deficit balances are carried forward in the Collection Fund similar to that for Council Tax at 31 March 2014.

4. Council Tax Benefit and the Council Tax Reduction Scheme

The Council Tax Benefit Scheme was changed from 1 April 2013 to the Local Scheme of Council Tax Reduction. Council Tax benefit was previously charged to the General Fund and transferred to the Collection Fund. The benefit was subsidised by Government grant. From 1 April 2013, the Council Tax Reduction Scheme, determined locally by the Council, reduced the income collectable as the reduction was applied to the Collection Fund. This explains the decrease in Council Tax receivable in 2013-2014.

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EDEN DISTRICT COUNCIL

Opinion on the Authority financial statements

We have audited the financial statements of Eden District Council for the year ended 31 March 2014 under the Audit Commission Act 1998. The financial statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement and the Collection Fund and the related notes.

The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2013-2014.

This report is made solely to the members of Eden District Council in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and Audited Bodies published by the Audit Commission in March 2010. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Authority and the Authority's Members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Director of Finance and auditor

As explained more fully in the Statement of Responsibilities, the Director of Finance is responsible for the preparation of the Statement of Accounts, which includes the financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom, and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Authority's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Director of Finance; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the explanatory foreword to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

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Opinion on financial statements

In our opinion the financial statements:

give a true and fair view of the financial position of Eden District Council as at 31 March 2014 and of its expenditure and income for the year then ended; and

have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2013/14 and applicable law.

Opinion on other matters

In our opinion, the information given in the explanatory foreword for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we report by exception

We report to you if:

in our opinion the annual governance statement does not reflect compliance with ‘Delivering Good Governance in Local Government: a Framework’ published by CIPFA/SOLACE in June 2007;

we issue a report in the public interest under section 8 of the Audit Commission Act 1998;

we designate under section 11 of the Audit Commission Act 1998 any recommendation as one that requires the Authority to consider it at a public meeting and to decide what action to take in response; or

we exercise any other special powers of the auditor under the Audit Commission Act 1998.

We have nothing to report in these respects.

Conclusion on the Authority's arrangements for securing economy, efficiency and effectiveness in the use of resources

Respective responsibilities of the Authority and the auditor

The Authority is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to review regularly the adequacy and effectiveness of these arrangements.

We are required under Section 5 of the Audit Commission Act 1998 to satisfy ourselves that the Authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires us to report to you our conclusion relating to proper arrangements, having regard to relevant criteria specified by the Audit Commission.

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We report if significant matters have come to our attention which prevent us from concluding that the Authority has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. We are not required to consider, nor have we considered, whether all aspects of the Authority's arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively.

Scope of the review of arrangements for securing economy, efficiency and effectiveness in the use of resources

We have undertaken our audit in accordance with the Code of Audit Practice, having regard to the guidance on the specified criteria, published by the Audit Commission in October 2013, as to whether the Authority has proper arrangements for:

securing financial resilience; and

challenging how it secures economy, efficiency and effectiveness.

The Audit Commission has determined these two criteria as those necessary for us to consider under the Code of Audit Practice in satisfying ourselves whether the Authority put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2014.

We planned our work in accordance with the Code of Audit Practice. Based on our risk assessment, we undertook such work as we considered necessary to form a view on whether, in all significant respects, the Authority had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources.

Conclusion

On the basis of our work, having regard to the guidance on the specified criteria published by the Audit Commission in October 2013, we are satisfied that, in all significant respects, Eden District Council put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2014.

Certificate

We certify that we have completed the audit of the financial statements of Eden District Council in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission.

Jackie Bellard Director for and on behalf of Grant Thornton UK LLP, Appointed Auditor 4 Hardman Square Manchester M3 3EB

26 September 2014