warrington statement of accounts

8/2/2019 Warrington Statement of Accounts

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2010-11Statement of Accounts


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Contents

Explanatory foreword 1

Statement of responsibilities 17

Movement in reserves statement 18Comprehensive income and expenditure statement 19

Balance sheet 20

Cash flow statement 22

Note 1 Accounting policies 23

Note 2 Accounting standards issued, not yet adopted 50

Note 3 Critical judgements in applying accounting policies 52

Note 4 Assumptions made about the future and other majorsources of estimation uncertainty 52

Note 5 Material items of income and expense 54

Note 6 Events after the balance sheet date 54

Note 7 Adjustments between accounting basis and funding basisunder regulations 54

Note 8 Transfers to/from earmarked reserves 57

Note 9 Other operating expenditure 59

Note 10 Financing and investment income and expenditure 59

Note 11 Taxation and non-specific grant income 59

Note 12 Property, plant and equipment 60

Note 13 Investment properties 64

Note 14 Intangible assets 65

Note 15 Financial instruments 67

Note 16 Inventories 69

Note 17 Construction contracts 69

Note 18 Debtors 70

Note 19 Cash and cash equivalents 70

Note 20 Assets held for sale 71

Note 21 Creditors 71

Note 22 Provisions 72

Note 23 Usable reserves 73

Note 24 Unusable reserves 75

Note 25 Operating activities 80

Note 26 Investing activities 81

Note 27 Financing activities 81Note 28 Amounts reported for resource allocation decisions 81

Note 29 Acquired and discontinued operations 83

Note 30 Trading operations 83

Note 31 Agency services 85

Note 32 Road charging schemes 85

Note 33 Pooled budgets 85

Note 34 Members allowances 86


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Note 35 Officers remuneration 87

Note 36 External audit costs 90

Note 37 Dedicated schools grant 90

Note 38 Grant income 91

Note 39 Related parties 94

Note 40 Capital expenditure and capital financing 96Note 41 Leases 97

Note 42 PFI and similar contracts 102

Note 43 Impairment losses 106

Note 44 Capitalisation of borrowing costs 106

Note 45 Termination benefits 107

Note 46 Pension schemes accounted for as defined contributionschemes 107

Note 47 Defined benefit pension schemes 107

Note 48 Contingent liabilities 113

Note 49 Contingent assets 114

Note 50 Nature and extent of risks arising from financialinstruments 114

Note 51 Large scale voluntary transfer (LSVT) 120

Note 52 Landfill allowance trading scheme (LATS) 122

Housing revenue account 124

Collection fund 131

Group accounts 134

First time adoption 154

Glossary 159

Independent auditors report 168


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EXPLANATORY FOREWORD

MESSAGE FROM THE CHIEF FINANCE OFFICER

This set of accounts are prepared at a time when Local Authorities are having to deal with

significant change brought about by the impact of the current recession, and ongoingGovernment spending cuts putting extra pressure on tight resources.

In addition, in line with the changes in requirements for the presentation of Local Authorityaccounts introduced by the adoption of the International Financial Reporting Standards(IFRS) from the financial year 2010/11, this is the first Statement of Accounts that theCouncil has prepared to comply with the new accounting regime. The format of theaccounts is different than in previous years and I have therefore taken the opportunity toexpand the information provided in my report accompanying the financial statements toprovide an overall explanation of the Councils financial position both during 2010/11 andinto 2011/12. This includes major influences affecting the accounts, and is prepared in a

style to enable readers to understand and interpret the accounting statements.

INTRODUCTION

The accounts relate to the year ended 31st March 2011. A summary of each statementand its purpose together with a brief overview of the Authoritys financial position isdetailed below. Definitions of any technical terms used in the statement can be found inthe glossary of terms section.

ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) IN2010/11

For the first time the 2010/11 accounts for the Council and all other Local Authorities havebeen prepared under International Financial Reporting Standards (IFRS), instead offormerly used UK Generally Accepted Accounting Practice (GAAP). This follows theChancellor of the Exchequers announcement in the 2007 budget that the UK public sectorwould adopt IFRS, as it was seen as best practice and allowed for internationalcomparisons to be made.

The move towards IFRS has been a major challenge for the public sector, resulting inmore disclosures in the Statement of Accounts, changes in accounting policies, changes innarrations to many of the statements and a number of key accountancy changes. Thechanges are summarised below:

Restatements - The opening balance sheet at 1st April 2009 has been restated on anIFRS basis as well as the 2009/10 accounts. The IFRS changes have been carried out byproducing comparative balance sheets for 1st April 2009 and for the year to 31st March2010 as well as notes. Also, a comparative Income and Expenditure account for 2009/10has been restated under IFRS including notes.

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The cumulative restatements have resulted in the net worth of the Authority increasing by123.116m, from 285.499m as at 31st March 2010 in the published UK GAAP statementof accounts to 408.615m as at 31st March 2010 in the IFRS restated balance sheet.

The key movements are:

Fixed Assets have increased by 14.763m, this is largely due to Lymm High School(a voluntary controlled school) being brought back on to the balance sheet as aresult of applying IAS16 (Property, Plant and Equipment). The Councils Fixed

Assets have also been restated in IFRS format that now groups assets as Plant,Property and Equipment (PPE), Investment Properties and Assets Held for Sale.

Grants and Contributions received have had to be restated in line with IAS20(Accounting for Government Grants and Disclosure of Government Assistance).This has resulted in 97.347m of Deferred Government Grants being treated asreserves, and a reduction in short term creditors of 16.883m and an increase inlong term creditors of 1.814m.

Creditors have increased by 4.062m for the inclusion of the AccumulatedAbsences Account which is an accrual for any untaken leave and/or benefits inyear, as required by IAS19 (Employee Benefits).

Component Accounting -This is also a new concept for Local Authorities and involvesthe splitting of assets into significant component parts and depreciating these partsseparately. This change has not had a material impact on the 2010/11 accounts.

Employee Benefit Accrual - A new charge that is applied to the accounts for untakenleave of staff at 31st March 2011. This amounted to 5.542m in the 2010/11 accounts andit is recorded as a short term creditor.

Assets - A full review of asset classes has taken place in line with IFRS requirements .This has meant a review and re-categorisation of assets including Assets Held for Sale (anew category, in summary assets which the Authority is actively marketing for sale), andInvestment Properties (now assets solely held for capital gain or rental income). Theremaining assets are classified on the Balance Sheet as Property Plant and Equipment(PPE).

Grants - Grants and contributions for capital purposes will be recognised as incomeimmediately rather than being deferred and released to revenue to match depreciation.For 2010/11, this has resulted in 34m of capital grants going through the ComprehensiveIncome and Expenditure Account instead of being deferred.

Leases - Property leases are classified and accounted for as separate leases of land andbuildings. The classification of leases has also changed. A Finance Lease is one thatsubstantially transfers all the risks and rewards incidental to ownership. These becomeBalance Sheet items as it is considered that the Authority is purchasing these assets.Operating leases are all leases that are not finance leases and are expenditure in theComprehensive Income and Expenditure Statement. Local Authorities also need to assess

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whether other contracts they have contain the substance of a lease, these are known asembedded leases. These changes have resulted in 0.637m of finance leases beingbrought back on the Councils Balance Sheet in 2010/11.

See Appendix One: First Time Adoption for further details on the implementation of

Internal Financial Reporting Standards.

EXPLANATION OF THE STATEMENTS

Movement in Reserves Statement

This shows the movement in year on the different reserves held by the Council, analysedinto usable reserves and unusable reserves. The statement shows 2010/11 usablereserves (cash backed reserves) decreased by 1.343m and unusable reserves(accountancy adjustments) reduced by 80.283m. The overall movement on the Councils2010/11 reserves was a reduction of 81.626m.

Comprehensive Income and Expenditure Statement

This replaces the Income and Expenditure account and now includes what was classifiedas the Statement of Total Recognised Gains and Losses under UK GAAP. The accountsummarises the resources that have been generated and consumed in providing servicesand managing the Council during the last financial year. It includes all day to dayexpenses and related income on an accruals basis, as well as transactions measuring thevalue of fixed assets actually consumed, and the real projected value of retirementbenefits earned by employees in the year. The statement shows the 2010/11 cost ofCouncil Services was 364.375m and the Council recorded a deficit on the provision of its

services of 212.353m.

The Balance Sheet

This statement sets out the financial position of the Council on 31st March 2011. Itincorporates the funds of the Authority, both Capital and Revenue. Headline figures fromthe Balance Sheet are:

Fixed Assets decreased by 301.334m in 2010/11 and this is primarily the result ofthe Housing Stock Transfer

The Councils Net Pension Liability at 31st March 2011 was 88.077m, a decreaseof 179.340m on 2009/10

Usable Reserves decreased by 1.343m Provisions increased by 1.315m in year The Net Worth of the Council reduced by 81.626m in 2010/11 to 326.989m at

31st March 2011. The main cause of this was the transfer of properties to GoldenGates Housing Trust following the Housing Stock Transfer

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Cash Flow Statement

The cash flow is split into four sections under IFRS, operating activities investing activities;financing activities and cash and cash equivalents. The Cash Flow Statement shows thechanges in cash and cash equivalents of the Council during the reporting period whereas

under UK GAAP this statement did not include movements in cash equivalents. Thestatement shows the Council recorded a cash flow net increase of 10.412 in 2010/11.

The Housing Revenue Account (HRA)

This summarises the income and expenditure in respect of the provision of Local Authorityhousing accommodation.

During 2010/11, the Authority transferred its housing stock to Golden Gates Housing Trustfollowing a positive ballot of tenants earlier in the year. The transfer took place on 29thNovember 2010.

There are detailed notes to help explain the changes and significant items within the HRA.The HRA recorded a deficit of 246.644m during 2010/11, which means the HRA heldreserves of 3.148m at 31st March 2011.

Following the audit of the 2010/11 HRA, the Authority will apply for approval, from theSecretary of State, to close down the HRA, which will mean all reserves will transfer to theGeneral Fund.

The Collection Fund

The Collection Fund is the account into which income due from Council Tax, BusinessRates and Residual Poll Tax is paid. Money is paid out to Government for BusinessesRates and to the Council, Fire and Police Authorities in respect of amounts required bytheir budgets for the financial year. A Provision is made for uncollectible Council Tax, andany surplus on the accounts is paid over to the Council and preceptors in subsequentyears. The Collection Fundrecorded a surplus of 0.356m for the year ended 31st March2011.

The Group Accounts

The Council is required to prepare Group Accounts where the Council has an interest insubsidiaries, associates and/or jointly controlled entities subject to the consideration ofmateriality. These statements consolidate the Councils accounts with those of:

Golden Gates Housing (only up to 29th November 2010). Golden Gates Housingmade a profit up to 28th November 2010 of 2.539m

Warrington Borough Transport (WBT). WBT reported a 2010/11 profit of 1.128m Connexions which made a 2010/11 profit of 2.405m

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Segmental Reporting

The Comprehensive Income and Expenditure Statement is produced under accountingstandards and differs from the financial management reporting the Council uses in year(this is the same for all Councils). The new Segmental reporting note (note 28) to the

Accounts reconciles the Comprehensive Income and Expenditure Statement with theCouncils internal management accounts reporting format.

FINANCIAL PERFORMANCE FOR THE YEAR 2010/11

Expenditure falls into two broad areas, namely revenue spending (concerning theprovision of Council services) and capital spending (the acquisition and improvement ofassets).

Revenue Spending (General Fund) in 2010/11

A comparison of budget and outturn is set out below with the actual spend asreported against the budget for each Directorate for 2010/11 as follows:

Original

Budget

m

In Year

Budget

Movement

m

Revised

Budget

m

Actual

Spend

m

Variance

m

Variance

%

Assistant Chief Executive 12.371 (4.391) 7.980 7.903 (0.077) (0.965)

Children & Young People 32.643 8.277 40.920 44.451 3.531 8.629

Environement & Regeneration 28.988 6.061 35.049 35.141 0.092 0.262

Neighbourhood & Community 61.260 12.164 73.424 71.470 (1.954) (2.661)

People & Improvement 1.730 0.885 2.615 2.089 (0.526) (20.115)

Corporate Financing (0.870) (9.059) (9.929) (10.995) (1.066) 10.736

Total 136.122 13.937 150.059 150.059 (0.000) (0.000)

The table above shows that the Council recorded a break even position for 2010/11 afterutilising certain earmarked reserves.

The Council incurred gross revenue expenditure in 2010/11 of 488.771m an analysis ofwhich is given in the charts below:

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Where the money was spent (m)

Employees - 228.346

Supplies & Services - 120.509

Transfer Payments - 71.945

Third Party Payments -32.214

Other - 35.757

The main elements of expenditure are:

Employees 228.346mprimarily salary costs (this includes teachers) Third Party Payments of 32.214m including 3.7m on Concessionary Travel,

4.2m Golden Gates Housing Management Fee, 2.3m on learning disability

Transfer Payments of71.945mincludes 36.0m of Rent Allowances, 13.8m ofCouncil Tax Benefits and 13.8m of Rent Rebates

Supplies of 120.509m includes 6.7m on Consultancy, 30.7m Social Carecosts, 0.379 Audit Commission fee

Other Operating costs of 35.757m includes 25.402m premises costs and10.465m of transport costs

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Services on which the money was spent (m)

Assistant Chief Executive -

78.852

Children & Young People -211.263

Environement & Regeneration -

58.363

Neighbourhood & Community -

102.562

People & Improvement -

9.629

Corporate Financing - 13.667

HRA - 14.435

Where the money came from (m)

RSG - 6.852

Area Based Grant - 14.180

Council Tax - 79.169

Movement from Reserves -

2.670

Dedicated Schools Grant -

124.319

Other Income (inc other

specific grants) - 214.393

NNDR Redistribution - 47.188

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Capital Spending in 2010/11

The Council Spent 57.162m (18% under the in-year Budgeted Programme) on capitalitems in 2010/11. The tables below show an analysis of 2010/11 capital expenditure,funding position and major scheme expenditure:

Original Revised Actual

MTFP (Dec) Spend

m m m m %

Children's Services 31.329 26.043 21.960 (4.083) -16%

Neighbourhood & Community 1.386 1.487 1.330 (0.157) -10%

Assistant Chief Executives 2.658 0.084 0.077 (0.007) -8%

People & Improvement 6.5 2.660 2.660 - 0%

Environment & Regeneration 36.368 34.911 24.057 (10.854) -31%

Housing 1.345 4.743 7.078 2.335 48%

Total 79.586 69.928 57.162 (12.766) -18%

Variance

2010/11 Capital Expenditure

The Council paid for its Capital Expenditure from the following sources:

Capital Programme

Actual

m

Council Supported Borrowing 6.412

Council Unsupported Borrowing 11.294

Council Capital Grants and Reserves 33.212

Council Capital Receipts 2.473

Council Revenue Funding 3.771

TOTAL - Capital Funding Plans 57.162

The most significant Capital Expenditure schemes, which incurred expenditure of 0.5m ormore, are shown below:

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Major Capital Schemes with Spending m

over 500,000St Margarets CE Primary School - Extension to existing building 2.223

Devolved Formula Capital - Primary Schools 0.741

Great Sankey High School - 6th Form Accommodation. & Modernisation 3.806

Birchwood High School - Post 16 & Modernisation 3.120

3-4yr old Capital Money for Nursery Unit (Extended Hours) 0.847

Schools Capital Works 0.809

Culcheth High School (BSF and community facilities) 4.619

Parr Hall Refurbishment 1.047

Workforce Remodelling(pensions) 1.710

LTP Bridges 1.000

LTP Structural Maintenance 2.041

Long Lane Roundabout 0.691

Community Infrastructure 1.659

Parks and Streets Refurbishment 0.840

ICT Infrastructure Modernisation/Unified Communications 2.846

Orford Park Sports village 7.050

Woolston Urban Ecology Nature Park (M'cer Road) REVIVE 0.718Pilot Community Hub (Woolston Leisure Centre) 1.422

Decent Homes/Capital Improvements 0.796

Affordable Housing 2.349

Disabled adaptations to private housing 1.187

41.521

Acquisition of Assets

The Council did not acquire any assets during 2010/11.

Disposal of Assets

The Council disposed of assets of 2.437m during the year with the major items being:

Woolston Library - 0.226m

Orford Lane Family centre - 0.186m

Booths Hill House - 1.4m

Warrington Baths - 0.335m

SCHOOLS

The Councils expenditure on schools and education is predominantly funded by grantmonies provided by the Government through the Dedicated Schools Grant, (DSG), (Sixthform funding derives from a separate, specific funding allocation). The DSG is ring-fencedand can only be used to cover either schools expenditure or specific central educationservices provided by the Council. Overall, the Council underspent on its DSG in 2010/11by 0.228m. This related to the proportion of DSG used to provide the central educationservices, and was chiefly as a result of lower than expected costs in placing Warringtonstudents in out-of-borough specialist educational establishments.

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In terms of school reserves, these began the year at 1.157m and stood at the end of2010/11 at 1.954m, an increase of 0.797m. The Primary and Special School Sectorssaw bottom-line increases (0.825m and 0.060m, respectively), with a small reduction inbalances in the Secondary Sector (0.088m). The increase in balances was largely theconsequence of a number of schools eliminating accumulated deficit balances through

managerial action plans agreed with the Authority. During the course of 2010/11, thenumber of schools in deficit almost halved, from 22 to 12. Also, during this financial year,the Warrington school sector reduced by one, with the closure in August 2010 of LongbarnCommunity Primary School. The Councils Building Schools for the Future programmewas also cancelled by the Government .This resulted in the Council having to meet costsalready incurred on the scheme of0.988m in 2010/11.

EXCEPTIONAL ITEMS

The Council had exceptional items, which are shown of the face of the ComprehensiveIncome and Expenditure Statement.

Net exceptional costs of 247.577m, relating to the transfer of Housing Stock to GoldenGates Housing Trust (see note 51).

Past Service Gain of 53.858m relating to the change in link in pensions from RPI toCPI (see note 47).

RESERVES

The Council holds both usable (funds available for the Council to use) and unusablereserves (non cash back reserves / accountancy adjustment reserves). The usablereserve balance at 31st March 2011 was 40.115m, a reduction of 1.343m over the year.

SIGNIFICANT PROVISIONS

Note 22 to the accounts shows the provisions that have been recorded in the accounts.The significant ones being:

1.5m Termination Benefits

1.1m Insurance Fund

MINIMUM REVENUE PROVISION (MRP)

The Council makes a yearly charge in its accounts for the future repayment of principal onits loans this is known as Minimum Revenue Provision. This charge is based on a complexcalculation. The Council have excluded the Golden Gates Shopping Centre from thiscalculation.

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PRIVATE FINANCE INITIATIVE (PFI)

The Council in 2004 procured and delivered 105 affordable social houses at the formerAnson Close and Blenheim Close site under the Private Finance Initiative (PFI). Under theterms of the agreement, the Council is liable to pay a maximum unitary charge of 300,000

per annum (until the year 2034) towards the annual operational cost of the project.Deductions will apply in respect of non-performance by the PFI Contractor.

The Council in 2004 also procured and delivered 38 affordable apartments for rent,providing supported housing at the former John Morris House site under the PrivateFinance Initiative. Under the terms of the agreement the Council is liable to pay amaximum unitary charge of 180,500 per annum (until the year 2038) towards the annualoperational cost of the project.

BORROWING FACILITIES

At 31st March 2011, the Councils total external deposits with financial institutionsamounted to 27.8m (18.7m at 31st March 2010). At 31st March 2011 the Council had112.3m of debt outstanding (146.7m at 31st March 2010) principally to finance the costof the Councils capital programme.

The significant reduction in the level of debt in 2010/11 is due to repayment by the DCLGof 60.6m PWLB loans as part of the Housing Stock Transfer.

The Council considers this level of borrowing to be prudent with reference to the CapitalFinancing Requirement (as defined in the Prudential Framework for Capital Accounting),which measures the underlying need to borrow to finance capital expenditure was

121.815m as at 31st March 2011 (149.825m at 31st March 2010). The Councilsborrowing is thus 9.5m below its Capital Financing Requirement. Also the Council as noncurrent assets of 539.046m and the net worth of s 327.320m.

Please note that these figures have been adjusted in the statement of accounts to reflectthe accounting treatment of accrued interest and financial instruments. The figures aboveshow the actual cash amounts outstanding at 31st March with financial institutions(including cash deposits).

OFFICERS REMUNERATION

During 2010/11 there has been a lot of national press coverage of the remunerationpackages paid to senior officers in the public services. Note 35 to the accounts providesdetails of the remuneration packages paid to senior officers of the Council.

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PENSION RESERVE

The Authoritys Balance Sheet includes a net pension liability of 88.077m as at 31stMarch 2011, a decrease of 179.340m. The impact of this liability is that it reduces the networth of the Council by 88.077m.

The 2010/11 179.340m decrease in the pension liability is principally due to the actuarialfinancial assumptions at 31st March 2011 being more favourable than they were at 31stMarch 2010, and pension increases now being based on the Consumer Price Index (CPI)instead of the Retail Price Index (RPI).

The pension liability reflects the fair value of future pension liabilities that have beenincurred less the assets that have already been set aside to fund them.

HOUSING STOCK TRANSFER

The Council transferred its housing stock to Golden Gates Housing Trust on 29thNovember 2010. Previously, Golden Gates Housing existed as an Arms LengthManagement Organisation (ALMO) wholly owned by the Council. The Large ScaleVoluntary Transfer has had a major impact on the Councils accounts for 2010/11.

The Council transferred 8,789 dwellings, and various small land holdings and garages andshops. The result of this is that the Authority has written off 235m of Housing Assets fromits Balance Sheet.

As well as writing off assets the Stock Transfer also enabled the Authority to remove 60mof Long Term debt.

As part of the Stock Transfer the Authority entered into an agreement with Golden GatesHousing to reclaim VAT on future improvement works to the transferred stock. Anestimated total of 55m of improvement works would be recoverable by the Golden GatesHousing Trust over the next 25 years.

The Council also will receive 100% of any proceeds from the future sale of propertiesunder the Right to Buy Scheme.

IMPACT OF ECONOMIC CLIMATE

In the summer of 2010/11, the new coalition Government announced the first of itsausterity measures which resulted in significant cuts in public sector funding.

For 2010/11, the major cuts announced that affected the Councils 2010/11 spending planswere:

The ending of Warringtons Building Schools for the Future programme. Thisresulted in the Council having to meet the abortive costs of 0.988m

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1.1m cut in Education Area Based Grant (ABG)

0.1m cut in Supporting People ABG

0.8m cut in capital grants (mainly transport related)

In 2010/11 the Government also announced its new transparency agenda. This required

all Councils to publish details of any spend of 500+. Warrington fully compiled with thisnew initiative and details can be found on the following web link:

http://www.warrington.gov.uk/home/your_council/Budget_and_spending/open_data/

A detailed review of the valuations of the Councils assets has been undertaken to assessthe impact of general economic conditions on property values. Where the value of theCouncils Assets have fallen, this has been reflected in the Councils accounts and theimpact shown under the Impairment of Fixed Assets. The financial impact of Impairmentof Fixed Assets in 2010/11 was 333.507m (2009/10 1.096m), see note 43 to the CoreFinancial Statements for further details.

The recession has also had a direct impact on the Councils finances in 2010/11. Likemost Councils we have experienced an increase in the demand for free school meals andHousing Benefit as well as falls in income in areas such has car parking. The low interestenvironment has also resulted in the Council receiving lower returns on its investments.

The Council also terminated the contracts of a number of employees in 2010/11 incurringtermination benefit costs of 4.845m. The Council received permission from theGovernment to capitalise (pay for out of capital resources) 2.262m of these costs.

On the 20th October 2010, the Government published the Comprehensive SpendingReview. This reported that Local Authority expenditure would be cut by 28% over thefollowing four year period and that the cuts would be front loaded with 11% needed to bemade in 2011/12. The total number of specific grants was reduced with a large number

being rolled into Councils formula grant allocation. This then incorporated itself in theLocal Government Finance Settlement that was announced later in the year.

The 2011/12 Local Government Finance Settlement was a two year settlement covering2011/12 and 2012/13. For Warrington, it reduced our funding by 13.3% in 2011/12 and8.7% in 2012/13.

Against this background the Council formulated its 2011/12 2013/14 Medium TermFinancial Plan. This incorporates savings of 35m over the MTFP period, 22.7m of whichare in 2011/12. Cuts of this magnitude require significant changes in the way the Councildelivers services in the medium term. The MTFP also incorporates changes in thestatutory functions of Councils in relation to taking on responsibility for Public Health from

2011/12 onwards.

The main costs and risks over the medium term continue to be Adult Social Care, largelythe result of an ageing population with increasing care needs, and waste, regardingincreased Landfill and the costs of using alternative, more sustainable methods of wastedisposal. In the short term interest rates are forecast to remain low which will continue tohave an impact on interest earned on revenue balances. A significant pressure is the

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delivery of planned efficiency savings and the Council will need to continue to invest inservice reconfiguration both to improve services and generate greater efficiency savings.

In setting the Councils 2011/12 2014/15 MTFP a full evaluation of Council reserves tookplace, to ensure that they were sufficient to meet the financial pressures facing the Councilin the medium term. Following this review I was able to issue an assurance statement to

full Council (in line with the 2003 Local Government Finance Act) that the reserves weresufficient in setting the 2010/11 budget. A breakdown of reserves can be found in notes23 & 24.

The Council has also set an ambitious 178m capital investment programme over theperiod 2011/12 2013 /14 which is fully funded over the period.

PERFORMANCE

In 2010/11 across the Authority there were 92 service delivery measures and at the end ofthe year 77% of these had been achieved. The year end management accounts positionreported an overspend of less than 1%.

Key Performance Highlights

In January 2011, Ofsted returned to Warrington to re-inspect safeguarding and lookedafter childrens services following an inadequate judgement in November 2009. Theresults show that the council and its partners are now meeting all of their statutoryrequirements. Performance is rated as adequate in 20 areas and good in the remainingtwo and as a result Ministers have withdrawn intervention early.

Warrington town centre footfall is outperforming the national downward trend in footfall intown centres. Warrington recorded an increase in footfall of 3.7% and recent figuresdemonstrate that Warrington town centre is thriving and is outperforming many other partsof the country.

Council Tax and Business Rates collection exceeded targets set for the year andWarrington is top within the Association of Greater Manchester Authorities (AGMA) groupof Authorities for Council Tax collection rates. The Benefits take up campaign has beensuccessful with 1m additional benefits raised for local residents during 2010/11.

FUTURE DEVELOPMENTS

Future Changes in the Funding of Local Government

The Government has initiated a Local Government Resource Review which is due toreport back in July 2011. The main focus is around the methodology for collection andretention of Business Rates with a longer term aim of Government being to free councilsfrom being funded via Central Government where this is practical, as well as developbetter incentives for Local Authorities to promote economic growth in their areas and tobenefit financially from that growth. In essence this would result in Councils being wholly

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funded by locally raised Council Tax and Business Rates, with minimal additional resourcecoming from Central Government.

This change could potentially have a positive impact on Warrington with the Councilpotentially benefiting from increased resource allocation, however it is recognised that any

change will have national implications which will have to be addressed.

Housing Benefit /Council Tax Benefit Changes

From the financial year 2013/14, substantial changes are proposed to housing benefitadministration and the financial responsibility for Council Tax Benefit. The Government isplanning to implement the Universal Credit system for new housing benefit claimantsfrom 1st April 2013. The financial impact on the Council who administer housing benefiton behalf of the Department of Work and Pensions (DWP) will become clearer as thedetailed proposals are developed. From 1 April 2013, financial responsibility for CouncilTax benefit will be transferred from the DWP to the Council. The level of funding

transferred to the Council will be 90% of the present level which is reimbursed by theDWP.

Joint Commissioning of Services with the NHS

One key development which will influence the future operating model of the Council is thetransfer of functions that are currently undertaken by the Primary Care Trust (PCT). TheNHS White Paper Equity and Excellence: Liberating the NHS (July 2010) and thesubsequent Health and Social Care Bill (January 2011) highlight a changing focus onstatutory responsibilities and commissioning responsibilities for the NHS and Local

Authorities .

Along with the Public Health White Paper: Healthy Lives, Healthy People: Our Strategyfor Public Health in England (November 2011) they provide the context for health andwellbeing developments over the coming years.

There will be significant changes in organisational responsibilities, with financial flows andtransferring functions. This change will need to be delivered at the same time asreductions in total NHS and Local Government funding and all the other organisationalchange that the Council will be facing.

YOUR COMMENTS

The Explanatory Foreword and the Accounts that follow are an important part of theCouncils arrangements for financial management and accountability.

A summarised version of the Accounts, which provides a more user-friendly overview ofthe key figures for 2010/11, will be published in Autumn 2011 following completion of the

Accounts Audit. This will be available on the Councils website and copies will be availablein public places after the conclusion of the audit.

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If you have any comments on any aspect of the Statement of Accounts, please contactDanny Mather by e-mail at [email protected] or by phone on 01925 442344.ACKNOWLEDGEMENTS

The production of the Statement of Accounts would not have been possible without theexceptionally hard work of staff across the Council. This has been a significant challengein a year of many changes and I would like to express my gratitude to all colleagues, fromthe finance team and other services, who have assisted in the preparation of thisdocument.

Lynton Green CPFAChief Finance Officer

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Statement of Responsibilities

The Authoritys Responsibilities

The Authority is required to:

Make arrangements for the proper administration of its financial affairs and tosecure that one of its officers has the responsibility for the administration of thoseaffairs. In this Authority, that officer is the Chief Finance Officer

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

Approve the Statement of Accounts

The Chief Finance Officers Responsibilities

The Chief Finance Officer is responsible for the preparation of the Authoritys Statement ofAccounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of

Practice on Local Authority Accounting in the United Kingdom (the Code).

In preparing this Statement of Accounts, the Chief Finance Officer has:

Selected suitable accounting policies and then applied them consistently

Made judgements and estimates that were reasonable and prudent Complied with the Local Authority Code

The Chief Finance Officer has also:

Kept proper accounting records which were up to date

Taken reasonable steps for the prevention and detection of fraud and otherirregularities

The Statement of Accounts gives a true and fair view of the financial position of theAuthority at 31st March 2011 and its income and expenditure for the year ended 31st March2011.

Signed

Dated 30th September 2011

Lynton Green, Chief Finance Officer

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Movement in Reserves Statement

This statement shows the movement in the year on the different reserves held by theAuthority, analysed into usable reserves (i.e. those that can be applied to fundexpenditure or reduce local taxation) and other reserves. The Surplus or (Deficit) on the

Provision of Services line shows the true economic cost of providing the Authoritysservices, more details of which are shown in the Comprehensive Income and ExpenditureStatement. These are different from the statutory amounts required to be charged to theGeneral Fund Balance and the Housing Revenue Account for council tax setting anddwellings rent setting purposes. The Net Increase / Decrease before Transfers toEarmarked Reserves line shows the statutory General Fund Balance and HousingRevenue Account Balance before any discretionary transfers to or from earmarkedreserves undertaken by the council.

General

Fund

Balance

000

Earmarked

General

Fund

Reserves

000

HRA

Balance

000

Earmarked

HRA

Reserves

000

Capital

Receipts

Reserve

000

Major

Repairs

Reserve

000

Capital

Grants

Unapplied

000

Total

Usable

Reserves

000

Total

Unusable

Reserves

000

Total

Reserves

of the

Authority

000

Balance as at 1 April 2009 976 22,891 1,182 842 289 2,448 4,013 32,641 489,580 522,221Movement in reserves during the year

Surplus or (deficit) on provision of services 24,665 519 25,184 25,184

Other Comprehensive Income and Expenditure (138,790) (138,790)

Total Comprehensive Income and Expenditure 24,665 - 519 - - - - 25,184 (138,790) (113,606)

Adjustments between accounting basis & funding

basis under regulations (24,079) 955 56 (739) 7,846 (15,961) 15,961 -

Net Increase/Decrease before Transfers to

Earmarked Reserves 586 - 1,474 - 56 (739) 7,846 9,223 (122,829) (113,606)

Transfers to or from earmarked reserves (586) 416 (235) (1) (406) 406 -

Increase/Decrease in Year - 416 1,239 (1) 56 (739) 7,846 8,817 (122,423) (113,606)

Balance as at 31 March 2010 976 23,307 2,421 841 345 1,709 11,859 41,458 367,157 408,615

Movement in reserves during the year

Sur plus or (defici t) on pr ovision of services 33,228 (245,580) (212,352) (212,352)

Other Comprehensive Income and Expenditure - - - 130,726 130,726

Total Comprehensive Income and Expenditure 33,228 - (245,580) - - - - (212,352) 130,726 (81,626)

Adjustments between accounting basis & funding

basis under regulations (36,480) 245,466 149 392 1,482 211,009 (211,009) -

Net Increase/Decrease before Transfers to

Earmarked Reserves (3,252) - (114) - 149 392 1,482 (1,343) (80,283) (81,626)

Transfers to or from earmarked reserves 3,252 (3,537) (1) 1 285 - - - - -

Increase/Decrease in Year - (3,537) (115) 1 434 392 1,482 (1,343) (80,283) (81,626)

Balance Sheet As At 31 March 2011 976 19,770 2,306 842 779 2,101 13,341 40,115 286,874 326,989

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Comprehensive Income and Expenditure Statement

This statement shows the accounting cost in the year of providing services in accordancewith generally accepted accounting practices, rather than the amount to be funded from

taxation. Authorities raise taxation to cover expenditure in accordance with regulations;this may be different from the accounting cost. The taxation position is shown in theMovement in Reserves Statement.

Gross

Expenditure

000

Gross

Income

000

Net

Expenditure

000 Notes

Gross

Expenditure

000

Gross

Income

000

Net

Expenditure

000

24,590 (12,367) 12,223 Central Services to the Public 85,241 (74,674) 10,567

31,876 (10,446) 21,430 Cultural, Environmental and Planning Services 44,874 (13,199) 31,675

200,017 (161,970) 38,047 Childrens and Education Services 234,628 (187,798) 46,830

18,516 (2,690) 15,826 Highways, Roads and Transport Services 19,618 (3,656) 15,962

27,281 (30,198) (2,917) Local Authority Housing (HRA) 17,084 (21,577) (4,493)

Local Authority Housing (HRA) Exceptional Costs - Stock Transfer 309,590 (62,013) 247,577

72,400 (71,190) 1,210 Other Housing Services 17,574 (5,682) 11,892

81,448 (31,517) 49,931 Adult Social Care 83,727 (31,948) 51,779

4,253 (220) 4,033 Corporate and Democratic Core 6,125 (220) 5,9052,147 - 2,147 Non-Distributed Cost 539 - 539

- - - Non-Distributed Cost Exceptional Costs - Pensions Past Service Gain (53,858) - (53,858)

462,528 (320,598) 141,930 Cost of Services 765,142 (400,767) 364,375

910 Other Operating Expenditure Note 9 5,795

13,357 Financing & Investment Income & Expenditure Note 10 21,341

- Surplus or Deficit on Discountinued Operations -

(181,381) Taxation and Non-Specific Grant Income Note 11 (179,158)

(25,184) (Surplus) or Deficit on Provision of Services 212,353

(7,532) Surplus or Deficit on revaluation of non-current assets Note 12 4,527

Surplus or deficit on revaluation of available for sale financial assets Note 23

146,322 Actuarial gains / losses on pension assets / liabilities Note 47 (135,253)

138,790 Other Comprehensive Income and Expenditure (130,726)

113,606 Total Comprehensive Income and Expenditure 81,627

2009/10 2010/11

The Council recorded 2010/11 exceptional item costs of 9,740,191 with regards to4,845,331 of termination of staff contracts costs, 3,907,000 of Housing Stock Transfer

costs and 987,860 of abortive Building Schools for the Future costs.

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Balance Sheet

The Balance Sheet shows the value as at the Balance Sheet date of the assets andliabilities recognised by the Authority. The net assets of the Authority (assets lessliabilities) are matched by the reserves held by the Authority. Reserves are reported in two

categories. The first category of reserves are usable reserves, i.e. those reserves that theAuthority may use to provide services, subject to the need to maintain a prudent level ofreserves and any statutory limitations on their use (for example the Capital ReceiptsReserve that may only be used to fund capital expenditure of repay debt). The secondcategory of reserves is those that the Authority is not able to use to provide services. Thiscategory of reserves includes reserves that hold unrealised gains and losses (for examplethe Revaluation Reserve), where amounts would only become available to provideservices if the assets are sold; and reserves that hold timing differences shown in theMovement in Reserves Statement line Adjustments between accounting basis andfunding basis under regulations.

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Notes

31st March

2011

000

31st March

2010

000

1st April

2009

000

Property, Plant & Equipment 12/12a 453,428 744,361 705,982

Investment Property 13 36,472 45,729 44,499

Intangible Assets 14 2,881 3,560 14Assets held for sale 20 - 465 465

Long Term Investments 15 2,007 1,038 1,098

Long Term Debtors 18 33,917 33,613 33,695

Long Term Assets 528,705 828,766 785,753

Short Term Investments 15 5,046 60 13,482

Inventories 16 925 880 640

Short Term Debtors 18 50,014 45,416 27,544

Cash and Cash Equivalents 19 31,203 22,953 19,068

Assets held for sale 20 - - -Current Assets 87,188 69,309 60,734

Cash and Cash Equivalents 19 (8,366) (10,528) (4,923)

Short Term Borrowing 15 (3,234) (2,143) (517)

Short Term Creditors 21 (56,456) (42,092) (47,992)

Provisions 22 (2,016) (1,127) (2,288)

Liabilities in disposal groups 20 - - -

Donated Assets 38 - - -

Grants receipts in advance 38 - - -

Current Liabilities (70,072) (55,890) (55,720)

Long Term Creditors 21 (5,476) (5,163) (5,328)

Capital Grants receipts in advance 38 (7,529) (8,004) (9,114)

Provisions 22 (1,531) (1,105) (1,244)

Long Term Borrowing 15 (116,219) (151,881) (135,101)

Other Long Term Liabilities 47 (88,077) (267,417) (117,758)

Long Term Liabilities (218,832) (433,570) (268,545)

Net Assets 326,989 408,615 522,222

Usable reserves 23 40,115 41,458 32,641

Unusable Reserves 24 286,874 367,157 489,581

Total Reserves 326,989 408,615 522,222

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Cash Flow Statement

The Cash Flow Statement shows the changes on cash and cash equivalents of theAuthority during the reporting period. The statement shows how the Authority generatesand 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 keyindicator of the extent to which the operations of the Authority are funded by way oftaxation and grant income or from the recipients of services provided by the Authority.Investing activities represent the extent to which cash outflows have been made forresources which are intended to contribute to the Authoritys future service delivery. Cashflows arising from financing activities are useful in predicting claims on future cash flows byproviders of capital (i.e. borrowing) to the Authority.

2009/10

000 Notes

2010/11

000(25,184) Net (surplus) or deficit on the provision of services 212,353

(192)

Adjustments to net surplus or deficit on the provision of

services for non-cash movements (323,499)

9,606

Adjust for items included in the net surplus or deficit on

the provision of services that are investing or financing

activities 48,670

(15,770) Net cash flows from Operating Activities 25 (62,476)

48,564 Investing Activities 26 16,145

(31,075) Financing Activities 27 35,918

1,719

Net (increase) or decrease in cash and cash

equivalents (10,413)

(14,144)

Cash and cash equivalents at the beginning of the

reporting period (12,425)

(12,425)Cash and cash equivalents at the end of the

reporting period19 (22,838)

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Notes to the Financial Statements

1 Accounting Policies

Statement of Accounting Policies

1.1 General Principles

The Statement of Accounts summarises the Authority's transactions for the 2010/11financial year and its position at the year-end of 31st March 2011. The Authority is requiredto prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2003,which require the statement to be prepared in accordance with proper accountingpractices. These practices primarily comprise the Code of Practice on Local Authority

Accounting in the United Kingdom 2010/11 and the Best Value Accounting Code ofPractice 2010/11, supported by International Financial Reporting Standards (IFRS) andstatutory guidance issued under section 12 of the 2003 Act.

The accounting convention adopted in the Statement of Accounts is principally historicalcost, modified by the revaluation of certain categories of non-current assets and financialinstruments.

1.2 Accruals of Income and Expenditure

Activity is accounted for in the year that it takes place, not simply when cash payments aremade or received. In particular:

Revenue from the sale of goods is recognised when the Authority transfers the

significant risks and rewards of ownership to the purchaser and it is probable thateconomic benefits or service potential associated with the transaction will flow tothe Authority.

Revenue from the provision of services is recognised when the Authority canmeasure reliably the percentage of completion of the transaction and it is probablethat economic benefits or service potential associated with the transaction will flowto the Authority.

Supplies are recorded as expenditure when they are consumed where there is agap between the date supplies are received and their consumption, they are carriedas 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 thanwhen payments are made.

Interest receivable on investments and payable on borrowings is accounted forrespectively as income and expenditure on the basis of the effective interest rate forthe relevant financial instrument rather than the cash flows fixed or determined bythe contract.

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

1.3 Acquisitions and Discontinued Operations

Acquired operationsThe Authority has not acquired any operations during the current financial year.

Discontinued OperationsThe results of discontinued operations are shown as a single amount on the face of theComprehensive Income and Expenditure account comprising the profit or loss ofdiscontinued operations and the gain or loss recognised either on measurement to fairvalue less costs to sell or on the disposal of the discontinued operation. A discontinuedoperation is a cash generating unit or a group of cash generating units that has been

disposed of, or is classified as held for sale and represents a separate entity within ourgroup accounts.

1.4 Cash and Cash Equivalents

Cash includes all bank credit balances and overdrafts held by the Authority as part of itsnormal cash management, including all deposit accounts accessible without notice.

Cash Equivalents are short term, highly liquid investments that are readily convertible toknown amounts of cash and which are subject to an insignificant risk of change in value.Cash Equivalents include investments with a fixed maturity of three months or less from

the date of acquisition and available for sale assets such as cash placed in money marketfunds.

1.5 Charges to Revenue for Non-Current Assets

Services, support services and trading accounts are debited with the following amounts torecord the cost of holding fixed 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 areno accumulated gains in the Revaluation Reserve against which the losses can be

written off amortisation of intangible fixed assets attributable to the service.

The Authority is not required to raise council tax to fund depreciation, revaluation andimpairment losses or amortisations. However, it is required to make an annual contributionfrom revenue towards the reduction in its overall borrowing requirement equal to an

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amount calculated on a prudent basis determined by the Authority in accordance withstatutory guidance.

Depreciation, revaluation and impairment losses and amortisations are therefore replacedby the 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 differencebetween the two.

1.6 Exceptional Items

When items of income and expenditure are material, their nature and amount is disclosedseparately, either on the face of the Comprehensive Income and Expenditure Statement orin the notes to the accounts, depending on how significant the items are to anunderstanding of the Authoritys financial performance.

1.7 Employee Benefits

Benefits Payable During EmploymentShort-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sickleave, bonuses and non-monetary benefits (e.g. cars) for current employees and arerecognised as an expense for services in the year in which employees render service tothe Authority. An accrual is made for the cost of holiday entitlements (or any form of leave,e.g. time off in lieu) earned by employees but not taken before the year-end whichemployees can carry forward into the next financial year. The accrual is made at the wageand salary rates applicable in the following accounting year, being the period in which theemployee 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 thatholiday benefits are charged to revenue in the financial year in which the holiday absenceoccurs.

The Authority does not award long term employee benefits i.e. those which are notexpected to be paid or settled within 12 months of the balance sheet date.

Termination BenefitsTermination benefits, whether they are a decision by the Council to terminate an officersemployment before the normal retirement date or an officers decision to accept voluntaryredundancy, are charged on an accruals basis to the relevant service line (or indiscontinued operations) in Comprehensive Income and Expenditure Statement.

Where termination benefits involve the enhancement of pensions, statutory provisionsrequire the General Fund balance to be charged with the amount payable by the Authorityto the pension fund or pensioner in the year, not the amount calculated according to therelevant accounting standards. In the Movement in Reserves Statement, appropriationsare required to and from the Pensions Reserve to remove the notional debits and creditsfor pension enhancement termination benefits and replace then with debits for the cash

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paid to the pension fund and pensioners and such amounts payable but unpaid at theyear-end.

Post Employment BenefitsEmployees of the Authority are members of two separate pension schemes:

The Teachers Pension Scheme, administered by Capita Teachers Pensions onbehalf of the Department for Education (DfE).

The Local Government Pensions Scheme, known as the Cheshire Pension Fundand administered by Cheshire West and Chester Council.

Both schemes provided defined benefits to members (retirement lump sums andpensions), earned as employees worked for the Authority.

Teachers Pension SchemeThe arrangements for the teachers scheme mean that liabilities for these benefits cannotordinarily be identified specifically to the Authority. The scheme is therefore accounted foras if it was a defined contribution scheme and no liability for future payments of benefits isrecognised in the Balance Sheet. The Childrens and Education Services line in theComprehensive Income and Expenditure Statement is charged with the employerscontributions payable to the Teachers Pensions in the year.

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

The liabilities of the Cheshire Pension Fund scheme attributable to the Authority areincluded in the Balance Sheet on an actuarial basis using the projected unit method

i.e. an assessment of the future payments that will be made in relation toretirement benefits earned to date by employees, based on assumptions aboutmortality rates, employee turnover rates, etc, and projections of projected earningsfor current employees.

Liabilities are discounted to their value at current prices, using a discount rate of6.9% (based on the indicative rate of return on iBoxx Sterling Corporate Index, AAover 15 years).

The assets of Cheshire Pension Fund attributable to the Authority are included inthe Balance Sheet at their fair value:

quoted securities current bid price

unquoted securities professional estimate

unitised securities current bid price property market value

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

current service cost the increase in liabilities as a result of years of serviceearned this year allocated in the Comprehensive Income and ExpenditureStatement to the services for which the employees worked

past service cost the increase in liabilities arising from current yeardecisions whose effect relates to years of service earned in earlier years

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debited to the Surplus or Deficit on the Provision of Services in theComprehensive Income and Expenditure Statement as part of NonDistributed Costs

interest cost the expected increase in the present value of liabilities duringthe year as they move one year closer to being paid debited to the

Financing and Investment Income and Expenditure line in theComprehensive Income and Expenditure Statement expected return on assets the annual investment return on the fund assets

attributable to the Authority, based on an average of the expected long termreturn credited to the Financing and Investment Income line in theComprehensive Income and Expenditure Statement

gains or losses on settlements and curtailments the result of actions torelieve the Authority of liabilities or events that reduce the expected futureservice or accrual of benefits of employees debited or credited to theSurplus or Deficit on the Provision of Services to the Comprehensive Incomeand Expenditure Statement as part of Non Distributed Costs

actuarial gains and losses changes on the net pensions liability that arisebecause events have not coincided with assumptions made at the lastactuarial valuation or because the actuaries have updated their assumptions

debited to the Pensions Reserve

contributions paid to the Cheshire Pension Fund cash paid as employerscontributions to the pension fund in settlement of liabilities; not accounted foras an expense.

In relation to retirement benefits, statutory provisions require the General Fund balance tobe charged with the amount payable by the Authority to the pension fund or directly topensioners in the year, not the amount calculated according to the relevant accounting

standards. In the Movement in Reserves Statement, this means that there areappropriations to and from the Pensions Reserve to remove the notional debits and creditsfor retirement benefits and replace them with debits for the cash paid to the pension fundand pensioners and any such amounts payable but unpaid at the year-end. The negativebalance that arises on the Pensions Reserve thereby measures the beneficial impact tothe General Fund of being required to account for retirement benefits on the basis of cashflows rather than as benefits earned by employees.

Employer contribution rates are reviewed every three years. The last review took place at31st March 2007; effective from 1st April 2008. The employer contribution rate set for theCouncil was 19.1 % for 2009/10 (19.45% in 2008/09). In accordance with current

regulations, the actuary set the rate at a level sufficient to enable the Pension Fund tomeet 100% of existing prospective liabilities, including pension increases.

Discretionary BenefitsThe Authority also has restricted powers to make discretionary awards of retirementbenefits in the event of early retirements. Any liabilities estimated to arise as a result of anaward to any member of staff (including teachers) are accrued in the year of the decision

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to make the award and accounted for using the same policies as are applied to the LocalGovernment Pension Scheme.

The Authority has in place a ground-up insurance policy which covers the majority of injuryawards. Any ad-hoc injury claims not covered by the policy and for which the Authority are

therefore liable are dealt with in the Comprehensive Income and Expenditure Account inthe financial year in which they occur.

1.8 Events after the Balance Sheet date

Events after the Balance Sheet date are those events, both favourable and unfavourable,that occur between the end of the reporting period and the date when the Statement of

Accounts is authorised for issue. Two types of events can be identified:

those that provide evidence of conditions that existed at the end of the reportingperiod the Statement of Accounts is adjusted to reflect such events

those that are indicative of conditions that arose after the reporting period. theStatement of Accounts are not adjusted to reflect such events, but where a categoryof events would have a material effect, disclosure is made in the notes of the natureof the events and their estimated financial effect.

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

1.9 Financial Instruments

Financial Liabilities

Financial liabilities are recognised on the Balance Sheet when the Authority becomes aparty to the contractual provisions of a financial instrument and are initially measured atfair value and are carried at their amortised cost. Annual charges to the Financing andInvestment Income and Expenditure line in the Comprehensive Income and ExpenditureStatement for interest payable are based on the carrying amount of the liability, multipliedby the effective rate of interest for the instrument. The effective interest rate is the rate thatexactly discounts estimated future cash payments over the life of the instrument to theamount at which it was originally recognised.

For most of the borrowings that the Authority has, this means that the amount presented inthe Balance Sheet is the outstanding principal repayable (plus accrued interest); and

interest charged to the Comprehensive Income and Expenditure Statement is the amountpayable for the year according to the loan agreement.

The bonds issued by the Authority in previous years however are carried at a loweramortised cost than the outstanding principal, and interest is charged at a marginallyhigher effective rate of interest than the rate payable to bondholders as a material amountof costs incurred in its issue is being financed over the life of the stock.

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Gains and losses on the repurchase or early settlement of borrowing are credited anddebited to the Financing and Investment Income and Expenditure line in theComprehensive Income and Expenditure Statement in the year or repurchase / settlement.However, where repurchase has taken place as part of a restructuring of the loan portfoliothat 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 loanand the write-down to the Comprehensive Income and Expenditure Statement is spreadover the life of the loan by an adjustment to the effective interest rate.

Where premiums and discounts have been charged to the Comprehensive Income andExpenditure Statement, regulations allow the impact on the General Fund Balance to bespread over future years. The Authority has a policy of spreading the gain or loss over theterm that was remaining on the loan against which the premium was payable or discountreceivable when it was repaid. The reconciliation of amounts charged to theComprehensive Income and Expenditure Statement to the net charge required against theGeneral Fund Balance is managed by a transfer to or from the Financial Instruments

Adjustment Account in the Movement in Reserves Statement.

Financial AssetsFinancial assets are classified into two types:

loans and receivables assets that have fixed or determinable payments but arenot quoted in an active market

available-for-sale assets assets that have a quoted market price and/or do nothave fixed or determinable payments.

Loans and Receivables

Loans and receivables are recognised on the Balance Sheet when the Authority becomesa party to the contractual provisions of a financial instrument and are initially measured atfair value. They are subsequently measured at their amortised cost. Annual credits to theFinancing and Investment Income and Expenditure line in the Comprehensive Income andExpenditure Statement for interest receivable are based on the carrying amount of theasset multiplied by the effective rate of interest for the instrument. For most of the loansthat the Authority has made, this means that the amount presented in the Balance Sheet isthe outstanding principal receivable (plus accrued interest) and interest credited to theComprehensive Income and Expenditure Statement is the amount receivable for the yearin the loan agreement.

However, the Authority has made a number of loans to voluntary organisations at less thanmarket rates (soft loans). When soft loans are made, a loss is recorded in theComprehensive 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 theFinancing and Investment Income and Expenditure line in the Comprehensive Income andExpenditure Statement at a marginally higher effective rate of interest than the ratereceivable from the voluntary organisations, with the difference serving to increase the

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amortised cost of the loan in the Balance Sheet. Statutory provisions require that theimpact of soft loans on the General Fund Balance is the interest receivable for the financialyear the reconciliation of amounts debited and credited to the Comprehensive Incomeand Expenditure Statement to the net gain required against the General Fund Balance ismanaged 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 eventthat payments due under the contract will not be made, the asset is written down and acharge made to the relevant service (for receivables specific to that service) or theFinancing and Investment Income and Expenditure line in the Comprehensive Income andExpenditure Statement. The impairment loss is measured as the difference between thecarrying amount and the present value of the revised future cash flows discounted at theassets original effective interest rate.

Any gains and losses that arise on derecognition of an asset are credited or debited to the

Financing and Investment Income and Expenditure line in the Comprehensive Income andExpenditure Statement.

Available-for-Sale AssetsAvailable-for-sale assets are recognised on the Balance Sheet when the Authoritybecomes a party to the contractual provisions of a financial instrument and are initiallymeasured 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 theComprehensive Income and Expenditure Statement for interest receivable are based onthe amortised cost of the asset multiplied by the effective rate of interest for the instrument.Where there are no fixed or determinable payments, income (e.g. dividends) is credited to

the Comprehensive Income and Expenditure Statement when it becomes receivable bythe Authority.

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

instruments with quoted market prices the market price

other instruments with fixed and determinable payments discounted cash flowanalysis

equity shares with no quoted market prices independent appraisal of companyvaluations.

Changes in fair value are balanced by an entry in the Available-for-Sale Reserve and thegain/loss is recognised in the Surplus or Deficit on Revaluation of Available-for-SaleFinancial Assets. The exception is where impairment losses have been incurred theseare debited to the Financing and Investment Income and Expenditure line in theComprehensive Income and Expenditure Statement, along with any net gain or loss for theasset accumulated in the Available-for-Sale Reserve.

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Where assets are identified as impaired because of a likelihood arising from a past eventthe payments due under the contract will not be made (fixed or determinable payments) orfair value falls below cost, the asset is written down and a charge made to the Financingand Investment Income line in the Comprehensive Income and Expenditure Statement. Ifthe 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 cashflows discounted as the assets original effective interest rate. Otherwise, the impairmentloss is measured as any shortfall of fair value against the acquisition cost of the instrument(net of any principal repayment and amortisation).

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

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

impairment losses).

1.10 Grants

Whether paid on account, by instalments or in arrears, Government grants and third partycontributions and donations are recognised as due to the Authority when there isreasonable assurance that:

the Authority 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 Incomeand Expenditure Statement until conditions attached to the grant or contribution have beensatisfied. Conditions are stipulations that specify that the future economic benefits orservice potential embodied in the asset acquired using the grant or contribution arerequired to be consumed by the recipient as specified, or future economic benefits orservices potential must be returned to the transferor.

Monies advanced as grants and contributions for which conditions have not been satisfiedare carried in the Balance Sheet as creditors. When conditions are satisfied, the grant orcontribution is credited to the relevant service line (attributable revenue grants andcontributions) or Taxation and Non-Specific Grant Income (non-ringfenced revenue grants

and all capital grants) in the Comprehensive Income and Expenditure Statement.

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

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transferred to the Capital Adjustment Account once they have been applied to fund capitalexpenditure.Area Based Grant

Area Based Grant (ABG) is a general grant allocated by central Government directly toLocal Authorities as additional revenue funding. ABG is non-ring-fenced and is credited to

Taxation and Non-Specific Grant income in the Comprehensive Income and ExpenditureStatement.

1.11 Intangible Fixed Assets

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

Internally generated assets are capitalised where it is demonstrable that the project is

technically feasible and is intended to be completed (with adequate resources beingavailable) and the Authority will be able to generate future economic benefits or deliverservice potential by being able to sell or use the asset. Expenditure is capitalised where itcan be measured reliably as attributable to the asset and is restricted to that incurredduring the development phase (research expenditure cannot be capitalised).

Expenditure on the development of websites is not capitalised if the website is solely orprimarily intended to promote or advertise the Authoritys goods or services.

Intangible assets are measured initially at cost. Amounts are only revalued where the fairvalue of the assets held by the Authority can be determined by reference to an active

market. In practice, no intangible asset held by the Authority meets this criterion, and theyare therefore carried at amortised cost. The depreciable amount of an intangible asset isamortised over its useful life to the relevant service line(s) in the Comprehensive Incomeand Expenditure Statement. An asset is tested for impairment whenever there is anindication that the asset might be impaired any losses recognised are posted to therelevant service line(s) in the Comprehensive Income and Expenditure Statement. Anygain or loss arising on the disposal or abandonment of an intangible asset is posted to theOther Operating Expenditure line in the Comprehensive Income and ExpenditureStatement.

Where expenditure on intangible assets qualifies as capital expenditure for statutorypurposes, amortisation, impairment losses and disposal gains and losses are notpermitted to have an impact on the General Fund Balance. The gains and losses aretherefore reversed out of the General Fund Balance in the Movement in ReservesStatement and posted to the Capital Adjustment Account and (for any sale proceedsgreater than 10,000) the Capital Receipts Reserve.

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1.12 Interest in Companies and Other Entities

The Authority has material interests in companies and other entities that have the nature ofsubsidiaries, associates and jointly controlled entities and require it to prepare groupaccounts. In the Authoritys own single-entity accounts, the interests in companies and

other entities are recorded as financial assets at cost, less any provision for losses.

The Council had interests in three limited companies during the financial year:

Warrington Borough Transport

Connexions

Golden Gates Housing

Warrington Borough Transport is wholly owned by Warrington Borough Council and isconsolidated into the Group Accounts as a subsidiary.

Golden Gates Housing (GGH) was wholly owned by Warrington Borough Council until the29th November, when it became an independent Trust separate from the Council. GGH isconsolidated into the Group Accounts as a subsidiary for the portion of the year up to itschange in operation. At that point the change is shown in the Group Accounts as adisposal of discontinued operations.

Warrington Borough Council owns 25% of Connexions which is shown as an associatewithin the Group Accounts.

1.13 Inventories and Long Term Contracts

Inventories are included in the balance sheet at the lower of cost or net realisable value.The cost of inventories is assigned using the FIFO costing formula.

Long term contracts are accounted for on the basis of charging the Surplus or Deficit onthe Provision of Services with the value of works and services received under the contractduring the financial year.

Work in progress is included in the IFRS balance sheet at cost.

1.14 Interest Receivable or Payable

The effective interest rate method is used to measure the carrying value of a financialasset or liability measured at amortised cost, and to allocate associated interest income orexpense to the relevant period. The effective interest rate is the rate that exactly discountsestimated future cash payments or receipts through the expected life of the financialinstrument to equal the amount at initial recognition. The effective interest is adjusted tothe actual interest payment or receipt through the Movement in Reserves Statement toensure only actual interest is charged to Council Tax.

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For financial assets and liabilities carried at cost because the effective rate of interest isthe same as the carrying rate of interest, the carrying value is adjusted for accruedinterest.

1.15 Internal Interest

Interest earned is recorded initially in the Comprehensive Income & Expenditure Account.Subsequent allocations are made to certain other individual funds, based on individualcash flows and an average rate of interest.

1.16 Investment Property

Investment properties are those that are used solely to earn rentals and/or for capitalappreciation. The definition is not met if the property is used in any way to facilitate thedelivery of services or production of goods or is held for sale.

Investment properties are measured initially at cost and subsequently at fair value, basedon the amount at which the asset could be exchanged between knowledgeable parties atarms-length. Properties are not depreciated but are revalued annually according to marketconditions at the balance sheet date (year-end). Gains and losses on revaluation areposted to the Financing and Investment Income and Expenditure line in theComprehensive Income and Expenditure Statement. The same treatment is applied togains and losses on disposal.

Rentals received in relation to investment properties are credited to the Financing andInvestment 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 thereforereversed out of the General Fund Balance in the Movement in Reserves Statement andposted to the Capital Adjustment Account and (for any sale proceeds greater than10,000) the Capital Receipts Reserve.

1.17 Jointly Controlled Operations and Jointly Controlled Assets

Jointly controlled operations are activities undertaken by the Authority in conjunction withother ventures that involve the use of the assets and resources of the venturers ratherthan the establishment of a separate entity. The Authority recognises on its Balance Sheetthe assets that it controls and the liabilities that it incurs and debits and credits theComprehensive Income and Expenditure Statement with the expenditure it incurs and theshare of income it earns from the activity of the operation.

Jointly controlled assets are items of property, plant or equipment that are jointly controlledby the Authority and other venturers, with the assets being used to obtain benefits for theventurers. The joint venture does not involve the establishment of a separate entity. The

Authority accounts for only its share of the jointly controlled assets, the liabilities and

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expenses that it incurs on its own behalf or jointly with others in respect of its interest in thejoint venture and income that it earns from the venture.

1.18 Leases

Leases are classified as finance leases when the terms of the lease transfer substantiallyall the risks and rewards incidental to ownership of the property, plant or equipment fromthe lesser to the lessee. All other leases are classified as operating leases.

Where a lease covers both land and buildings, the land and buildings elements areconsidered separately for classification.

Arrangements that do not have the legal status of a lease but convey a right to use anasset in return for payment are accounted for under this policy where fulfilment of thearrangement is dependent on the use of specific assets.

The Authority as Lessee

Finance LeasesProperty, Plant and Equipment held under finance leases is recognised on the BalanceSheet at the commencement of the lease at its fair value measured at the leases inception(or the present value of the minimum lease payments, if lower). The asset recognised ismatched by a liability for the obligation to pay the lessor. Initial direct costs of the Authorityare added to the carrying amount of the asset. Premiums paid on entry into a lease areapplied to writing down the lease liability. Contingent rents are charged as expenses in theperiods in which they are incurred.

Lease payments are apportioned between: a charge for the acquisition of the interest in the property, plant and equipment

applied to write down the lease liability, and

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

Property, Plant and Equipment recognised under finance leases is accounted for using thepolicies applied generally to such assets, subject to depreciation being charged over thelease term if this is shorter than the assets estimated useful life (where ownership of theasset does not transfer to the Authority at the end of the lease period.)

The Authority is not required to raise council tax to cover depreciation or revaluation andimpairment losses arising on leased assets. Instead, a prudent annual contribution ismade from revenue funds towards the deemed capital investment in accordance withstatutory requirements. Depreciation and revaluation and impairment losses are thereforesubstituted by a revenue contribution in the General Fund Balance, by way on an adjustingtransaction with the Capital Adjustment Account in the Movement in Reserves Statementfor the difference between the two.

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Operating LeasesRentals paid under operating leases are charged in the Comprehensive Income andExpenditure Statement as an expense of the services benefitting from the use of theleased property, plant or equipment. Charges are made on a straight-line basis over thelife of the lease, even if this does not match the pattern of payments (e.g. there is a rent-

free period at the commencement of the lease).

The Authority as Lessor

Finance LeasesWhere the Authority grants a finance lease over a property or an item of plant orequipment, the relevant asset is written out of the Balance Sheet as a disposal. At thecommencement 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 OtherOperating Expenditure line in the Comprehensive Income and Expenditure Statement aspart of the gain or loss on disposal. A gain, representing the Authoritys net investment in

the lease, is credited to the same line in the Comprehensive Income and ExpenditureStatement also as part of the gain or loss on disposal (i.e. netted off against the carryingvalue of the asset at the time of disposal), matched by a lease (long-term debtor) asset inthe Balance Sheet.

Lease rentals receivable are apportioned between:

a charge for the acquisition of the interest in the property applied to write downthe lease debtor (together with any premiums received), and

finance income (credited to the Financing and Investment Income and Expenditureline in the Comprehensive Income and Expenditure Statement).

The gain credited to the Comprehensive Income and Expenditure Statement on disposal isnot permitted by statute to increase the General Fund Balance and is required to betreated as a capital receipt. Where a premium has been received, this is posted out of theGeneral Fund Balance to the Capital Receipts Reserve in the Movement in ReservesStatement. Where the amount due in relation to the lease asset is to be settled by thepayment of rentals in future financial years, this is posted out of the General Fund Balanceto the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. Whenthe future rentals are received, the element for the capital receipt for the disposal of theasset is used to write down the lease debtor. At this point, the deferred capital receipts aretransferred to the Capital Receipts Reserve.

The written-off value of disposals is not a charge against council tax, as the cost of fixedassets is fully provided for under separate arrangements for capital financing. Amounts aretherefore appropriated to the Capital Adjustment Account from the General Fund Balancein the Movement in Reserves Statement.

Operating LeasesWhere the Authority grants an operating lease over a property or an item of plant orequipment, the asset is retained in the Balance Sheet. Rental income is credited to the

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Other Operating Expenditure line in the Comprehensive Income and Expe

warrington statement of accounts

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