Audit Committee, 30 September 2013 Page 1

AUDIT COMMITTEE

Date: 30 September 2013

The Statement of Accounts 2012-2013

Report of the Corporate Director of Finance

Policy Board Member: Councillor Dave Ledger – Deputy Leader of the Council

Purpose of report

The purpose of this report is to provide the members of the Audit Committee with an overview of the changes made to the Draft Statement of Accounts presented in June of this year.

Recommendations

It is recommended that the members of the Audit Committee should note the changes made to the draft document and approve the Statement of Accounts 2012-2013.

Report Author: Alison Elsdon – Head of Business Support

(01670) 622168

alison.elsdon@northumberland.gov.uk

C

Audit Committee, 30 September 2013 Page 2

BACKGROUND

1. The draft 2012-2013 Statement of Accounts was presented to the Audit Committee in June. Since then a number of minor amendments have been made to the document including changes recommended by the external auditors.

2. The key changes made to the figures are set out in Appendix A.

3. Changes made to the narrative within the accounts are set out in Appendix B.

4. Appendices C to I show the page numbers as per the Draft Statement of Accounts so that comparison is easy.

5. Appendix C shows the revised Comprehensive Income and Expenditure Account; these changes have been followed through to the segmental analysis statements at Appendices D and E; and the subjective analysis statements at Appendices F and G.

6. This in turn has resulted in changes to the Group Comprehensive Income and Expenditure Statement for both 2011-2012 and 2012-2013 shown at Appendices H and I.

7. There are some unadjusted items but both management and the external auditors agree that these are not material. The unadjusted items are documented in the ISA260 report which is an item on the agenda of this meeting.

8. There have been some minor changes to wording in the Annual Governance Statement which was approved in June.

9. The final version of the Statement of Accounts and the ISA260 will be published on the Council’s web-site once approved by this meeting.

Background papers

Draft Statement of Accounts 2012-2013.

Audit Committee, 30 September 2013 Page 3

IMPLICATIONS ARISING OUT OF THE REPORT

Policy: None

Finance and value for money: The Statement of Accounts summarise the financial performance of the Council and its subsidiaries for the financial year 2012-2013 and shows its net worth as at 31 March 2013.

Human Resources: None

Property: None

Equalities: None (Impact Assessment attached) Yes o No o N/A þ An impact assessment is not applicable as

the report does not require a key decision.

Risk Assessment: The risks within the preparation of the Statement of Accounts are well managed through the embedded processes in place.

Customer Considerations: None

Carbon Reduction: None

Consultation: Deputy Leader.

Wards: All

Summary of changes to figures within the Statement of Accounts Appendix A

Audit Committee, 30 September 2013 Page 4

Page Description Changed from £’000

Changed to

£’000

11 Comprehensive Income and Expenditure Account (CIES) Revised statement at appendix c 36 Service Areas Expenditure (2012-2013) Revised statement at appendix d 37 Service Areas Expenditure (2011-2012) Revised statement at appendix e 38 Reconciliation of Service Area income and expenditure to cost of services

in the CIES (2011-2012)

Net expenditure in service area analysis 273,420 272,048 Amounts included in analysis not included in the CEIS (15,610) (15,522) Cost of Services in CIES 349,039 347,755 39 Reconciliation to Subjective Analysis (2012-2013) Revised statement at appendix f 40 Reconciliation to Subjective Analysis (2011-2012) Revised statement at appendix g 60 Other operating expenditure (2011-2012) Parish and other precepts 5,130 5,042 Total net operating expenditure 64,721 64,333 60 Other operating expenditure (2012-2013) Losses of the disposal of non-current assets 11,998 13,086 Total net operating expenditure 17,466 18,554 61 Property, Plant and Equipment (PFI Assets) Additions 1,745 1,725 Reclassifications 0 20 66 Heritage Assets Five year summary (2011-2012) Revaluations in the period – Museum , art and artefact collection 4,601 4,600 Revaluations in the period – Public sculptures and memorials 374 375 74 Financial Instruments (2012-2013) Long term investments – fair value 101,766 118,505 78 Provisions – Redundancy costs Amounts used in 2012-2013 (260) 2,202 Additional provisions made in 2012-2013 2,202 (260) 87 Trading Operations (2012-2013) Support services recharged to expenditure of continuing operations 9,402 9,403

Summary of changes to figures within the Statement of Accounts Appendix A

Audit Committee, 30 September 2013 Page 5

Page Description Changed from £’000

Changed to

£’000

88 Officers Remuneration Corporate Director of Children’s Services – Paul Moffat - Salary 127,199 126,533 Corporate Director of Finance – Steven Mason – Benefits in kind 17,305 18,799 130 General Government Grants (2011-2012) Local Services Support Grant (1,372) 0 142 Housing Revenue Account (2012-2013) Depreciation and impairment of fixed assets (3,170) (4,258) Loss on disposal of non-current assets 0 1,088 Change in fair value of investment properties 144 0 Amortisation of premiums 368 0 Amortisation of discounts (201) 0 Capital grants and contributions receivable (787) (787) Interest payable and similar charges 3,979 4,347 Interest and investment income 218 (275) 142 Housing Revenue Account (2011-2012) Movement in the allowance for bad debt (not specified by the code) 69 (42) Dwelling rents (gross) (24,487) (24,376) Change in fair value of investment properties (271) 0 Amortisation of premiums 381 0 Amortisation of discounts (201) 0 Capital grants and contributions receivable (100) (100) Interest payable and similar charges 2,747 3,128 Interest and investment income (219) (691) 149 Collection Fund (2012-2013) Council Tax receivable (142,461) (142,460) Total income (235,834) (235,833) Write off uncollectable amounts 1,331 1,332 Total expenditure 237,835 237,836 Movement on fund balance 2,001 2,003 Closing fund balance (966) (964) 162 Group Comprehensive Income and Expenditure Statement (2012-2013) Revised statement at appendix h 163 Group Comprehensive Income and Expenditure Statement (2012-2013) Revised statement at appendix i 165 Group Balance Sheet (2012-2013) Short term debtors 61,941 62,432 Current assets 287,364 287,855 Short term creditors (52,922) (53,483) Current liabilities (162,768) (163,259)

Summary of changes to figures within the Statement of Accounts Appendix A

Audit Committee, 30 September 2013 Page 6

Page Description Changed from £’000

Changed to

£’000

173 Group Short Term Debtors (2012-2013) Other entities and individuals 34,146 31,637 Total short term debtors 61,941 62,432 174 Group Short Term Creditors (2012-2013) Other entities and individuals (42,245) (42,736) Total short term creditors (52,992) (53,483) 189 Taxation and Non-Specific Grant Income (2011-2012) Council Only - Non ring fenced government grants (36,698) (35,326) Group - Non ring fenced government grants (36,698) (35,326 Council Only – Total financing and investment income and expenditure (350,055) (348,683) Group – Total financing and investment income and expenditure (350,044) (348,672)

Summary of narrative changes within the Statement of Accounts Appendix B

Audit Committee, 30 September 2013 Page 7

Page Area Change

6 Note 4 - Capital expenditure Further explanation added around REFCUS and prior year capitalisation direction

6 Note 6 – Treasury Management Total debt rate/return changed from 8.05% (sum) to 3.28%

(average) 94 Note 40 – Grant Income Local Services Support Grant for 2011-2012 moved from ‘Credited

to taxation and nonspecific grant income’ to ‘Grants credited to services – revenue’.

124 Note 50 – Credit Risk Maximum period of investment � amended for UK clearing

banks/building societies 101 Note 42 – Capital

expenditure/Financing Removed wording ‘re Icelandic Impairments’ from the Reversal of capitalisation (REFCUS) line

122 Note 48 – Contingent Liabilities

(MMI) Wording regarding Scheme of arrangement changed to say that this was triggered in November 2012.

202 Pension Fund Note 15 – Fund

value and proportions 2012-2013 values changed for Morgan Stanley (private equity) from 4.9% to 5.1% and from £44.87m to £46.31m.

2012-2013 values changed for BlackRock from 2.4% to 2.2% and £20.10m to £21.54m.

202 Pension Fund Note 16 –

Significant Holdings Value of UK Equity Index Fund holdings changed from £108.41m (11.9%) to £108.14m (11.8%).

Value of Over Five Year Index-Linked Gilts Fund changed from £73.25m to £73.00m.

203 Pension Fund Note 17 –

Additional Voluntary Contributions

Aggregate value of AVC investments with Prudential changed from £1.83m to £1.85m.

205 Pension Fund Note 21 –

Outstanding Commitments Morgan Stanley Private Markets III – Capital payments changed from $46.04m to $45.64m, outstanding commitment changed from $3.96m (£2.61m) to $4.36m (£2.87m).

Global Infrastructure Partners II-C – Capital payments changed from $12.18m to $8.75m, outstanding commitments changed from $30.82 (£20.30m) to $34.25 (£22.55m).

Outstanding capital commitments total changed from £32.42m to £34.93m.

207 Pension Fund Note 23 – Risk

(Liquidity Risk) Total of the Fund’s holdings with Legal & General (£612.59m) included along with a sentence regarding net withdrawals from dealings with members and the maximum withdrawal in a single year.

Notes to the Financial Statements Appendix C

2012-2013 Statement of Accounts Page 11

Note Gross

Expenditure

Gross

Income

Net

Expenditure

Gross

Expenditure

Gross

Income

Net

Expenditure

£’000 £’000 £’000 £’000 £’000 £’000

Central Services to the Public 7,771 (2,795) 4,976 8,035 (3,017) 5,018

Cultural and Related Services 20,518 (4,471) 16,047 22,935 (3,137) 19,798

Environmental and Regulatory Services 49,311 (13,337) 35,974 47,644 (12,897) 34,747

Planning Services 19,049 (4,854) 14,195 10,882 (3,467) 7,415

Fire and Rescue Services 23,298 (3,264) 20,034 17,338 (2,731) 14,607

Education and Children’s Services 350,141 (252,122) 98,019 289,563 (233,386) 56,177

Highways and Transport Services 40,423 (9,983) 30,440 40,959 (10,225) 30,734

Local Authority Housing (HRA) 31,164 (25,879) 5,285 9,768 (28,118) (18,350)

Local Authority Housing (HRA) - Settlement Payment to Government for HRASelf-

financing 10,254 - 10,254 - - -

Other Housing Services 112,897 (107,809) 5,088 116,702 (112,829) 3,873

Adult Social Care 156,108 (69,910) 86,198 131,919 (46,357) 85,562

Exceptional Costs of Equal Pay 9 6,937 - 6,937 (14,441) - (14,441)

Corporate and Democratic Core 10,917 (375) 10,542 13,479 (462) 13,017

Non Distributed Costs 3,793 (27) 3,766 4,795 (46) 4,749

Cost of Services 842,581 (494,826) 347,755 699,578 (456,672) 242,906

Other Operating Expenditure 13 73,146 (8,513) 64,633 40,642 (22,088) 18,554

Financing and Investment Income and Expenditure 14 47,421 (17,564) 29,857 62,598 (20,008) 42,590

Taxation and Non-Specific Grant Income 15 - (348,683) (348,683) - (322,648) (322,648)

(Surplus) or Deficit on Provision of Services 963,148 (869,586) 93,562 802,818 (821,416) (18,598)

(Surplus) or Deficit on Revaluation of Non Current Assets (16,307) 1,069

(Surplus) or Deficit on Revaluation of Available for Sale Financial Assets - (13,104)

Actuarial (Gains)/Losses on Pension Assets/Liabilities 47 117,160 63,480

Other Comprehensive Income and Expenditure 100,853 51,445

Total Comprehensive Income and Expenditure 194,415 32,847

2011-2012 2012-2013

Notes to the Financial Statements Appendix D

2012-2013 Statement of Accounts Page 36

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

Income and Expenditure

2012-2013

Adult Services Children’s

Services

Finance Fire and

Rescue

HRA Local

Services

Public Health

and Public

Protection

Transformation Total

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

Fees, Charges and Other Service Income (38,660) (39,253) (17,468) (1,402) (28,079) (43,847) (6,167) (57,655) (232,531)

Interest and Investment Income (12) (38) (7,887) - (420) - - - (8,357)

Government Grants (9,173) (208,990) (111,505) (1,793) (38) (6,220) (202) (483) (338,404)

Total Income (47,845) (248,281) (136,860) (3,195) (28,537) (50,067) (6,369) (58,138) (579,292)

Employee Expenses 32,827 176,781 20,899 13,421 128 31,377 5,544 15,265 296,242

Other Service Expenses 101,672 97,117 109,833 4,192 13,024 70,930 4,791 42,501 444,060

Support Service Recharges 3,933 13,778 7,784 1,219 1,030 10,795 1,952 11,652 52,143

Interest Payments - 3 21,630 - 4,347 - - - 25,980

Precepts and Levies - - 6,169 - - - - - 6,169

Total Expenditure 138,432 287,679 166,315 18,832 18,529 113,102 12,287 69,418 824,594

Net Expenditure 90,587 39,398 29,455 15,637 (10,008) 63,035 5,918 11,280 245,302

Notes to the Financial Statements Appendix E

2012-2013 Statement of Accounts Page 37

Income and Expenditure

2011-2012

Adult

Services

Children’s

Services

Finance Fire and

Rescue

HRA Local

Services

Public

Health and

Public

Protection

Regeneration T ransformation Total

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

Fees, Charges and Other Service Income (62,874) (44,944) (17,220) (1,459) (26,149) (69,392) (6,957) (2,045) (29,497) (260,537)

Interest and Investment Income - - (3,590) - (420) - - - - (4,010)

Government Grants (9,507) (224,024) (105,947) (2,244) - (3,869) (654) (265) (14) (346,524)

Total Income (72,381) (268,968) (126,757) (3,703) (26,569) (73,261) (7,611) (2,310) (29,511) (611,071)

Employee Expenses 32,237 203,435 20,784 13,540 120 44,749 5,287 2,695 24,128 346,975

Other Service Expenses 130,546 102,778 101,878 4,184 15,082 80,348 5,001 8,732 22,599 471,148

Support Service Recharges 3,928 12,611 6,664 1,188 1,013 11,917 2,268 629 3,928 44,146

Interest Payments - - 12,681 - 3,127 - - - - 15,808

Precepts and Levies - - 5,042 - - - - - - 5,042

Total Expenditure 166,711 318,824 147,049 18,912 19,342 137,014 12,556 12,056 50,655 883,119

Net Expenditure 94,330 49,856 20,292 15,209 (7,227) 63,753 4,945 9,746 21,144 272,048

Notes to the Financial Statements Appendix F

2012-2013 Statement of Accounts Page 39

Reconciliation to Subjective Analysis

This reconciliation shows how the figures in the analysis of Service Area income and expenditure relate to a subjective analysis of the

Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

2012-2013 Service

Area

Analysis

Services

and

Support

Services

not in

Analysis

Amounts not

reported to

managment

for decision

making

Amounts

not

included in

CIES

Allocation

of

Recharges

Cost of

Services

Corporate

Amounts

Total

£‘000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Fees, charges & other service income (232,531) 61,898 (5,450) (89) 57,715 (118,457) (11,461) (129,918)

Interest and investment income (8,357) - - 8,357 - - (8,357) (8,357)

Income from council tax - - - - - - (156,530) (156,530)

Government grants and contributions (338,404) 188 - - - (338,216) (166,308) (504,524)

Gain or loss on Disposal of Non-Current Assets - - - - - (22,088) (22,088)

Total Income (579,292) 62,086 (5,450) 8,268 57,715 (456,673) (364,744) (821,417)

Employee expenses 296,242 (26,458) (5,460) - - 264,324 41,992 306,316

Other service expenses 444,060 (24,858) - (1,174) (57,715) 360,313 (24,459) 335,854

Support Service recharges 52,143 (11,031) - - - 41,112 11,031 52,143

Depreciation, revaluation,amortisation and impairment - (9,142) 42,972 - - 33,830 7,487 41,317

Interest Payments 25,980 - - (25,980) - - 25,980 25,980

Precepts & Levies 6,169 - - (6,169) - - 6,169 6,169

Payments to Housing Capital Receipts Pool - - - - - - 954 954

Gain or loss on Disposal of Non-Current Assets - - - - - - 34,086 34,086

Total Expenditure 824,594 (71,489) 37,512 (33,323) (57,715) 699,579 103,240 802,819

(Surplus) or deficit on the provision of services 245,302 (9,403) 32,062 (25,055) - 242,906 (261,504) (18,598)

The approach to internal recharging adopted by the Council means that the cost of support services has been fully removed in the ‘Other

Service Expenses’ line.

Notes to the Financial Statements Appendix G

2012-2013 Statement of Accounts Page 40

2011-2012 Service Area

Analysis

Services and

Support

Services not

in Analysis

Amounts not

reported to

managment

for decision

making

Amounts not

included in

CIES

Allocation of

Recharges

Cost of

Services

Corporate

Amounts

Total

£‘000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Fees, charges & other service income (260,537) 58,068 8,343 1,310 43,963 (148,853) (13,004) (161,857)

Interest and investment income (4,010) - - 4,010 - - (4,010) (4,010)

Income from council tax - - - - - - (154,854) (154,854)

Government grants and contributions (346,524) 551 - - - (345,973) (194,379) (540,352)

Gain or loss on Disposal of Non-Current Assets - - - - - - (8,513) (8,513)

Total Income (611,071) 58,619 8,343 5,320 43,963 (494,826) (374,760) (869,586)

Employee expenses 346,975 (28,135) (25,313) - - 293,527 45,005 338,532

Other service expenses 471,148 (19,953) - 8 (43,963) 407,240 (26,428) 380,812

Support Service recharges 44,146 (7,644) - - - 36,502 7,644 44,146

Depreciation, revaluation,amortisation and impairment - (1,017) 107,412 - - 106,395 5,914 112,309

Interest Payments 15,808 - - (15,808) - - 15,808 15,808

Precepts & Levies 5,042 - - (5,042) - - 5,042 5,042

Payments to Housing Capital Receipts Pool - - - - - - 520 520

Gain or loss on Disposal of Non-Current Assets - (1,083) - - - (1,083) 67,062 65,979

Total Expenditure 883,119 (57,832) 82,099 (20,842) (43,963) 842,581 120,567 963,148

(Surplus) or deficit on the provision of services 272,048 787 90,442 (15,522) - 347,755 (254,193) 93,562

The approach to internal recharging adopted by the Council means that the cost of support services has been fully removed in the ‘Other

Service Expenses’ line.

Group Comprehensive Income and Expenditure Statement Appendix H for the year ended 31 March 2013

2012-2013 Statement of Accounts Page 162

Note Gross

Expenditure

Gross

Income

Net

Expenditure

Gross

Expenditure

Gross

Income

Net

Expenditure

£’000 £’000 £’000 £’000 £’000 £’000

8,035 (3,017) 5,018 8,035 (3,017) 5,018

22,935 (3,137) 19,798 22,935 (796) 22,139

47,644 (12,897) 34,747 49,497 (14,547) 34,950

10,882 (3,467) 7,415 10,882 (3,467) 7,415

17,338 (2,731) 14,607 17,338 (2,731) 14,607

289,563 (233,386) 56,177 289,563 (233,386) 56,177

40,959 (10,225) 30,734 40,959 (10,225) 30,734

9,768 (28,118) (18,350) 11,286 (30,310) (19,024)

- - - - - -

116,702 (112,829) 3,873 118,084 (115,530) 2,554

131,919 (46,357) 85,562 131,919 (46,357) 85,562

(14,441) - (14,441) (14,441) - (14,441)

13,479 (462) 13,017 13,479 (462) 13,017

4,795 (46) 4,749 4,795 (46) 4,749

699,578 (456,672) 242,906 704,331 (460,874) 243,457

40,642 (22,088) 18,554 40,642 (22,088) 18,554

18 62,598 (20,008) 42,590 62,664 (19,985) 42,679

19 - (322,648) (322,648) - (322,323) (322,323)

802,818 (821,416) (18,598) 807,637 (825,270) (17,633)

- -

(18,598) (17,633)

1,069 (1,699)

(13,104) (13,104)

63,480 63,460

51,445 48,657

32,847 31,024

Other Comprehensive Income and Expenditure

Total Comprehensive Income and Expenditure

Corporate and Democratic Core

Non Distributed costs

Cost Of Services

Other Operating Expenditure

Financing and Investment Income and Expenditure

Group (Surplus)/Deficit

(Surplus) or Deficit on Revaluation of Property, Plant & Equipment Assets

(Surplus) or Deficit on Revaluation of Available for Sale Finincial Instruments

Central Services to the Public

Culture and related Services

Actuarial (Gains)/Losses on Pension Assets/Liabilities

Council Only Group

Taxation and Non-Specific Grant Incomes

Deficit on Provision of Services

Tax Expenses of Associates

Local Authority Housing (HRA)

Local Authority Housing (HRA)-Settlement Payment to Government for HRA self financing

Other Housing Services

Adult Social Care

Exceptional costs of Equal Pay

Environmental and Regulatory Services

Planning Services

Fire and Rescue Services

Education and children's Services

Highways and Transport Services

2012-2013 Group

Group Comprehensive Income and Expenditure Statement Appendix I for the year ended 31 March 2012

2012-2013 Statement of Accounts Page 163

Note Gross

Expenditure

Gross

Income

Net

Expenditure

Gross

Expenditure

Gross

Income

Net

Expenditure

£’000 £’000 £’000 £’000 £’000 £’000

7,771 (2,795) 4,976 7,771 (2,795) 4,976

20,518 (4,471) 16,047 20,518 (1,990) 18,528

49,311 (13,337) 35,974 49,773 (13,739) 36,034

19,049 (4,854) 14,195 19,049 (4,854) 14,195

23,298 (3,264) 20,034 23,298 (3,264) 20,034

350,141 (252,122) 98,019 350,141 (252,122) 98,019

40,423 (9,983) 30,440 40,423 (9,983) 30,440

31,164 (25,879) 5,285 30,776 (27,563) 3,213

10,254 - 10,254 10,254 - 10,254

112,897 (107,809) 5,088 115,584 (110,322) 5,262

156,108 (69,910) 86,198 156,108 (69,911) 86,197

6,937 - 6,937 6,937 - 6,937

10,917 (375) 10,542 10,917 (375) 10,542

3,793 (27) 3,766 3,793 (27) 3,766

842,581 (494,826) 347,755 845,342 (496,945) 348,397

73,146 (8,513) 64,633 73,147 (8,513) 64,634

18 47,421 (17,564) 29,857 47,502 (17,585) 29,917

19 - (348,683) (348,683) - (348,672) (348,672)

963,148 (869,586) 93,562 965,991 (871,715) 94,276

- -

93,562 94,276

(16,307) (12,882)

117,160 119,730

100,853 106,848

194,415 201,124

Council Only Group2011-2012 Group

Other Comprehensive Income and Expenditure

Other Housing Services

Adult Social Care

Exceptional costs of Equal Pay

Corporate and Democratic Core

Non Distributed costs

Cost Of Services

Other Operating Expenditure

Financing and Investment Income and Expenditure

Taxation and Non-Specific Grant Incomes

Total Comprehensive Income and Expenditure

Central Services to the Public

Culture and related Services

Environmental and Regulatory Services

Deficit on Provision of Services

Tax Expenses of Associates

Group (Surplus)/Deficit

(Surplus) or Deficit on Revaluation of Property, Plant & Equipment Assets

Actuarial (Gains)/Losses on Pension Assets/Liabilities

Planning Services

Fire and Rescue Services

Education and children's Services

Highways and Transport Services

Local Authority Housing (HRA)

Local Authority Housing (HRA)-Settlement Payment to Government for HRA self financing