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Aylesbury Vale District Council Statement of Accounts For the Year Ended 31st March 2008AYLESBURY VALE DISTRICT COUNCIL STATEMENT OF ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2008 PAGE Explanatory Foreword 1 Statement of Accounting Policies 4 Statement of Responsibilities 7 Income and Expenditure Account 8 Statement of Movement on General Fund Balance 9 Statement of Total Recognised Gains and Losses 9 Balance Sheet 10 Cash Flow Statement 11 Notes to the Core Financial Statements 12 Income and Expenditure 12 Balance Sheet 19 Cash Flow 30 Housing Revenue Account 32 Collection Fund 33 Glossary of Terms 35 Annual Governance Statement 39 Audit Opinion 54 Prepared by the Accountancy Section Page 1 of 38 EXPLANATORY FOREWORD The accounts for the year 2007/08 are set out on the following pages and are supported by explanatory notes together with a statement of the Council's and Head of Finance responsibilities and a statement of the main policies that were adopted. The accounts are prepared in accordance with the provisions of the Accounts and Audit Regulations 2003, issued under Sections 27 of the Audit Commission Act 1998, and the Chartered Institute of Public Finance Accountancy Code of Practice on Local Authority Accounting (June 2008). 1. The Financial Statements. The Code of Practice requires the following core financial statements: i) Income and Expenditure Account This shows the revenue activities of both the Council's main accounts, General Fund and Housing, covering income and expenditure on all services. ii) Statement of Movement on General Fund Balance This is a reconciliation showing how the balance on the Income and Expenditure account links with the statutory requirements of raising the council tax. iii) Statement of Total Recognised Gains and Losses This demonstrates how the movement in net worth in the Balance Sheet is identified to the net balance on the Income and Expenditure account and to other unrealised gains and losses. iv) Balance Sheet This sets out the financial position of the Council on 31st March 2008 and incorporates the General Fund Account, Collection Fund Account and Company Accounts. v) Cash Flow Statement This summarises all of the inflows and outflows of cash for the Council arising from transactions with third parties for revenue and capital purposes. 2. Statutory Changes and Changes to Accounting Policies i) Accounting Policies The accounting policies adopted by the Council comply with the relevant legislation and recommended accounting practices and are outlined in the Statement of Accounting Policies. The following provides a background to the Council's financial transactions, affected by major legislative areas. ii) Implementation of the Revaluation Reserve In the 2007/08 statement of accounts, the council has adopted two significant new accounting policies that impact on the Balance Sheet: The Balance Sheet figures for 31 March 2007 have been adjusted from those included in the Statement of Accounts for 2006/07 to accommodate the implementation of the Revaluation Reserve. The Revaluation Reserve and Capital Adjustment Account replace the Fixed Asset Restatement Reserve (FARA) and Capital Financing Account (CFA). The credit balance of £216,112,000 on the FARA and the debit balance of £57,109,000 on the CFA at the 31 March 2007 have been written off to the Capital Adjustment Account with a resulting credit balance of £159,003,000. The Revaluation Reserve has been included in the Balance Sheet with a zero balance. The closing balance on the Revaluation Reserve at 31 March 2008 only shows revaluation gains accumulated since 1 April 2007. iii) Accounting for Financial Instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability of another. The term 'financial instrument' covers both financial assets and financial liabilities from the most straightforward to the most complex. Typical financial instruments are: Liabilities - trade payables, borrowings and financial guarantees. Assets - bank deposits, trade receivables, loans receivables and investments. 3. Financial Summary 2007/08 i) General Fund Revenue In 2007/08 the District General Fund net expenditure was £473,248. A summary of the financial position is shown below: 2007/08 2007/08 2007/08 2007/08 General Fund Revenue Budget Actual General Fund Balances Budget Actual £'000 £'000 £'000 £'000 Expenditure 87,449 117,991 Balance 1st April -4,858 -4,858 Income -64,278 -93,490 Trans To General Fund 1,200 1,200 Net Cost of Services 23,171 24,501 -3,658 -3,658 Other Costs 504 596 Net Balance to Fund 0 -1,673 Investment Interest -3,140 -5,678 Balance 31st March -3,658 -5,331 Income from Grants -11,405 -11,962 Net Expenditure 9,130 7,457 Local Taxpayers -7,930 -7,930 Net Balance 1,200 -473 The 2007/08 out-turn was significantly under the precept requirement, with the actual contribution to balances being £473,248. The original budget had assumed a transfer from balances of £1,200,000; which meant that £1,673,000 was actually contributed to balances. Within this figure the Head of Finance agreed to bring forward £160,500 under delegated powers for projects that did not take place in 2007/08 but will be take place early in 2008/09. The actual figures are much higher than the budget due to the year end accounting entries that are required covering FRS17, depreciation, impairment, deferred charges and contributions to and from reserves. These entries are not normally budgeted for as they do not impact on the council tax requirement. The unexpected contribution to balances was largely the result of the Council receiving authorisation from the DCLG to close the Housing Revenue Account. This meant that the balance in the Housing Revenue Account reserve, £2,323,000, was transferred to the General Fund. There were some areas that did vary from the anticipated outturn and they were Car Parking Income, which was £102,000 below target due to changes in usage patterns and lower use of the car parks. Local Land Charges suffered a loss of income of £102,000 because of a downturn in the market and a result of increased competition in the market. Office Accommodation, had increased running expenses of £168,000 on utility costs, relocation expenses and rentals at both the new Gateway building and Friars Square. The impending closure of the Civic Centre impacted upon the number of bookings received, this together with increased performance costs resulted in increased costs of £124,000. The testing and maintenance regime associated with the water feature in Kingsbury cost the Council an additional £113,000; testing for legionella bacteria is a legal requirement under Health and Safety laws. The vacant Head of Design Services post together with more fee income created a saving of £116,000. The Government award of LABGI at the end of 2007, which was carried forward in balances has been taken out of balances and transferred to a specific reserve. During the year a further award of £415,000 was received and transferred into the reserve. (ii) Housing Revenue Account Although the housing stock was transferred to the Vale of Aylesbury Housing Trust in July 2006, the Housing Revenue Account has to remain open until formal closure is granted by the Department of Communities and Local Government. The DCLG granted consent for the HRA to be closed on the 28th March 2008, on this day the balance in the HRA reserve was transferred into the General Fund reserves. As the account was open during 2007/08 some residual housing subsidy and mortgage interest transactions were charged there, which produced a small surplus of £137,000. This is shown in the following table: 2007/08 2007/08 Budget Actual £'000 £'000 Gross Expenditure 0 0 Gross Income 0 -137 Surplus for the Year 0 -137 Housing Revenue Account The year end surplus was transferred to reserves and then the balance of £2,323,227 was transferred to the general fund reserves. Prepared by the Accountancy Section Page 2 of 38 4. Collection Fund The average Band D Equivalent Council Tax for 2007/08 was £1,287.08. This comprised an average District Council Charge of £171.60 (including special expenses and parish precepts), a Buckinghamshire County Council Charge of £933.04, a Thames Valley Police Authority Charge of £132.58, and a Buckinghamshire and Milton Keynes Fire Authority Charge of £49.86. The Council also collects non-domestic rates for its area which are based on local rateable values multiplied by the uniform rate. The total amount, less certain relief's and other deductions, is paid to a central pool managed by Central Government. The amount of redistributed NNDR is shown in the Income and Expenditure Account. 5. Capital In 2007/08 the Council spent £13.714m on capital projects, compared with the forecast budget of £25.888m. General Housing Improvements accounted for 5% of the total spend, with Social Housing Enabling Grants accounting for another 19%. The redevelopment of the Exchange Street area, known as Waterside, accounted for 12%, whilst work on the new theatre to replace the Civic Centre amounted to 29%. The remaining spend covered existing projects that included work on The Gateway office area, 23%, and car parks, 3%. The actual outturn figure is well below the forecast budget due to slippage on a number of schemes plus the budgets for the Waterside and Theatre schemes assumed more expenditure in the year when realistically the budgets should have been programmed for the next couple of years. In 2007/08 capital receipts arising from the sale of assets amounted to £679,832. The Council did receive a further £4.735m from non asset backed receipts, of which the majority was from house sales as part of the transfer agreement. The Council's capital expenditure in 2007/08 was financed by several sources, the largest being capital receipts. Of the available receipts £11.491m were used during the year. 6. Significant Factors Affecting the Accounts There are no factors that significantly affect the accounts. P.H.Watson CPFA J.Cartwright Head of Finance Leader of the Council 10 June 2008 10 June 2008 Further Information about these accounts is available from: The Head of Finance Friars Square Offices, 4 Great Western St. Aylesbury, Bucks HP20 2TW Prepared by the Accountancy Section Page 3 of 38 Prepared by the Accountancy Section Page 4 of 38 STATEMENT OF ACCOUNTING POLICIES The following principles have been adopted in compiling the Authority's Accounts: 1. GENERAL PRINCIPLES The general principles adopted are those recommended by the Chartered Institute of Public Finance and Accountancy (CIPFA), which has prepared guidance notes on the application of Statements of Standard Accounting Practice (SSAPs) and Financial Reporting Standards (FRSs) to local authority accounts. The accounts comply with all the relevant standards covered by the guidance notes, except where departures are disclosed in the following paragraphs. In some cases, there may be small discrepancies between figures appearing in different accounting statements; these are due to the rounding necessary when producing summarised statements. The figures on the left of each financial statement are included for comparison purposes and relate to the year ended 31st March 2007. 2. ACCRUALS OF INCOME AND EXPENDITURE All revenue and capital transactions have been recorded on an income and expenditure basis. Provision has been made on an actual or estimated basis for all debtors and creditors as at 31 March 2008. Provisions made for doubtful debts are shown as a note to the Balance Sheet and in the appropriate Revenue Accounts. There is a requirement for Local Authorities to analyse services based upon the CIPFA standard classification as detailed in the Best Value Accounting Code of Practice. 3. ALLOCATION OF EXPENDITURE ON SUPPORT SERVICES The costs of support services during the year have been allocated to the revenue and capital accounts of the Authority on a variety of bases. These allocation bases are a combination of actual time spent by staff and staff numbers on the various services, together with a number of fixed price agreements. Service Level Agreements (SLAs) have been adopted as the methodology for charging between service areas. 4. GOVERNMENT GRANTS Grants and subsidies have been credited to the appropriate revenue and capital accounts and accruals have been made for balances known to be receivable for the period to 31 March 2008. Grant received for the purchase of fixed assets are deferred and amortised over the useful economic life of the assets. Deferred government grants are now charged directly to service accounts rather than as a corporate income item. 5. TANGIBLE FIXED ASSETS All expenditure on the acquisition, creation or enhancement of fixed assets is capitalised on an accruals basis in the accounts, provided that the fixed asset yields benefits to the Authority and the services it provides, for a period of more than one year. The Council has established a de-minimis level of £10,000 on capital transactions. Expenditure on fixed assets under this level is not capitalised. Expenditure on routine repairs and maintenance of fixed assets is charged direct to service revenue accounts and is not capitalised. Income from the disposal of fixed assets is accounted for on an accruals basis. Fixed assets are valued on the basis recommended by CIPFA and in accordance with the Statements of Asset Valuation Principles and Guidance Notes issued by The Royal Institution of Chartered Surveyors (RICS). Fixed assets are classified into groupings required by the 2008 Statement of Recommended Practice on Local Authority Accounting. All assets were last valued on the 21 March 2007, with 20% being revalued as at 1st March 2008, on the following basis: Properties regarded by the Authority as operational were valued on the basis of open market value for the existing use or, where this could not be assessed because there was no market for the subject asset, the depreciated replacement cost. Properties regarded as non-operational, including investment properties, have been valued on the basis of open market value. Community assets are included in the balance sheet at a nominal value of £1 each. Re-valuations of land and buildings are planned at five yearly intervals, although material changes to asset valuations will be adjusted in the interim period, as they occur, including an annual assessment of indications of impairment. The Councils property assets were revalued in the spring and the new valuations have been reflected in the accounts. A de minimis value of £30,000 has been set for valuations although this has not been applied to property already included in the existing valuation. Depreciation is provided for on all fixed assets with a finite useful life (which can be determined at the time of acquisition or revaluation), apart from investment properties. Newly acquired assets and assets in the course of construction are not depreciated until they are brought into use. Where depreciation is calculated, the straight-line method is used over the following periods: Buildings 20 - 70 years Infrastructure 30 - 70 years Vehicles and Equipments 3 - 5 years Prepared by the Accountancy Section Page 5 of 38 The Council will review all properties each year with a view to determining any impairment. Any changes will be reflected within the service line of the income and expenditure account. 6. CHARGING FOR THE USE OF CAPITAL ASSETS All service centres are charged with the following amounts to record the real cost of holding fixed assets during the year. Depreciation attributable to the assets used by the relevant service, impairment losses attributable to the clear consumption of economic benefits on tangible fixed assets used by the service and amortisation of intangible fixed assets attributable to the service. This is different to previous years where a notional interest charge was also charged to the service centres. 7. INTANGIBLE ASSETS (Deferred Charges) Intangible Assets represent expenditure which may properly be capitalised, but which does not represent tangible fixed assets, and in the main this relates to expenditure on home improvement grants and grants to housing associations for affordable housing. These charges are written off to the income and expenditure account in the year the expenditure was incurred. They could also take the form of non-financial fixed assets that do not have physical substance but are identifiable and are controlled by the entity through custody or legal rights. 8. CAPITAL RECEIPTS Capital receipts from the disposal of assets are held in the Usable Capital Receipts Account until such time as they are used to finance capital expenditure, these can be applied at the Council's discretion. Since April 2004 Government regulations require that all Local Authorities must pay up to 75% of housing capital receipts, excluding stock transfer receipts, to a Central Government Pool. Although, the Council has transferred its housing stock, receipts in the form of repaid discounts and mortgage repayments fall under this regulation. From last year all gains and losses on the disposal of fixed assets are now recognised in the income and expenditure account. 9. FINANCE AND OPERATING LEASES The Council has acquired some assets, mainly wheeled bins, recycling baskets vehicles and photocopiers, under leases. Rentals paid under leasing arrangements have been accrued and accounted for through the revenue accounts in the period to which they relate. The amount of outstanding payments of material items acquired under operating leases is recorded as a note to the Balance Sheet. The amount of operating lease rentals paid during the year is also shown. 10. STOCKS AND STORES Stocks and stores held by the Council are recorded in the accounts at the lower of cost or net realisable value. 11. FINANCIAL RELATIONSHIPS WITH RELATED COMPANIES The Council holds a majority stake in the Aylesbury Vale Development Holding Company and its two subsidiaries, shown in the Council's accounts under 'Investments'. The accounts of the three companies have been consolidated within the overall AVDC accounts. The Council also has a 25% holding in the Aylesbury Sports Company. Further details are contained in the notes to the Balance Sheet. 12. PENSION PROVISIONS In 2007/08, the pension costs that were previously charged to the Council's accounts in respect of its employees are now charged to the new pension asset /liability reserve. The actual costs paid have been replaced in the accounts by a new current service cost. The costs that arise in respect of certain pensions paid to retired employees on an unfunded basis, and the provision made for future liabilities arising from recent retirements and redundancies are now charged to the pension asset /liability reserve. 13. PROVISIONS Provisions are established for any liabilities or losses, which are likely to be incurred or certain to be incurred but uncertain as to the amounts, or the dates on which they will arise. The provisions established are disclosed by way of a note to the core financial statements and indicate the purpose for establishing the provision. 14. EARMARKED RESERVES. The Council sets aside amounts for specific policy purposes and balances, which represent general contingencies and cash flow management. Section 25 of the Local Government Act 2003 requires the Head of Finance to report to the Council on the robustness of estimates and adequacy of reserves implicit in each year's budget proposals, this report is considered each January. The Statement of Total Recognised Gains and Losses summarises all movements of the revenue and capital reserves. The following paragraphs provide an explanation of those reserves, whose balance is in excess of £1 million. (a) Benefit Subsidy Reserve The Council has established a reserve for the purpose of meeting fluctuations in respect of housing benefit subsidy. Additional year end subsidy received during the following year will be available to meet future fluctuations once the final benefit subsidy position is known. (b) Repairs and Maintenance (Corporate Property) Reserve The Council maintains a reserve for the purpose of providing for the future refurbishment of General Fund property assets. (c) Interest Equalisation Reserve The Council has established a reserve for the purpose of maintaining the level of interest transferred to the General Fund annually. The reserve helps to counteract any fluctuations in interest rates. Prepared by the Accountancy Section Page 6 of 38 (d) Amenity Areas The Council has established a reserve to hold commuted sums and sums received by way of section 106 agreements. The sums are invested and the interest transferred to the general fund to meet on going revenue costs. (e) Superannuation Reserve This reserve has been established for the purpose of meeting back funding contributions and pension strain costs in respect of deleted posts. (f) Property Sinking Reserve In December 2007 the Council established a Property Sinking Fund for the purpose of meeting large maintenance and refurbishments costs associated with operational buildings, particularly the offices and the new theatre. (g) Industrial Rent Loss /Property Strategy During the year the Council established an industrial rent loss for the purpose of meeting the revenue rent loss caused by major tenants vacating industrial premises. The reserve will also finance the professional fees that will be incurred in relation to a property strategy exercise currently being undertaken. (h) Planning Reserves The Council has established a number of reserves for the purpose of meeting fees and costs associated with major planning enquiries. (i) LABGI (Local Authority Business Growth Incentive) Reserve The Council has created a reserve from the grant income received from the DCLG pending the allocation to specific areas that have been identified within the District. 15. INVESTMENTS All investments have been recorded in the accounts at cost, including brokerage and other fees, including the 5.5% Government stocks held by the Council that were re-valued to the lower of cost or net realisable value. 16. RELATED PARTIES All District Councillors and senior officers of the Council have been asked to declare any transactions with the Council by themselves, their close family, or any organisation that they are involved with. The disclosure in note 9 to the Income and Expenditure account details any responses received by the Head of Finance. 17. REVALUATION RESERVE /CAPITAL ADJUSTMENT ACCOUNT From the 1st April 2008 a new revaluation reserve was created replacing the Restatement Reserve and the old Capital Financing Account was replaced with the Capital Adjustment Account. The balance on these reserves do not represent resources available to support capital financing but record the accumulated gains on the fixed assets held by Aylesbury Vale District Council. 18. FINANCIAL ASSETS /LIABILITIES Financial Assets -Financial assets are classified into two types: Loans and Receivables -assets that have fixed or determinable payments but are not quoted in an active market and Available For Sale Assets -assets that have a quoted market price and/or do not have fixed or determinable payments. Financial Liabilities -Financial Liabilities are initially measured at fair value and carried at their amortised cost. Annual charges to the Income and Expenditure for interest payable are based upon the carrying amount of the liability multiplied by the effective rate of interest for the instrument. -Gains and losses on the repurchase or early settlement of borrowing are required to be credited/debited to Net Operating Expenditure in the Income and Expenditure Account in the year of repurchase /settlement. No such transactions took place in the year. Loans and Receivables -Loans and receivables are initially measured at fair value and carried at their amortised costs. Annual credits to the Income and Expenditure Account for interest receivable are based upon the carrying amount of the asset multiplied by the effective rate of interest for the instrument. The Council has not made any loans at less than market rate (soft loans). INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31 MARCH 2008 This account summarises the resources that have been generated and consumed in providing services and managing the council during the last year. It includes all day-to-day expenses and related income on accruals basis, as well as transactions measuring the value of fixed assets actually consumed and the real projected value of retirement benefits earned by employees in the year. 2006/07 EXPENDITURE ON CONTINUING SERVICES 2007/08 2007/08 2007/08 Net Gross Gross Net Expenditure Expenditure Income Expenditure £'000 £'000 £'000 £'000 Housing Services 178,558 Housing Revenue Account 0 137 -137 6,863 General Fund Housing 32,019 26,072 5,947 185,421 32,019 26,209 5,810 Central Services 2,802 Corporate & Democratic Core 3,089 295 2,794 712 Non Distributed Costs 5,508 0 5,508 1,543 Central Services to the Public 10,891 9,043 1,848 5,057 19,488 9,338 10,150 Cultural, Environmental & Planning Services 5,072 Cultural & Related Services 9,273 3,043 6,230 7,102 Environmental Services 13,270 5,171 8,099 3,194 Planning & Development Services 7,024 2,939 4,085 15,368 29,567 11,153 18,414 Highways, Roads & Transport Services 119 Street Lighting 99 2 97 -593 Parking Services 4,099 3,017 1,082 885 Public Transport 1,030 149 881 411 5,228 3,168 2,060 206,257 NET COST OF SERVICES (Notes 1 to 9) 86,302 49,868 36,434 2,701 Parish Precepts 2,861 -3,721 Trading Activities (Note 10) -3,036 -416 -Gain /Loss on Disposal of Fixed Assets 587 1,157 HRA Capital Receipts Pooling Levy (Note 11) 100 5,361 Stock Transfer Levy 0 -4,485 Interest and Investment Income -6,143 1,325 Interest Cost /Return on Pensions 1,657 578 Other Operating Costs 688 0 Post Stock Transfer Capital Receipts -4,716 -3 Commuted Sum Income -91 0 Capital Income -4,573 208,754 NET OPERATING EXPENDITURE 23,768 -11,104 Precepts on the Collection Fund -11,736 45 Transfer from Collection Fund of Surplus -103 -917 Other Government Grants -557 -1,836 Revenue Support Grant -1,639 -9,312 NNDR share of Pool -9,766 -23,124 -23,801 185,630 -33 DEFICIT /-SURPLUS FOR THE YEAR TAKEN TO GENERAL FUND Prepared by the Accountancy Section Page 8 of 38 STATEMENT OF MOVEMENT ON GENERAL FUND BALANCE FOR THE YEAR ENDED 31 MARCH 2008 The Income and Expenditure Account shows the council's actual financial performance for the year, measured in terms of the resources consumed and generated over the last 12 months. However, the authority is required to raise council tax on a different accounting basis, the main differences being: Capital investment is accounted for as it is financed, rather than when the fixed assets are consumed. The payment of a share of housing capital receipts to the Government scores as a loss in the Income and Expenditure Account, but is met from the usable capital receipts balance rather than council tax. Retirement benefits are charged as amounts payable to pension funds and pensioners, rather than as future benefits earned. The Statement of Movement on the General Fund Balance compares the Council's spending against the council tax it raised for the year, taking account the use of reserves built up in the past and contributions to reserves earmarked for future expenditure. The reconciliation statement summarises the difference between the outturn on the Income and Expenditure Account and the General Fund Balance. The table below the Statement of Balances gives a further analysis of the other amounts required under statutory and non statutory proper practices. 2006/07 STATEMENT OF BALANCES 2007/08 £,000 £,000 -5,740 Balance In Hand at 1st April 2007 -4,858 185,630 Income and Expend -Surplus /Deficit for the Year -33 -184,748 Net Amount Required by Statute and Non -440 Statutory Proper Practices 882 General Fund -Surplus /Deficit For The Year -473 -4,858 Balance In Hand at 31st March 2008 -5,331 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 MARCH 2008 This statement brings together all the gains and losses of the Council for the year and shows the aggregate increase or decrease in its net worth. In addition to the deficit generated in the Income and Expenditure Account, it includes gains and losses relating to the revaluation of fixed assets and re-measurement of the net liability to cover the cost of retirement benefits. Year Ending 2006/07 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year Ending 2007/08 £'000 £'000 185,630 Deficit /-Surplus on the Income and Expenditure Account for the Year -33 197,989 -Gains or Losses on Revaluation of Fixed Assets -4,499 0 -Surplus /Deficit on Revaluation of Available for Sale Financial Assets 0 -122 Movement on the Collection Fund Balance 99 23 Other Losses Required to be included in the STRGL 0 -5,343 Actuarial Gain relating to pensions -6,594 378,177 Total Recognised -Gains and Losses for the Year -11,027 Prepared by the Accountancy Section Page 9 of 38 BALANCE SHEET AS AT 31ST MARCH 2008 2006/07 Notes 2007/08 2007/08 £'000 £'000 £'000 0 Intangible Assets 0 TANGIBLE ASSETS Operational Assets 62,023 Other Land and Buildings 16 57,800 147 Vehicles, Equipment and IT 16 1,920 169 Community Assets 16 169 Non Operational Assets 18,476 Surplus Assets & Leased Properties 16 15,976 4,343 Assets Under Construction 16 9,720 67,368 Investment Properties 16 68,247 152,526 153,832 54 Investments 20 54 155 Long Term Debtors 22 176 209 230 152,735 LONG TERM ASSETS 154,062 CURRENT ASSETS 38 Stocks in Hand 54 13,223 Sundry Debtors 23 14,789 854 Cash at Bank 588 93,550 Short Term Investment 20 96,634 107,665 112,065 CURRENT LIABILITIES 0 Short Term Loans 0 -11,728 Sundry Creditors 24 -11,827 0 Cash Overdrawn 0 -11,728 -11,827 95,937 NET CURRENT ASSETS 100,238 248,672 TOTAL ASSETS Less CURRENT LIABILITIES 254,300 -44,219 Pensions Liability 26 -38,878 -870 Deferred Capital Contributions 27 -854 -51 Provisions 28 -9 -45,140 -39,741 203,532 NET ASSETS 214,559 FINANCED BY -76 Deferred Capital Receipts 29 -57 0 Revaluation Reserve 31 -4,499 -159,003 Capital Adjustment Account 32 -155,798 -60,982 Capital Receipts Unapplied 33 -57,240 -974 Capital Reserves Unapplied 33 -3,782 -7,453 General Revenue Reserves 34 -5,532 -19,263 Earmarked Revenue Reserves 35 -26,529 44,219 Pension Reserve 26 38,878 -203,456 -214,502 -203,532 TOTALS -214,559 Prepared by the Accountancy Section Page 10 of 38 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2008 2006/07 £'000 2007/08 £'000 2007/08 £'000 Revenue Activities Expenditure 22,050 Employment Costs 22,810 43,798 Other Operating Costs 27,151 18,643 Housing Benefits 23,840 3,064 Housing Subsidy -31 60,130 Bucks County Council Precept 64,357 8,545 Thames Valley Police Authority Precept 9,187 3,214 Bucks & Milton Keynes Fire Authority 3,454 2,701 Parish Precepts 2,861 38,466 Payments to National Pool 40,934 200,611 Total Payments 194,563 Income -4,020 Net Rents after Rebates 0 -79,235 Council Tax Income -83,025 0 Collection Fund Disbursements 0 -40,863 N.N.D.R. Income -41,662 -1,836 Revenue Support Grant -1,639 -30,466 DSS Rebate Grants -31,614 -2,824 Other Government Grants -2,118 -42,619 Other Income -32,371 -201,863 Total Receipts -192,429 -1,252 Net Cash -Inflow/Outflow From Revenue Activities 2,134 Returns on Investments and Servicing of Finance 0 Interest Paid 0 -3,635 Interest Received -6,198 -3,635 Net Cash -Inflow /Outflow -6,198 Capital Activities Cash Outflows 18,473 Purchase of Fixed Assets /Enhancements 14,092 5,361 Capital Grants and Advances 0 23,834 Total Payments 14,092 Cash Inflows -49,103 Sale of Fixed Assets -6,079 -2,464 Capital Grants Received -3,378 -46 Other Income -3,389 -51,613 Total Receipts -12,846 -27,779 Net Cash -Inflow /Outflow From Capital Activities 1,246 Management of Liquid Resources 31,692 -Decrease /Increase in short term investments 3,084 Financed By 0 New short term Loans (Cash inflow) 0 0 Repayment of Short Term Loans (Cash outflow) 0 0 Repayment of Long Term Debt (Cash outflow) 0 0 -974 -Increase /Decrease in Cash 266 Prepared by the Accountancy Section Page 11 of 38 NOTES TO THE CORE FINANCIAL STATEMENTS INCOME AND EXPENDITURE ACCOUNT SERVICE EXPENDITURE ANALYSIS /CONTINUING SERVICES 1. SPECIAL EXPENSE AREA Under the Local Government Finance Act 1988, Special Expenses are levied on Aylesbury for services which are provided by the District solely for this area, and which are provided elsewhere in the District by the Town and Parish Councils. A summary revenue account is shown below. 2006/07 2007/08 Net Expenditure £'000s Expenditure £'000s Income £'000s Net Expenditure £'000s 558 Parks & Recreation Grounds 713 -123 590 246 Community Centres 519 -258 261 77 Cemetery 29 -12 17 -23 Open Air Market 27 -50 -23 16 Small Scale Enhancements 0 -6 -6 -4 Interest on Balances 0 -5 -5 0 Transfer to Town Council 44 0 44 870 Total 1,332 -454 878 -891 Precept For The Year -945 -21 -67 -93 -114 -114 -181 Balance In Hand 1st April 2007 AYLESBURY SPECIAL EXPENSES AREA SUMMARY REVENUE ACCOUNT 2007/08 Balance In Hand 31st March 2008 -Surplus For The Year At the end of May 2007 the cemetery and mausoleum were transferred to the Aylesbury Town Council for nil cost. The unspent budget on the cemetery and the money collected from third parties who had purchased a mausoleum chamber was passed over to the Town Council. 2006/07 2007/08 Net Expenditure £'000s Expenditure £'000s Income £'000s Net Expenditure £'000s -26 Aylesbury Mausoleum 1 -10 -9 -6 Interest on Balances 0 -1 -1 0 Transfer to Town Council 187 0 187 -32 Total 188 -11 177 -145 -177 -177 0 AYLESBURY SPECIAL EXPENSES MAUSOLEUM ACCOUNT 2007/08 Balance In Hand 31st March 2008 Balance In Hand 1st April 2007 2. AGENCY SERVICES Highway Verges Maintenance The District Council cuts the highway verges within the towns and villages on behalf of Buckinghamshire County Council. In 2007/08 AVDC received £228,754 for providing this service, (2006/07 -£219,968). The expenditure relating to this service was £268,347, leaving £39,593 funded by the District Council. Special Parking Areas In 2003/04 the District Council took responsibility for administering the Special Parking Areas in Aylesbury and Buckingham on behalf of Buckinghamshire County Council. The agreement is for 5 years with the yearly surplus or deficit being carried forward each year until the end of the agreement. In the case of a deficit Aylesbury Vale has to meet the first £312,000 after that the deficit will be met by Bucks County Council. In 2007/08 the expenditure relating to this service was £405,678, whilst the income was £246,192 resulting in a deficit of £159,486. As this is the final year of the agreement the cumulative deficit that has to met by Aylesbury Vale and Bucks County Council at the 31st March 2008 was £880,277. Prepared by the Accountancy Section Page 12 of 38 2006/07 £'000 Special Parking Areas 2007/08 £'000 2007/08 £'000 Expenditure 4 Bailiffs Commission 4 32 Bad Debts Contribution 20 370 Management Costs 381 405 Income -170 Penalty Notices -196 -38 Residents Parking -44 -3 Visitor Parking -6 -246 195 Deficit for the Year 159 3. PARTNERSHIPS County Sports Aylesbury Vale District Council (the host authority) is in partnership with Buckinghamshire County Council, Chiltern District Council, Milton Keynes Council, South Bucks District Council and Wycombe District Council. The partnership, known as County Sports, has been established to "coordinate, develop and improve the sporting opportunities available to all people in Buckinghamshire". The work is undertaken in cooperation with Sport England who provides Lottery grants to AVDC to fund the work. All income and expenditure is recorded within the revenue account, total expenditure in the year was £973,032 against income of £1,752,666, and the unspent money is carried forward into 2008/09. The sports that benefited during 2007/08 were basketball, cricket, hockey, netball, girls' football, rugby swimming and athletics. 4. AUDIT COSTS In 2007/08 Aylesbury Vale incurred the following fees, payable to the Audit Commission, relating to external audit and inspection: 2006/07 Audit Costs 2007/08 £'000 £'000 148 External Audit Services * 127 0 Statutory Inspection 0 35 Certification of Grant Claims and Returns # 46 183 Total 173 * = Planned, # = Estimate 5. SECTION 137 EXPENDITURE Section 137 of the Local Government Act 1972 (as amended by the Local Authorities (Discretionary Expenditure Limits) (England) Order 2005) enables a local authority to spend for the benefit of the people in their area on activities or projects not specifically authorised by other powers. Following amendments under the Local Government Act 2000 the Council is obliged to publish details of grants contributed to certain charitable funds, not-for-profit bodies providing a public service in the UK and mayoral appeals. The amount spent under this power was £122,042, mainly on grants to voluntary bodies. Grants made under this section are detailed in section 9. There is a small amount of staff time involved in administering the grants but it is considered immaterial for reporting. 6. SECTION 5 EXPENDITURE Section 5 of the Local Government Act 1986 requires local authorities to keep a separate account of publicity. 2006/07 Publicity Account 2007/08 £'000 £'000 250 80 126 158 376 238 Publicity Costs Staff Advertisements Other Publicity 7. OFFICERS' REMUNERATION The following information is required under the Accounts and Audit Regulations 2003. This note gives the number of officers, employed during the year, whose remuneration exceeded £50,000 in 2007/08. For this purpose remuneration includes all taxable benefits, but excludes pension contributions. Prepared by the Accountancy Section Page 13 of 38 31st March 31st March 2007 2008 18 50,001 60,000 13 1 60,001 70,000 8 0 70,001 80,000 2 2 80,001 90,000 2 0 90,001 100,000 0 0 100,001 110,000 0 0 110,001 120,000 0 0 120,001 130,000 1 Remuneration Band £ 8. MEMBERS' ALLOWANCES In line with Government requirements the Council's scheme of allowances consists of a Basic Allowance of £5,004 (£4,824 in 2006/07) and a Special Responsibility Allowance that depends on each Member's role in the Council. The total allowances paid to members during the year are shown below. Detailed information on individual allowances paid is available on request. 2006/07 Members' Allowances 2007/08 £'000 £'000 300 Basic Allowance 312 126 Special Responsibility 133 426 Total Allowances 445 9. RELATED PARTY TRANSACTIONS The Council is required to disclose the existence of related parties and material transactions with them. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another parts ability to bargain freely with the Council. The related parties of Aylesbury Vale District Council are considered to be Central Government, Local Authorities and other bodies' precepting on the council tax, the Vale of Aylesbury Housing Trust, associated bodies, Members, senior officers and the Pension Fund. The majority of transactions with these parties are disclosed elsewhere in the accounts and are therefore not repeated again here. Transactions with elected Members and Senior Officers A review has been made of the register of Members' Interests and of declarations of interests made by Members during the year. No related party issues arose. Transactions with Voluntary Organisations During 2007/08 the Council gave grants to the following voluntary organisation where it also appointed Councillor(s) to sit on the Management Committee or board. Prepared by the Accountancy Section Page 14 of 38 31st March 2007 Grants To Voluntary Bodies 31st March 2008 £'000 £'000 3 Aylesbury Vale Advocates 3 65 Aylesbury Dial -A -Ride 72 19 Aylesbury Vale Age Concern -* 21 22 Aylesbury Vale Arts Council 15 32 Aylesbury Vale Council for Racial Equality -* 36 11 Aylesbury Vale Volunteer Council -* 12 25 Aylesbury Womens Aid -* 28 20 Quarrendon & Meadowcroft Comm Association 20 8 Bucks Community Action -* 0 8 Aylesbury Vale Rape Crisis 8 77 Citizens Advice Bureau -Aylesbury 86 63 Citizens Advice Bureau -Buckingham 72 9 Dove Centre 10 8 Haydon Hill Comm Association 10 0 Healthy Living Centre 15 7 Luncheon Club Grants -* 9 8 Maxwell Swim Squad 0 22 Minor Grants -Sports Council 22 17 Multicultural Centre 20 31 Play Association 42 24 Queens Park Centre 30 12 Relate -* 13 12 Southcourt Project 13 14 Uptown Coffee Bar 16 16 Walton Court Community Association 17 533 TOTAL 590 -* = Payments made under Section 137(3). 10. TRADING SERVICES The net surplus shown as Trading Services in the General Fund Income and Expenditure Account covers the operation of the industrial and commercial holdings. The income and expenditure for all the operations is shown below: 2006/07 Trading Services 2007/08 £'000 £'000 -4,512 -4,153 791 1,117 -3,721 -3,036 Net Trading Position Income from Operations Expenditure BUILDING CONTROL ACCOUNT The Building (LA Charges) Regulations 1998 require an authority to determine a Scale of Charges for Building Regulation activity. The regulations also require that the income that is derived shall not be less than the costs incurred in performing the Building Regulation function over a continuous three year period. The income and expenditure arising from the Scheme in the financial year 2007/08 is shown below. Building Control Services Chargeable Non Total 2005/06 2006/07 Chargeable 2007/08 £'000 £'000 £'000 £'000 £'000 -642 -592 Income from Building Control -627 -25 -652 598 575 Expenditure 560 197 757 -44 -17 Net Trading Position -67 172 105 Chargeable Prepared by the Accountancy Section Page 15 of 38 11. HOUSING CAPITAL RECEIPT LEVY From the 1st April 2004, the Government changed the way the set aside element of capital receipts was treated. Prior to this date 75% of Housing receipts had to be set aside unless you were debt free but from April 2004 it had to be paid over to the DCLG. During 2007/08 AVDC paid a capital receipt levy of £99,512. 12. APPROPRIATIONS 2006/07 Appropriations Made During the Year 2007/08 2007/08 £'000 £'000 £'000 REVENUE RESERVES Contribution -from Earmarked Reserves -29 Insurance -77 0 Elections -101 0 Business Transformation -82 0 LABGI -50 0 Commercial Property Repairs -189 0 Interest Equalisation -8,000 0 Housing Benefit Subsidy -500 0 Planning Fees and Appeal Costs -278 0 Repairs and Renewals -492 -69 Parish Council Commuted Sums -115 0 HRA Reserve -2,323 0 Olympic Action Plan -50 0 Industrial Rent Loss -319 -86 Miscellaneous -181 -12,757 Contribution to Earmarked Reserves 0 Property Sinking 5,000 0 Industrial Rent Loss 3,881 47 Insurance 36 149 Information Technology 91 222 Business Transformation 175 105 Superannuation 161 3,314 Interest Equalisation 3,935 0 LABGI 1,273 0 Pathfinder 85 0 Housing Needs and Section 106 134 284 Planning Fees and Appeal Costs 201 66 Repairs and Renewals 1,332 62 Car Parking Reserve 64 11 Open Spaces Section 106s 91 57 District Council Elections 21 110 Other 6 109 Licensing Income 0 0 Fairford Leys Riverine Corridor 173 36 Corporate Improvement 60 564 Benefit Subsidy 981 17,700 4,952 Total of Discretionary Revenue Transfers 4,943 53 Aylesbury Special Expenses -109 CAPITAL RESERVES -44 Contribution -from Capital Adjustment Acc -5,061 0 Contribution -from Capital Reserve -1,434 Contribution to Capital Reserves 858 Capital Reserves Unapplied 5,171 139 Fairford Leys Reserve 0 0 Capital Receipts Unapplied Account 9,143 14,314 -44 Total of Discretionary Capital Transfers 7,819 4,961 Total of Discretionary Transfers 12,653 -1,157 Contribution -from Usable Capital Receipts -100 The total of the discretionary transfers is shown in note 15 and is a combination of two figures, Gain/Loss on disposal of Fixed Assets, £-587,000, Post Stock Transfer, £4,716,000 and Transfers made at the Discretion of the Council, £8,524,000. Prepared by the Accountancy Section Page 16 of 38 Prepared by the Accountancy Section Page 17 of 38 13. THE EURO Officers have considered the impact of the Euro and have decided that no action will be taken until such time as the Government should decide to hold a referendum. No significant costs have been incurred to date connected with the Euro. However, all future financial systems that are procured will be capable of switching to the Euro. 14. INVOLVEMENT IN LOCAL AREA AGREEMENT (LAA) The Council is a participant in an LAA - a partnership with other public bodies involving the pooling of government grants to finance work towards jointly agreed objectives for local public services. In 2007/08 the Bucks LAA completed the second and final year of its original agreement. A new LAA agreement will be agreed in 2008. The purpose of the LAA is: To form an agreement between the Buckinghamshire Strategic Partnership, Government (represented by the Government Office for the South East (GOSE)), and other external agencies, to ensure that together we achieve the vision as set out in the Buckinghamshire Community Strategy 2005-08. To agree specific outcomes and targets that will be achieved each year of the agreement. To improve the effectiveness and efficiency of public services in Buckinghamshire by pooling and aligning funding streams. The Buckinghamshire Strategic Partnership Partners include: Local government bodies - Buckinghamshire County Council, Aylesbury Vale District Council, Chiltern District Council, South Bucks District Council and Wycombe District Council. Community protection authorities - Bucks Fire & Rescue and Thames Valley police. Health bodies - Bucks PCT, Buckinghamshire Hospitals NHS Trusts. Learning bodies - Bucks Lifelong Learning Partnership, MKOB Learning and Skills Council, Thames Valley Learning and Skills Council. Other bodies - Bucks Community Action, Chiltern Community Partnership, Age Concern Bucks, The Wycombe Partnership, Wycombe REC, Bucks Forum of Faiths, Bucks Association of Local Councils, Youth Focus, Chilterns Conservation Board, South Bucks Partnership, Voluntary Impact and Federation of Small Businesses. Buckinghamshire County Council acts as the accountable body for the LAA. This means that it is responsible for managing the distribution of grant paid by GOSE to the partners involved, but the council does not determine which bodies are due payments - this is determined by the partnership. In this context Buckinghamshire County Council acts as an agent to the partnership. The total amount of LAA grant received by the Partnership in 2007/08 was £9.6m. Aylesbury Vale District Council received £195,472 of this total. Prepared by the Accountancy Section Page 18 of 38 15. RECONCILIATION OF SURPLUS /DEFICIT TO INCOME AND EXPENDITURE ACCOUNT The movement for the year on the General Fund was £0.440m (£184,748m surplus in 2006/07) and is explained as follows. The Income and Expenditure Account discloses the income and expenditure incurred in operating the authority's services for the year and is equivalent to the Profit and Loss Account of a business. There are, however, other items that need to be credited or debited to the General Fund as laid down in statute and non-statutory 'proper practices' and these are shown in the table below. Whilst, the surplus or deficit on the Income and Expenditure Account is one measure of the Council's financial result for the year in accordance with Generally Accepted Accounting Practice, the movement on the General Fund Balance is also an important aspect of the Council's stewardship. £,000 Amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the General Fund surplus or deficit for the year. £'000 £,000 -1,164 Depreciation, amortisation and impairment of fixed assets (excluding depreciation charged to HRA services) -8,097 -16 Government Grants Deferred amortisation matching depreciation 16 416 Gain /-Loss on Disposal of Fixed Assets (Note 12) -587 0 Post Stock Transfer Capital Receipts (Note 12) 4,716 -5,133 Write Down of Deferred Charges -3,796 -2,867 Amounts by which pension costs are different from the contributions due under the pension scheme regulations. -4,681 -8,764 -12,429 -1,157 Tr -5,361 Tr 3,134 -3,384 Tr -178,558 5,958 -172,600 -184,748 RECONCILIATION OF SURPLUS /DEFICIT TO INCOME & EXPENDITURE ACCOUNT Amounts not included in the Income and Expenditure Account but required by statute to be excluded when determining the General Fund surplus or deficit for the year. ansfer from Usable Capital Receipts to meet payments to the Housing Capital Receipts Pool -100 ansfer from Usable Capital Receipts to meet payment of the Stock Transfer Levy 0 Employer's Contributions payable to the Pension Fund and retirement benefits payable direct to pensioners. 3,428 3,328 ansfers to or from the General Fund that are required by statute to be taken into account when determining the General Fund surplus or deficit for the year. Statutorily required transfer of the statutory surplus/deficit for the year on the HRA to the HRA Reserve. 137 Transfers made at the discretion of the Council to or from reserves that have been earmarked for specific purpose. (Note 12) 8,524 8,661 NET AMOUNT REQUIRED BY STATUE AND NONSTATTUTOR PROPER PRACTICES TO BE DEBITED OR CREDITED TO THE GENERAL FUND BALANCE -440 Land & Buildings Leased Properties Vehicles & Equipment Total Community Assets Development Sites Assets Under Construction Investment Properties Total Total Fixed £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gross Value 1 April 2007 75,629 12,700 675 89,004 1,748 5,968 4,343 72,526 84,585 173,589 Accumulated Depreciation 0 0 0 and Impairment -13,606 -192 -528 -14,326 -1,579 -5,158 -6,737 -21,063 Net Value 1 April 2007 62,023 12,508 147 74,678 169 5,968 4,343 67,368 77,848 152,526 Movement in 2007/08 Reclassification -1,028 -1,028 565 463 1,028 0 Revaluations 991 233 1,224 1,245 1,245 2,469 Additions 2,986 181 2,264 5,431 1,051 5,377 89 6,517 11,948 Impairments -4,456 -56 -4,512 -352 -918 -1,270 -5,782 Disposals -1,210 -1,210 -3,804 -3,804 -5,014 Depreciation -1,506 -318 -491 -2,315 0 -2,315 Enhancements 0 0 0 Net Value 31 March 2008 57,800 12,548 1,920 72,268 169 3,428 9,720 68,247 81,564 153,832 Operational Assets Non Operational Assets Prepared by the Accountancy Section Page 19 of 38 NOTES TO THE BALANCE SHEET 16. FIXED ASSETS Movements in fixed assets during the year were as follows: Fixed Asset Valuation A partial revaluation of 20% of the assets, along with some significant changes, was carried out by the Colin Hammond M.R.I.C.S. of the Valuation Office. It is the intention that a rolling programme of revaluation of 20% of the property, along with any significant changes, will be undertaken each year. See note 5 on page 4 of the Statement of Accounting Policies. During the valuation exercise the properties were assessed for impairment of which there was some and this is reflected in the table above. Community assets consist of the Council's parks plus a number of small areas of open space. Civic Centre Community Centres Offices Public Conveniences Car Parks Swimming Pools Homeless Hostels Vehicles Sports Pavilions Cemeteries Open Spaces Property Rented Out 31 March 2007 1 8 4 4 19 2 2 37 6 1 620 acres 203 units 31 March 2008 1 8 4 4 19 2 1 38 6 0 620 acres 203 units An analysis of the number of Fixed Assets held can be found below: 17. DEFERRED CHARGES Deferred charges arise when payments of a capital nature are made and no fixed asset is created. They are written off to the capital adjustment account in the year in which they arise. Balance Raised Writen Off Balance 31/03/2007 In Year In Year 31/03/2008 £,000 £,000 £'000 £,000 0 Renovation Grants 505 -505 0 0 Enabling Schemes 2,636 -2,636 0 0 IE Government 212 -212 0 0 Match Funding 95 -95 0 0 Aylesbury Mausoleum 124 -124 0 0 Post Transfer House Repairs 200 -200 0 0 Car Park 24 -24 0 0 TOTAL 3,796 -3,796 0 18. INTANGIBLE ASSETS The Council has one software licence that covers a three year period but the fee is paid annually rather than upfront and so is written off in year. All other software licenses held are on an annual basis and are written off in the year. 19. CAPITAL EXPENDITURE AND FUNDING STATEMENT This statement shows the Council's total capital expenditure and how it was funded. 2006/07 2007/08 £'000 £'000 Capital Investment Operational Assets 2,543 3,400 Non Operational Assets 9,781 6,517 Deferred Charges 5,133 3,796 17,457 13,713 Sources of Finance Capital Receipts -9,796 -11,491 Government Grants & Other Contributions -2,473 -1,790 Sums Set Aside From Revenue -5,188 -432 -17,457 -13,713 FUTURE CAPITAL COMMITMENTS The Council has an approved capital expenditure programme for the next 5 years that totals £83.194 million. The ability to fully undertake the programme is dependent upon resource availability. Schemes in the programme that are earmarked total £45.286 million, plus another £37.908 million actually committed. The following table shows some of the major projects over the next five years: Contract Value Amount Outstanding £'000 £'000 Theatre Piling and Sub Structure Works 2,908 809 Theatre Main Contract 35,000 35,000 TOTAL 37,908 35,809 CAPITAL EXPENDITURE CONTROLS The system of allocating credit approvals to finance expenditure by credit arrangement has been replaced by a system known as 'The Prudential Framework'. This new framework allows the Council to determine its own plans based upon affordability. The basis of the framework is as follows: Prepared by the Accountancy Section Page 20 of 38 Authorities set their capital programme on the basis of long term affordability, taking into account the consequences of investment for future years' revenue accounts. Capital grants and receipts are applied to finance capital expenditure. The balance is paid for when the charges hit the revenue accounts, usually in the form of revenue provisions /principal and external interest arising from any borrowing that was necessary to finance expenditure. The Council must set their spending plans in accordance with the CIPFA Prudential Code, which sets the process by which members need to set limits on expenditure, borrowing and monitor prudential indicators. OPERATING LEASES The Council leases a number of buildings, the majority of which are on a peppercorn lease, the amount paid under these arrangements in 2007/08 was £9,500. The Council holds various capital assets in the form of operating leases, principally refuse and recycling vehicles, plus a few items consisting of printers and recycling baskets. The Authority currently has no finance leases. A total of £793,146 was spent on leasing charges during the year and un-discharged leasing obligations for the next 2 years are estimated to be £157,000 per annum dropping to £35,000 thereafter. With regard to the Authority's activity as a lessor, the gross value of assets held for use in operating leases was £68.247m, all of which relate to investment properties. 20. INVESTMENTS The Council has investments of £96.688 million of which £23.873 million is managed by an external fund manager. The external investments reflect accumulated usable capital receipts, revenue reserves and general receipts. 31st March 2007 31st March 2008 £'000 £'000 52 5.5% Treasury Stock 2008/12 52 1 3.5% War Stock 1 1 2.5% Consolidated Stock 1 0 Aylesbury Vale Dev. Co. 0 54 Total Long Term Investments 54 93,550 Short Term Investments 96,634 93,604 TOTAL 96,688 Investments in Related Companies The Council holds 99% of the £100 share capital of the Aylesbury Vale Development Holding Company Ltd, which has two wholly owned subsidiaries -the Aylesbury Vale (Upper Hundreds) Company Ltd, and the Aylesbury Vale Property Development Company Ltd. They have now elected for dormant status. The Council holds 49% of the share capital of the Buckingham Borough Development Company Ltd., consisting of 49 fully paid £1 ordinary shares. Buckinghamshire County Council holds the majority stake of 51 shares. In October 2001 the Company decided to go into voluntary liquidation. The Company's accounts are now in the hands of the liquidator, Mr Stephen Treharne of KPMG based in St Albans, for the process of winding up the company. The Council holds £25 of shares in the Aylesbury Sports Company. This company has effectively been dormant for a number of years. The total investment in related companies is £173 valued at the cost of the share capital. 21. INVESTMENTS PORTFOLIO Key Risks Aylesbury Vale District Council's activities expose it to a variety of financial risks. The Council does not require debt financing and currently does not have any debt exposure. As such the key risks are in relation to financial assets and are: Credit Risk - the possibility that other parties might fail to pay amounts due to the Council; Liquidity Risk - the possibility that the Council might not have funds available to meet its commitments to make payments; Re-financing Risk - the possibility that the Council might be required to renew a financial instrument on maturity at disadvantageous interest rates or terms; Market Risk - the possibility that financial loss might arise for the Council as a result of changes in such measures as interest rates movements. Prepared by the Accountancy Section Page 21 of 38 Overall Procedures for Managing Risk The Council's overall risk management procedures focus on the unpredictability of financial markets and implementing restrictions to minimise these risks. The procedures for risk management are set out through a legal framework set out in the Local Government Act 2003 and the associated regulations. These require the Council to comply with the CIPFA Prudential code, the CIPFA Treasury Management in the Public Services Code of Practice and Investment Guidance issued through the Act. Overall these procedures require the Council to mange risk in the following ways: By formally adopting the requirements of the Code of Practice; By approving annually in advance prudential indicators for the following three years limiting: The Council's overall borrowing; Its maximum and minimum exposures to fixed and variable rates; The maturity structure of its debt; Its maximum annual exposures to investments maturing beyond a year. By approving an investment strategy for the forthcoming year setting out its criteria for both investing and selecting investment counterparties in compliance with the Government Guidance. These are required to be reported and approved at or before the Council's annual Council Tax setting budget. These items are reported with the annual treasury management strategy which outlines the detailed approach to managing risk in relation to the Council's financial instrument exposure. Actual performance is also reported annually to Members. These policies are implemented by a treasury team. The Council maintains written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk and the investment of surplus cash through Treasury Management Practice and are reviewed regularly. Credit Risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Council's customers. Deposits are not made with banks and financial institutions unless they meet the minimum requirements of the investment criteria outlined above. The following analysis summaries the Authority's potential maximum exposure to credit risk, based upon on experience of default assessed by the ratings agencies and the Council's experience of its customer collection levels over the last five financial years, adjusted to reflect current market conditions. Deposits with Banks and Financial Institutions Amount at 31 March 2008 Historical Experience of Default Adjustment for market conditions at 31 March 2008 Estimated Maximum Exposure to Default £'000 % % £'000 AAA rated counterparties 51 0 0 0 AA rated counterparties 23,822 0.027% 0.027% 6 A rated counterparties 21,606 0.627% 0.627% 135 Other counterparties 51,000 0.627% 0.627% 320 Bonds -AAA rates 0 0.001% 0.001% 0 Trade Debtors 2,158 5.000% 5.000% 108 98,637 570 No breaches of the Council's counterparty criteria occurred during the reporting period and the Council does not expect any losses from non-performance by any of its counterparties in relation to deposits and bonds. The Council does not generally allow credit for its trade debtors, such that £1.2m of the £2.2m balance is past its due date for payment. The past due amount can be analysed by age as follows: £,000 Month to three months 295 Three to six months 124 Six to twelve months 300 More than one year 549 TOTAL 1,268 Collateral - During the reporting period the council held no collateral as security. Prepared by the Accountancy Section Page 22 of 38 Liquidity Risk The Council manages its liquidity position through the risk management procedures above as well through cash flow management procedures required by the Code of Practice. In the event of an unexpected cash requirement the Council has ready access to borrowings from the Money Markets to cover any day to day cash flow need. The Council is also required to provide a balanced budget through the Local Government Act 1992, which ensures sufficient monies are raised to cover the annual expenditure. Therefore, there is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. Refinancing and Maturity Risk The Council maintains an investment portfolio, whilst the cash flow procedures are considered against the refinancing risk procedures, longer term risk to the Council relates to managing the exposure to replacing financial instruments as they mature. This risk relates to the maturing of longer term financial assets. The approved prudential indicator limits investments placed for greater than one year in duration are the key parameters used to address this risk. The Council approved treasury and investment strategies address the main risks and the treasury team address the operational risks within the approved parameters. This includes monitoring the maturity profile of investments to ensure sufficient liquidity is available for the Council's day to day cash flow needs and the spread of longer term investments provide stability of maturities and returns in relation to the longer term cash flow needs. The Council has no long term financial liabilities as all maturities are less than one year. Interest Rate Risk The Council is exposed to interest rate movements on its investments. Movements in interest rates have a complex impact on the Council, depending on how variable and fixed interest rates move across differing financial instrument periods. For instance, a rise in variable and fixed interest rates would have the following effects: Investments at variable rates - the interest income credited to the Income and Expenditure account will rise; and Investments at fixed rates - the fair value of the assets will fall. Changes in interest payable and receivable on variable rate investments will be posted to the Income and Expenditure Account and effect the General Fund Balance, subject to influences from Government grants. Movements in the fair value of fixed rate investments will be reflected in the STRGL, unless the investments have been designated Fair Value through the Income and Expenditure Account. The Council has strategies for managing interest rate risk. The Annual Treasury Management Strategy draws together the Council's prudential indicators and its expected treasury operations, including an expectation of interest rate movements. From this a prudential indicator is set which provides maximum and minimum limits for fixed and variable interest exposure. The treasury team will monitor market and forecast interest rates within the year to adjust exposures appropriately. For instance, during periods of falling interest rates, fixed rate investments may be taken for longer periods to secure better long term returns. Price Risk The Council does not invest in equity shares and is not exposed to losses arising from movements in the prices of the shares. Foreign Exchange Risk The Council has no financial assets or liabilities denominated in foreign currencies. Therefore, it has no exposure to loss arising from movements in exchange rates. Environmental Risk The Council has taken out a rolling 10 year environmental warranty to safeguard against the risk of contaminated land that was transferred to the Vale of Aylesbury Housing Trust as part of the stock transfer. The risk of having to make use of the warranty is minimal. Category Of Instruments The investments disclosed in the Balance Sheet are made up of the following categories of financial instruments: 31-Mar-07 31-Mar-08 31-Mar-07 31-Mar-08 £'000 £'000 £'000 £'000 Loans and Receivables 0 0 70,992 72,764 Available for Sale Financial Assets 0 0 22,558 23,870 Unquoted Equity Investment at Cost 54 54 0 0 54 54 93,550 96,634 Long Term Current Prepared by the Accountancy Section Page 23 of 38 22. LONG TERM DEBTORS This represents the amount of loans outstanding, of over one year, from car purchase advances. The balance outstanding as at 31st March was £175,529. 23. ANALYSIS OF DEBTORS Debtors are shown net of bad debt provisions. Net Debtors Gross Bad Debts Net Debtors 31/03/2007 Debtors Provision 31/03/2008 £,000 £,000 £'000 £,000 550 Central Government 1,578 0 1,578 262 Other Local Authorities 1,100 0 1,100 5,265 Capital 8,968 0 8,968 82 Car Purchase Scheme 92 0 92 5,411 Other Debtors 3,420 -1,090 2,330 1,366 Prepayments 49 0 49 241 Council Tax Payers 1,954 -1,402 552 41 Non Domestic Rate Payers 115 0 115 5 Community Charge Payers 5 0 5 13,223 TOTAL 17,281 -2,492 14,789 The capital debtor mainly relates to the proportion of receipts from council houses sold by the Vale of Aylesbury Housing Association, which are due to Aylesbury Vale District Council under the transfer agreement. Provision for Doubtful Debts Provisions were made for doubtful debts in 2007/08 from the General Fund Revenue and Collection Fund Accounts. Closing balances were £1,090,264 and £1,401,848 respectively. 24. ANALYSIS OF CREDITORS 31st March 2007 31st March 2008 £,000 £,000 -2,230 Central Government -842 -1,227 Other Local Authorities -193 -1,984 Other Creditors -1,798 -1,284 Income In Advance -1,265 -309 Council Tax Payers -260 -1,272 Non Domestic Rate Payers -1,593 -3,422 Capital -5,876 -11,728 TOTAL -11,827 25. LOANS OUTSTANDING There were no loans outstanding to external lenders (banks, financial institutions and Government) as at 31st March. 26. PENSIONS In 2007/08 the Council paid, in accordance with FRS 17, "Retirement Benefits", an employer's contribution of £3,225,567 (£3,305,738 - 2006/07) based on 22.3% (22.5% -2006/07) of employees' pensionable pay, into Buckinghamshire County Council's Superannuation Fund, which provides members with defined benefits related to pay and service. The contribution rate determined by the County Fund's Actuary at the last triennial actuarial valuations on 31 March 2007 was set under Superannuation Fund Regulations to meet 100% funding over a 20 year period. Current level at 31st March 2007 was 81%, of the overall liabilities of the Fund. The rate for employer contributions from April 2008 to March 2011 will remain fixed for the 3 year period. During the year a payment of £4,937 (£79,935 - 2006/07) was made to the Superannuation Fund in respect of discretionary payments or expenditure on added years, this equates to approximately 0.03% of employees pensionable pay. The employer's contributions certified by the actuary to the Fund in respect of the period 1 April 2005 to 31 March 2008 when expressed as a percentage of members' contributions are as follows: Prepared by the Accountancy Section Page 24 of 38 1 April 2005 to 31 March 2006 375% 1 April 2006 to 31 March 2007 375% 1 April 2007 to 31 March 2008 375% As a result of the implementation of FRS 17, "Accounting for Pensions", a pension's asset /liability account has been established to reflect the current position of the Authority's share of the Pension Fund. As the fund is currently under funded, the account is shown as a liability. The main financial assumptions adopted 2005/06 2006/07 2007/08 as at 31 March were % % % Retail Price Inflation 3.0 3.3 3.7 Increases in Salaries 4.8 5.1 5.2 Increase in Pensions and Deferred Pensions 3.0 3.3 3.7 Discount Rate 4.9 5.4 6.6 Discount Rate (Real) 1.8 2.0 2.8 The fair value of each class of assets and 2006/07 2007/08 2006/07 2007/08 expected rates of return for the year are below Return Return Fair Value Fair Value % % £'m £'m Equities 7.2 7.1 51 46 Gilts 4.4 4.3 11 11 Other Bonds 5.4 6.6 5 5 Property 6.7 6.6 6 5 Cash 5.0 5.0 1 4 Total 74 71 The Fair Value and Liabilities 2006/07 2007/08 Relating to Aylesbury Vale £'m £'m 74.3 71 The value placed on the liabilities relating to Aylesbury Vale DC was 118.6 110 Consequently, at 31 March, the deficiency relating to Aylesbury Vale was -44.3 -39 The fair value of the above assets relating to Aylesbury Vale DC was There is no provision for unitising the assets of a Fund under the LGPS. The above assets as a whole are allocated to participating bodies on a consistent and reasonable basis. The latest actuarial assessment of the scheme in March 2007 placed a value on the assets of the total fund of £1,223 million, whilst the past service liabilities totalled £1,501 million. The movement in the net deficit for the year is as follows: Movement in the Net Deficit 31st March 2007 31st March 2008 For the Year is as follows £'m £'m Net Deficit at Beginning of the Year 49,984 44,219 Contributions Paid -3,557 -3,428 Current Service Costs 3,337 2,993 Other Finance Costs 1,325 1,657 Effect of Change in Accounting Methodolgy 0 0 Actuarial (Gain) /Loss -5,343 -6,594 (Gain) /Loss on Curtailments -1,527 31 Net Deficit at End of the Year 44,219 38,878 The main financial assumptions adopted; the fair values of assets and expected returns as at 31 March and the actuarial gain can be further analysed as follows: Prepared by the Accountancy Section Page 25 of 38 Analysis of Acturial Gain /(Loss) £'m % £'m % £'m % £'m % £'m % Actuarial Return less Expected Return on Assets 6,093 13.0 950 2.0 12,685 17.7 1,097 1.5 -6,282 -8.8 Changes in Assumptions Underlying the Present Value of Pension Liabilities -1017 -2.2 -6,914 -12.9 -13,392 -18.7 4,246 4.5 15,343 6.0 Experience Gains and Losses Arising on the Scheme Liabilities 0 3,752 3.6 0 -2,466 -2.0 Actuarial Gain /(Loss) 5,076 -2,212 -707 5,343 6,595 Effect of Change in Accounting Methodology 0 -14496 0 0 0 2007/08 2006/07 2003/04 2004/05 2005/06 Further information can be found in Buckinghamshire County Council's Superannuation Fund Annual Report which is available upon request from Buckinghamshire County Council, County Hall, Aylesbury. 27. DEFERRED CAPITAL CONTRIBUTIONS There is a deferred capital contribution account that is maintained for the Aqua Vale swimming pool. The capital grant received for this asset is written off to revenue over the same time period as the swimming pool is depreciated, which is 60 years. The balance still to be written off over the next 53 years is £853,664. Movements in Deferred Capital Resources Unapplied Capital Grant for the Aqua Vale Pool £,000 Amounts receivable in 2007/08 0 Transfer to Income & Expenditure Account 16 Total increase/(decrease) in realised capital resources in 2007/08 16 Balance Brought Forward at 1 April 2007 -870 Balance Carried Forward at 31 March 2008 -854 28. PROVISIONS Closing Balance Closing Balance 31/03/2007 Provisions Income Expenditure 31/03/2008 £,000 £,000 £'000 £'000 -38 Section 16 Contributions 0 38 0 -13 Other 0 4 -9 -51 TOTAL 0 42 -9 Movements in the Year Section 16 Contributions This provision related to first time sewerage schemes constructed by both Thames Water and Anglian Water Authorities. The Council made an annual contribution of 1/8th of the capital cost over a total of 12 years. Costs become due when the schemes were completed and an annual contribution into the provision evened out the peaks and troughs. During the year the final payments were made to the water authorities and the provision is now no longer required. Refundable Bonds This balance relates to refundable bonds, an agreed amount is repaid annually following the successful inspection of the open space. 29. DEFERRED CAPITAL RECEIPTS These are amounts derived from sales of assets, which will be received in instalments over agreed periods of time. 31st March 2007 31st March 2008 £'000 £'000 -76 Sale of Council Houses -57 Prepared by the Accountancy Section Page 26 of 38 30. MOVEMENT ON RESERVES Reserves Balance Brought Forward -Gains /Losses For The Year Transfers Between Reserves Net Movement in Year Balance Carried Forward £'000 £'000 £'000 £'000 £'000 Revaluation Reserve 0 -4,499 -4,499 -4,499 Capital Adjustment Account -159,003 3,205 3,205 -155,798 Usable Capital Receipts Reserve -61,956 934 934 -61,022 Pension Reserve 44,219 -6,594 1,253 -5,341 38,878 Deferred Capital Receipts -76 19 19 -57 Housing Revenue Account Reserve -2,187 2,187 2,187 0 General Fund Reserves -General Fund Balance -4,858 -33 -440 -473 -5,331 -ASE, Collection Fund & Upper 100s -408 99 108 207 -201 -Earmarked General Fund Reserves -19,263 -7,266 -7,266 -26,529 Total Reserves -203,532 -11,027 0 -11,027 -214,559 PRIOR PERIOD ADJUSTMENTS The following table summarises the changes made to the balance sheet values at the 31st March 2007. 2006/07 Published Balance Sheet Capital Accounting Assets Under Construction Adjustment Restated 2006/07 Balance Sheet £'000 £'000 £'000 £'000 Fixed Asset Restatement Account 211,769 -211,769 0 0 Capital Financing Account -57,109 57,109 0 0 Capital Adjustment Account 0 -154,660 -4,343 -159,003 31. REVALUATION RESERVE This is a new reserve and the purpose of the reserve is to record the accumulated gains on the fixed assets held by the authority arising from increases in value, as a result of inflation or other factors. The reserve is also debited with amounts equal to the part of depreciation charges on assets that has been incurred only because the asset has been revalued. On disposal, the Revaluation Reserve balance for the asset disposed of is written out to the Capital Adjustment Account. The overall balance on the Reserve represents the amount by which the current value of fixed assets carried in the Balance Sheet is greater because they are carried at revalued amounts rather than depreciated historical cost. 2006/07 Revaluation Reserve 2007/08 £,000 £,000 0 Balance Brought Forward at 1 April 2007 0 0 Acquistion and Enhancement -2,030 0 Revaluation of Assets -2,469 0 Depreciation, Impairment and Disposal 0 0 Balance Carried Forward at 31 March 2008 -4,499 32. CAPITAL ADJUSTMENT ACCOUNT The Capital Adjustment Account (previously the Capital Financing Account) accumulates the write down of the historical cost of fixed assets as they are consumed by depreciation and impairments or written off on disposal. It also accumulates the resources that have been set aside to finance capital expenditure and deferred charges. The balance on the Account represents timing differences between the amount of the historical cost of fixed assets that have been consumed and the amount that has been financed. Prepared by the Accountancy Section Page 27 of 38 2006/07 Capital Adjustment Account 2007/08 £,000 £,000 -577,884 Balance Brought Forward at 1 April 2007 -159,003 -15,156 Capital Receipts Applied -11,490 -3,700 Capital Expenditure Financed from Revenue -2,223 -16 Grants /Deferred Receipts in 2007/08 -36 431,151 Impairment, Depreciation and Deferred Charges 11,893 6,602 Revaluation, Disposal of Assets 5,061 -159,003 Balance Carried Forward at 31 March 2008 -155,798 33. CAPITAL RECEIPTS /CAPITAL GRANTS UNAPPLIED Capital reserves are maintained by the Authority as a means of providing Capital Finance for spending portfolios or for repaying debt. Apart from sale of assets, contributions were made to the reserve by the General Fund, whilst other contributions came in the form of external contributions and grants. Movements in Realised Capital Resources Usable Capital Receipts Unapplied Capital Grants & Contributions £'000 £,000 Amounts receivable in 2007/08 -9,143 -5,171 Amounts Applied to finance new capital investment 11,490 2,223 Transfer to Revenue Reserve 100 1,435 Total increase/(decrease) in realised capital resources in 2007/08 2,447 -1,513 Balance Brought Forward at 1 April 2007 -59,687 -2,269 Balance Carried Forward at 31 March 2008 -57,240 -3,782 34. GENERAL REVENUE RESERVES Movement in Revenue Reserves General Fund Balance HRA Balances Aylesbury Special Expenses Collection Fund Upper 100's Company Earmarked Revenue Reserves Pensions Reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 -Surplus /Deficit for 2007/08 -33 -137 98 -7,266 1,253 Appropriations (to)/from revenue -440 2,324 109 0 0 0 Actuarial -gains and losses on pensions 0 0 0 0 -6,594 -473 2,187 109 98 0 -7,266 -5,341 Balance B/Forward at 1 April 2007 -4,858 -2,187 -291 -90 -27 -19,263 44,219 Balance C/Forward at 31 March 2008 -5,331 0 -182 8 -27 -26,529 38,878 -5,532 The Collection Fund is a statutory fund in which the Council records transactions for council tax, business rates and residual community charges. The deficit on the Fund will be recovered from the Council, the County, Thames Valley Police Authority and the Bucks & Milton Keynes Fire Authority in the next financial year to the value of £8,046, £43,737, £6,244 and £2,347 respectively. Only the figure due from Aylesbury Vale is shown in the table above as the amounts due from the precepting bodies are shown within the debtors section of the overall accounts. The Upper 100's Company reserve is a dormant company set up to build a car park a number of years ago and this represents the level of its reserves. 35. EARMARKED REVENUE RESERVES Earmarked revenue reserves are as detailed in the following table, with the purpose of some of the major reserves explained after the table. Prepared by the Accountancy Section Page 28 of 38 Closing Balance Specific Reserves Closing Balance 31/03/2007 Income Expenditure 31/03/2008 £,000 £,000 £'000 £'000 -777 Self Insurance -36 77 -736 -544 Information Technology -91 0 -635 -1,186 Superannuation -161 0 -1,347 -9,465 Interest Equalisation -3,935 8,000 -5,400 -222 Business Transformation -175 82 -315 -1,230 Amenity Areas -91 115 -1,206 -93 Other Investments 0 77 -16 0 Property Sinking -5,000 0 -5,000 0 Industrial Rent Loss -3,881 319 -3,562 -1,816 Benefit Subsidy -981 500 -2,297 -1321 Planning Fees -201 278 -1,244 -406 Car Parking -64 0 -470 -262 Historic Buildings 0 0 -262 -112 District Elections -21 101 -32 -44 Market Research 0 0 -44 -1,242 Repairs & Renewals -1,332 681 -1,893 -31 Rent Guarantee Scheme -5 0 -36 -25 Land Registry Fees 0 13 -12 -225 Health Licensing Income 0 0 -225 -87 Corporate Improvement -60 75 -72 -80 Future Vehicle Costs 0 0 -80 -95 Other -1 66 -30 0 Fairford Leys Riverine -173 0 -173 0 LABGI -1,273 50 -1,223 0 Housing Needs & S.106 -134 0 -134 0 Pathfinder -85 0 -85 -19,263 TOTAL -17,700 10,434 -26,529 Movements in the Year Self Insurance Reserve including MMI Potential Claims The Council has decided that the following areas will not be insured with an external body, theft of council contents, all risks and motor credit; these will be covered within an insurance reserve. The excess on public liability claims also fall on the reserve, the balance at the year end was £735,840. This reserve also relates to sums set aside to cover possible liabilities that could arise from finalisation of MMI liabilities. The latest possible liability was notified as £413,000, the fund covers 42% of that figure. However, it is increasingly unlikely that the Council will have to meet this liability. Information Technology Reserve Contributions are made to provide for future corporate technology requirements. The balance as at 31st March 2008 was £636,494. Amenity Areas and Other Reserves This represents sums received for the future upkeep of areas of open spaces and of children's play areas. The money is invested and the annual interest funds the yearly repair and maintenance of these areas. Interest Equalisation Reserve Interest earned in the year from investments is paid into the general fund, after all contributions have been made to other reserves; the balance is transferred in to the reserve. The reserve is maintained to ensure that there is sufficient interest available in future years to meet the needs of the general fund and to even out fluctuations in interest rates. Superannuation The Council makes annual contributions to the Bucks CC Superannuation Fund based upon employees' pensionable pay. The contribution rate is set to eventually ensure that 100% of the fund liabilities are covered. The reserve is used to cover the back funding element of the employer's costs. Property Sinking The purpose of this reserve is to meet large maintenance and refurbishment costs associated with operational buildings, particularly the offices and the new theatre. Industrial Rent Loss The purpose of this reserve is to meet rent loss from industrial premises caused by tenants vacating their premises. It will also finance the professional fees that will be incurred in relation to a property strategy exercise being undertaken. Prepared by the Accountancy Section Page 29 of 38 36. ANALYSIS OF NET ASSETS EMPLOYED This note shows the assets (both revenue and capital) attributable to the General Fund and Collection Fund. 31st March 2007 31st March 2008 £,000 £,000 202,860 General Fund 214,620 672 Collection Fund -61 203,532 TOTAL 214,559 37. NOTES TO THE CASHFLOW STATEMENT The cash flow statement summarises the inflows and outflows of cash arising from transactions with third parties for revenue and capital purposes during the year 2007/08. Reconciliation of Revenue Surplus to Net Cash Flow The purpose of this note is to reconcile the net cash flow from revenue activities in the Cash Flow Statement to the surplus or deficit for the year in the Consolidated Revenue Account. 31st March 2007 £'000 £'000 £'000 5,732 General Fund -Surplus/Deficit for the Year -33 529 H.R.A. -Surplus /Deficit for the Year 0 -53 Special Exps -Surplus /Deficit for the Year 0 -122 Collection Fund -Surplus /Deficit in Year 733 700 Non Cash Transactions -4,785 : Depreciation /Impairment -8,097 -5,133 : Deferred Charges -3,796 -963 : Contributions -to /from Provisions 13 -5,454 : Unattached Capital Receipts 9,289 267 : Net Changes on Retirement Benefits -1,253 0 : Loss on Sale of Fixed Assets -587 16 : Deferred Government Grant /Other 22 0 : Capital Receipts Pooling -100 -4,509 Change in current assets /liabilities -124 -Increase /Decrease in stocks -16 7,758 -Increase /Decrease in debtors 2,116 -2,555 Increase /-Decrease in creditors -2,355 -255 Servicing of Finance 3,635 Less: Investment Income 6,198 6,198 -1,252 2,134 -3,635 Returns on Investments -6,198 -27,779 Capital Activities 1,246 31,692 Management of Liquid Funds 3,084 -974 -Increase /Decrease in Cash 266 -31,692 -Increase in Liquid Resources -3,084 -32,666 -2,818 -61,738 Net Investment at 1st April -94,404 -94,404 Net Investment at 31st March -97,222 NET CASHFLOW FROM REVENUE ACTIVITIES 31st March 2008 Prepared by the Accountancy Section Page 30 of 38 Movement in Cash Balance 1st April Balance 31st March Movement In the Year £'000 £'000 £'000 Cash at Bank and in Hand 854 588 266 Cash Overdrawn 0 0 0 Increase in Cash 266 Debt Due Within 1 Year 0 0 0 Current Asset Investments 93,550 96,634 -3,084 Net Investment at 31 March 94,404 97,222 -2,818 Analysis of Government Grants Government Grants £ Government Grants £ Homelessness 31,000 Building Safer Communities 104,345 Housing Benefit Administration 844,068 Local Delivery Vehicle 537,947 Fraud Investigation 97,020 Smoking 71,554 Mandatory Rent Allowances 23,421,998 Planning Delivery 412,866 Rent Rebates 583,863 Circus Fields 1,466,631 Council Tax Benefit Subsidy 6,917,409 LABGI 415,177 Greening the Vale 261,601 Concessionary Travel 72,000 38. POST BALANCE SHEET EVENTS Waterside Development. The Council has entered into negotiations with developers to transform the Exchange Street area of Aylesbury. The development will see new shops, housing and a revitalisation of the canal basin area. Work on a new entertainment centre has begun after a number of properties were demolished including the Exchange Street offices following the staff relocating to the new Gateway offices on the edge of the town centre. Iceland Bank Collapse The Council held £2m of deposits with Icelandic banks at 31 March 2008. These deposits were paid back to the Council after the 31st March 2008. During the current financial year the Council placed another £3m of deposits with Icelandic banks. These banks have collapsed and there is a risk that the Council will not recover all or some of the money on deposit. 39. AUTHORISATION FOR ISSUE The Statement of Accounts for the year ended 31 March 2008 was authorised for issue on 24 June 2008 by the Audit Committee. All events up to this date have been considered for inclusion in the accounts. Prepared by the Accountancy Section Page 31 of 38 40. HOUSING REVENUE ACCOUNT 2006/07 2007/08 Net Net Expenditure Expenditure £'000 £'000 Income -7,587 Rents 0 -686 0 -3,516 0 -11,789 0 Expenditure 1,336 0 6,546 0 3,012 -32 0 -100 186,614 0 168 0 197,676 -132 185,887 -132 21 0 185,908 -132 -113 -5 -7,237 0 178,558 -137 2006/07 2007/08 £'000 £'000 7,237 0 -185,251 0 -15 0 0 2,323 -178,029 2,323 2006/07 2007/08 £'000 £'000 178,558 -137 -178,029 2,323 529 2,186 -2,715 -2,186 -2,186 0 Transfer of reserves to General Fund reserves on closure of HRA Deficit /-Surplus for the Year HRA services share of Corporate and Democratic Core Net Cost of HRA Services per Authority's I & E Account Depreciation, Amortisation and Impairment of Fixed Assets Investment and Mortgage Interest HOUSING REVENUE ACCOUNT INCOME AND EXPENDITURE ACCOUNT Statement of Movement on the Housing Revenue Account Balance Net charges for retirement benefits in accordance with FRS 17 Contributions towards expenditure Net additional amount required by statute to be debited or credited to the HRA Charges for Service & Facilities Supervision and Management -Gain or Loss on Sale HRA of Fixed Assets Balance Carried Forward on the HRA Reserve In Hand at 31st March 2008 Deficit /-Surplus for the Year on the HRA Income and Expenditure Account Balance Brought Forward on the HRA Reserve In Hand at 1st April 2007 Items included in the HRA Income and Expenditure Account but excluded from the movement on the Housing Revenue Account Balance for the year. Gain or -Loss on Sale HRA of Fixed Assets to the HRA Balance for the year. Increase or decrease in the HRA Balance Net additional amount required by Statute to be debited or -credited Total Income Total Expenditure Net Cost of HRA Services Depreciation and Impairment on Fixed Assets Rent Rebates Housing Subsidy -Note 1 Repairs & Maintenance Contribution to Bad Debts Provision NOTES TO THE HOUSING REVENUE ACCOUNT General Note The transactions for 2007/08 reflect the housing subsidy and mortgage interest payments that are required to be charged to the Housing Revenue Account until the account can be closed. There was also a contribution from the tenants bad debts provision. The DCLG gave its formal consent that the HRA could be closed on the 28th March 2008. Note1 - Housing Subsidy The Government operates a housing subsidy regime. It is based on a notional housing revenue account representing the Government's assessment of what the Council should be collecting and spending. If the amount of subsidy is negative, this has to be paid over to the Government where previously it was transferred to the General Fund. In 2007/08 the amount of subsidy that was due to the DCLG was £6,000, this has been offset by refund of subsidy from 2006/07 of £36,500. Prepared by the Accountancy Section Page 32 of 38 41. COLLECTION FUND 2006/07 INCOME AND EXPENDITURE ACCOUNT Notes 2007/08 2007/08 £'000 FOR THE YEAR ENDED 31st MARCH 2008 £'000 £'000 INCOME 77,599 Council Tax 4 81,616 6,280 Council Tax Benefits 4 6,508 38,978 NNDR 2 40,020 122,857 Total Income 128,144 EXPENDITURE 60,378 Buckinghamshire County Council 63,793 8,580 Thames Valley Police Authority 9,107 3,227 Bucks & Milton Keynes Fire Authority 3,424 11,104 Aylesbury Vale District Council 11,735 83,289 88,059 Estimated Collection Fund Surplus 2006/07 -251 Buckinghamshire County Council 564 -35 Thames Valley Police Authority 80 -13 Bucks & Milton Keynes Fire Authority 30 -45 Aylesbury Vale District Council 104 -344 778 Non Domestic Rates 13 Interest Payable (Gross) 2 32 38,744 Payment to National Pool 2 39,764 221 Cost of Collection Allowance 2 224 38,978 40,020 18 Provision for Uncollectable Amounts 20 18 20 121,941 Total Expenditure 128,877 -916 -Surplus /Deficit for the Year 733 31st March 2007 Statement of Balances 31st March 2008 £,000 £,000 244 Balance In Hand 1st April 2007 -672 -916 Deficit /-Surplus For The Year 733 -672 Balance -In Hand /Overdrawn March 2008 61 2006/07 Increase In Levels of Precepts 2007/08 2007/08 £'000 £'000 Increase INCOME -77,599 Council Tax -81,616 -4,017 -6,280 Council Tax Benefits -6,508 -228 -83,879 Total Income -88,124 -4,245 EXPENDITURE 60,378 Buckinghamshire County Council 63,793 3,415 8,580 Thames Valley Police Authority 9,107 527 3,227 Bucks & Milton Keynes Fire Authority 3,424 197 11,104 Aylesbury Vale District Council 11,735 631 83,289 Total Precepts 88,059 4,770 -590 525 Prepared by the Accountancy Section Page 33 of 38 NOTES TO THE COLLECTION FUND ACCOUNTS 1. GENERAL These accounts represent the transactions of the Collection Fund, which is a statutory fund, drawn up on an accruals basis. The accounts have been consolidated with the Council's overall accounts. Precepts of local parish councils are met from the Council's General Fund, not the Collection Fund and are included within the District Council's demand on the Collection Fund. The deficit on the Collection Fund (£60,374) as at 31 March 2008 will be allocated to the District Council, Bucks County Council, Thames Valley Police Authority and the Bucks & Milton Keynes Fire Authority pro rata to the value of the precepts. However, an amount, £349,429, based upon the estimated surplus position in January 2008, has already been paid over in 2008/09. Any amounts in respect of Community Charges, are to be transferred to the General Fund so as to benefit or be borne by Council taxpayers of the billing authority. 2. INCOME FROM BUSINESS RATES 2006/07 2007/08 £'000 £'000 105,100 105,904 42.6 44.1 44,773 46,704 38,744 39,764 Total non domestic rateable value at year end National non-domestic rate multiplier Product of year end value and multiplier Outturn Payment to N.N.D.R. pool 3. COUNCIL TAX BASE Band Chargeable Dwellings Less Exemptions & Discounts Band D Ratio Net Dwellings Allowance for Losses and MOD Properties Band D Equivalent Dwellings A* 4.50 5/9 3.00 -0.05 2.95 A 2,157.20 6/9 1,438.19 -21.52 1,416.67 B 9,614.65 7/9 7,478.04 -112.17 7,365.87 C 17,471.05 8/9 15,529.83 -217.80 15,312.03 D 10,688.10 9/9 10,688.10 56.73 10,744.83 E 9,439.65 11/9 11,537.34 -156.53 11,380.81 F 6,845.40 13/9 9,887.83 -32.58 9,855.25 G 5,274.65 15/9 8,791.11 -79.27 8,711.84 H 317.55 18/9 635.10 1.34 636.44 61,812.75 65,988.54 -561.85 65,426.69 4. COUNCIL TAX ARREARS The following shows the level of arrears still due for each financial year. 2007/08 1,114,329 £ 2001/02 13,955 £ 2006/07 446,290 £ 2000/01 11,675 £ 2005/06 205,412 £ 1999/98 8,131 £ 2004/05 97,371 £ 1998/99 3,151 £ 2003/04 39,059 £ 1997/98 2,252 £ 2002/03 18,060 £ 1994/5 & 95/6 1,369 £ Prepared by the Accountancy Section Page 34 of 38 Prepared by the Accountancy Section Page 35 of 38 Glossary of Terms Accounting Period This is the length of time covered by the accounts. It is normally a period of twelve months commencing on the 1st April. The end of the accounting period is the balance sheet date. Accrual This is one of the main accounting concepts and ensures that income and expenditure are shown in the accounting period that they are earned or incurred and not as money received or paid. Appointed Auditors These are the external auditors appointed by the Audit Commission. They may be from the Audit Commission's own operations directorate, as is the case at AVDC, or from a major accountancy firm. Approved Institutions Funds that are not needed for day to day transactions may be invested but only with third parties meeting the credit rating criteria approved annually as apart of the Council's Treasury Management Policy. Asset An asset is something that the Council owns that has a monetary value. Assets are either "current" or "fixed". A fixed asset provides benefits for a period of more than one year e.g. buildings. Whilst a current asset is one that will be used or cease to have material value by the end of the next financial year e.g. stock or debtors. Audit of Accounts An audit is an examination by an independent expert of the Council's financial affairs to check that the relevant legal obligations and codes of practice have been followed. Balance Sheet A financial statement summarising an organisation's assets, liabilities, and other balances at the end of each accounting period. Budget A budget is a financial statement that expresses an organisation's service delivery plans and capital programme in monetary terms. Capital Expenditure Expenditure on the acquisition of a fixed asset that will be used to provide services beyond the current accounting period or expenditure that adds value to an existing asset. Capital Financing This term describes the various sources of money used to pay for capital expenditure. There are a number of sources available, Aylesbury Vale District Council uses usable capital receipts, capital grants, capital contributions and earmarked reserves. Capital Programme This is a financial summary of the capital schemes that AVDC intends to carry out over a specified period of time. Capital Receipt A capital receipt is the income that results from the sale of land or property. Capital receipts cannot be used to fund revenue services. Cashflow Statement A statement that summarises the inflows and outflows of cash within the council's accounts. CIPFA This is the Chartered Institute of Public Finance and Accountancy. Collection Fund A separate fund recording the expenditure and income relating to council tax and non domestic rates. Community Assets This is land and property that AVDC intends to hold forever. They generally have no determinable useful life and there are often restrictions regarding their sale. Consistency This is one of the fundamental accounting concept. It requires accountants to treat similar items of income and expenditure the same way - both within an accounting period and from one accounting period to another. Contingent Liability A sum due to be paid which may arise in the future but which cannot be determined in advance. Prepared by the Accountancy Section Page 36 of 38 Council Tax This is one of the main sources of income to the council. Council tax is levied on households within its area by the billing authority and the proceeds are paid into the Collection Fund for distribution to precepting authorities and for use by the billing authorities own General Fund. Creditor This applies to money the Council owes to third parties for goods and services it has received but not paid for at the end of the accounting period. Debtor This applies to money that is owed to the Council from third parties for goods and services it has provided but not yet been paid for at the end of the accounting period. Deferred Charges This is capital expenditure that does not create an asset that belongs to the Council. The value is written off to revenue in the year. An example of a deferred charge is an improvement grant to another organisation. Depreciation This is a charge made to the revenue account each year that reflects the reduction in value of fixed assets used to deliver services. Estimates These are the amounts expected to be spent, or received , during an accounting period. They are also referred to as budgets. The original estimate is the estimate for a financial year approved by the Council before the start of a financial year and the forecast estimate is an updated version of the original estimate. The original estimate can be updated at ant time during the accounting period. Exceptional Items Material items which derive from events or transactions that fall within the normal activities of the authority and which need to be disclosed separately by virtue of their size or incidence to give fair presentation to the accounts. Extraordinary Items Material items possessing a high degree of abnormality which derive from events or transactions that fall outside the normal activities of the authority and which are not expected to recur. Finance Lease This is a lease, usually of land or buildings, which is treated as capital borrowing. Financial Reporting Standards (FRS) Financial Reporting Standards advice the accounting treatment and disclosure requirements of transactions so that an authority's accounts "present fairly" the financial position of the authority. Financial Year The period of time to which the Statement of Accounts relates. The financial year runs from 1 April to 31 March. Fixed Asset Revaluation Reserve A reserve containing revaluations arising after the initial valuation of fixed assets. Fixed Assets Tangible assets that yield benefits to the authority and its services for a period of more than one year. Government Grants Grants made by the central government towards either revenue or capital expenditure to help with the costs of providing services and capital projects. Some government grants have restrictions on how they may be used whilst others are general purpose. Gross Expenditure The total cost of providing the council's services before taking into account income from fees, charges and government grants. Housing Benefits This is the national system for giving financial assistance to individuals towards certain housing costs. The cost of the service is subsidised by central government. Impairment This is a reduction in the value of a fixed asset as shown in the balance sheet to reflect its true value. Income This is the money that the Council receives or expects to receive from any source; fees, charges, sales, grants and interest. Prepared by the Accountancy Section Page 37 of 38 Income and Expenditure Account This account is the main revenue account. It reports the net costs for the accounting period of all the functions that AVDC is responsible for. Infrastructure Assets Inalienable fixed assets, expenditure on which is recoverable only by continued use of the asset created e.g. pedestrianisation. Intangible Assets These are non financial fixed assets that do not have any physical substance but are identifiable and are controlled by the authority through custom or legal rights e.g. computer software. Liability A liability arises when the Council owes money to others and it must be included in the financial statements. There are two types of liability: A current liability is a sum of money that will or might be payable during the next accounting period e.g. creditors or cash overdrawn. A deferred liability is a sum of money that will not be payable until some point after the next accounting period or is paid off over a number off accounting periods. Long Term Investments Long term investments are investments intended to be held for use on a continuing basis in the activities of the authority. They should be classified as long term only where an intention to hold the asset for longer than one year can be clearly demonstrated. Materiality This is one of the main accounting concepts. It ensures that the statement of accounts includes all the transactions that, if omitted, would lead to a significant distortion of the financial position at the end of the accounting period. National Non Domestic Rate (NNDR) This is a national scheme for collecting contributions from businesses towards the cost of local government services. Each business property has a rateable value. Central government determines how much a business has to pay per £ of rateable value each year. Non Operational Assets These are fixed assets owned by the Council that it does not directly occupy or use to delivery its services. Operating Lease This is a lease where ownership of the fixed asset remains with the lessor. Operational Assets These are fixed assets owned by the Council and used or consumed in the direct delivery of services. Post Balance Sheet Event These are events, both favourable and unfavourable, which occur between the balance sheet date and the date on which the Statement of Accounts is signed. Precept The levy made by precepting authorities on billing authorities, requiring the latter to collect income from council taxpayers on their behalf. Precepts are paid from the Collection Fund. Provision This is a sum of money that has been put aside in the accounts for liabilities or losses that are due but where the amount due or timing of the payment is not known with any certainty. Prudence This is one of the main accounting concepts. It ensures that an organisation only includes income in its accounts if it is sure it will receive the money. Rateable Value The annual assumed rental value of a property that is used for business purposes. Related Parties Two or more parties are related parties when at any time during the financial period: One party has direct or indirect control of the other party. The parties are subject to common control from the same source. One party has influence over the financial and operational policies of the other party to an extent that the other party might be inhibited from pursuing its own interests. The parties, in entering a transaction, are subject to influence from the same source to such an extent that one of the parties to the transaction has subordinated its own interests. Prepared by the Accountancy Section Page 38 of 38 Reserves A reserve results from an accumulation of surpluses, deficits and appropriations over past years. Reserves of a revenue nature are available and can be spent or earmarked at the Council's discretion. Residual Value This is the net realisable value of an asset at the end of its useful life. Revenue Expenditure The day to day expenses associated with the provision of services. Revenue Support Grant A general grant paid by central government to local authorities as a contribution towards the cost of their services. SORP Statement of Recommended Practice is generally based upon those accounting principles that are incorporated within approved accounting standards, modified to reflect the statutory framework in which local authorities operate. The SORP states which accounts should be published as part of the Statement of Accounts and the information to be included in each account. Stocks These are items of stores that AVDC has bought to use on a continuing basis but has not yet used. Temporary Borrowing This is a sum of money borrowed for a period of less than one year. UK GAAP Accounting practices regarded as permissible by the UK accounting profession that are grouped together under the term "Generally Accepted Accounting Practices". Useful Life This is the period over which an organisation will derive benefits from the use of a fixed asset. Work in Progress The value of works that has been completed or is partially complete at the end of the accounting period that should be included in the financial statements. Annual Governance Statement 1. Scope of responsibility 1.1. Aylesbury Vale District Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. Aylesbury Vale District Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. 1.2. In discharging this overall responsibility, Aylesbury Vale District Council is responsible for putting in place proper arrangements for the governance of its affairs, facilitating the effective exercise of its functions, which includes arrangements for the management of risk. 1.3. Aylesbury Vale District Council's arrangements for ensuring good Corporate Governance are embedded in its constitution, policies and procedures. It has not approved and adopted a separate single code of corporate governance. However the principles to which the Council operates are intended to be consistent with those contained in the CIPFA /SOLACE Framework Delivering Good Governance in Local Government. Copies of the Council's principal policies and codes of practice can be consulted on its web site. (www.aylesburyvaledc.gov.uk) A list of the more significant documents is attached at Appendix A. 1.4. This Annual Governance Statement explains how Aylesbury Vale District Council has complied with the principles of corporate governance and also meets the requirements of regulation 4(2) of the Accounts and Audit Regulations 2003 as amended by the Accounts and Audit (Amendment) [England] Regulations 2006 in relation to the publication of a statement on internal control. 2. The purpose of the governance framework 2.1. The governance framework comprises the systems and processes, and culture and values, by which the authority is directed and controlled and its activities through which it accounts to, engages with and leads the community. It enables the authority to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost-effective services. 3 2.2. The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risk to the achievement of Aylesbury Vale District Council's policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. 3. The governance framework 3.1. The governance framework has been in place at Aylesbury Vale District Council for the year ended 31 March 2008 and up to the date of approval of the Annual Governance Report and Statement of Accounts. The following paragraphs include the key elements of the governance framework: 3.2. Identifying, communicating and reviewing the Council's vision and outcomes 3.2.1. Following the election in May 2007, Cabinet agreed to review the strategic priorities and develop a new corporate plan to come into effect from April 2008. 3.2.2. A new vision for the district was agreed under which a number of key aims and objectives were identified. These are set out in the Corporate Plan. The new priorities are communicated to the public primarily through the District Link magazine, the website and the media. 3.2.3. In developing the corporate plan the Council has taken into account national and local issues affecting the district in its medium and long term future, as well as feedback from the community through consultation exercises undertaken in 2006 and 2007. The issues include: the projected housing growth; the economic potential of the district; building vibrant communities; the desire to protect and enhance the countryside; and a concern for quality and efficiency. 3.3. Measuring the quality of services for users 3.3.1. The Business Transformation Programme was revised in 07/08 and projects identified which would deliver improved customer value and widen access channels for a range of services. A major focus for this programme is a series of Vanguard Reviews. These follow the 4 principles of the Vanguard organisation which promotes the lean thinking and operation model working very much from the customer perspective to reduce processing time and process stages. 3.3.2. Project Based Activity - in 2007/08 the council set up a Strategic Investment Board (SIB) to oversee the evaluation of project proposals and the allocation of funding. Their first task was to undertake a complete review and restructuring of the Council's capital programme. This first checked that all items complied with AVDC's corporate objectives. Business case validity, contribution to service development and affordability were also then assessed for each project. A much changed capital programme resulted and has now been adopted by Council. The SIB will continue to manage capital investment in projects and ensure proper evaluation of new proposals. 3.3.3. The Council has a Procurement Strategy and a set of Contract Procedure Rules which were updated and came into effect on 1 January 2007. The strategy sets out the framework for how goods, works and services are procured. The strategy is in line with the Council's aims and objectives and principles of best value. 3.3.4. Scrutiny is central to the decision making processes of the Council and each Scrutiny Committee produces an annual report of its work. Scrutiny is primarily concerned with improving services for people in Aylesbury Vale. For example, in 07/08 scrutiny considered issues relating to the district being designated as a growth area. 3.3.5. Benchmarking takes place to compare costs and quality of services with other authorities including those that have a similar geographical spread. A report to Corporate Team includes the development of actions plans to address areas of weakness. 3.4. Roles and responsibilities of Members and Officers 3.4.1. The Council's Constitution sets out the roles of and relationships between the full Council, the Cabinet and Scrutiny and other Committees in the policy and decision making process and sets out their legal requirements. It also sets out a record of what responsibility each Council body or individual has for particular types of decisions or for decisions relating to particular areas or functions. The Constitution requires that all decisions taken by or on behalf of the Council will be made in accordance with the principles set out in the Constitution. 3.4.2. The Constitution also sets out how the public can access the decision making process and the Cabinet's Forward Plan of decisions sets out what consultation will be undertaken before a decision is taken and with whom. Many of the responsibilities of the Council committees require statutory consultation to precede a decision being taken. 5 3.4.3. The Constitution was subject to review during 2007/08 with refinements approved by Council at its meeting in March 2008. 3.5. The standards of behaviour for members and staff 3.5.1. Member and Officer behaviours are governed by Codes of Conduct which are set out in the Constitution. The Member Code of Conduct was updated in May 2007. 3.5.2. The Constitution also includes a Member/Officer protocol which describes and regulates the way in which Members and Officers should interact to work effectively together. This was reviewed by Scrutiny Committee in September 2007 and consultation on the proposed amendments has taken place with members and staff side representatives. An updated protocol will be approved in October 2008. 3.6. Standing orders, Financial Regulations and Schemes of Delegation 3.6.1. The constitution sets out the scheme of delegation and the Contract Procedure Rules and guidance. 3.6.2. Financial procedure notes and manuals are checked at key financial audits. Some areas are also producing formal flowcharts as part of the Vanguard review process. 3.7. Role of the Audit Committee 3.7.1. The Audit Committee was created as a full committee of the Council after the local government elections held in May 2007. Its terms of reference, structure, composition and work programme have been developed with reference to the guidance issued by CIPFA in 2005, "Audit Committees: Practical Guidance for Local Authorities". 3.8. Compliance with relevant laws and regulations, internal policies and procedure 3.8.1. Ensuring compliance with established policies, procedures, laws and regulations involves a range of measures which include: Notification of changes in the law, regulations and practice to Directorates; Awareness, understanding and training carried out by internal officers and external experts; The drawing up and circulation of guidance and advice on key procedures, policies and practices; 6 Proactive monitoring of compliance by relevant key officers including the Section 151 Officer (Head of Finance) and the Monitoring Officer (Head of Legal Services). 3.8.2. Compliance with the new or revised policies is monitored by the relevant key officers and is incorporated in the Internal Control Checklist completed by each Directorate. 3.8.3. Internal Audit reviews compliance and outstanding issues are reported to Audit Committee. The Probity Group (see section 4.8.4) looks at emerging issues and non-compliance from any source. 3.8.4. Under Section 5 of the Local Government and Housing Act 1989 the Monitoring Officer is required to report to the Council where, in his/her opinion, a proposal, decision or omission by the Council, its Members or Officers is or is likely to be unlawful and also to report on any investigation by the Local Government Ombudsman. It has not been necessary for the Monitoring Officer to issue a formal report for the year 2007/08. 3.8.5. The Section 151 officer also has a legal responsibility to issue formal reports if they have particular concerns about the financial arrangements or situation of the Council. No such formal reports have been issued during the 2007/08 financial year. 3.9. Risk Management Arrangements 3.9.1. The Council has in place a process for identifying, assessing, managing and reviewing the key areas of risk and uncertainty that could impact on the achievement of the Council's objectives and service priorities. Risk management is an integral part of the business planning process. 3.9.2. A corporate risk register is in place that is owned and reviewed by Corporate Team. Service Risk Registers are owned and reviewed by each Head of Service with their management teams on a regular basis. 3.9.3. Risk Management in projects is a standard defined in the Corporate Project Management Guidelines and includes the requirement for a risk assessment as part of the business case and a risk register to be maintained as part of the project managers responsibilities. 3.10. Whistle-blowing and Complaints procedures 3.10.1. The Contract Regulations require officers preparing contracts to consider including references to AVDC's Confidential Reporting 7 Policy. Copies of the policy itself are available on the AVDC web site and are provided to staff when they join the Council. 3.10.2. There is a Customer Compliments/Complaints Procedure which includes a publication for the public which explains the process. There are also detailed procedures for staff who are dealing with a complaint. Complaints about Members are monitored centrally and reported to the Standards Committee every six months. 3.10.3. The Standards Committee considers any complaints made against councillors relating to breaches of the code of conduct. 3.11. Member and Officer Development needs 3.11.1. A Programme of training and induction for newly elected members was implemented following the elections in May 2007. A training and evaluation report was reported to the Standards Committee in January 2008 and a report on the wider induction programme to Group Leaders in February 2008. 3.11.2. Directors and Heads of Service development needs are identified through the appraisal process. There is a specific set of competencies for Heads of Service. 3.11.3. The training and development programme recognises the specific needs of senior managers. There is a programme of training courses which includes participation in the MKOB Strategic Leadership Programme 3.12. Communication and Consultation with the public and other stakeholders 3.12.1. The Council's Community Involvement and Consultation Strategy was updated in July 2007. This sets out how the Council will engage with the community and stakeholders. 3.12.2. The Communication and Marketing Service takes the lead in meeting the Council's consultation targets as specified by the Government as well as co-ordinating, supporting and acting as a central consultation point for specialist advice and quality control. 3.12.3. The representational and scrutiny role of members is growing within the consultation process in terms of their formal involvement in local community initiatives. 3.12.4. The Council uses a number of channels to both consult and communicate with the community and other stakeholders. Consultation methods range from quantitative selfcomplletio questionnaires to focus groups depending on the target 8 audience and the objectives of each consultation project. Regular communication channels include the residents' magazine delivered to all households, a proactive media relations programme (radio, TV, newspapers), parish and community noticeboards, and information stands in 60 locations throughout the district. The Council's website has also been re designed and relaunched to improve access to information and services. 3.13. Governance Arrangements for Partnerships 3.13.1. Article 1 of the constitution commits the Council to providing community leadership in partnership with local people and businesses and effective and transparent decision-making; and to improving the delivery of services in consultation with the community. The Council has identified its significant partnerships and there are appropriate governance arrangements in place. A Partnership Protocol was agreed by Corporate Team in September 2007 and a Partnership Evaluation tool has been designed for reviewing performance of partnerships on an annual basis. 4. Review of effectiveness 4.1. Aylesbury Vale District Council has responsibility for conducting, at least annually, a review of effectiveness of its governance framework including the system of internal control. The review of effectiveness is informed by the work of the executive managers within the authority who have responsibility for the development and maintenance of the governance environment, the Head of Internal Audit's annual report, and also by comments made by the external auditors and other review agencies and inspectorates. 4.2. The Review of Effectiveness has to consider the following areas: The authority The executive The audit committee /overview and scrutiny committees /risk management committee The standards committee Internal audit Other explicit review /assurance mechanisms 4.3. The Authority 4.3.1. Aylesbury Vale District Council has adopted the Cabinet model of political management under the Local Government Act 2000. Ultimate authority rests with the Council meeting as a corporate body, but the responsibility for policy in specific areas is delegated to Cabinet and separate Committees. At the full Council meeting held on 24th May 2007 the Council formally approved the appointment of Cabinet Members and creation of full Committees. It also adopted the Scheme 9 of Delegation. This meeting also approved the arrangements for allocating seats to political groups on all Committees. 4.3.2. Minutes and papers for all Council and Committee meetings are in the public domain and are freely available on the Council's web site. 4.3.3. To encourage participation and accountability one hour is set aside for questions from members at every full ordinary Council meeting. 4.4. The Executive 4.4.1. Operational Management of the Council is a partnership between the Cabinet and the Corporate Management Team. 4.4.2. Formal Cabinet meetings are held monthly and the papers and Minutes are made available to the public on the AVDC web site. Time is set aside for questions from members at the start of every Cabinet meeting. The scheme of delegation sets out the areas for which each Cabinet post holder is responsible. Cabinet Members provide quarterly reports on their own areas to all members. 4.4.3. Regular informal Cabinet briefing sessions are held approximately once a fortnight at which the Corporate Team meet with the Cabinet and discuss Council business. Close working relationships are maintained as the Leader's, Cabinet Members' and Chief Executive's offices are all located close to each other. 4.4.4. The Corporate Management Team consists of the Chief Executive and three Directors, responsible for Resources, Communities and Development respectively. They meet every week. 4.4.5. Each Director has a number of Heads of Service who report direct to him. Regular Heads of Service meetings are held to which all Heads of Service are invited. These are used to ensure a consistency of information and approach to service provision across the Council. 4.4.6. Officers reporting to Heads of Service are involved in Management Forum meetings. Where required, full staff meetings are also arranged to inform all employees of significant changes, developments or requirements. A current set of such meetings is being used to discuss the new Corporate Plan. 4.4.7. Urgent items, or issues where Corporate Team require feedback from staff are sent out as a Core Brief. These are publicised down the management chain to reach all staff within 48 hours. Responses are collected and returned via the management hierarchy to Corporate Team. 10 4.4.8. All paid staff at the Council participate in a formal appraisal process. The Chief Executive's appraisal is conducted by the Leader of the Council. Targets agreed at appraisals are linked back to the Section and Service Plans, which are themselves derived from the Council's Corporate Plan and Corporate Aims and Objectives. 4.4.9. Information on each Service's performance is captured in standard indicators. The Performance Plus system is used to collate and present this information to Members each quarter. 4.4.10. In 2007 the Council entered the "Best Council to Work For" award run by The Times. AVDC was placed within the top twenty councils. An Action Plan has been prepared to address weaknesses revealed in the assessment process and AVDC has committed to maintaining and/or improving its position in this survey in the future. 4.5. The Audit Committee 4.5.1. As it is a new Committee, it has not yet produced its first Annual Report, but this will be prepared in the Spring of 2009 and circulated to all members who will have the opportunity to raise questions at full Council. 4.5.2. During the course of the year it became apparent that a minor change was needed to the original Terms of Reference to allow the Audit Committee to approve the Annual Accounts for the Authority. The Terms of Reference have now been amended to include this. 4.5.3. The effectiveness of the Audit Committee forms part of the overall assessment of the effectiveness of Internal Audit, discussed below. 4.5.4. Audit Committee meetings have included regular training and information sessions to ensure that Members are able to fulfil their responsibilities effectively. 4.5.5. The Audit Committee's Terms of Reference also include oversight of Risk Management arrangements at the Council. Training on Risk Management has been provided to Members of the Council as part of their induction programme and additional training has been made available to Members of the Audit Committee. 4.6. Overview & Scrutiny Committees 4.6.1. AVDC has four Scrutiny Committees which look at issues relating to Communities, Economy, Environment, Resources and Corporate Performance. Their role includes policy development, service reviews, holding the Cabinet to account, representing community interests and external scrutiny. They look at how and why decisions are made, how 11 services are functioning and whether there is scope for improvement and also consider wider community issues, particularly improving services to people living in the area. 4.6.2. An Annual Report on the work of the Overview and Scrutiny Committees is presented to Council each year. The report for 2007-2008 was presented to the full Council meeting held on 30th April 2008. It shows the number of meetings held, how many meetings each Member attended and also the number of decisions "Called in" for further consideration by each Scrutiny Committee. In addition it includes a form to encourage members of the public to suggest items which they would like to see raised by the Scrutiny Committees. 4.7. Standards Committee 4.7.1. The Chairman of the Standards Committee presented his Annual Report to full Council on 30th April 2008. This sets out the work of the Committee over the year, including information on the Committee's Role and Terms of Reference, an overview of its activities during the year and a report on the monitoring of complaints and compliance with the Code of Conduct. 4.7.2. Copies of the Annual Report are sent to all parish councils and published on the Council's web site. 4.7.3. The introduction of local filtering for complaints from May 2008 led the Standards Committee to review its role and composition during the year and a separate report to amend its composition in advance of the new responsibilities was presented to full Council on 6th February 2008. 4.7.4. Members of the Standards Committee have received training in their role and in the new duties required following the introduction of local filtering. 4.8. Internal Audit 4.8.1. The Internal Audit service operates under regulation 6 of the Accounts and Audit Regulations 2003 (amended 2006) and in accordance with the CIPFA Code of Practice for Internal Audit in Local Government. 4.8.2. The Council's Financial Regulations and Internal Audit Charter grant Internal Audit an unrestricted right of access to all Council records and property. They also confirm the organisational independence which allows Internal Audit to form an objective opinion on the adequacy and effectiveness of the whole system of internal control. 12 4.8.3. The Internal Audit Manager reports to the Head of Finance and may also report direct to the Chief Executive, Directors and Members of the Council if required. 4.8.4. A Probity Group consisting of the Chief Executive, Monitoring Officer, Section 151 Officer, Head of Internal Audit and Head of Personnel meets quarterly to discuss governance issues and significant risks to the Council. 4.8.5. The plan of work undertaken by Internal Audit is prepared with regard to the risks faced by the Council and following discussions with Directors and Heads of Service. It is presented to and approved by the Audit Committee. 4.8.6. The scope of work included in the annual audit plan extends beyond financial governance to include corporate governance, risk management, probity, effectiveness and compliance with laws and standards. 4.8.7. The outcome of all Audit reviews is reported to the responsible Director and Head of Service as well as to the Head of Finance (Section 151 officer) and Director of Corporate Resources. A summary of the report will also be presented to the Audit Committee. 4.8.8. Where recommendations for the improvement of controls or systems are made at the end of an Audit review, these are agreed with the responsible managers together with details of the required action and an expected date for implementation. These actions will then be included on a Tracker system which is used to monitor implementation. Reports from this system are provided to the Audit Committee on a regular basis. 4.8.9. Where action to address issues is not undertaken within the predeterrmine timescales the Audit Committee can and has required the responsible manager to attend a formal meeting and be personally accountable. 4.8.10. An internal review of the Effectiveness of Internal Audit was undertaken and the results presented to the Audit Committee in November 2007. 4.8.11. The Council's External Auditors conduct a formal review of the effectiveness of Internal Audit once every three years. This review was undertaken in March 2008 and has confirmed that the Internal Audit service meets the expected standards. External Audit will continue to rely on the work of Internal Audit where appropriate. 13 4.9. Risk Management 4.9.1. The Risk Manager carried out a review of the risk management arrangements shortly after being appointed on 1 November 2007. The processes were reviewed and improvements to the risk assessment and risk register process were introduced. 4.9.2. The Corporate Generic risks and those relating to the main objectives of the Council were reviewed and updated by Corporate Team. 4.10. Internal Control Self Assessments 4.10.1. In preparation for the Annual Governance Statement a formal review of the governance and control arrangements in their areas has been completed by each Head of Service. Results have been returned to and reviewed by the Section 151 Officer, Internal Audit Manager and Risk Manager. 4.10.2. Where the returns have reported significant corporate governance or control weaknesses, these are included in the section on Significant Governance Issues below. 4.11. Other Assurance and Review Mechanisms 4.11.1. Aylesbury Vale District Council is subject to external review by its officially appointed External Auditors, the Audit Commission. They publish a series of reports on the Council's performance each year, which are reported to the Audit Committee. They also produce regular progress reports on their work for this Committee and are able to raise any items of concern with them. 4.11.2. The Annual Audit and Inspection Letter, which provides an overall summary of the Audit Commission's assessment of the Council was presented to the Audit Committee meeting held on 17th March 2008. This is made available to the public by the Audit Commission and is also on the Council's web site. 5. Significant governance issues 5.1. A number of significant control issues were raised in the Statement of Internal Control published with the 2006-2007 Accounts in June 2007. These have been updated and included below: 5.2. Clarification of objectives & targets. Following the elections in May 2007 a full review of all the Council's objectives was undertaken and the new Corporate Plan prepared for the new Council. Action Plans are being developed for the Corporate Objectives and these now need to be filtered down into detailed operational areas. 14 5.3. Risk Management. A number of concerns were expressed about how the Risk Management arrangements were working. These have been addressed by the creation of a new post for a Risk Manager, who is reviewing and revising the Risk Management arrangements across the Council to increase their effectiveness. Improvements have been made to the process but prior to the Risk Manager starting some Service risk registers were not consistently being reviewed quarterly and changes documented. 5.4. Performance Indicators & Data Quality. Significant improvements have been made in arrangements to ensure that quality of information submitted for performance indicators is acceptable. External Audit's review of Data Quality resulted in the award of a level 3 assessment this year, an improvement on previous years. 5.5. Joint Working and Partnerships. A revised Partnership Protocol has been introduced and the list of Significant Partnerships reviewed and updated. A standard evaluation form to be completed for all significant partnerships is now in use. 5.5.1. While significant improvements have been made in the past year to arrangements for working with existing partnerships, the Council is proposing to enter into further agreements where Council resources will be committed to new and in some cases untested arrangements. These include: a. Pathfinder which is exploring shared working arrangements with other Buckinghamshire Councils; b. Local Area Agreement with other Councils and wider public sector organisations; c. Vale of Aylesbury Housing Trust joint arrangements, e.g. Choice Based Lettings; d. Growth Area Funding to be facilitated via Aylesbury Vale Advantage; e. A deal with the private sector to facilitate the Waterside retail and residential development in Aylesbury; f. Property Strategy which proposes the creation of a 50% Council owned Venture company to manage the commercial property portfolio. 5.5.2. The governance of all these arrangements needs to ensure full accountability for public money & openness of reporting. In addition new and revised Service Plans will need to be drawn up for the areas involved in these initiatives, to ensure that joint working arrangements meet the aspirations and objectives of all Councils involved. 5.6. Information Security & Data Protection. A corporate group chaired by the Corporate Director (Communities) has been formed to take responsibility for the management of Information Security policy issues. Work has been undertaken on revising AVDC's policies in this 15 area. Further work to introduce the new arrangements has been started and will continue into next year. 5.7. Contract Management. Following an Internal Audit review, Corporate Team have agreed improvements to the monitoring of contracts and procurement arrangements. Contract Regulations are being updated to include the new requirements. 5.8. Reconciling Financial & Service Information. Consideration has been given to integrating financial reporting with the performance reports produced from the new Performance Management system. However, the requirements of the two systems are not easily combined and progress has been limited. This is an area which will receive further consideration in the new year. The following new governance issues have been raised during the preparation of the Annual Governance Statement this year: 5.9. Business Continuity Plan Testing and adequate accommodation arrangements for contingency situations. Progress on Business Continuity Plans is being reported to and monitored by the Audit Committee on a quarterly basis. 5.10. Local Development Framework Project needs to be reviewed and refocused following changes to strategy. 5.11. Delivery of Capital Projects The Council has a number of high profile projects in progress, including the building of a new theatre in Aylesbury. There is extensive public interest and resources in the Capital programme are limited. The Council must ensure that resources and risks are managed and prioritised effectively and that the budget is not overspent. 5.12. Project Management framework. Managers must ensure that all major projects are following the corporate standards and risk registers are reviewed on a regular basis. 16 6. Assurance Statement 6.1 We have been advised on the implications of the result of the review of the effectiveness of the governance framework by Audit Committee and plan to address weaknesses and ensure continuous improvement of the system in place. 6.2 We propose over the coming year to take steps to address the above matters to further enhance our governance arrangements. We are satisfied that these steps will address the need for improvements that we identified in our review of effectiveness and will monitor their implementation and operation as part of our next annual review. Signed: Leader Signed: Chief Executive on behalf of Aylesbury Vale District Council. 17 Independent auditor's report to the Members of Aylesbury Vale District Council Opinion on the financial statements I have audited the Authority accounting statements and related notes of Aylesbury Vale District Council for the year ended 31 March 2008 under the Audit Commission Act 1998. The Authority accounting statements comprise the Authority Income and Expenditure Account, the Authority Statement of the Movement on the General Fund Balance, the Authority Balance Sheet, the Authority Statement of Total Recognised Gains and Losses, the Authority Cash Flow Statement, the Authority Housing Revenue Account, the Authority Collection Fund and the related notes. These accounting statements have been prepared under the accounting policies set out in the Statement of Accounting Policies. This report is made solely to the members of Aylesbury Vale District Council in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 36 of the Statement of Responsibilities of Auditors and of Audited Bodies prepared by the Audit Commission. Respective responsibilities of the Head of Finance and auditor The Head of Finance's responsibilities for preparing the financial statements in accordance with relevant legal and regulatory requirements and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2007 are set out in the Statement of Responsibilities for the Statement of Accounts. My responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). I report to you my opinion as to whether the Authority accounting statements present fairly, in accordance with relevant legal and regulatory requirements and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2007, the financial position of the Authority and its income and expenditure for the year. I review whether the governance statement reflects compliance with 'Delivering Good Governance in Local Government: A Framework' published by CIPFA/SOLACE in June 2007. I report if it does not comply with proper practices specified by CIPFA/SOLACE or if the statement is misleading or inconsistent with other information I am aware of from my audit of the financial statements. I am not required to consider, nor have I considered, whether the governance statement covers all risks and controls. Neither am I required to form an opinion on the effectiveness of the Authority's corporate governance procedures or its risk and control procedures. I read other information published with the Authority accounting statements and consider whether it is consistent with the audited Authority accounting statements. This other information comprises the Explanatory Foreword. I consider the implications for my report if I become aware of any apparent misstatements or material inconsistencies with the Authority accounting statements. My responsibilities do not extend to any other information. Basis of audit opinion I conducted my audit in accordance with the Audit Commission Act 1998, the Code of Audit Practice issued by the Audit Commission and International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Authority accounting statements and related notes. It also includes an assessment of the significant estimates and judgments made by the Authority in the preparation of the Authority accounting statements and related notes, and of whether the accounting policies are appropriate to the Authority's circumstances, consistently applied and adequately disclosed. I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the Authority accounting statements and related notes are free from material misstatement, whether caused by fraud or other irregularity or error. In forming my opinion I also evaluated the overall adequacy of the presentation of information in the Authority accounting statements and related notes. Opinion In my opinion the Authority financial statements present fairly, in accordance with relevant legal and regulatory requirements and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2007, the financial position of the Authority as at 31 March 2008 and its income and expenditure for the year then ended. Conclusion on arrangements for securing economy, efficiency and effectiveness in the use of resources Authority's Responsibilities The Authority is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance and regularly to review the adequacy and effectiveness of these arrangements. Auditor's Responsibilities I am required by the Audit Commission Act 1998 to be satisfied that proper arrangements have been made by the Authority for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires me to report to you my conclusion in relation to proper arrangements, having regard to relevant criteria specified by the Audit Commission for principal local authorities. I report if significant matters have come to my attention which prevent me from concluding that the Authority has made such proper arrangements. I am not required to consider, nor have I considered, whether all aspects of the Authority's arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively. Conclusion I have undertaken my audit in accordance with the Code of Audit Practice and having regard to the criteria for other local government bodies specified by the Audit Commission and published in December 2006, I am satisfied that, in all significant respects, Aylesbury Vale District Council made proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2008. Best Value Performance Plan I have issued our statutory report on the audit of the authority's best value performance plan for the financial year 2007/08 on 7 December 2007. I did not identify any matters to be reported to the authority and did not make any recommendations on procedures in relation to the plan. Certificate I certify that I have completed the audit of the accounts in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission. Mick West Address Unit 5, Isis Business Centre, Horspath Road, Oxford OX4 2RD Date 10 November 2008