West Devon Borough Council

Audited Statement of Accounts

2021/2022

Contents                                                                                                      

 

                                                                                                                                                                                                                          Page

 

 

Section 1 – Narrative Statement                                                                 3 - 26

 

·          Introduction

·          Review of the Year – the Revenue Budget

·          Key areas to note from the 2021/22 Statement of Accounts      

·          Financial needs and resources

·          Looking forward to the future and next steps

·          Corporate Performance for 2021/22

·          Principal risks and uncertainties           

 

Section 2 - Core Financial Statements                                                       27 - 32

 

·          A. Comprehensive Income and Expenditure Statement 

·          B. Movement in Reserves Statement                 

·          C. Balance Sheet

·          D. Cash Flow Statement                                     

 

Section 3 - Notes to the Financial Statements                                          33 - 113

 

Section 4 - Collection Fund                                                                         114 - 118

 

Section 5 - Statement of Responsibilities/Approval of the Accounts    119 - 120

 

Section 6 - Auditors’ Report                                                                       121 - 126

 

Section 7 - Glossary of Terms                                                                    127 – 130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Section 1

 

 

Narrative Statement

 

 

 

 

 

 

 

Introduction to the 2021/22 Statement of Accounts by Councillor Neil Jory, Leader of West Devon Borough Council

I am very pleased to welcome you to the 2021/22 Statement of Accounts for West Devon Borough Council which summarises the work the Council has been involved in over the past year.

The Council has delivered on many of the targets within ‘The Plan for West Devon’. This also highlights both our ambitions and the manner in which West Devon has responded to recent events, as it works its way out of the Covid-19 pandemic and into the emerging problems of a post-Covid World. This has been complicated by the spectre of a major war in Europe.

I am immensely proud of the way that our Borough as a whole has responded over the past couple of years. Residents have supported each other, their local communities and local businesses throughout the period. The manner of that response has made our jobs as Councillors, at County, Borough, Town and Parish levels, that little bit easier despite the difficulties we all faced. I am also appreciative of the work of officers of the Council who have continued to adapt to ways of working and efficiently and effectively distributed millions of pounds of support to businesses, via a plethora of different schemes, at a time when they most needed it.

One major boost for the Borough and Okehampton, was the reintroduction of regular rail services to the town’s station. We are sure that this project will give an economic boost to the area, the rest of the Borough and beyond. We are grateful to all those that worked with Devon County Council, Great Western Rail, Network Rail, West Devon, Okehampton Town Council and the OkeRail Group to bring this about. We continue to work with our partners to provide additional access via a proposed West Devon Transport Hub to that line, in order to enhance the service still further.

Our contracted Waste and Recycling Service has also performed admirably for most of that period. I have the utmost admiration for the staff there, the job they do and the manner in which they carry it out. However, that service has suffered from the national shortage of HGV drivers and resourcing difficulties which have resulted in some collection problems. We continue to work with the contractor to find ways to meet the high performance standards to which we aspire.

Despite all the difficulties and problems, there were many positive achievements over the year and the Council will report a balanced budget. The next few years will continue to be challenging – we need to deliver more around our climate change and biodiversity targets, respond to the housing crisis, provide assistance to residents struggling with high cost of living increases, welcome refugees to the Borough under the Homes for Ukraine scheme and so on.

I am pleased to report a small surplus for the 21/22 year of £196,000 (2.7% of the net budget of £7.3m).  This demonstrates the Council’s financial resilience and actions taken to maintain longer term stability in service delivery going forward. This surplus will go into the Council’s unearmarked reserves, with a view to it being reinvested in our core services and The Plan for West Devon.

Councillor N Jory, Leader of the Council

Foreword by the Chief Executive

 

I have been incredibly impressed by the efforts of staff across the Council to support our residents and communities. We began the year continuing with our response to the global pandemic and as we ended the year, teams from across the Council were stepping up to support the Homes for Ukraine scheme. While our staff have continued to work from home throughout the pandemic, we have started to see a return to a form of normality, bringing our office staff together and working face to face.

 

I have to say, personally it has been fantastic to begin meeting colleagues in the office for the first time in over two years! I’ve also been pleased to have been able to begin joining local Members in their Towns and Parishes, experiencing first hand the incredibly positive work being delivered across the Borough. I look forward to being able to carry out many more of these insightful visits in the coming year.

 

It is great achievement that West Devon Borough Council and South Hams District Council won the Gold award at the iESE Public Sector Transformation Awards in 2022. The Councils installed software called Liberty Create which enabled both Councils to quickly set up an online system for businesses to apply for emergency Government business grants. The software saved the Councils time and money (£450,000) and also helped us to respond to the needs of our business community when they needed us most. In West Devon, £33m in COVID business support grants have been awarded by the Council over the last two years, providing a vital lifeline across West Devon’s business sectors.

 

The Borough Council has also been highly commended at the 2022 Local Land Charges Awards for Excellence. Typically the Council handles about 2,000 searches per year and aims for a 5 day turn around on all searches submitted to them. I am proud of the team for consistently providing timely, accurate property searches to conveyancers, especially during the challenging property market of the last 12 months. This reward is particularly unique, as the commendations are given by the customers who use the service.

 

Yet again, the Council has managed to balance its budget exceptionally well while continuing to provide a level of good service to residents of the Borough. Time and again, our staff have impressed me with their efforts to support the people and communities of West Devon. There are ongoing challenges presented by COVID-19 and we continue to work with our waste contractor to find ways to meet the high performance standards to which we aspire. We’re responding to new challenges that continue to appear, like making sure we offer adequate support to our Ukrainian guests through the Homes for Ukraine scheme, but I have no doubt that our teams will continue to rise to those challenges

We know that the year ahead will be challenging for many across the Borough, as the cost of living continues to provide day to day challenges. We will do all we can to support our residents and businesses by delivering the essential support you need.

Andy Bates, Chief Executive

 

Message from the Section 151 Officer and Corporate Director for Strategic Finance - Lisa Buckle

The Statement of Accounts has been prepared in accordance with the requirements of the Chartered Institute of Public Finance and Accountancy (CIPFA). The aim of the Accounts is to enable members of the public, Council Members, partners, stakeholders and other interested parties to:

·         Understand the financial position of the Council as at 31 March 2022 and how the Council has performed against the budget set for 2021/22

·         Be assured that the financial position of the Council is secure, with a degree of resilience.

This Narrative Statement provides information about West Devon Borough Council, including the key issues affecting the Council and its Accounts. It is very important to us to provide residents and other stakeholders with the confidence that the public money for which we are responsible has been properly accounted for.

 

Prudent financial management in the past, has meant that the Council was in a relatively healthy position financially before the pandemic hit. When Councillors set the Budget for 2020/21 in February 2020, no-one could have foreseen how our future finances and everyday lives were about to be impacted. The pandemic has also changed the world we operate in. Across the Council, staff have been called upon to continue the efforts to help local communities against the impact of the pandemic.

 

The management of risk and promoting financial resilience is a key principle of our budget strategy and this has helped facilitate our response. Key to the authority’s financial resilience are our reserves, which are at a prudent level.

 

The recent challenges presented by the war in Ukraine with its broader implications along with the current ‘cost of living crisis’ will have an impact on the Council’s finances as well as the finances of the residents of the Borough. The Council’s approach to delivering services remains steadfast.

 

The financial standing of the Council is secure in the immediate future, but there is still much work to do to ensure the long term financial sustainability of the Council.

 

There is no indication yet of the detailed local government funding levels for 2023/24 and beyond and therefore there are many uncertainties in preparing for the challenges we know we will face in the near future. These include the review of local authority funding as part of the Government’s fair funding review, the business rates baseline reset and changes to the New Homes Bonus scheme. We will continue to assess the impacts on our finances and our communities through long term strategic financial planning.

 

Mrs Lisa Buckle BSc (Hons), ACA

Corporate Director for Strategic Finance (S151 Officer)

NARRATIVE STATEMENT – INTRODUCTION

 

1.         Each year West Devon Borough Council publishes a Statement of Accounts that incorporates all the financial statements and disclosure notes required by statute. The Statement of Accounting Policies summarises the framework within which the Council’s accounts are prepared and published.

REVIEW OF THE YEAR – THE REVENUE BUDGET

 

2.         The 2021/22 budget for West Devon was £7.30 million. A surplus of £196,000 means that the actual spend was 2.7% less than the budget. This saving will go into the Council’s Unearmarked Reserves which now stand at £1.49 million. The main components of the General Fund budget for 2021/22 and how these compare with actual income and expenditure are set out below:

	Estimate £000	Actual £000	Difference Cost/ (Saving) £000
Cost of services	7,405	7,099	(306)
Parish Precepts	1,763	1,763	-
Interest and Investment income	(105)	(35)	70
Amount to be met from Government grants and taxation	9,063	8,827	(236)
Financed from:
Business Rates (baseline funding level)	(1,648)	(1,648)	-
Business Rates (achieved over baseline funding level)	(25)	(25)	-
Business Rates Pooling Gain - See Note* below	(40)	-	40
Council Tax	(6,653)	(6,653)	-
Deficit on Collection Fund	10	10	-
Rural Services Delivery Grant	(487)	(487)	-
Lower Tier Services Grant	(70)	(70)	-
Budgeted Earmarked Reserve Contributions	(150)	(150)	-
UNDERSPEND FOR 2021/22	-	(196)	(196)

 

Note* - The 2021/22 Business Rates Pooling Gain of £127,000 has been transferred to the Business Rates Retention Earmarked Reserve and has therefore not been used to support the cost of services in 2021/22.

 

3.         The movement in the General Fund Balance is shown in the Movement In Reserves Statement in Section 2B and can be summarised as follows:

	£000
General Fund Balance (un-earmarked revenue reserve) at 1 April 2021	(1,294)
Surplus for the 2021/22 financial year	(196)
General Fund Balance (un-earmarked revenue reserve) at 31 March 2022	(1,490)

*On including the earmarked reserves, Total General Fund Reserves are £10.68 million.

 

4.         The surplus on the General Fund Balance of £196,000 is essentially a break-even position and represents less than 0.9% of the Council’s gross turnover in 2021/22 of £23 million.

 

5.         The table below shows a reconciliation of the position shown on the bottom of the Comprehensive Income and Expenditure Statement and the underspend for 21/22.

	£000
Total Comprehensive Income and Expenditure Statement	(5,373)
Surplus on the revaluation of Property, Plant and Equipment	767
Deficit on the revaluation of Financial Instruments	83
Remeasurements of the net defined benefit pension liability	4,038
Transfers to earmarked reserves	248
The detail of the items below are shown in Note 7 ‘Adjustments between Accounting Basis and Funding Basis under Regulations’ in the General Fund Balance column.
Adjustments primarily involving the Capital Adjustment Account	(1,001)
Adjustments primarily involving the Capital Grants Unapplied Account	237
Adjustments primarily involving the Capital Receipts Reserve	13
Adjustments primarily involving the Pensions Reserve	(1,116)
Adjustments primarily involving the Council Tax Collection Fund Adjustment Account	258
Adjustments primarily involving the Business Rates Collection Fund Adjustment Account	1,653
Adjustments primarily involving the Accumulated Absences Account	(3)
Underspend for the 2021/22 financial year	(196)

6.         A summary of the main differences from budget in 2021/22 is provided below:

ANALYSIS OF VARIATIONS (% column shows variation against budget)	£000	% variation
Reductions in expenditure/additional income
Recycling Credits and Dry Recycling - additional income (transferred to the Waste Earmarked Reserve as shown below)	(250)	75.8%
Housing Benefit payments – mainly unbudgeted Housing Benefit overpayment recoveries	(82)	-
Salaries – mainly vacancy savings	(81)	1.9%
Homelessness – savings in Homelessness prevention expenses	(77)	82.8%
Savings on staff and Member travel and expenses	(30)	33.0%
Trade Waste – additional income	(28)	186.7%
Street Cleaning – mainly an underspend on cleansing contract costs	(24)	5.0%
Garden Waste – additional income	(17)	6.9%
Land Charges – additional income	(13)	13.7%
Compensation from the Government income guarantee scheme for sales, fees and charges for April to June 21 – mainly for car parking income (£44k)	(46)	-
Increases in expenditure/reduction in income
Car Parking income – net loss is £82,000 after taking into account the Government sales, fees & charges compensation for April to June 21 of £44k	126	11.0%
COVID-19 expenditure - extra housing costs, ICT and remote working, waste, cleaning costs and community support costs.	123	-
Investment income - shortfall in treasury management investment income due to low base rates	70	66.7%
ICT software and support contracts – additional costs from above inflation increases, increased number of users on the Council’s network and disability access legislation compliance.	58	11.6%
Waste & Recycling – the three weekly waste collection trials were not extended to the whole of the Borough due to significant structural changes in the waste industry and other external pressures such as the national LGV driver shortage. Therefore the additional income target in 2021/22 of £50,000 was not achieved.	50	-
Joint Local Plan contribution	25	-
Council Tax Collection – shortfall in budgeted income from summons costs	13	12.7%
Other small variances	7	-
Sub Total	(176)
Less: Transfer to the Waste and Cleansing Options Review Earmarked Reserve: (Additional recycling credits and dry recycling income transferred to the waste earmarked reserve) – Council CM42 4th December 2018	250	-
Add: Transfer from the COVID Earmarked Reserve: (This is Government funding that was used to support the cost of Covid-19 expenditure and net losses on car parking income in 2021/22) – Council CM39 28th Sept 2021	(190)	-
Add: Transfer from the Salary Savings Earmarked Reserve: (to support salary costs) – Council CM57 15th February 2022	(80)	-
TOTAL UNDERSPEND FOR 2021/22	(196)	(2.7%)

The 2021/22 budget for West Devon was £7.30 million but the actual spend was 2.7% lower, providing an underspend of £196,000 as shown above.

 

 

KEY AREAS TO NOTE FROM THE 2021/22 STATEMENT OF ACCOUNTS

 

Pension Liability

 

7.         International Accounting Standard 19 (IAS19) requires local authorities to recognise pension assets and liabilities within their accounts. The overall impact on the General Fund of the IAS 19 entries is neutral.

 

8.         The Actuary has estimated a net deficit on the funded liabilities within the Pension Fund as at 31 March 2022 of £24.2 million, which compares to a deficit of £27.1 million as at 31 March 2021. The deficit is derived by calculating the pension assets and liabilities at 31 March 2022. See Note 36 for further information.

 

Business Rates

 

9.         The Local Government Finance Act 2012 introduced a Business Rates Retention Scheme (BRRS) that enabled local authorities to retain a proportion of the business rates generated in their area, with effect from 1 April 2013. There is a risk of volatility in the system because Councils are exposed to any loss of income if businesses go into decline or if a Council’s income from business rates falls due to successful business rates appeals.

 

10.      Provision is made for likely refunds of business rates as a result of appeals against the rateable value of business properties. The provision is based on the total value of outstanding appeals at the end of the financial year as advised by the Valuation Office Agency. Using this information, an assessment was made about the likely success rate of appeals and their value.

 

11.      In 2021/22 there has been an £86,000 increase in the provision for appeals within the Collection Fund. The balance on the Business Rates Collection Fund at 31 March 2022 is a deficit of £3.09 million (£7.21 million in 2020/21). West Devon Borough Council’s share of the deficit is 40% (£1.23 million).

 

12.         Monies are set aside in the Business Rates Retention Earmarked Reserve to mitigate the impact of volatility in Business Rates income due to the complex accounting arrangements for Business Rates. In 2021/22 the balance of the Business Rates Retention Scheme (BRRS) earmarked reserve reduced by £0.17m to £1.09m as at 31 March 2022 (£1.26m at 31 March 2021). Some of this additional business rates income is due to timing differences in the way the Collection Fund operates and part of the funding will be needed to meet future years’ budgets for business rates, in particular when business rates baselines are due to be re-set in the future.

 

13.      In addition, a new earmarked reserve was created in 2020/21 called the S31 Compensation Grant (Business Rates) Reserve to hold the S31 grant (£2.46m) received in 2020/21 to offset the business rate reliefs given to businesses during the pandemic and the Tax Income Guarantee S31 grant for Business Rates (£0.15m). The balance on this reserve as at 31 March 2021 was £2.61m. Under current Collection Fund accounting rules, the S31 grants received will not be discharged against the Collection Fund deficit until the following year. In 2021/22 further S31 grants were transferred to the S31 Compensation Grant (Business Rates) Reserve (£1.39m) and S31 grant received in 2020/21 was discharged to the Business Rates Collection Fund (£2.37m). This compensation grant will continue to be applied to the Collection Fund over the next three years to smooth the impact of the Business Rates deficit. The balance on this reserve as at 31 March 2022 is £1.63m.

 

Trading Company

 

14.      West Devon Borough Council and South Hams District Council set up a trading company, Servaco Limited, on 4th September 2014. This is a company limited by shares. The company has not traded in 2021/22 and a set of statutory dormant Accounts will be filed with Companies House for the period 1 April 2021 to 31 March 2022.  The future of Servaco Limited will be reviewed during 2022/23.  

 

Borrowing

 

15.      In 2021/22 the long term borrowing of the Council decreased from £28,342,000 (20/21) to £27,726,000. Short term borrowing increased from £603,000 to £615,000.

 

 

Capital Spending

 

16.      The Council spent £1.1 million on capital projects in 2021/22. The main areas of expenditure were as follows:

 

·         Housing renovation grants including disabled facilities grants (£0.6m)

 

·         IT schemes (£0.2m)

 

·         Purchase of property (£0.2m)

 

The capital programme is funded from capital receipts, capital grants, external contributions, earmarked reserves and internal borrowing (please see Note 33).

 

 

 

Financial Instruments – IFRS9 Election to treat Equity Instruments as Fair Value through Other Comprehensive Income

 

17.      In February 2017, the Council made the decision to invest £500,000 in the CCLA Local Authority Property Fund, with the investment being placed in April 2017.

 

18.      Upon transition to IFRS 9 – Financial Instruments on 1 April 2018, and in accordance with paragraphs 5.7.5 and 7.2.8 (b) of IFRS9, West Devon Borough Council made an irrevocable election to present in other comprehensive income, changes in the fair values of its equity instruments. These investments are eligible for the election because they meet the definition of equity instruments in paragraph 11 of IAS32 and are neither held for trading (the Council holds this investment as a long term strategic investment) nor contingent consideration recognised by an acquirer in a business combination to which IFRS3 applies. They are not considered to be puttable instruments because the Council does not have a contractual right to put the instrument back to the issuer for cash.

 

19.      A summary of the position of these equity instruments as at 31 March 2022 is shown below:

 

	Purchase cost	Fair Value at 31 March 2022	Movement in Financial Instruments Revaluation Reserve 2021/22
	£000	£000	£000
Equity Instrument
CCLA Local Authorities Property Fund	500	553	82

 

 

FINANCIAL NEEDS AND RESOURCES

 

20.      The Council maintains both capital and revenue reserves.  The provision of an appropriate level of balances is a fundamental part of prudent financial management, enabling the Council to build up funds to meet known and potential financial commitments. 

21.      General Fund reserves (which include earmarked reserves) have increased by £0.44m from the preceding year and stand at £10.68m at 31 March 2022.  This reflects the 2021/22 surplus of £196,000 and an increase in earmarked reserves of £248,000.

 

 

22.      The total Earmarked Reserves balance at 31 March 2022 of £9.2m includes £1.6m held in the Business Rates s31 Compensation Grant Reserve. This is due to a technical accounting adjustment where Councils were compensated for the business rates holidays that were announced by the Government for the retail, hospitality and leisure sectors in 2020/21 and 2021/22 (this funding is in the S31 Compensation Grant Reserve). This temporary increase in reserves will reverse back out again in the 2022/23 Accounts, to fund the deficit on the Collection Fund. Therefore this is not money which is available for the Council to spend and it is important that this is not misinterpreted in the Accounts, as this is a national issue.

23.      The General Fund Balance (un-earmarked reserve) has increased by £196,000 in 2021/22 and totals £1.490m. Revenue reserves may be used to finance capital or revenue spending plans. The level of Reserves are assessed as adequate for the Council’s operations.

24.      Capital Reserves are represented by capital receipts and capital contributions unapplied. The balance at 31 March 2022 amounts to £0.409m, compared to £0.377m at the end of the previous year.

25.      There are a number of Unusable Reserves which include the Revaluation Reserve, Capital Adjustment Account and Pensions Reserve which are subject to complex accounting arrangements. The Revaluation Reserve and Capital Adjustment Account are used primarily to account for changes in fixed asset values associated with revaluations and new capital expenditure and as such cannot be used to finance capital or revenue expenditure. In addition the Financial Instruments Revaluation Unusable Reserve was created in 2018/19 following the implementation of IFRS9 Financial Instruments on 1 April 2018.

 

26.      When reviewing the amount of overall reserves held, consideration should be given to the possible implications of the Pension Fund deficiency disclosed within the notes to the balance sheet.  The requirement to recognise the net pension liability in the balance sheet has reduced the reported net worth of the Authority by £24.2 million at 31 March 2022.  This disclosure follows the implementation of the International Accounting Standards (IAS 19).  This standard requires local authorities and other businesses to disclose pension assets and liabilities within the balance sheet.

27.      It is important to gain an understanding of the accounts to appreciate the nature of this reported deficiency, which is based on a “snapshot” of pension assets and liabilities at the year end.  This is quite different from the valuation basis used for the purposes of establishing the employer’s contribution rate and fund shortfall, which are calculated using actuarial assumptions spread over a number of years. 

 

 

 

 

 

Annual Governance Statement (AGS)

 

28.      The Council’s Annual Governance Statement sets out the arrangements for governance which the Council has in place. The AGS is published alongside the Accounts for 2021/22.

 

Housing Crisis

 

29.      In February this year, the Council declared a housing crisis. This called for recognition of the current difficulties in the housing market and the effect on the affordability of good quality housing within the Borough.

 

30.      House prices in West Devon are the least affordable in Devon with average housing costs at over 12 times the average salary. An almost complete lack of long term rented accommodation is one of the leading problems contributing to the crisis, alongside the increasing trend for people to move to the area from urban locations. Whilst the Joint Local Plan is working well and we are beating the targets for new houses, this national initiative is not enough to match our current local situation. The Council has identified 15 core actions to help resolve the crisis. This will be a key focus for us in the coming year.

 

A Plan for West Devon

 

31.      During the year we continued the development of a new corporate strategy for the Council, now known as ‘A Plan for West Devon’.

 

32.      A Plan for West Devon was developed over 12 months in response to the impacts of Covid-19 and a post-Brexit UK. A series of workshops were held with our Councillors and a wide range of partner organisations were consulted to shape our focus for the next three years. The strategy is underpinned by a detailed delivery plan setting out specific actions that we will undertake in each of the years.

 

33.      Each meeting of the Overview and Scrutiny committee now considers a detailed update on one of the themes. Furthermore, we have implemented a quarterly ‘Integrated Performance Management Report’ process to highlight progress and key risks related to the strategy to our Hub Committee.   

 

 

 

Annual Report of Achievements

 

34.      The Council has prepared an Annual Report of Achievements setting out the key activities it has been involved in during the year.

 

 

35.      The Annual Report was considered by Hub Committee at their meeting on 7^th June 2022 and can be found on our Website.

 

 

LOOKING FORWARD TO THE FUTURE AND NEXT STEPS

 

Continuing to respond to the housing crisis

 

36.      A significant focus for us during 2022/23 will be on delivering our action plan to address the Housing Crisis in West Devon. We will be pressing ahead with our action plan while continuing to deliver on our longer-term housing strategy,

37.      We have already committed to increasing capacity within the Housing Team and recruitment to these roles will be carried out in the coming year.

 

Climate Emergency Response

38.      This year will be the third year of delivering of our Climate and Biodiversity Emergency Action Plan. We will be continuing to deliver on those actions including ensuring the Council delivers on commitments including progressing plans for an electric vehicle fleet and continuing with our wild flowering on Council land.

 

Homes for Ukraine

39.      As the conflict in Ukraine continues, we will be ensuring that the Borough Council develops a package of support for our Ukrainian guests and those residents stepping up to offer them a safe space to live. We’ll be working closely with the voluntary sector to ensure wrap-around support and to ensure that as many host/sponsor placements as possible are maintained as they come towards the end of the initial 6-month term.

 

Levelling up

 

40.      A significant focus for the Council in the coming 12 months will be submitting bids for Levelling Up funding and the Shared Prosperity Fund. We’ll be identifying and working up bids for projects that can make a positive difference to the lives of our communities and businesses in the future.

 

Our financial future

 

41.      The financial standing of the Council is secure in the immediate future, but there is still much work to do to ensure the long term financial sustainability of the Council. In his speech to the Local Government Association (LGA) conference on 28 June 2022, the Secretary of State, Michael Gove MP, promised to give local authorities greater “financial certainty”. It was confirmed that a 2-year financial settlement will be introduced.  The proposal for a 2-year settlement suggests that there will be rollover settlements in both 2023/24 and 2024/25, meaning financial settlements that are broadly similar to 2022/23.  The Fair Funding Review, business rates baseline reset, and other funding reforms now look set to be pushed back to 2025/26.  It also suggests that the 2021 Census might not be reflected in funding allocations until 2025/26. In addition, the timing of the cessation of the current New Homes Bonus scheme is not clear, but if it does continue, it will be smaller in value with no historic legacy payments.

 

42.      Pushing these major changes back to 2025/26 means that they can be aligned with the next spending review period (the current spending review runs to 2024/25). 2025/26 now looks like it is shaping up to be a very significant financial year for local government, incorporating a new spending review, the 2021 Census and funding reforms. 

 

 Going Concern

 

43.      As highlighted above there is a high degree of uncertainty about future levels of funding for local government. However, the S151 Officer is keeping a close watch on developments and planning for this longer-term uncertainty. For example, the Council has a Financial Stability earmarked reserve to help secure financial stability for the longer term. This will include addressing any future financial pressures from changes in local government funding levels. The balance on the Financial Stability earmarked reserve at 31 March 2022 is £0.454m.

 

44.      Based on the S151 Officer’s management assessment (which has included consideration of the Government support available, the Council’s current level of reserves, the level of working capital including cash and investments, a sensitivity analysis on forecast cashflows, income from local taxation and borrowing headroom etc.), there is no material uncertainty and as a result the Accounts for 2021/22 are prepared on a going concern basis.

 

Issue of the Accounts

 

45.      The Corporate Director for Strategic Finance (Section 151 Officer) authorised the audited Statement of Accounts 2021/22 for issue on 22 November 2022. Events taking place after this date are not reflected in the financial statements or notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CORPORATE PERFORMANCE FOR 2021/22

 

The Council adopted its Plan for West Devon in September 2021 and regularly reports on the performance of the delivery plan to both Overview and Scrutiny and the Hub Committee. At the end of the year, the performance for the priorities within the strategy is as set out below. Overall, positive progress has been made across all themes. Each theme has a lead officer and lead Member who meet regularly to monitor progress. Performance against each theme is also considered by an Advisory Group consisting of 6-8 Councillors.

 

 

 

The performance by theme is as set out below.

 

Strengthening Communities 

 

From awarding funding to support community schemes to ensuring we’ve continued to deliver leisure facilities within the Borough.

 

 

Community Wellbeing

Ensuring the wellbeing of our residents has continued to be a major focus for the Council and we’ve made positive progress on this front.

 

Improving Homes

We know that having a decent, safe home is essential for the wellbeing of all residents. This year we’ve taken the step of declaring a Housing Crisis in West Devon to highlight the significant shortage of homes within the Borough.

 

Thriving Economy

2021/22 continued to see sectors within our economy impacted by the Covid-19 pandemic, but we’ve taken positive steps to support West Devon businesses into the future.

 

Natural Environment

During the year we have continued to progress delivery of our ambitious Climate and Biodiversity Action Plan as well as delivering on our wider commitments for our Natural Environment.

 

Built Environment

During the year we were able to support a number of events across the Borough that celebrated our heritage and also took steps to ensure that our Planning Service adapts to meet the needs of residents. We were also ‘Highly Commended’ at the 2022 Land Data Local Land Charges awards.

 

Inclusive Services

During 2021/22 we’ve continued implementing systems that improve our online access for residents. We had 534,600 visits to our website in 12 months and were pleased to be ranked 22^nd out of all Local Authorities for the accessibility of our online pages.

 

 

Maximising Resources

During  the year our ICT transformation programme was recognised at a national level when we won Gold for implementation of customer friendly ICT.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

A risk and opportunity management strategy is in place to identify and evaluate risks. There are clearly defined steps to support better decision making through the understanding of risks, whether a positive opportunity or a threat and the likely impact. The latest update was presented to the Audit Committee on 9^th December 2021 and a high-level summary considered by Hub Committee as part of the quarterly Integrated Performance Management Reports.

 

 

 

Risk Title	Description	Latest update to Audit (November 2021)
Adherence to Medium Term Financial Strategy	Failure to sustain a robust on-going medium term financial strategy in WDBC with adequate reserves to meet unforeseen circumstances, due to cost pressures and reduced income, council decisions, changes in Government policy with regard to business rates and affordable housing; Potential impact on delivering the MTFS, particularly if national/regional businesses successfully appeal against business rate valuations or litigation proceedings / legal challenges / planning appeals, etc.	The Council has closed its Accounts for 2020/21 and the Audited Accounts were published on 2nd November 2021. The Council reported a small surplus for the 20/21 year of £75,000 (1%) against the Council's total net budget of just over £7million. The Council has to be entirely independent to fund all of its services, as the Borough Council no longer receives any main Government Grant (Revenue Support Grant). The Council has had a reduction in core Government funding of £3million per year since 2010. The Council prepared its Medium-Term Financial Strategy for the period covering 2022/23 to 2024/25 and this was presented to the Hub Committee at its September 2021 meeting. The Council will continue to respond to national funding consultations and lobby alongside other Devon Councils and national organisations such as the District Councils' Network for a multi-year financial settlement, to aid long term strategic financial planning. The Fair Funding Review and the re-setting of the Business Rates baseline will be deferred until at least 2023/24. The Council is also awaiting further Government announcements on the New Homes Bonus funding. The Budget Gap over the next two years is predicted to be in excess of £0.5million and work is already underway to address this. Much will also depend on the next Government financial settlement for the three year period from 2022/23 and confirmation on funding items like Negative Revenue Support Grant, which has been assumed in the modelling to start impacting in 2023/24 onwards.
Covid-19 Impact on Services	The risk is that Covid-19 (Coronavirus) will impact on the ability for the Council to deliver its services leading to a drop in operational performance and customer satisfaction. There is the potential for additional financial implications due to increased demand for services or a reduction in income.	Our office based staff continue to work from home in order to mitigate the risk of spreading Covid 19 and in turn reducing the capacity of our workforce. Our frontline staff continue to employ safety measures to reduce the risk of transmission of Covid with risk assessments continually being updated.   Member meetings have resumed face to face for many months and with the exception of wearing facemasks when moving around the building and maintaining social distancing, other safety measures have been removed. This has not so far resulted in any significant outbreaks. We will continue to monitor the impact on services (particularly given Omicron variant developments) over the winter but overall the impact on services to this point has not been significant.
Inadequate Staffing Resource	The risk is that the Council fails to have sufficient staffing arrangement resulting in a loss of staff morale, and inadequate resources for training and reskilling in an ongoing period of change. Failure to engage staff resulting in uncertainty regarding changes in working practices and job security. Particular risk in relation to future terms and conditions. Cost and time of retraining/up-skilling staff. Unrealistic expectations in relation to staffing capacity.	Good progress has been made in reducing this risk. - Planning (Development Management) Review has identified a requirement for additional planning officers. This has been approved by Members and recruitment underway. - Extended Leadership Team has been realigned to better support delivery of our priorities and also to ensure an even spread of management across the organisation which will enable improved support for staff across the Council. - New performance management and appraisal process has begun to be rolled out which will ensure we enhance our understanding of training and development requirements for staff. - A Plan for West Devon is now guiding the work planning and in turn enabling better resource planning.
Organisational Commitment to Change	The risk is that there is a lack of on-going organisational commitment to support changes needed for ongoing financial sustainability & community resilience.	In September 2021, Council unanimously adopted ‘A Plan for West Devon’ its longer-term plan for the Council and Borough as a whole. Developed over many months and with full Member engagement through workshops, it is now underpinned by detailed delivery plans. This is a positive step and will guide the work of the Council, its resource allocations and its priorities for lobbying and partnership working. We will also soon have much greater certainty around funding with proposals for a three year financial settlement from government. This will further enhance our future financial planning capabilities.
Health and Wellbeing (Leisure) Service Provision	Covid-19 has a significant impact on Leisure provision given the nature of activities and hygiene requirements. The risk is that as leisure centres make adjustments to reduce the risk of Covid-19 to both staff and customers, the capacity of the centres is significantly reduced while many overheads and operating costs remain the same.	At their meeting on 2nd November 2021, Hub Committee considered a report on the Leisure Services provision as a result of the pandemic. The report set out that following their reopening (from lockdown) on 12th April 2021, and with more activities able to take place from 19th July as restrictions were eased, centre participation has increased across both Fusion operated leisure centres in the Borough. Meadowlands participation has increased by 67% and Parklands has increased by 63%. The report also set out some actions that Fusion are taking to further increase participation including launching a new tourist membership and extending hours to increase uptake where demand and revenue growth has allowed. The report set out options to Members in respect of the contract management fee for delivery of the leisure services. Further work is planned to consider this and a decision will be taken by Members In the new year.
Business Continuity	The risk is that we do not develop and keep maintained robust processes to ensure business continuity in the event of a significant event occurring, e.g. Failure to ensure the continuous availability of critical IT systems leading to inability to deliver key council services.	While we still find ourselves in the 'response' phase of the pandemic however focus in now changing to refining our broader business continuity plans to cover other scenarios. Our ability to work online is fundamental to our ongoing delivery of services and this is therefore a key focus for our Business Continuity Planning. We are aware of rising incidents of cyber attacks on local authorities and are monitoring their learning closely in order to refine our own response plans. Where cyber attacks on those have been successful (i.e. not prevented by their systems and processes) they have been without core operating systems for many months and with the cost of recovery being in the several millions of pounds. As a result of this learning we have increased the financial impact score to 5. Additionally, our Waste collection service continues to be impacted by the national HGV driver shortages and while out of our control, does represent an increase in the risk of further impacts to delivery of that service (particularly as we get into the typical flu season and with added Covid risk). We have commissioned external advice to support us in updating our ICT Business Continuity Plans with this work aiming to complete in January 2022. Following this we can update our other service business continuity plans. A group of core officers will be recommencing a dedicated work stream to reduce this risk to acceptable level
Emergency Response	The risk is that the council fails to meet the high public expectation in relation to supporting communities during storm damage/flooding/ other events, as well as engagement in longer term recovery, in particular assumptions about capital investment to restore assets. The risk relates to how best to support dispersed communities, e.g. with filling, transporting and laying sandbags as well as providing workforce on site, given limited resources and expectations during an event.	The Council continues to engage with the Local Resilience Forum and is keeping its emergency response plans up to date. Winter plans are developed and in place. Most of our emergency response support will be provided by the Environmental Health Team who are also the team that are involved in supporting any requirements to respond to Covid-19. To support their ability to respond to any other emergencies through the winter, we have extended the contract of the covid-19 support officers until end of March 2022.
Maximising the use of Government economic support funds	The risk is that the Council does not maximise the use of government high street support funding and business grants which in turn support the economic recovery of the area leading to a longer-term negative impact as we begin to recover from Covid-19.	As part of its Plan for West Devon, the Council has placed a significant emphasis on the support to the economy of West Devon with a clear delivery plan in place for the next three years. One aspect of supporting project activity is funded by ERDF monies. The Council has recently been notified that its first claim for funding was successful and payment is being processed. We were able to demonstrate through the claim process our compliance with the requirements of the scheme. It is a requirement of the scheme that the funding scheme is included on the Councils strategic risk register. This funding has enabled to support projects in all of our key towns and we have plans for further promotional and marketing activities over the Christmas period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Section 2

 

 

Core Financial Statements

This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in both the Expenditure and Funding Analysis and the Movement in Reserves Statement.

 

    2020/21                                                                                          2021/22

Gross Expenditure	Gross Income	Net Expenditure	Segment	Gross Expenditure	Gross Income	Net Expenditure
£000	£000	£000		£000	£000	£000
19,260	(14,114)	5,146	Customer Service & Delivery	17,959	(13,130)	4,829
477	(50)	427	Strategic Finance	519	(89)	430
3,556	(2,885)	671	Place and Enterprise	3,306	(3,066)	240
3,660	(644)	3,016	Governance & Assurance	3,858	(1,210)	2,648
26,953	(17,693)	9,260	Cost of Services	25,642	(17,495)	8,147
		1,659	Other operating expenditure (Note 9)			1,785
		(785)	Financing and investment income and expenditure (Note 10)			779
		(11,626)	Taxation and non-specific grant income (Note 11)			(11,196)
		(1,492)	(Surplus) or Deficit on Provision of Services			(485)
		(1,724)	(Surplus) or deficit on revaluation of Property, Plant and Equipment			(767)
		4,787	Remeasurements of the net defined benefit liability			(4,038)
		3	(Surplus) or deficit from investments in equity instruments designated at fair value through other comprehensive income			(83)
		3,066	Other Comprehensive Income and Expenditure			(4,888)
		1,574	Total Comprehensive Income and Expenditure			(5,373)

 

 

 

 

 

 

 

 

Movement in Reserves Statement

 

This statement shows the movement from the start of the year to the end on the different reserves held by the Authority, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other ‘unusable reserves’. The Movement in Reserves Statement shows how the movements in year of the Authority’s reserves are broken down between gains and losses incurred in accordance with generally accepted accounting practices and the statutory adjustments required to return to the amounts chargeable to council tax for the year. The Increase/Decrease in Year line shows the statutory General Fund Balance movements in the year following these adjustments.

 

2021/22	General Fund Balance   £000	Earmarked General Fund Reserves £000	Total General Fund Reserves £000	Capital Receipts Reserve   £000	Capital Grants Unapplied   £000	Total Usable Reserves   £000	Unusable Reserves     £000	Total Authority Reserves 2021/22 £000
Balance at 31 March 2021 carried forward	1,294	8,941	10,235	158	219	10,612	(9,748)	864
Movement in Reserves during Year
Total Comprehensive Income & Expenditure	485	0	485	0	0	485	4,430	4,915
Adjustments between accounting basis & funding basis under regulations (Note 7)	(41)	0	(41)	(102)	134	(9)	9	0
Transfers to/from Earmarked Reserves (Note 8)	(248)	248	0	0	0	0	0	0
Increase/ (Decrease) in Year	196	248	444	(102)	134	476	4,439	4,915
Balance at 31 March 2022 carried forward	1,490	9,189	10,679	56	353	11,088	(5,309)	5,779

 

2020/21 Comparatives	General Fund Balance   £000	Earmarked General Fund Reserves £000	Total General Fund Reserves £000	Capital Receipts Reserve   £000	Capital Grants Unapplied   £000	Total Usable Reserves   £000	Unusable Reserves     £000	Total Authority Reserves 2020/21 £000
Balance at 31 March 2020 carried forward	1,219	4,984	6,203	159	208	6,570	(4,132)	2,438
Movement in Reserves during Year
Total Comprehensive Income & Expenditure	1,492	0	1,492	0	0	1,492	(3,066)	(1,574)
Adjustments between accounting basis & funding basis under regulations (Note 7)	2,540	0	2,540	(1)	11	2,550	(2,550)	0
Transfers to/from Earmarked Reserves (Note 8)	(3,957)	3,957	0	0	0	0	0	0
Increase/ (Decrease) in Year	75	3,957	4,032	(1)	11	4,042	(5,616)	(1,574)
Balance at 31 March 2021 carried forward	1,294	8,941	10,235	158	219	10,612	(9,748)	864

 

 

 

 

 

 

 

 

 

The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Authority. The net assets of the Authority (assets less liabilities) are matched by the reserves held by the Authority. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Authority may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves is those that the Authority is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’.
31 March 2021		Notes		31 March 2022
£000				£000
25,594	Property, Plant & Equipment	12		25,285
19,830	Investment Property	13		19,120
200	Intangible Assets			285
471	Long Term Investments	14		553
46,095	Long Term Assets			45,243
6,500	Short Term Investments	14		17,200
6,283	Short Term Debtors	15		3,732
12,760	Cash and Cash Equivalents	17		10,011
25,543	Current Assets			30,943
(11,138)	Short Term Creditors	18		(14,602)
(603)	Short Term Borrowing	14		(615)
(689)	Revenue Grants in Advance	31		(125)
(886)	Provisions	19		(921)
(13,316)	Current Liabilities			(16,263)
(179)	Long Term Creditors	18		(184)
(28,342)	Long Term Borrowing	14		(27,726)
(27,142)	Pension Fund Liabilities	36		(24,220)
(1,795)	Capital Grants Receipts in Advance	31		(2,014)
(57,458)	Long Term Liabilities			(54,144)
864	Total Net Assets			5,779
10,612	Usable Reserves	20		11,088
(9,748)	Unusable Reserves	21		(5,309)
864	Total Reserves			5,779

 

The notes on pages 33 to 113 form part of these financial statements. The unaudited accounts were issued on 29 July 2022. The audited accounts were issued on 22 November 2022.

 

Lisa Buckle BSc (Hons), ACA

Corporate Director of Strategic Finance (Section 151 Officer)

The Cash Flow Statement shows the changes in cash and cash equivalents of the Authority during the reporting period. The statement shows how the Authority generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Authority are funded by way of taxation and grant income or from the recipients of services provided by the Authority. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Authority’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Authority.

 

2020/21 £000		2021/22 £000
(1,492)	Net (surplus) or deficit on the provision of services	(485)
(4,580)	Adjustments to net surplus or deficit on the provision of services for non-cash movements (Note 22)	(4,802)
669	Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities (Note 23)	754
(5,403)	Net cash flows from Operating Activities	(4,533)
2,111	Net increase/(decrease) in Investing Activities (Note 24)	10,107
1,009	Net cash outflow/(inflow) from Financing Activities (Note 25)	(2,825)
(2,283)	Net (increase) or decrease in cash and cash equivalents	2,749
10,477	Cash and cash equivalents at the beginning of the reporting period	12,760
12,760	Cash and cash equivalents at the end of the reporting period (Note 17)	10,011

 

 

 

 

 

 

 

 

 

 

 

 

Section 3

 

 

Notes to the

Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements
1	Assumptions Made about the Future and Other Major Sources of Estimation Uncertainty
2	Material Items of Income and Expenditure
3	Events After the Reporting Period
4 5	Expenditure and Funding Analysis Note to the Expenditure and Funding Analysis
6	Expenditure and Income Analysed by Nature
7	Adjustments between Accounting Basis and Funding Basis under Regulations
8	Transfers to/from Earmarked Reserves
9	Other Operating Expenditure
10	Financing and Investment Income and Expenditure
11	Taxation and Non-Specific Grant Income
12 13	Property, Plant and Equipment Investment Properties
14	Financial Instruments
15 16	Debtors Debtors for Local Taxation
17	Cash and Cash Equivalents
18	Creditors
19	Provisions
20	Usable Reserves
21	Unusable Reserves Revaluation Reserve Capital Adjustment Account Pensions Reserve Available for Sale Financial Instruments Reserve Financial Instruments Revaluation Reserve Council Tax Collection Fund Adjustment Account Business Rates Collection Fund Adjustment Account Accumulated Absences Account
22	Cash Flow Statement – Adjustments to Net Surplus or Deficit on the Provision of Services for Non-Cash Movements
23	Cash Flow Statement – Adjustments to Net Surplus or Deficit on the Provision of Services that are Investing and Financing Activities
24	Cash Flow Statement – Investing Activities
25	Cash Flow Statement – Financing Activities
26	Trading Operations – Building Control
27	Business Improvement Districts
28	Members’ Allowances
29	Officers’ Remuneration
30	Payments to External Auditors
31	Grant Income
32	Related Parties
33	Capital Expenditure and Capital Financing
34	Leases
35	Exit Packages and Termination Benefits
36	Defined Benefit Pension Schemes
37	Contingent Liabilities
38	Nature and Extent of Risks Arising from Financial Instruments
39	Accounting Policies
40	Accounting Standards that have been Issued but have not yet been Adopted
41	Critical Judgements in Applying Accounting Policies

 

 

 

1. ASSUMPTIONS MADE ABOUT THE FUTURE AND OTHER MAJOR

SOURCES OF ESTIMATION UNCERTAINTY 

 

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

 

The items in the Authority’s Balance Sheet at 31 March 2022 for which there are significant risks of material adjustment in the forthcoming financial year are as follows:

 

Item	Uncertainties	Effect if Actual Results Differ from Assumptions
Property, Plant and Equipment	Asset valuations are based on market prices and are periodically reviewed to ensure that the Council does not materially misstate its non-current assets.   Assets are depreciated over useful lives that are dependent on assumptions about the level of repairs and maintenance that will be incurred in relation to individual assets.  The current economic climate makes it uncertain that the Authority will be able to sustain its current spending on repairs and maintenance, bringing into doubt the useful lives assigned to assets.   The carrying value of Property, Plant and Equipment as at 31 March 2022 is £26million.	A reduction in the estimated valuations would result in reductions to the Revaluation Reserve and / or a loss recorded as appropriate in the Comprehensive Income and Expenditure Statement. If the value of the Council’s operational properties were to reduce by 10%, this would result in an impact on the financial statements of approximately £2.6m.   An increase in estimated valuations would result in increases to the Revaluation Reserve and / or reversals of previous negative revaluations to the Comprehensive Income and Expenditure Statement and / or gains being recorded as appropriate in the Comprehensive Income and Expenditure Statement.   If the useful life of assets is reduced, depreciation increases and the carrying amount of the asset falls. If the depreciation lives of the assets were to change by 1 year across all assets, this would have a £205,000 impact on the Council’s finances.
Pensions Liability	Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets.  A firm of consulting actuaries is engaged to provide the Authority with expert advice about the assumptions to be applied. The value of pension assets is estimated based upon information available at the Balance Sheet date, but these valuations may be earlier than the Balance Sheet date. The actual valuations at the Balance Sheet date, which may not be available until sometime later, may give a different value of pension assets, but this difference is not considered to be material.   The Pension Fund’s Actuary has provided updated figures for the year based on the last valuation in 2019. This valuation is based upon cash flow and assets values as at 31 March 2022. Contributions are set every 3 years as a result of the actuarial valuation of the Fund required by the Regulations. The next actuarial valuation of the Fund will be carried out during 2022/23 (as at 31 March 2022) and will set contributions for the period from 1 April 2023 to 31 March 2026. The carrying value of the Pensions Liability as at 31 March 2022 is £24.2 million.   Movements in the value of investments due to current economic uncertainty will affect the valuation of the pension liability. This will include the impact on the value of Investment Properties held by the Local Government Pension Scheme on behalf of West Devon Borough Council.	The effects on the net pension liability of changes in individual assumptions can be measured.  For example, a 0.1% increase in the discount rate assumption would result in a decrease in the pension liability of £1 million. The assumptions interact in complex ways. For example, in 2021/22, the Authority’s actuaries advised that the pension liability has decreased by £2 million as a result of a change in “financial assumptions” and had not changed as a result of a change in "demographic assumptions".   Please refer to Note 36 for further information about the assumptions used by the actuaries.   If the value of investments is found to have changed from the estimates used by the actuaries, it will impact the overall value of the pension liability. For instance, a 5% increase in the pension liability would have an impact of £1.2m on the financial statements.   The Council’s share of these Pension Fund property investments would be material to the Council’s net liability, this would also present a material uncertainty on the valuation of the Council’s pension assets and liabilities as at 31 March 2022.

2. MATERIAL ITEMS OF INCOME AND EXPENDITURE

 

There are no material items of income and expense in 2020/21 or 2021/22.

 

 

3. EVENTS AFTER THE REPORTING PERIOD

 

The draft Statement of Accounts (SOA) for 2021/22 was approved for issue by the Section 151 Officer & Corporate Director for Strategic Finance on 29 July 2022. The Statement of Accounts were then reviewed by the Audit Committee on 6 September 2022 and the audited accounts were authorised for issue on 22 November 2022. This is also the date up to which events after the reporting period have been considered. There are no events which took place after 31 March 2022 which require disclosure.

 

 

4. EXPENDITURE AND FUNDING ANALYSIS

 

The objective of the Expenditure and Funding Analysis is to demonstrate to council tax payers how the funding available to the Authority (i.e. government grants, council tax and business rates) for the year has been used in providing services in comparison with those resources consumed or earned by the Authority in accordance with generally accepted accounting practices. The Expenditure and Funding Analysis also shows how this expenditure is allocated for decision making purposes between the Authority’s service areas. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the Comprehensive Income and Expenditure Statement in Section 2A. The Expenditure and Funding Analysis also fulfils the requirement to report by segments.

 

2021-2022	Net Expenditure Chargeable to the General Fund £000	Adjustments between Funding and Accounting Basis (Note 5) £000	Net Expenditure in the Comprehensive Income and Expenditure Statement £000
Customer Service and Delivery	3,827	1,002	4,829
Strategic Finance	430	0	430
Place and Enterprise	(120)	360	240
Governance and Assurance	1,810	838	2,648
Net Cost of Services	5,947	2,200	8,147
Other income and expenditure	(6,391)	(2,241)	(8,632)
(Surplus)/Deficit on Provision of Services	(444)	(41)	(485)

 

 

 

 

 

	General Fund Balance £000	Earmarked Reserves   £000	Total General Fund Reserves   £000
Opening Balance at 31 March 2021	(1,294)	(8,941)	(10,235)
(Increase)/decrease in year	(196)	(248)	(444)
Closing Balance at 31 March 2022	(1,490)	(9,189)	(10,679)

 

2020-2021 Comparatives	Net Expenditure Chargeable to the General Fund £000	Adjustments between Funding and Accounting Basis (Note 5) £000	Net Expenditure in the Comprehensive Income and Expenditure Statement £000
Customer Service and Delivery	4,435	711	5,146
Strategic Finance	427	0	427
Place and Enterprise	444	227	671
Governance and Assurance	2,292	724	3,016
Net Cost of Services	7,598	1,662	9,260
Other income and expenditure	(11,630)	878	(10,752)
(Surplus)/Deficit on Provision of Services	(4,032)	2,540	(1,492)

 

	General Fund Balance £000	Earmarked Reserves   £000	Total General Fund Reserves   £000
Opening Balance at 31 March 2020	(1,219)	(4,984)	(6,203)
(Increase)/decrease in year	(75)	(3,957)	(4,032)
Closing Balance at 31 March 2021	(1,294)	(8,941)	(10,235)

 

 

 

 

 

 

 

 

 

 

 

5. NOTE TO THE EXPENDITURE AND FUNDING ANALYSIS

 

This note explains the main adjustments from net expenditure chargeable to the general fund balances to arrive at the amounts in the Comprehensive Income and Expenditure Statement (CIES).

 

Adjustments between Funding and Accounting Basis
2021/22	Adjustments for capital purposes   (Note A) £000	Net change for the pensions adjustments (Note B) £000	Other Differences     (Note C) £000	Total adjustments       £000
Customer Service & Delivery	613	386	3	1,002
Place and Enterprise	248	112	0	360
Governance & Assurance	772	66	0	838
Net Cost of Services	1,633	564	3	2,200
Other income and expenditure from the Expenditure & Funding Analysis	(882)	552	(1,911)	(2,241)
Difference between the General Fund surplus or deficit, and the surplus or deficit on the provision of services in the CIES	751	1,116	(1,908)	(41)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments between Funding and Accounting Basis
2020/21 Comparatives	Adjustments for capital purposes   (Note A) £000	Net change for the pensions adjustments (Note B) £000	Other Differences     (Note C) £000	Total adjustments       £000
Customer Service & Delivery	677	32	2	711
Place and Enterprise	215	12	0	227
Governance & Assurance	715	9	0	724
Net Cost of Services	1,607	53	2	1,662
Other income and expenditure from the Expenditure & Funding Analysis	(2,455)	519	2,814	878
Difference between the General Fund surplus or deficit, and the surplus or deficit on the provision of services in the CIES	(848)	572	2,816	2,540

 

Note A: Adjustments for Capital Purposes

Adjustments for capital purposes reflect:

For services this column adds in depreciation and impairment and adjusts for revenue expenditure funded from capital under statute.

Other income and expenditure from the Expenditure and Funding Analysis – this adjusts for statutory charges for capital financing i.e. Minimum Revenue Provision and other capital contributions. It also adjusts for capital disposals with a transfer of the income on the disposal and the amounts written-off.

Note B: Net Change for the Pensions Adjustments

Net changes for the removal of pension contributions and the addition of IAS 19 Employee Benefits pension related expenditure and income:

For services this represents the removal of the employer pension contributions made by the Authority as allowed by statute and the replacement with current service costs and past service costs.

For other income and expenditure from the Expenditure and Funding Analysis – the net interest on the defined benefit liability is charged to the CIES.

Note C: Other Differences

Other differences between amounts debited/credited to the Comprehensive Income and Expenditure Statement and amounts payable/receivable to be recognised under statute:

For services reflects the change in the annual leave accrual when compared with the previous year.

For other income and expenditure from the Expenditure and Funding Analysis represents the timing difference between what is chargeable under statutory regulations for Council Tax and Business Rates that was projected to be received at the start of the financial year, and the income recognised under generally accepted accounting practices.

 

6. EXPENDITURE AND INCOME ANALYSED BY NATURE

 

The Expenditure and Income Analysed by Nature note shows the amounts that make up the surplus or deficit on the provision of services on the CIES, but here they are categorised by nature instead of by service segment.

Expenditure and Income Analysed by Nature	2020/21 £000	2021/22 £000
Employee Benefits Expenses	7,099	8,102
Other Service Expenses*	18,267	15,935
Depreciation, Amortisation and Impairment	1,606	1,633
Interest Payments	758	746
Pension Fund Administration Expenses	19	18
Net Interest on the net defined benefit liability	498	534
Losses/(Gains) from fair value adjustments	(826)	714
Total Expenditure	27,421	27,682
Fees, Charges and Other Service Income**	(5,773)	(6,765)
Interest and Investment Income	(37)	(35)
Income from Council Tax and Business Rates***	(3,188)	(5,036)
Revenue Grants and Contributions****	(19,246)	(15,576)
Capital Grants and Contributions	(659)	(741)
Other Income	(10)	(14)
Total Income	(28,913)	(28,167)
(Surplus) or Deficit on Provision of Services	(1,492)	(485)

 

* Other Service Expenses

Other Service Expenses have reduced by £2.3m in 2021/22. This mainly reflects the reduction in payment of business grants paid out on behalf of Central Government during the pandemic.

 

**Fees, Charges and Other Service Income

The increase in fees and charges income in 2021/22 reflects the detrimental impact of the pandemic on the Council’s income in 2020/21. For example, car parking income was over £400,000 lower in 2020/21.

 

*** Income from Council Tax and Business Rates

The increase in income from Council Tax and Business Rates in 2021/22 mainly reflects the impact of the accounting treatment of the Business Rates S31 compensation grant. During 2020/21 local authorities received S31 grants to offset the business rate reliefs given to businesses during lockdown. Under current Collection Fund accounting rules, the S31 grants received in 2020/21 were not discharged against the Collection Fund deficit until 2021/22 onwards. This has resulted in an increase in Business Rates Receivable from £4.6m in 2020/21 to £8.1m in 2021/22.

The figure for Council Tax and Business Rates in this statement is shown net of expenditure (precepts to other bodies).

 

****Revenue Grants and Contributions

The overall reduction in grant income between 2020/21 and 2021/22 of £3.7 million mainly relates to the S31 Business Rate Relief Grants. The larger share of this funding was received in 2020/21. This S31 compensation grant was awarded to local authorities to offset the business rate reliefs given to businesses during the pandemic.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.ADJUSTMENTS BETWEEN ACCOUNTING BASIS AND FUNDING BASIS UNDER REGULATIONS

 

This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Authority in the year, in accordance with proper accounting practice, to the resources that are specified by statutory provisions as being available to the Authority to meet future capital and revenue expenditure.

 

 

	Usable Reserves
2021/22	General Fund Balance £000	Capital Receipts Reserve £000	Capital Grants Unapplied £000	Movement in Unusable Reserves £000
Adjustments primarily involving the Capital Adjustment Account (CAA):
Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement (CIES):
Charges for depreciation and impairment of non-current assets	929			(929)
Movements in the market value of Investment Properties	710			(710)
Amortisation of Intangible Assets	81			(81)
Capital grants and contributions applied	(504)			504
Revenue expenditure funded from capital under statute (REFCUS)	623			(623)
Amounts of non-current assets written off on disposal or sale as part of the gain/loss on disposal	4			(4)
Insertion of items not debited or credited to the CIES:
Statutory provision for the financing of capital investment	(623)			623
Capital expenditure charged against the General Fund	(96)			96
Revenue Contribution to Capital Outlay - RCCO	(123)			123
Adjustments primarily involving the Capital Grants Unapplied Account:
Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Statement	(237)		237	0
Application of grants to capital financing transferred to the Capital Adjustment Account			(103)	103
	Usable Reserves
2021/22	General Fund Balance £000	Capital Receipts Reserve £000	Capital Grants Unapplied £000	Movement in Unusable Reserves £000
Adjustments primarily involving the Capital Receipts Reserve:
Transfer of unattached capital receipts	(13)	13
Use of the Capital Receipts Reserve to finance new capital expenditure		(115)		115
Adjustments primarily involving the Pensions Reserve:
Reversal of items relating to retirement benefits debited or credited to the CIES (see Note 36)	2,047			(2,047)
Employer’s pension contributions and direct payments to pensioners payable in the year	(931)			931
Adjustments primarily involving the Council Tax Collection Fund Adjustment Account:
Amount by which Council Tax income credited to the CIES is different from Council Tax income calculated for the year in accordance with statutory requirements	(258)			258
Adjustments primarily involving the Business Rates Collection Fund Adjustment Account*:
Amount by which Business Rates income credited to the CIES is different from Business Rates income calculated for the year in accordance with statutory requirements	(1,653)			1,653
Adjustment primarily involving the Accumulated Absences Account:
Amount by which officer remuneration charged to the CIES on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements	3			(3)
Total Adjustments between the Accounting Basis and Funding Basis under regulations in 2021/22	(41)	(102)	134	9

*The large adjustment in 2021/22 regarding the Business Rates Collection Fund Adjustment Account reflects the reduced deficit on the Business Rates Collection Fund at 31 March 2022 (£3.1m compared to £7.2m at 31 March 2021). During 2020/21 local authorities received S31 grants to offset the business rate reliefs given to businesses during lockdown. Under current Collection Fund accounting rules, the S31 grants received in 2020/21 are being discharged against the Collection Fund deficit in 2021/22 onwards. Further S31 grants were also received in 2021/22 which will have a similar impact on the Business Rates Collection Fund in future years.

	Usable Reserves
2020/21 Comparatives	General Fund Balance   £000	Capital Receipts Reserve   £000	Capital Grants Unapplied   £000	Movement in Unusable Reserves £000
Adjustments primarily involving the Capital Adjustment Account (CAA):
Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement (CIES):
Charges for depreciation and impairment of non-current assets	894			(894)
Movements in the market value of Investment Properties	(826)			826
Amortisation of Intangible Assets	54			(54)
Capital grants and contributions applied	(556)			556
Revenue expenditure funded from capital under statute (REFCUS)	658			(658)
Insertion of items not debited or credited to the CIES:
Statutory provision for the financing of capital investment	(610)			610
Capital expenditure charged against the General Fund	(199)			199
Revenue Contribution to Capital Outlay - RCCO	(150)			150
Adjustments primarily involving the Capital Grants Unapplied Account:
Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Statement	(103)		103	0
Application of grants to capital financing transferred to the Capital Adjustment Account			(92)	92
	Usable Reserves
2020/21 Comparatives	General Fund Balance   £000	Capital Receipts Reserve   £000	Capital Grants Unapplied   £000	Movement in Unusable Reserves £000
Adjustments primarily involving the Capital Receipts Reserve:
Transfer of unattached capital receipts	(10)	10		0
Use of the Capital Receipts Reserve to finance new capital expenditure		(11)		11
Adjustments primarily involving the Pensions Reserve:
Reversal of items relating to retirement benefits debited or credited to the CIES (see Note 36)	1,473			(1,473)
Employer’s pension contributions and direct payments to pensioners payable in the year	(901)			901
Adjustments primarily involving the Council Tax Collection Fund Adjustment Account:
Amount by which Council Tax income credited to the CIES is different from Council Tax income calculated for the year in accordance with statutory requirements	(51)			51
Adjustments primarily involving the Business Rates Collection Fund Adjustment Account*:
Amount by which Business Rates income credited to the CIES is different from Business Rates income calculated for the year in accordance with statutory requirements	2,866			(2,866)
Adjustment primarily involving the Accumulated Absences Account:
Amount by which officer remuneration charged to the CIES on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements	1			(1)
Total Adjustments between the Accounting Basis and Funding Basis under regulations in 2020/21	2,540	(1)	11	(2,550)

*The large adjustment in 2020/21 regarding the Business Rates Collection Fund Adjustment Account reflects the deficit position on the Business Rates Collection Fund at 31 March 2021.During 2020/21 local authorities received S31 grants to offset the business rate reliefs given to businesses during lockdown. Under current Collection Fund accounting rules, the S31 grants received in 2020/21 were not discharged against the Collection Fund deficit until 2021/22 onwards. Therefore there was a deficit on the Business Rates Collection Fund Adjustment Account at 31 March 2021.

8. TRANSFERS TO/ FROM EARMARKED RESERVES

This note details the amounts set aside from the General Fund balances in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund expenditure in 2021/22. The purpose of some of the more significant earmarked reserves are shown below:

 

Car Parking Maintenance – In line with the Council’s car parking strategy, a car parking maintenance reserve is held to ensure that major planned works on car parks can be carried out at the appropriate time, in line with a cyclical programme of maintenance and repairs.

New Homes Bonus – This reserve was established to show how New Homes Bonus funding has been used on an annual basis.

Business Rates Retention Scheme – The business rates reserve covers any possible funding issues from the new accounting arrangements and also smooths the volatility in business rates income over a number of years.

Revenue Grants Reserve – This reserve holds revenue grants with no repayment conditions that have not been used during the year.

S31 Compensation Grant (Business Rates) Reserve – This is a new reserve set up to hold the business rates S31 grants received in 2020/21 to offset the business rate reliefs given to businesses during lockdown. The S31 grants received in 2020/21 and 2021/22 will not be discharged against the Collection Fund deficit until 2021/22 and 2022/23 onwards respectively.

 

Financial Stability Reserve – This reserve was set up to help secure financial stability for the longer term.

Maintenance, Management and Risk Mitigation Reserve – Every year the Council sets aside 10% of rental income from commercial property into this reserve to cover any longer-term maintenance issues.

 

Strategic Waste Reserve – This reserve is used to support any unforeseen future waste cost pressures relating to market changes. Additional income from increased recycling credits and dry recycling income has been transferred to this reserve. In addition, the reserve also holds the value of the 2021/22 contractual performance deductions, to contribute to the contracted costs and capital outlay.

*The total Earmarked Reserves balance at 31 March 2022 of £9.2m includes £1.6m held in the Business Rates s31 Compensation Grant Reserve. This is due to a technical accounting adjustment where Councils were compensated for the business rates holidays that were announced by the Government for the retail, hospitality and leisure sectors in 2020/21 and 2021/22 (this funding is in the S31 Compensation Grant Reserve). This temporary increase in reserves will reverse back out again in the 2022/23 Accounts, to fund the deficit on the Collection Fund. Therefore this is not money which is available for the Council to spend and it is important that this is not misinterpreted in the Accounts, as this is a national issue.

 

The table below shows the earmarked reserve balances at 31 March 2022 and the movement during 2021/22.

2021/22 EARMARKED RESERVES	Balance at 31.3.2021	Transfers Out	Transfers In	Balance at 31.3.2022
	£000	£000	£000	£000
Car Parking Maintenance	484	-	50	534
ICT Development	39	(39)	25	25
JSG Future Options	5	-	-	5
Planning Policy & Major Developments	147	(1)	-	146
16/17 Budget Surplus Contingency	86	-	-	86
Members Sustainable Community Fund	6	-	-	6
Innovation Fund (Invest to Earn)	399	(21)	-	378
Outdoor Sports & Recreation	16	-	-	16
Strategic Waste	176	-	482	658
Leisure Services	58	(10)	-	48
Support Services Trading	31	(27)	16	20
Environmental Health Initiatives	20	-	-	20
Financial Stability	454	-	-	454
Maintenance, Management & Risk Mitigation (Investment Properties)	302	(3)	119	418
Grounds Maintenance	48	-	30	78
Invest to Save	12	-	-	12
Elections	20	-	14	34
DCC Localism Support Officer	5	-	-	5
Neighbourhood Planning Grants	10	(23)	60	47
Cannons Meadow	5	(2)	-	3
DCC Public Health	6	-	-	6
Revenue Grants	912	(53)	558	1,417
Business Rates Retention Scheme	1,260	(173)	-	1,087
COVID-19	221	(249)	282	254
Town Teams & Economic Grants	26	-	-	26
Flood Works	15	-	-	15
New Homes Bonus	452	(239)	293	506
Homelessness	173	(19)	90	244
Strategic Change	67	-	-	67
Planning Enforcement	5	-	-	5
Maintenance Fund	242	-	119	361
Salary Savings Reserve	80	(80)	-	-
Recovery Plan & Corporate Strategy	200	(18)	-	182
Broadband Community Support	50	-	-	50
S106 Monitoring	-	(6)	6	-
S106 Technical Support	2	(2)	-	-
Vehicle Replacement	298	(20)	50	328
Tree Maintenance	-	-	17	17
SUBTOTAL EARMARKED RESERVES	6,332	(985)	2,211	7,558
Business Rates S31 Compensation Grants*	2,609	(978)	-	1,631
TOTAL EARMARKED REVENUE RESERVES (See note above on the S31 Grant)	8,941	(1,963)	2,211	9,189
2020/21 Comparatives EARMARKED RESERVES	Balance at 31.3.2020	Transfers Out	Transfers In	Balance at 31.3.2021
	£000	£000	£000	£000
Car Parking Maintenance	464	(23)	43	484
ICT Development	66	(52)	25	39
JSG Future Options	5	-	-	5
Planning Policy & Major Developments	122	-	25	147
16/17 Budget Surplus Contingency	196	(110)	-	86
Members Sustainable Community Fund	-	(3)	9	6
Innovation Fund (Invest to Earn)	432	(33)	-	399
Outdoor Sports & Recreation	18	(2)	-	16
Strategic Waste	104	(8)	80	176
Leisure Services	204	(146)	-	58
Support Services Trading	8	-	23	31
Environmental Health Initiatives	20	-	-	20
Habitats Reserve	3	(3)	-	-
Financial Stability	454	-	-	454
Joint Local Plan	20	(20)	-	-
Maintenance, Management & Risk Mitigation	190	(6)	118	302
Grounds Maintenance	18	-	30	48
Invest to Save	12	-	-	12
Elections	-	-	20	20
DCC Localism Support Officer	14	(9)	-	5
Neighbourhood Planning Grants	16	(27)	21	10
Cannons Meadow	8	(3)	-	5
DCC Public Health	6	-	-	6
Revenue Grants	508	(67)	471	912
Business Rates Retention Scheme	904	(2,875)	3,231	1,260
COVID-19	-	-	221	221
Town Teams & Economic Grants	23	(18)	21	26
Flood Works	15	-	-	15
New Homes Bonus	401	(297)	348	452
Homelessness	115	-	58	173
Strategic Change	67	-	-	67
Planning Enforcement	5	-	-	5
Maintenance Fund	170	-	72	242
Salary Savings Reserve	-	-	80	80
Recovery Plan & Corporate Strategy	-	-	200	200
Broadband Community Support	-	-	50	50
S106 Monitoring	-	(4)	4	-
S106 Technical Support	-	(6)	8	2
Vehicle Replacement	396	(149)	51	298
SUBTOTAL EARMARKED RESERVES	4,984	(3,861)	5,209	6,332
Business Rates S31 Compensation Grants*	-	-	2,609	2,609
TOTAL EARMARKED REVENUE RESERVES	4,984	(3,861)	7,818	8,941

Note* - Business Rates S31 Compensation Grant Earmarked Reserve

Earmarked Reserves increased by £3.957m in 2020/21. This was mainly due to the creation of a new earmarked reserve in 2020/21 called the S31 Compensation Grant (Business Rates) Reserve. During 2020/21 local authorities received S31 grants to offset the business rate reliefs given to businesses during lockdown in the retail, hospitality and leisure sectors (business rates holidays). Under current Collection Fund accounting rules, the S31 grants received in 2020/21 will not be discharged against the Collection Fund deficit until 2021/22 onwards. Therefore this S31 grant (£2.46m) together with the Tax Income Guarantee S31 grant for Business Rates of £0.15m were transferred to the S31 Compensation Grant (Business Rates) Earmarked Reserve. This compensation grant will be applied to the Collection Fund over the next three years (2021/22 onwards) to smooth the impact of the Business Rates deficit. The balance on this reserve as at 31 March 2021 was £2.609m. This is not money which is available for the Council to spend and it is important that this is not misinterpreted in the Accounts, as this is a national issue.

 

 

9. OTHER OPERATING EXPENDITURE

 

2020/21				2021/22
£000				£000
1,640		Parish council precepts		1,763
0		(Gains)/losses on the disposal of non-current assets		4
19		Pension administration expenses		18
1,659		Total		1,785

 

 

 

10. FINANCING AND INVESTMENT INCOME AND EXPENDITURE

 

2020/21				2021/22
£000				£000
759		Interest payable and similar charges		746
(37)		Interest receivable and similar income		(35)
(10)		Other investment income		(14)
498		Net interest on the net defined benefit liability		534
(1,995)		Investment properties (Note 13)		(452)
(785)		Total		779

 

 

 

 

 

 

 

 

11. TAXATION AND NON-SPECIFIC GRANT INCOME

 

2020/21				2021/22
£000				£000
		Council Tax
(6,437)		Income		(6,653)
(112)		Collection Fund adjustment		(257)
(6)		Collection Fund - distribution of surplus		10
		Business Rates
(4,067)		Income		(4,250)
3,230		Tariff		3,230
1		Pooling administration costs		1
(163)		Pooling gain		(127)
127		Levy payment		344
2,599		Transfer of Collection Fund deficit/(surplus)*		903
		Non ring - fenced Government Grants:
(3,740)		S31 Business Rate Relief Grants*		(2,323)
(347)		New Homes Bonus Grant		(293)
(464)		Rural Services Delivery Grant		(487)
0		Lower Tier Services Grant		(70)
		Non ring – fenced Government Grants: COVID-19
(797)		LA Response Grant		(282)
(436)		Sales, Fees and Charges Compensation		(70)
(355)		New Burdens Admin Support Grant		(131)
(659)		Capital grants and contributions		(741)
(11,626)		Total		(11,196)

 

*The S31 Business Rate Relief Grants received in 2020/21 and 2021/22 include the S31 compensation grant that local authorities were awarded to offset the business rate reliefs given to businesses during the pandemic. Under current Collection Fund accounting rules, the S31 grants are not discharged against the Collection Fund deficit until the following year onwards. Therefore there is a deficit on the Business Rates Collection Fund Adjustment Account at 31 March 2021 and 31 March 2022 which is reflected in the transfers of the Collection Fund deficit above. The S31 compensation grant is held in an earmarked reserve and will be applied to the Collection Fund over the next three years to smooth the impact of the Business Rates deficit.

 

 

 

 

 

 

 

 

12.  PROPERTY, PLANT AND EQUIPMENT

 

Movements in 2021/22:

 

	Land and Buildings     £000	Vehicles, Plant & Equipment   £000	Infra-structure Assets   £000	Community Assets     £000	Assets Under Construction     £000	Total Property, Plant and Equipment £000
Cost or Valuation
At 1 April 2021	23,327	2,799	1,074	0	0	27,200
Additions	208	102	4			314
Revaluation increases/(decreases) recognised in the Revaluation Reserve	50					50
De-recognition - Disposals		(19)				(19)
At 31 March 2022	23,585	2,882	1,078	0	0	27,545
Accumulated Depreciation and Impairment at 1 April 2021	312	858	436	0	0	1,606
Charge for 2021/22	569	331	29			929
Depreciation written out to the Revaluation Reserve	(259)					(259)
De-recognition - Disposals		(16)				(16)
At 31 March 2022	622	1,173	465		0	2,260
Balance Sheet amount at 31 March 2022	22,963	1,709	613	0	0	25,285
Balance Sheet amount at 31 March 2021	23,015	1,941	638	0	0	25,594

 

 

 

 

 

 

 

 

 

 

Comparative Movements in 2020/21:

 

	Land and Buildings     £000	Vehicles, Plant & Equipment   £000	Infra-structure Assets   £000	Community Assets     £000	Assets Under Construction     £000	Total Property, Plant and Equipment £000
Cost or Valuation
At 1 April 2020	22,405	2,628	1,074	0	0	26,107
Additions		171				171
Revaluation increases/(decreases) recognised in the Revaluation Reserve	922					922
At 31 March 2021	23,327	2,799	1,074	0	0	27,200
Accumulated Depreciation and Impairment at 1 April 2020	559	543	412	0	0	1,514
Charge for 2020/21	555	315	24			894
Depreciation written out to the Revaluation Reserve	(740)					(740)
Depreciation Adjustment (re 19/20)	(62)					(62)
At 31 March 2021	312	858	436	0	0	1,606
Balance Sheet amount at 31 March 2021	23,015	1,941	638	0	0	25,594
Balance Sheet amount at 31 March 2020	21,846	2,085	662	0	0	24,593

 

 

Depreciation

 

The Council provides for depreciation on all assets other than freehold land and community assets. The provision for depreciation is made by allocating the cost (or revalued amount) of the assets over the accounting period expected to benefit from their use. The straight line method of depreciation is used. Assets are depreciated in the year following acquisition and in the year of disposal.

 

Asset lives are reviewed regularly as part of the property revaluation and annual impairment review. Where the useful life of an asset is revised the carrying amount of the asset is depreciated over the revised remaining life.

Capital Commitments

 

As at 31 March 2022 the Authority has entered into one contract for the construction or enhancement of Property, Plant and Equipment.  This commitment relates to:

 

·         Tavistock Temporary Accommodation  £0.85 million

 

As a comparison, as at 31 March 2021 the Authority had not entered into any contracts for the construction or enhancement of Property, Plant and Equipment.

 

Revaluations

 

All material freehold land and buildings which comprise the Authority’s property portfolio are revalued by the Council’s Valuer on a rolling basis.

 

Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors.

 

Assets are valued in accordance with a five year rolling programme (with ad hoc valuations taking place, for example where assets have been enhanced). In addition, a formal impairment review of the entire holding of land and buildings is undertaken at the end of each financial year, to ensure the carrying value reflects the fair value at the Balance Sheet date.  The basis of valuation is set out in the Statement of Accounting policies in Note 39.

 

 

	Land and buildings	Vehicles, plant furniture & equipment	Total
	£000	£000	£000
Valued at historical cost	0	1,709	1,709
Valued at current value in:
2021/22 2020/21 2019/20 2018/19	6,139 16,238 491 95	0 0 0 0	6,139 16,238 491 95
Total	22,963	1,709	24,672

 

Impairment Losses

 

Impairment losses and impairment reversals charged to the Surplus or Deficit on the Provision of Services and to Other Comprehensive Income and Expenditure, are summarised in the preceding movements table, reconciling the movement over the year in the Property, Plant and Equipment balances. No impairment losses other than those relating to revaluation losses were incurred.

 

13. INVESTMENT PROPERTIES

 

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

 

A. Income & Expenditure Account	2020/21        £000	2021/22        £000
Rental income from investment properties	(1,180)	(1,190)
Direct operating expenses arising from investment properties	(815)	739
Net (gain)/ loss	(1,995)	(451)

 

 

The following table summarises the movement in the fair value of investment properties over the year:

 

B. Movement in fair value	2020/21        £000	2021/22        £000
Balance at start of the year	19,004	19,830
Net gains/(losses) from fair value adjustments	826	(710)
Balance at end of the year	19,830	19,120

 

There are no restrictions on the Authority’s ability to realise the value inherent in its investment property or on the Authority’s right to the remittance of income and the proceeds of disposal.

 

The Code requires that Investment Properties are measured annually at fair value. The fair value valuation was £19.1 million as at 31 March 2022.

 

There has been a net loss on the fair value valuations of the four Investment properties of £710,000 in 2021/22. This predominantly relates to one investment property in Bristol and the reduction in value is caused by a softening of the yield. The accommodation is open plan and as such is set up for a single occupier. The office market is witnessing a trend towards good quality, smaller office suites, which better suit the new hybrid ways of working.

 

The Code confirms that movements in fair value are debited to the provision of services and are not proper charges to the General Fund. They are reversed out to the Capital Adjustment Account in the Movement in Reserves Statement. Therefore this change in valuation does not impact on the Council’s ‘bottom line’ of the Income and Expenditure account, as it is reversed out through the Capital Adjustment Account.

 

 

 

Fair Value Measurement of Investment Property

 

Observable Inputs – Level 2

 

The commercial land and buildings are measured using in the income approach, by means of the discounted cash flow method, where the expected cash flows from the properties are discounted using a market-derived discount rate to establish the present value of the net income stream. The approach has been developed using the Council’s own data factoring in assumptions such as duration and timing of cash inflows and outflows, rent growth, occupancy levels, bad debt levels and maintenance costs.

 

The Council’s commercial land and buildings are therefore categorised as Level 2 based on assumptions on observable inputs in the fair value hierarchy as the measurement technique uses observable inputs to determine the fair value measurements.

 

Highest and Best Use of Investment Properties

 

In estimating the fair value of the Council’s Investment Properties, it has been established that their current use is the highest and best use of the properties.

 

Valuation Techniques

 

There has been no change in the valuation techniques used during the year for Investment Properties.

 

 

14. FINANCIAL INSTRUMENTS

 

Categories of Financial Instruments

 

Financial instruments are recognised on the Balance Sheet when the Council becomes party to the contractual provisions of a financial instrument. They are classified based on the business model for holding the instruments and their expected cash flow characteristics.

 

Financial Liabilities

 

Financial liabilities are initially measured at fair value and subsequently measured at amortised cost. For the Council’s borrowing this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus outstanding interest payable).

 

Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument.

 

 

 

 

Financial Assets

 

To meet the code requirements, financial assets are now classified into one of three categories:

 

·         Financial assets held at amortised cost – These represent loans and loan-type arrangements where repayments or interest and principal take place on set dates and at specific amounts. The figure presented in the Balance Sheet represents the outstanding principal received plus accrued interest. Interest credited to the Comprehensive Income and Expenditure Statement (CIES) is the amount receivable as per the loan agreement.

 

·          Fair Value Through Other Comprehensive Income (FVOCI) – These assets are measured and carried at fair value. All gains and losses due to changes in fair value (both realised and unrealised) are accounted for through a reserve account, with the balance debited or credited to the CIES when the asset is disposed of.

 

·         Fair Value Through Profit and Loss (FVTPL) – These assets are measured and carried at fair value. All gains and losses due to changes in fair value (both realised and unrealised) are recognised in the CIES as they occur.

Allowances for impairment losses have been calculated for amortised cost assets, applying the expected credit loss method. Changes in loss allowances (including balances outstanding at the date of recognition of an asset) are debited/credited to the Financing and Investment Income and Expenditure line in the CIES. Changes in the value of assets carried at fair value are debited/credited to the Financing and Investment Income and Expenditure line in the CIES as they arise.

 

The value of debtors and creditors reported in the table below are solely those amounts meeting the definition of a financial instrument. The balances of debtors and creditors reported in the Balance Sheet and Notes 15 and 18 also include balances which do not meet the definition of a financial instrument, such as tax-based debtors and creditors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary of Financial Instruments

 

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

 

	Long term			Current
	31 March 2021 £000	31 March 2022 £000		31 March 2021 £000	31 March 2022 £000
Financial Assets at Amortised Cost
Investments*	0	0		6,500	17,200
Cash and Cash Equivalents	0	0		12,760	10,011
Debtors	0	0		1,562	1,307
Fair Value through Other Comprehensive Income – Financial Assets
Investments – Local Authorities’ Property Fund	471	553		0	0
Total Financial Assets	471	553		20,822	28,518
Financial Liabilities at Amortised Cost
Borrowing	(28,342)	(27,726)		(603)	(615)
Creditors	(179)	(184)		(6,127)	(8,394)
Total Financial Liabilities	(28,521)	(27,910)		(6,730)	(9,009)

 

*The increase in investments as at 31 March 2022 of £10.7m partly relates to the timing of the Council Tax energy rebate grant (£2.99m) which was received at the end of 2021/22 and the payments are being made on behalf of Central Government at the beginning of 2022/23. The Council also administered various Business Grants on behalf of Central Government and part of this increase relates to unapplied funding due to be repaid to Central Government.

 

Designated to Fair Value Through Other Comprehensive Income

 

At 31 March 2022 the Council had a £0.5 million investment with the CCLA Property Fund and up to 31 March 2018 this was held as an ‘Available for Sale Financial Asset’ and measured at fair value each year. Any change in fair value was posted to Other Comprehensive Income and Expenditure and accumulated gains and losses have been held in an Available for Sale Financial Instruments Reserve.

 

Following the adoption of accounting standard IFRS 9 Financial Instruments in 2018/19, the ‘Available for Sale Financial Asset’ category is no longer available. The new standard requires that investments in equity to be classified as fair value through profit and loss unless there is an irrevocable election to designate the asset as fair value through other comprehensive income.

 

The Council has elected to designate the CCLA investment as fair value through other comprehensive income. These investments are eligible for the election because they meet the definition of equity instruments in paragraph 11 of IAS32 and are neither held for trading (the Council holds this investment as a long term strategic investment) nor contingent consideration recognised by an acquirer in a business combination to which IFRS3 applies. They are not considered to be puttable instruments because the Council does not have a contractual right to put the instrument back to the issuer for cash.

 

This election means there is no impact on the revenue budget. Any gains or losses on the valuation of the CCLA investment will therefore be transferred to a Financial Instruments Revaluation Reserve until they are realised.

 

Statutory Override on Pooled Investments

 

As a result of the change in accounting standards for 2018/19 under IFRS 9, the Ministry for Housing, Communities and Local Government (MHCLG) have agreed a temporary override to allow English Local Authorities time to adjust their portfolio of all pooled investments by announcing a statutory override to delay implementation of IFRS 9 for five years commencing from April 2018. The Council will use the statutory override to account for any changes in the fair value on its pooled investments. For the Council’s Money Market Fund investments the change in fair value was immaterial in 2021/22.

 

 

Investments in Equity Instruments Designated at Fair Value Through Other Comprehensive Income

 

The Council had the following investments in equity instruments at 31 March 2022:

 

Investment	Nominal	Fair Value March 2022	Change in Fair Value During 2021/22
	£000	£000	£000
CCLA Property Fund	500	553	83

 

 

 

 

 

 

 

 

 

 

Net Gains and Losses on Financial Instruments

 

The following gains and losses have been recognised in the Comprehensive Income and Expenditure Statement in relation to financial instruments:

 

	2020/21	2021/22
	£000	£000
Net gains/losses on: Financial Assets measured at fair value through other comprehensive income	(3)	83
Total Net Gains/(Losses)	(3)	83

 

 

 

Fair Value of Financial Instruments

 

The following financial asset is measured in the Balance Sheet at fair value on a recurring basis:

 

Recurring Fair Value Measurements	Input Level in Fair Value Hierarchy	Valuation Technique Used to Measure Fair Value	31 March 2021 Fair Value	31 March 2022 Fair Value
			£000	£000
Fair Value Through Other Comprehensive Income   CCLA Property Fund	Level 2	Inputs other than quoted market prices that are observable for the asset or liability	471	553
TOTAL			471	553

 

 

 

 

 

 

 

 

 

 

Except for the financial assets carried at fair value, all other financial liabilities and financial assets represented are carried forward on the Balance Sheet at amortised cost. Their fair values are as follows:

 

	31 March 2021		31 March 2022
	Carrying amount	Fair Value	Carrying amount	Fair Value
	£000	£000	£000	£000
PWLB Debt – Maturity	(5,692)	(7,255)	(5,692)	(6,646)
PWLB Debt – Annuity	(23,252)	(24,906)	(22,649)	(22,483)
Long Term Creditors	(179)	(179)	(184)	(184)

 

 

15. DEBTORS

 

31.3.2021				31.3.2022
£000				£000
		Short Term
795		Central Government bodies		584
524		Other Local Authorities		354
		Other debtors
811		Council Tax		503
3,115		Business Rates*		1,192
1,038		Other entities and individuals		1,099
6,283		Total		3,732

 

*There is a significant decrease in the short term Business Rates debtor as at 31 March 2022. The large debtor as at 31 March 2021 (£3.115m) was due to the deficit position on the Business Rates Collection Fund resulting from the timing differences in the Collection Fund accounting treatment of the S31 compensation grant. The debtor includes the deficits attributable to each of the Business Rates Preceptors (Central Government £3.61m, Devon County Council £0.65m and Devon and Somerset Fire Authority £0.07m) at 31 March 2021. This S31 compensation grant is gradually being released to the Collection Fund hence the reduction in the Business Rates Collection Fund deficit in 2021/22 and therefore the Business Rates debtor at 31 March 2022. The £1.192m debtor includes the following deficits attributable to each of the Business Rates Preceptors as at 31 March 2022 - Central Government £1.54m, Devon County Council £0.28m and Devon and Somerset Fire Authority £0.03m. These deficits are partly offset by the Preceptors share of the Business Rates appeals and bad debts provisions as at 31 March 2022.

 

 

 

 

 

16. DEBTORS FOR LOCAL TAXATION

 

The past due but not impaired amount for local taxation (council tax and business rates) can be analysed by age as follows:

 

31.3.2021				31.3.2022
£000				£000
247		Up to one year		384
265		One to three years		322
112		Over three years		144
624		Total Debtors for Local Taxation		850

 

 

17. CASH AND CASH EQUIVALENTS

 

31.3.2021				31.3.2022
£000				£000
760		Cash held by the Authority		361
12,000		Money Market Funds*		9,650
12,760		Total Cash and Cash Equivalents		10,011

 

*Cash and Cash Equivalents have reduced by £2.7m in 2021/22. This is mainly due to the receipt of S31 compensation grants during 2020/21 amounting to £2.61m. These grants were held in an earmarked reserve as at 31 March 2021 and are now being applied to the Business Rates Collection Fund to smooth the impact of the Business Rates deficit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18. CREDITORS

 

31.3.2021						31.3.2022
£000						£000
			Short Term
(3,925)			Central Government bodies*			(7,013)
(1,102)			Other Local Authorities			(986)
			Other Creditors
(80)			Council Tax**			(1,429)
(3,720)			Business Rates			(3,569)
(2,311)			Other entities and individuals			(1,605)
(11,138)			Total			(14,602)
(179)			Long Term                                                                                                              Other entities and individuals			(184)
(179)			Total			(184)

 

*The increase in the short term Central Government bodies creditor mainly relates to the non-discretionary element of the Council Tax energy rebate grant (£2.9m). This grant was received at the end of 2021/22 and the payments are being made on behalf of Central Government at the beginning of 2022/23. The Council also administered various Business Grants on behalf of Central Government during 2020/21 and 2021/22. The large Central Government bodies creditor balance also reflects the unapplied funding due to be repaid to Central Government.

 

** There is a large increase in the short term Council Tax creditors as at 31 March 2022 which reflects the favourable movement in the Council Tax Collection Fund balance in 2021/22. As at 31 March 2021, the Council was due to receive £295,000 from Council Tax Preceptors (a debtors balance). However, as at 31 March 2022 the Council owes Council Tax Preceptors £1.34m (a creditor balance). This follows the improved position on the Council Tax Collection Fund at 31 March 2022, a surplus of £2.45m compared to a surplus of £742,000 as at 31 March 2021. The debtor/creditor position also reflects the Preceptors share of the Council Tax bad debts provision.

 

 

 

 

 

 

 

 

 

 

 

 

 

19. PROVISIONS

 

Provisions payable within twelve months of the Balance Sheet date are classified as current liabilities; provisions payable more than twelve months from the Balance Sheet date are classified as long term liabilities. No long term provisions were created in 2021/22 or 2020/21. The breakdown of the 2021/22 provision is shown in the following table:

 

	Business Rates Appeals £000
Balance at 1 April 2021	886
Provisions made in year	91
Amounts used in year	(56)
Balance at 31 March 2022	921

 

Short term Provision – Business Rates Appeals:

 

Provision is made for likely refunds of business rates as a result of appeals against the rateable value of business properties. The provision is based on the total value of outstanding appeals at the end of the financial year as advised by the Valuation Office Agency. Using this information, an assessment was made about the likely success rate of appeals and their value. In 2021/22 there has been a £86,000 increase in the provision for appeals within the Collection Fund.  The Council’s share of this is 40% (£35,000).

 

 

20. USABLE RESERVES

 

Movements in the Authority’s usable reserves are detailed in the Movement in Reserves Statement in Section 2B. The Council has the following usable reserves:

 

General Fund Balance – This balance has been established from surpluses on the Council’s total expenditure. It provides a financial cushion should anything unexpected happen which would require unplanned expenditure.

 

Earmarked Reserves – The Council has set aside monies for specific purposes e.g. vehicle and plant replacement and the funding of strategic issues. In addition, on an annual basis monies are set aside in the Business Rates Retention Earmarked Reserve to mitigate the impact of business rates income volatility in future years. The movements in the 2021/22 Earmarked Reserves balance is explained in detail in the Narrative Statement.

 

Capital Receipts Reserve – Proceeds from the sale of assets are held in this reserve to be made available for future capital expenditure.

 

Capital Grants Unapplied – This reserve represents grants and contributions received in advance of matching to new capital investment.

 

 

21. UNUSABLE RESERVES

 

31.3.2021				31.3.2022
£000				£000
10,327		Revaluation Reserve		10,834
9,936		Capital Adjustment Account		9,413
(27,142)		Pensions Reserve		(24,220)
(30)		Financial Instruments Revaluation Reserve		53
112		Council Tax Collection Fund Adjustment Account		370
(2,887)		Business Rates Collection Fund Adjustment Account		(1,234)
(64)		Accumulated Absences Account		(67)
(9,748)		Total Unusable Reserves		(4,851)

 

 

Revaluation Reserve

 

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

 

•  revalued downwards or impaired and the gains are lost

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

•  disposed of and the gains are realised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

31.3.2021 £000	31.3.2021 £000	Revaluation Reserve	31.3.2022 £000	31.3.2022 £000
	8,974	Balance at 1 April		10,327
2,067		Upward revaluation of assets	408
(343)		Downward revaluation of assets and impairment losses not charged to the Surplus or Deficit on the Provision of Services	(99)
	1,724	Surplus or (Deficit) on revaluation of non-current assets not posted to the Surplus or Deficit on the Provision of Services		309
(371)		Difference between fair value depreciation and historical cost depreciation	(43)
		Accumulated gains on assets sold or scrapped
	(371)	Amount written off to the Capital Adjustment Account		(43)
	10,327	Balance at 31 March		10,593

 

 

Capital Adjustment Account

 

The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement, as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to an historical cost basis). The Account is credited with the amounts set aside by the Authority as finance for the costs of acquisition, construction and enhancement. The Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Authority.

 

 

2020/21      £000	2020/21      £000	Capital Adjustment Account	2021/22      £000	2021/22      £000
	8,727	Balance at 1 April		9,936
		Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement (CIES) :
(894)		Charges for depreciation of non-current assets	(929)
826		Revaluation gains/(losses) on Investment Properties	(710)
(54)		Amortisation of Intangible Assets	(81)
(658)		Revenue expenditure funded from capital under statute (REFCUS)	(623)
0		Amounts of Revaluation Reserve balance written off on disposal or sale of PPE	(4)
	(780)	Total		(2,347)
371		Adjusting amounts written out of the Revaluation Reserve	43
	371	Net written out amount of the cost of non-current assets consumed in the year		43
		Capital financing applied in the year:
11		Use of the Capital Receipts Reserve to finance new capital expenditure	115
556		Capital grants and contributions credited to the CIES that have been applied to capital financing	504
92		Application of grants to capital financing from the Capitals Grants Unapplied Account	103
199		Capital expenditure charged against the General Fund	96
610		Statutory provision for the financing of capital investment charged against the General Fund (Minimum Revenue Provision)	623
150		Revenue Contribution to Capital Outlay (RCCO)	123
	1,618	Total		1,564
	9,936	Balance at 31 March		9,196

 

 

 

 

 

 

Pensions Reserve

 

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

 

31.3.2021		Pensions Reserve		31.3.2022
£000				£000
(21,783)		Balance at 1 April		(27,142)
(4,787)		Actuarial gains or (losses) on pension assets and liabilities		4,038
(1,473)		Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the CIES		(2,047)
901		Employer’s pensions contributions and direct payments to pensioners payable in the year		931
(27,142)		Balance at 31 March		(24,220)

 

 

Financial Instruments Revaluation Reserve

 

The Financial Instruments Revaluation Reserve contains the gains made by the Authority arising from increases in the value of its investments that are measured at fair value through other comprehensive income. The balance is reduced when investments with accumulated gains are:

 

·         revalued downwards or impaired and the gains are lost

·         disposed of and the gains are realised

 

31.3.2021		Financial Instruments Revaluation Reserve		31.3.2022
£000				£000
(27)		Balance at 1 April		(30)
0		Upward revaluation of assets		83
(3)		Downward revaluation of assets		0
(30)		Balance at 31 March		53

 

Council Tax Collection Fund Adjustment Account

 

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

 

31.3.2021	Council Tax Collection Fund Adjustment Account			31.3.2022
£000				£000
61		Balance at 1 April		112
51		Amount by which council tax income credited to the CIES is different from council tax income calculated for the year in accordance with statutory requirements		258
112		Balance at 31 March		370

 

 

Business Rates Collection Fund Adjustment Account

 

A scheme for the retention of business rates came in to effect on 1 April 2013 and established new accounting arrangements. The Business Rates Collection Fund Adjustment Account manages the differences arising from the recognition of business rates income in the Comprehensive Income and Expenditure Statement (CIES) as it falls due from ratepayers, compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.

 

31.3.2021	Business Rates Collection Fund Adjustment Account		31.3.2022
£000			£000
(21)		Balance at 1 April	(2,887)
(2,866)		Amount by which Business Rates income credited to the CIES is different from Business Rates income calculated for the year in accordance with statutory requirements*	1,653
(2,887)		Balance at 31 March	(1,234)

 

 

*The large movement in the Business Rates Collection Fund Adjustment Account between 2020/21 and 2021/22 reflects the reduced deficit on the Business Rates Collection Fund at 31 March 2022 (£3.1m compared to £7.2m at 31 March 2021). During 2020/21 local authorities received S31 grants to offset the business rate reliefs given to businesses during lockdown. Under current Collection Fund accounting rules, the S31 grants received in 2020/21 are being discharged against the Collection Fund deficit in 2021/22 onwards. Further S31 grants were also received in 2021/22 which will have a similar impact on the Business Rates Collection Fund in future years.

 

Accumulated Absences Account

 

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

 

 

31.3.2021		Accumulated Absences Account	31.3.2022
£000	£000		£000	£000
	(63)	Balance at 1 April		(64)
63		Settlement or cancellation of accrual made at the end of the preceding year	64
(64)		Amounts accrued at the end of the current year	(67)
	(1)	Amount by which officer remuneration charged to the CIES on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements		(3)
	(64)	Balance at 31 March		(67)

 

 

22. CASH FLOW STATEMENT – ADJUSTMENTS TO NET SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES FOR NON-CASH MOVEMENTS

 

2020/21				2021/22
£000				£000
(894)		Depreciation		(929)
826		Movement in investment properties		(710)
(54)		Amortisation		(81)
(35)		(Increase)/decrease in Debtors		(320)
(3,954)		Increase/(decrease) in Creditors		(1,707)
(572)		Movement in pension liability		(1,116)
103		Other non-cash items charged to the net surplus or deficit on the provision of services		61
(4,580)		Total		(4,802)

 

 

 

 

23. CASH FLOW STATEMENT – ADJUSTMENTS TO NET SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES THAT ARE INVESTING AND FINANCING ACTIVITIES

 

2020/21				2021/22
£000				£000
10		Proceeds from the sale of non-current assets		13
659		Other non-cash items charged to the net surplus or deficit on the provision of services		741
669		Total		754

 

 

24. CASH FLOW STATEMENT – INVESTING ACTIVITIES

 

2020/21				2021/22
£000				£000
350		Purchase of non-current assets		480
3,500		Purchase of short and long term investments*		10,700
(10)		Proceeds from the sale of non-current assets		(13)
(1,729)		Other receipts from investing activities (capital grants & contributions)		(1,060)
2,111		Net cash flows from investing activities		10,107

 

*The increase in the purchase of short and long term investments partly relates to the timing of the Council Tax energy rebate grant (£2.99m) which was received at the end of 2021/22 and the payments are being made on behalf of Central Government at the beginning of 2022/23. The Council also administered various Business Grants on behalf of Central Government and part of this increase relates to unapplied funding due to be repaid to Central Government.

 

 

25. CASH FLOW STATEMENT – FINANCING ACTIVITIES

 

2020/21				2021/22
£000				£000
589 420		Repayments of short and long term borrowing Other receipts/payments from financing activity*		604 (3,429)
1,009		Total		(2,825)

 

*The movement between 2020/21 and 2021/22 is due to the significant decrease in short term Business Rates debtors and large increase in the short term Council Tax creditors. For further information please see note15 Debtors and note 18 Creditors.

 

 

 

 

26.  TRADING OPERATIONS – BUILDING CONTROL

 

The Building (Local Authority Charges) Regulations 1998 require the disclosure of information regarding the setting of charges for the administration of the Building Control function.  Building Regulations Control Services operate as a separate trading unit.

 

As of 1 April 2017, West Devon Borough Council (WDBC), South Hams District Council (SHDC) and Teignbridge District Council (TDC) entered into an updated partnership agreement and a new hosting agreement with respect to the staff and functions delivered by the Devon Building Control Partnership (DBCP) to the three Council areas.  This agreement saw the transfer of all staff who had DBCP responsibilities from WDBC or SHDC to TDC.  WDBC and SHDC retain an active participation in the controlling Devon Building Control Partnership Committee.    

 

The Summary Accounts for the year will be detailed in the DBCP, which can be found on Teignbridge District Council’s Website under the Devon Building Control Partnership Committee 2021/2022.

 

27.  BUSINESS IMPROVEMENT DISTRICTS

 

The Tavistock Business Improvement District (BID) was set up in Tavistock on the 1^st September 2011 for the purpose of providing additional services or improvements to the Tavistock BID area. The BID is funded in part by a levy which is based on the rateable value of each property within the BID area and this is charged in addition to the non-domestic rates. West Devon Borough Council acts as agent for the BID Company.    

 

28. MEMBERS’ ALLOWANCES

 

The Authority paid the following amounts to Members of the Council during the year. Members allowances are published on the Council’s website under ‘Your Council’ in the ‘Councillors and Committees’ section.

  

2020/21				2021/22
£000				£000
207		Allowances		208
1		Expenses		5
208		Total		213

 

 

29.  OFFICERS’ REMUNERATION

 

Regulation 4 of the Accounts and Audit (Amendment No.2) (England) Regulations 2009 [SI 2009 No. 3322] introduced a legal requirement to increase transparency and accountability in Local Government for reporting remuneration of senior employees.

 

A senior employee is defined as an employee whose salary is more than £150,000 per year, or alternatively one whose salary is at least £50,000 per year (to be calculated pro rata for a part-time employee) and who is:

• the designated head of paid service, a statutory chief officer or a non-statutory chief officer of a relevant body, as defined under the Local Government and Housing Act 1989
• the head of staff for a relevant body which does not have a designated head of paid service; or
• any person having responsibility for the management of the relevant body, to the extent that the person has power to direct or control the major activities of the body, in particular activities involving the expenditure of money, whether solely or collectively with other persons.

The remuneration paid to the Authority’s senior employees is as follows:

 

Post	Year	Salary, Fees and Allowances £	Expenses     £	Pension Contribution   £	Total     £
Strategic Director of Customer Service Delivery and Deputy Chief Executive (see note B)	21/22	87,500	500	13,600	101,600
	20/21	92,200	0	13,700	105,900
Corporate Director of Strategic Finance (S151 Officer)	21/22	77,400	0	11,400	88,800
	20/21	74,000	0	10,900	84,900
Strategic Director of Place & Enterprise	21/22	79,700	900	10,900	91,500
	20/21	74,000	900	10,900	85,800
Business Manager Specialists & Monitoring Officer (Monitoring officer duties terminated 10th November 20 -see note C).	21/22	63,800	0	9,400	73,200
	20/21	62,900	0	9,300	72,200
Head of Commissioning & Contracts (left post 15th Oct 21)	21/22	34,800	500	4,500	39,800
	20/21	56,700	900	8,400	66,000
Business Manager, Case Management	21/22	54,400	300	8,100	62,800
	20/21	47,700	0	7,100	54,800
Head of Environmental Health & Licensing	21/22	61,800	0	9,100	70,900
	20/21	59,900	0	8,900	68,800
Head of Projects & Strategy	21/22	60,800	0	9,000	69,800
	20/21	56,500	100	8,300	64,900
Post	Year	Salary, Fees and Allowances £	Expenses     £	Pension Contribution   £	Total     £
Head of Assets Practice	21/22	57,500	900	8,500	66,900
	20/21	53,400	800	7,900	62,100
Head of Development Management	21/22	57,500	400	8,500	66,400
	20/21	58,700	500	8,700	67,900
Head of Revenues, Benefits & Housing	21/22	52,800	500	7,800	61,100
	20/21	51,900	100	7,700	59,700
Customer Service Improvement Manager	21/22	50,300	0	7,400	57,700
	20/21	48,600	100	7,200	55,900
Head of Communications	21/22	50,300	0	6,600	56,900
	20/21	49,400	0	6,900	56,300

 

No other senior officer posts earned over £50,000 during 2021/22 or 2020/21.

 

Note A: Shared Services with South Hams District Council

The total cost of senior employees employed by South Hams District Council has been included in the equivalent note of South Hams District Council’s Accounts in accordance with the accounting requirements and is therefore excluded from the table above.

 

In 2021/22 West Devon Borough Council reimbursed costs amounting to £271,400 (2020/21 £233,100) in respect of some members of the Senior Leadership Team (SLT), and the Extended Leadership Team (ELT) who are employed by South Hams District Council. West Devon Borough Council received a reimbursement in 2021/22 from South Hams District Council of £489,100 (2020/21 £502,000) in respect of the above shared senior employees.

 

Note B: Chief Executive and Head of Paid Service

The Chief Executive and Head of Paid Service left the Council on 15^th March 2020. This post was covered on an interim basis by the Strategic Director of Customer Service employed by West Devon Borough Council. South Hams District Council successfully recruited to this post in June 2020.

Note C: Head of Legal and Monitoring Officer

The Chief Executive and Head of Paid Service conducted a review of the arrangements to ensure there was clarity of accountability for the statutory functions, and to make sure that the Monitoring Officer had the capacity to respond in a timely and effective manner to all issues referred to the role. A report was taken to Council in September 2020 which recommended the designation of the Monitoring Officer role to the Head of Legal Services (once appointed) and removal of the Monitoring Officer responsibilities and duties from the Business Manager (Specialists) employed by West Devon Borough Council. The Head of Legal and Monitoring Officer was appointed on 10 November 2020.

30. PAYMENTS TO EXTERNAL AUDITORS

 

The Authority has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and to non-audit services provided by the Authority’s external auditors:

 

 

31. GRANT INCOME

 

The Authority credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement.

	2020/21        £000	2021/22        £000
Credited to Taxation and Non-Specific Grant Income
Capital grants and contributions:
Disabled Facilities Grants	(659)	(741)
Non ring - fenced Government grants and contributions:
New Homes Bonus Grant	(348)	(293)
S.31 Business Rate Relief Grants*	(3,740)	(2,323)
Rural Services Delivery Grant	(464)	(487)
Lower Tier Services Grant	0	(70)
COVID-19 LA Response Grant	(797)	(282)
COVID-19 Sales, Fees & Charges Compensation	(436)	(70)
COVID-19 New Burdens Admin Support Grant	(355)	(131)
Total	(6,799)	(4,397)
Credited to Services
Rent Allowance subsidy	(8,984)	(8,484)
Housing Benefit administration subsidy	(130)	(111)
Rent rebate subsidy	(41)	(62)
Flexible Homelessness Support Grant	(108)	(211)
Discretionary housing payments	(181)	(118)
Business Rates cost of collection allowance	(80)	(82)
Section 106 deposits	(123)	(97)
Recycling credits	(345)	(347)
Electoral Commission - General Elections, Referendum and Police & Crime Commissioners	(2)	(88)
	2020/21        £000	2021/22        £000
European Election	(9)	0
Devon County Council – County Council Elections	0	(75)
COVID-19 Additional Restrictions Grant	(931)	(1,355)
COVID-19 Track & Trace Administration Support Grant	(23)	(12)
COVID-19 Discretionary Business Grants Fund	(861)	0
COVID-19 LA Support Grant	(32)	(138)
COVID-19 Council Tax Hardship Grant Fund	(356)	(103)
COVID-19 Local Restrictions Support Grant (Open)	(586)	0
COVID-19 Contain Outbreak Management Fund	0	(73)
Other grants	(306)	(566)
Total	(13,098)	(11,922)

 

S31 Business Rate Relief Grants

*The overall reduction in grant income between 2020/21 and 2021/22 of £1.2 million mainly relates to the S31 Business Rate Relief Grants. The larger share of this funding was received in 2020/21. This S31 compensation grant was awarded to local authorities to offset the business rate reliefs given to businesses during the pandemic.

 

The Authority has received a number of grants, contributions and donations that have yet to be recognised as income as they have repayment conditions attached to them. Until these conditions are met these grants are held as receipts in advance. Should these conditions not be met the monies would need to be returned to the grantor. The balances at the year-end are as follows:

 

Capital Grants Receipts in Advance	31 March 2021 £000	31 March 2022       £000
Hayedown, Tavistock	(20)	(20)
Batheway Fields, North Tawton	(9)	(9)
Annan Down Park Drive, Tavistock	(29)	(29)
Land adjacent to Shellsley, North Tawton	(47)	(47)
The Barton, Spreyton	(72)	(72)
Land at Butcher Park Hill, Tavistock	(207)	(171)
The Beeches, Yelverton	(21)	(21)
Land at Lower Trendle, Tavistock	(46)	(46)
Barns at Hurlditch Horn, Gulworthy	(32)	(32)
Rear of Rowan Cottage, Lewdown	(26)	(26)
Land at New Launceston Road, Tavistock	(113)	(228)
Harewood House, Tavistock	(164)	(164)
Land North of Crediton Road, Okehampton	(58)	(50)
Other Section 106 deposits	(267)	(406)
Green Homes Grant	(684)	(693)
Total	(1,795)	(2,014)
Revenue Grants Receipts in Advance	31 March 2021 £000	31 March 2022       £000
MHCLG COVID-19 Additional Restrictions Grant	(303)	0
MHCLG COVID-19 Additional Restrictions Grant Top Up	(377)	0
Council Tax Rebate - Discretionary Scheme	0	(111)
Nottingham City Council - Minimum Energy Efficiency Standard Grant	0	(14)
LGA Digital Connectivity	(9)	0
Total	(689)	(125)

 

 

32. RELATED PARTIES

 

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

 

Central Government

Central Government has effective control over the general operations of the Authority – it is responsible for providing the statutory framework, within which the Authority operates and prescribes the terms of many of the transactions that the Authority has with other parties (e.g. council tax bills, housing benefits). Grants received from Government departments are detailed in Note 31.

 

Members

Members of the Council have direct control over the Council’s financial and operating policies. The total of members’ allowances paid in 2021/22 is shown in Note 28.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33. CAPITAL EXPENDITURE AND CAPITAL FINANCING

 

The total amount of capital expenditure incurred in the year is shown in the table below with the resources that have been used to finance it,giving rise to the movement in the Council’s Capital Financing Requirement.

 

Summary of Capital Expenditure and Financing (incorporating the Capital Financing Requirement)	2020/21	2021/22
	£000	£000
Opening Capital Financing Requirement	25,972	25,362
Capital Investment
Property, Plant and Equipment	171	314
Intangible Assets	179	166
Revenue expenditure funded from capital under  statute (REFCUS)	658	623
Assets under Construction	0	0
Total expenditure for capital purposes	1,008	1,103
Sources of Finance
Capital receipts	(11)	(115)
Capital grants and external contributions	(648)	(607)
Earmarked reserves	(199)	(96)
Revenue Contributions to Capital Outlay (RCCO)	(150)	(123)
Total funding	(1,008)	(941)
Minimum Revenue Provision	(610)	(623)
Closing Capital Financing Requirement	25,362	24,901
Movement in Capital Financing Requirement	(610)	(461)
Explained by:
Increase/(decrease) in underlying need to borrow (unsupported by government financial assistance)	(610)	(461)
Increase/(decrease) in Capital Financing Requirement	(610)	(461)

 

 

 

 

 

 

34. LEASES

 

Authority as Lessee

 

The Authority has, in the past, acquired some assets through operating leases. These have included vehicles and printers. However, all remaining material operating leases have ceased and no lease payments have been made since 2009/10.

 

Authority as Lessor

 

The Authority leases various parcels of land and buildings to external organisations. The most significant are shown below:

 

Detail of lease	Term	Expiry date	Segment in CIES
The rental of office accommodation	15 years	17/09/2033	Investment Properties
The operation of a supermarket	39 years	08/01/2028	Investment Properties
The rental of an industrial unit	10 years	28/11/2028	Investment Properties
The rental of an industrial unit	10 years	11/12/2027	Investment Properties
The rental of an industrial unit	15 years	28/09/2032	Investment Properties

 

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

 

	31 March 2021 £000	31 March 2022 £000
Not later than one year	1,062	1,062
Later than one year & not later than five years	4,248	4,248
Later than five years	5,845	4,783
Total	11,155	10,093

 

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

 

 

 

 

 

 

 

35. EXIT PACKAGES AND TERMINATION BENEFITS

 

There were no exit packages in 2021/22 or 2020/21.

 

Shared Services with South Hams District Council

West Devon Borough Council made a contribution of nil to South Hams District Council in respect of their exit package costs of £796 in 2021/22 (£2,830 in 2020/21).

 

 

36. DEFINED BENEFIT PENSION SCHEMES

 

Participation in Pension Schemes

 

As part of the terms and conditions of employment of its officers, the Authority makes contributions towards the cost of post-employment benefits. Although these benefits will not actually be payable until employees retire, the Authority has a commitment to make the payments that need to be disclosed at the time that employees earn their future entitlement.

 

The Authority participates in the Local Government Pension Scheme (LGPS). The LGPS is a defined benefit statutory scheme administered in accordance with the Local Government Pension Scheme Regulations 2013 and currently provides benefits based on career average revalued earnings.

 

The administering Authority for the Fund is Devon County Council. The Pension Fund Committee oversees the management of the Fund whilst the day to day fund administration is undertaken by a team within the administering Authority. Where appropriate some functions are delegated to the Fund’s professional advisers.  

 

Contributions are set every 3 years as a result of the actuarial valuation of the Fund required by the Regulations. The next actuarial valuation of the Fund will be carried out as at 31 March 2022 and will set contributions for the period from 1 April 2023 to 31 March 2026. There are no minimum funding requirements in the LGPS but the contributions are generally set to target a funding level of 100% using the actuarial valuation assumptions. Funding levels are monitored on an annual basis. The total contributions expected to be made to the LGPS by the Council in the year to 31 March 2023 is £800,000. The Actuary has estimated the duration of the Employer’s liabilities to be 20 years.

 

Further information can be found in Devon County Council Pension Fund’s Annual Report, which is available upon request from The County Treasurer, Devon County Council, County Hall, Exeter, EX2 4QJ.

 

 

 

 

 

 

 

Transactions Relating to Post-employment Benefits

 

The cost of retirement benefits are recognised in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge we are required to make against council tax is based on the cash payable in the year, so the real cost of post-employment/retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement.

 

The movement in the pension scheme assets and liabilities together with the treatment of the corresponding transactions in the CIES is summarised in the following tables:

 

Comprehensive Income and Expenditure Statement	2020/21	2021/22
	£000	£000
Cost of Services
Service cost comprising
- Current Service Cost	956	1,495
Financing and Investment Income and Expenditure
- Net Interest Expense	498	534
- Administration Expenses	19	18
Total Post-employment benefits charged to the Surplus or Deficit on the Provision of Services	1,473	2,047
Other post-employment benefits charged to the comprehensive income and expenditure statement
Re-measurement of the net defined benefit liability comprising;
- Change in financial assumptions	11,503	(2,498)
- Change in demographic assumptions	(514)	0
- Experience loss/(gain)	(628)	144
- Return on fund assets in excess of interest	(5,574)	(1,684)
Total re-measurement recognised	4,787	(4,038)
Total post-employment benefits charged to the Comprehensive Income and Expenditure Statement	6,260	(1,991)
Movement in Reserves Statement
- Reversal of net charges made to the surplus or deficit on the provision of services for post-employment benefits in accordance with the code	(1,473)	(2,047)
Actual amount charged against the General Fund Balance for pensions in the year
- Employers contributions payable to scheme	901	931

 

 

Pensions Assets and Liabilities Recognised in the Balance Sheet

 

The amount included in the balance sheet arising from the Authority’s obligation in respect of its defined benefit plans is as follows:

 

Net Pension Liability	31 March 2021	31 March 2022
	£000	£000
Present value of the defined benefit obligation	55,622	54,558
Fair value of Fund assets	(29,292)	(31,085)
Deficit/(Surplus)	26,330	23,473
Present value of unfunded obligation	812	747
Net defined benefit liability/(asset)	27,142	24,220

 

Reconciliation of opening and closing balances of the fair value of Fund assets	31 March 2021	31 March 2022
	£000	£000
Opening fair value of Fund assets	24,258	29,292
Interest on assets	561	581
Return on assets less interest	5,574	1,684
Administration expenses	(19)	(18)
Contributions by employer including unfunded	901	931
Contributions by Scheme participants	204	204
Estimated benefits paid plus unfunded net of transfers in	(2,187)	(1,589)
Closing fair value of Fund assets	29,292	31,085
Reconciliation of opening and closing balances of the present value of the defined benefit obligation	31 March 2021	31 March 2022
	£000	£000
Opening defined benefit obligation	46,041	56,434
Current service cost	956	1,495
Interest cost	1,059	1,115
Change in financial assumptions	11,503	(2,498)
Change in demographic assumptions	(514)	0
Experience loss/(gain) on defined benefit obligation	(628)	144
Estimated benefits paid net of transfers in	(2,108)	(1,521)
Contributions by Scheme participants	204	204
Unfunded pension payments	(79)	(68)
Closing defined benefit obligation	56,434	55,305

 

 

 

Basis for Estimating Assets and Liabilities

 

Assets and liabilities are assessed by Barnett Waddingham, an independent firm of actuaries. As required under IAS19 they use the projected unit method of valuation to calculate the service cost.

 

To assess the value of the Employer's liabilities at 31 March 2022, they have rolled forward the value of the Employer's liabilities calculated for the funding valuation as at 31 March 2021, using financial assumptions that comply with IAS19.

 

To calculate the asset share they have rolled forward the assets allocated to West Devon Borough Council as at 31 March 2021 allowing for investment returns (estimated where necessary), contributions paid into and estimated benefits paid from the Fund, by and in respect of the Employer and its employees.

 

The demographic assumptions are projected using the CMI_2020 Model and are summarised in the following table:

 

Basis for estimating assets and liabilities	31 March 2021	31 March 2022
Mortality assumptions (in years):
Longevity at 65 for current pensioners
- Men	22.6	22.7
- Women	23.9	24
Longevity at 65 for future pensioners (in 20 years)
- Men	24.0	24
- Women	25.4	25.4
Financial assumptions (in percentages):
- RPI increases	3.20%	3.60%
- CPI increases	2.80%	3.20%
- Salary increases	3.80%	4.20%
- Pension increases	2.80%	3.20%
- Discount rate	2.00%	2.60%

 

The CMI_2020 Model introduces a ‘2020 weight parameter’ for the mortality data in 2020 so that the exceptional mortality experienced due to the coronavirus pandemic can be incorporated without having a disproportionate impact on results.

 

 

 

 

 

The table below looks at the sensitivity of the major assumptions:

 

Sensitivity analysis	£000s	£000s	£000s
Adjustment to discount rate	+0.1%	0.0%	(0.1%)
Present value of total obligation	54,264	55,305	56,366
Projected service cost	1,356	1,406	1,458
Adjustment to long term salary increase	+0.1%	0.0%	(0.1%)
Present value of total obligation	55,399	55,305	55,211
Projected service cost	1,407	1,406	1,405
Adjustment to pension increases and deferred revaluation	+0.1%	0.0%	(0.1%)
Present value of total obligation	56,265	55,305	54,362
Projected service cost	1,457	1,406	1,356
Adjustment to life expectancy assumptions	+ 1 Year	None	-1 Year
Present value of total obligation	57,929	55,305	52,804
Projected service cost	1,467	1,406	1,347

 

The estimated asset allocation for West Devon Borough Council as at 31 March 2022 is as follows:

 

Employer asset share	31 March 2021		31 March 2022
	£000	%	£000	%
Gilts	996	4%	4,134	13%
UK equities	3,244	11%	2,771	9%
Overseas equities	15,127	52%	15,633	50%
Property	2,353	8%	2,929	10%
Infrastructure	1,187	4%	1,755	6%
Target return portfolio	2,758	9%	2,873	9%
Cash	302	1%	367	1%
Other bonds	1,313	4%	636	2%
Alternative assets	2,012	7%	(13)	0%
Private equity	0	n/a	0	n/a
Total	29,292	100%	31,085	100%

 

 

 

 

 

Of the total fund asset at 31 March 2022, the following table identifies the split of those assets with a quoted market price and those that do not:

 

Employer Asset Share – Bid Value		31 March 2022
		% Quoted	% Unquoted
Fixed interest government securities	UK	0.0%	0.0%
	Overseas	13.0%	0.0%
Corporate bonds	UK	0.0%	0.0%
	Overseas	0.0%	0.0%
Equities	UK	8.0%	0.0%
	Overseas	50.0%	0.0%
Property	All	0.0%	9.0%
Others	Absolute return portfolio	9.0%	0.0%
	Private Equity	0.0%	0.0%
	Infrastructure	0.0%	6.0%
	Multi sector credit fund	0.0%	0.0%
	Private Debt	0.0%	2.0%
	Cash/Temporary investments	0.0%	1.0%
Net current assets	Debtors	0.0%	0.0%
	Creditors	0.0%	0.0%
Total		80.0%	18.0%

 

McCloud Judgement

 

A judgement in the Court of Appeal about cases involving judges’ and firefighters’ pensions (the McCloud judgement) has the potential to impact on the Council.  The cases concerned possible age discrimination in the arrangements for protecting certain scheme members from the impact of introducing new pensions arrangements.  As the Local Government Pension Scheme was restructured in 2014, with protections for those members who were active in the Scheme at 2012 and over the age of 55, the judgement is likely to extend to the Scheme.

On 16 July 2020, the Government published a consultation on the proposed remedy to be applied to LGPS benefits in response to the McCloud case. The consultation closed on 8 October 2020 and a ministerial statement in response to this was published on 13 May 2021, however a full response to the consultation is still awaited; the outcome of these matters is still to be agreed so the exact impact they will have on LGPS benefits is unknown.

 

The actuary valuation within the financial statements includes an allowance for the McCloud judgement.

 

 

 

 

37. CONTINGENT LIABILITIES

 

The Council had no contingent liabilities at 31 March 2022.

 

38. NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS

 

Key Risks

Financial Instruments held by the Council are detailed in Note 14. The Council’s activities expose it to a variety of financial risks:

• Credit risk – the possibility that other parties might fail to pay amounts due to the Council;
• Liquidity risk – the possibility that the Council might not have funds available to meet its commitments to make payments;
• Market risk - the possibility that financial loss might arise for the Council as a result of changes in such measures as interest rate movements;
• Re-financing risk - the possibility that the Council might be required to renew a financial instrument on maturity at disadvantageous interest rates or terms.

 

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 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 manage risk in the following ways:

• by formally adopting the requirements of the Code of Practice;
• by the adoption of a Treasury Policy Statement and treasury management clauses within its Financial Regulations/Standing Orders/Constitution;
• by approving annually in advance prudential and treasury indicators for the following three years limiting:

o   The Council’s overall borrowing;

o   Its maximum and minimum exposures to fixed and variable rates;

o   Its maximum and minimum exposures regarding the maturity structure of its debt;

o   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 or before the start of the year to which they relate.  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 to Members during the year.

The Annual Treasury Management Strategy which incorporates the prudential indicators was approved by Council on 30 March 2021 and is available on the Council’s website (Minute CM 44).

These policies are implemented by the Finance 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 Practices (TMPs).  These TMPs are a requirement of the Code.

Credit risk

 

Credit risk arises from deposits with banks and financial institutions, as well as credit exposures from the Council’s customers.

This risk is minimised through the Annual Investment Strategy, which requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria, in accordance with Fitch and Moody’s Credit Ratings Services. The Annual Investment Strategy also considers maximum amounts and time limits in respect of each financial institution.  Deposits are not made with banks and financial institutions unless they meet the minimum requirements of the investment criteria outlined above.

The Council uses the creditworthiness service provided by Link Asset Services. This service uses a sophisticated modelling approach with credit ratings from all three rating agencies forming the core element. However, it does not rely solely on the current credit ratings of counterparties but also uses the following overlays:

 

·         Credit watches and credit outlooks from credit rating agencies;

·         Credit Default Swap (CDS) spreads to give early warning of likely changes in credit ratings; and

·         Sovereign ratings to select counterparties from only the most creditworthy countries.

 

Institutions are split into colour bandings to determine the maximum level and duration of the investment.

 

The full Investment Strategy for 2021/22 was approved by Council on 30 March 2021 and is available on the Council’s website (Minute CM 44)

 

 

 

The Council’s Counterparty limits are as follows:

 

·         £3.0 million for Money Market Funds

·         £1.0 million on CCLA Property Investment Fund

·         £3.0 million on term deposits with banks and building societies within the UK (£4.0 million with Lloyds Bank PLC)

 

The Council takes a very prudent approach regarding the collection of debts from its customers and calculates an annual provision for bad debts based on the age of its debt. A detailed review of potential bad debts was undertaken at 31 March 2022 and is reflected in the current figure of £278,000. This compares to £323,000 in 2020/21. The bad debt provision is adequate to deal with the historical experience of default and current market conditions. An analysis of the Council’s debtors is provided in Note 15 to the accounts.

 

 

Amounts Arising from Expected Credit Losses

 

The Council’s short term investments have been assessed and the expected credit loss is not material and therefore no allowances have been made.

 

	Balance at 31 March 2022	Historical Experience of Default	Estimated Maximum Exposure to Default and Uncollectability at 31 March 2022
	£000	%	£000
Deposits with Bank and Financial Institutions Aberdeen Standard Money Market Fund Deutsche Money Market Fund Blackrock Money Market Fund LGIM Money Market Fund Debt Management Office (DMO) Standard Chartered Bank Lloyds Bank Plc	3,000 650 3,000 3,000 11,200 3,000 3,000	0.000% 0.000% 0.000% 0.000% 0.002% 0.012% 0.023%	0 0 0 0 0 0 1
Total	26,850		-

 

 

 

 

Liquidity risk

The Authority manages its liquidity position through the risk management procedures above (the setting and approval of prudential indicators and the approval of the treasury and investment strategy reports), as well as through a comprehensive cash flow management system, as required by the CIPFA Code of Practice. An analysis of the Council’s cash and cash equivalents is provided in Note 17 to the accounts. This seeks to ensure that cash is available when needed.

The Authority has ready access to borrowing from the money markets to cover any day to day cash flow need, and the PWLB and money markets for access to longer term funds.  The Authority is also required to provide a balanced budget through the Local Government Finance Act 1992, which ensures sufficient monies are raised to cover annual expenditure.  There is therefore no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. 

 

Market Risk

 

The Council is exposed to market risk in terms of its exposure that the value of an instrument will fluctuate because of changes in:

 

·         Interest rate risk;

·         Price risk; and

·         Foreign exchange rate risk.

 

Interest rate risk

 

The Authority is exposed to interest rate movements on its borrowings and investments.  Movements in interest rates have a complex impact on the Authority, depending on how variable and fixed interest rates move across differing financial instrument periods.  For instance, a rise in fixed interest rates would have the following effects:

 

·          Borrowings at fixed rates – the fair value of the borrowing will fall (no impact on revenue balances).

·          Investments at fixed rates – the fair value of the assets will fall (no impact on revenue balances).

Borrowings are not carried at fair value on the balance sheet, so nominal gains and losses on fixed rate borrowings would not impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in the Other Comprehensive Income and Expenditure Statement.

The Council has a number of 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 Strategy a prudential indicator is set which provides maximum and minimum limits for fixed and variable interest rate exposure.  The Finance team will monitor markets and forecast interest rates within the year to adjust exposures appropriately.  For instance, during periods of falling interest rates, and where economic circumstances make it favourable, fixed rate investments may be taken for longer periods to secure better long term returns, similarly the drawing of longer-term fixed rates borrowing would be postponed. 

 

Price risk 

The Council has an investment of £0.5 million in the CCLA Local Authorities Property Fund. At the end of each financial year the value of the Local Authority’s investment is adjusted to equal the number of units held, multiplied by the published bid price.

The above investment has been elected as Fair Value through Other Comprehensive Income, meaning that all movements in price will impact on gains and losses recognised in the Financial Instruments Revaluation Reserve, therefore there will be no impact on the General Fund until the investment is sold or impaired.

Foreign exchange risk 

The Council does not have any financial assets or liabilities denominated in foreign currencies, and thus has no exposure to loss arising from movements in exchange rates.

Refinancing and Maturity Risk

 

The Council maintains a debt and investment portfolio. Whilst the cash flow procedures above are considered against the refinancing risk procedures, longer-term risk to the Council relates to managing the exposure to replacing financial instruments as they mature.  This risk relates to both the maturing of longer-term financial liabilities and longer-term financial assets.

 

The approved treasury indicator limits for the maturity structure of debt and the limits placed on 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 Finance team address the operational risks within the approved parameters.  This includes:

 

·          monitoring the maturity profile of financial liabilities and amending the profile through either new borrowing or the rescheduling of the existing debt; and

·          monitoring the maturity profile of investments to ensure sufficient liquidity is available for the Authority’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 maturity analysis of financial liabilities is as follows, with the maximum and minimum limits for fixed interest rates maturing in each period:

 

	Approved minimum limits	Approved maximum limits	31 March 2021		31 March 2022
	%	%	£million	%	£million	%
Less than 1 year	0%	10%	0.603	2.1%	0.615	2.2%
Between 1 and 2 years	0%	10%	0.615	2.1%	0.713	2.5%
Between 2 and 5 years	0%	30%	2.101	7.3%	2.057	7.3%
Between 5 and 10 years	0%	50%	2.355	8.1%	2.185	7.7%
More than 10 years	0%	100%	23.270	80.4%	22.771	80.3%
Total			28.944	100.0%	28.341	100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39. ACCOUNTING POLICIES

 

a)    General Principles

 

The Statement of Accounts summarises the Authority’s transactions for the 2021/22 financial year and its position at the year end of 31 March 2022. The Authority is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2015. These regulations require the accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2021/22, supported by International Financial Reporting Standards (IFRS) (and statutory guidance issued under section 12 of the 2003 Act).

 

The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments.

 

The accounting policies are applicable to all of the Council’s transactions including those of the Collection Fund (council tax and business rates).

 

b)   Accruals of Income and Expenditure

 

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

 

• Revenue from the sale of goods is recognised when the Authority transfers the significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Authority;

 

• Revenue from the provision of services is recognised when the Authority can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Authority;

 

·         Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption; they are carried as inventories on the Statement of Financial Position (also known as the Balance Sheet);

 

·         Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made;

 

• Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract;

 

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

 

The Council operates a de minimis policy for accruals. For revenue and capital, the de minimis has remained at £5,000 in 2021/22.

 

 

c)    Cash and Cash Equivalents

 

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that are readily convertible to known amounts of cash with insignificant risk of change in value. Our policy is shown in the following table:

 

Type of Investment	Settlement Terms	Gain/Loss on Sale	Cash Equivalent
Money Market Fund	T + 0	O	P
Call Account	T + 0	O	P
Notice Deposit	Maturity	O	O
Term Deposit	T + 7 days	O	P
Other Term Deposits	Maturity	O	O

Key:  T = trade date

 

The Council's view is that investments made with an investment period of greater than 7 days would not be classified as cash equivalents because they are not sufficiently liquid to meet short term cash commitments.

 

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

 

d)   Material items of Income and Expense

 

When items of income and expense are material (in excess of £300,000), their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement (CIES) or in the notes to the accounts, depending on how significant the items are to an understanding of the Authority’s financial performance.

 

 

 

 

 

e)    Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors

 

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment.

 

Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Authority’s financial position or financial performance.  Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.

 

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

 

 

f)     Charges to Revenue for Non-Current Assets

 

Services, support services and trading accounts are debited with the following amounts to record the cost of holding assets during the year:

 

·         depreciation attributable to the assets used by the relevant service

 

·         revaluation and impairment losses on assets used by the service   where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off

 

·         amortisation of intangible assets attributable to the service

 

The Council is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisations. These charges are therefore replaced by the contribution in the General Fund Balance – Minimum Revenue Provision (MRP), by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement, for the difference between the two.

 

g)   Employee Benefits

 

Benefits Payable during Employment

 

Short term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees and are recognised as an expense for services in the year in which employees render service to the Authority. An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. time off in lieu)

earned by employees but not taken before the year-end which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs.

 

Termination Benefits

 

Termination benefits are amounts payable as a result of a decision by the Authority to end an officer’s employment before the normal retirement date, or an officer’s decision to accept voluntary redundancy in exchange for those benefits. These benefits are charged on an accruals basis to the appropriate service or, where applicable, to the Non Distributed Costs line in the Comprehensive Income and Expenditure Statement, to terminate at the earlier of when the Authority can no longer withdraw the offer of those benefits or when the Authority recognises costs for a restructuring.

 

Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund Balance to be charged with the amount payable by the Authority to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end.

 

Post-Employment Benefits

 

Employees of the Authority are members of the Local Government Pensions Scheme, administered by Devon County Council.  This scheme provides defined benefits to members (retirement lump sums and pensions), earned as employees worked for the Authority.

 

The Local Government Scheme is accounted for as a defined benefits scheme in the following way:

 

• The liabilities of the Devon County Council Pension Fund attributable to the Council are included in the Statement of Financial Position (Balance Sheet) on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates etc. and estimates of projected earnings for current employees.

 

• Liabilities are discounted to their value at current prices, using a discount rate.

 

• The assets of the pension fund attributable to the Council are included in the Statement of Financial Position (Balance Sheet) at their fair value.

 

For further information please refer to Note 36.

 

The change in the net pension liability is analysed into the following components:

 

·                  Service cost comprising:

·    current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked

·    past service cost – the increase in liabilities as a result of a scheme amendment or curtailment whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs

·    net interest on the net defined benefit liability (asset), i.e. net interest expense for the Authority – the change during the period in the net defined benefit liability (asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement – this is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability (asset) at the beginning of the period – taking into account any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payments.

 

·         Re-measurements comprising:

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

·    actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure

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

 

In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Authority to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits earned by employees.

 

 

 

Discretionary Benefits

 

The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.

 

 

h)   Events after the Reporting Period

 

Events after the Reporting Period are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue.

 

 Two types of events can be identified:

 

• those that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts is adjusted to reflect such events

 

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

 

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

 

 

i)     Financial Instruments

 

 

Financial Liabilities

 

Financial liabilities are recognised on the Statement of Financial Position (Balance Sheet) when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement (CIES) for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised.

 

For the borrowings held by the Council, this means that the amount presented in the Statement of Financial Position (Balance Sheet) is the outstanding principal repayable (plus accrued interest); and interest charged to the CIES is the amount payable for the year according to the loan agreement.

 

Financial Assets

 

Financial assets are classified based on a classification and measurement approach that reflects the business model for holding the financial assets and their cash flow characteristics.

 

The three main classes of financial assets are measured at:

 

·         Amortised cost

·         Fair value through profit or loss (FVPL), and

·         Fair value through other comprehensive income (FVOCI)

 

The Council’s business model is to hold investments to collect contractual cash flows i.e. payments of interest and principal. Most of the Council’s financial assets are therefore classified at amortised cost, except for those whose contractual payments are not solely payment of principal and interest (i.e. where the cash flows do not take the form of a basic debt instrument).

 

 

Financial Assets Measured at Amortised Cost

 

Financial assets measured at amortised cost are recognised on the Statement of Financial Position (Balance Sheet) when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement (CIES) for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the financial assets held by the Council, this means that the amount presented in the Statement of Financial Position (Balance Sheet) is the outstanding principal receivable (plus accrued interest) and interest credited to the CIES is the amount receivable for the year in the loan agreement.

 

Any gains and losses that arise on the derecognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the CIES.

 

 

Financial Assets measured at Fair Value through other Comprehensive Income (FVOCI)

 

The Council has equity instruments designated at fair value through other Comprehensive Income (FVOCI).

 

The Council has made an irrevocable election to designate its equity instruments as FVOCI on the basis that it is held for non-contractual benefits, it is not held for trading but for strategic purposes.

 

The asset is initially measured and carried at fair value.

 

Dividend income is credited to Financing and Investment Income and Expenditure in the Comprehensive Income and Expenditure Statement when it becomes receivable by the Council.

 

Changes in fair value are posted to Other Comprehensive Income and Expenditure and are balanced by an entry in the Financial Instruments Revaluation Reserve.

 

When the asset is de-recognised, the cumulative gain or loss previously recognised in Other Comprehensive Income and Expenditure is transferred from the Financial Instruments Revaluation Reserve and recognised in the Surplus or Deficit on the Provision of Services.

 

 

Expected Credit Loss Model

 

The Council recognises expected credit losses on all of its financial assets held at amortised cost (or where relevant FVOCI), either on a 12-month or lifetime basis. The expected credit loss model also applies to lease receivables and contract assets. Only lifetime losses are recognised for trade receivables (debtors) held by the Council.

 

Impairment losses are calculated to reflect the expectation that the future cash flows might not take place because the borrower could default on their obligations. Credit risk plays a crucial part in assessing losses. Where risk has increased significantly since an instrument was initially recognised, losses are assessed on a lifetime basis. Where risk has not increased significantly or remains low, losses are assessed on the basis of 12-month expected losses.

 

Fair Value

 

The Council measures some of its assets and liabilities at their fair value at the end of the reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability at the measurement date.

 

The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place in the principal market for the asset or liability. The Authority measures the fair value of an asset or liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

When measuring the fair value of a non-financial asset, the Authority takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

 

The Authority uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

 

Inputs to the valuation techniques in respect of the Council’s fair value measurement of its assets and liabilities are categorised within the fair value hierarchy as follows:

 

• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the Authority can access at the measurement date.

 

• Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

• Level 3 – unobservable inputs for the asset or liability.

 

 

j)     Government Grants and Contributions

 

General

 

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

 

• the Authority will comply with the conditions attached to the payments and

 

• the grants or contributions will be received.

 

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

 

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

 

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

 

A Business Improvement District (BID) scheme operates in Tavistock. This scheme is funded by a BID levy paid by non-domestic ratepayers. The Council acts as an agent for the Tavistock BID Company, the Council is the billing Authority and collects the levy on the BID company’s behalf. No income or expenditure is included in the Comprehensive Income and Expenditure Statement, and any cash balance collected by the Council but not yet paid to the BID company at the year-end is carried in the Balance Sheet as a creditor. 

 

k)    Heritage Assets

 

Heritage assets are assets that are held by the Authority principally for their contribution to knowledge or culture. The Council has reviewed its insurance and assets registers and has not identified any material assets that require disclosure.

 

 

l)     Intangible Assets

 

Expenditure on non-monetary assets that do not have physical substance but are controlled by the Authority as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Authority. As with Property, Plant and Equipment a de minimis level of £10,000 has been set for capitalisation.

 

Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Authority can be determined by reference to an active market. In practice, no intangible asset held by the Authority meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over 3 years to the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

 

Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation charges are not permitted to have an impact on the General Fund Balance. Therefore, these charges are reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account.

 

m)  Investment Properties

 

Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale. Investment properties are measured initially at cost and subsequently at fair value, based on the amount that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

 

Properties are not depreciated but are revalued annually according to market conditions at the year-end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal.

 

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

 

n)   Jointly Controlled Operations

 

Jointly controlled operations are activities undertaken by the Council in conjunction with other partners that involve the use of the assets and resources of the partners rather than the establishment of a separate entity. The Council recognises on its Statement of Financial Position (Balance Sheet) the assets that it controls and the liabilities that it incurs and debits and credits the Comprehensive Income and Expenditure Statement with the expenditure it incurs and the share of income it earns from the activity of the operation.

 

o)    Leases

 

Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases.

 

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets (i.e. embedded leases).

 

The Authority as Lessee

 

Finance Leases

 

The Council does not hold any finance leases as a lessee.

 

Operating Leases

 

Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or equipment. Where material, charges are made on a straight line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease).

 

The Authority as Lessor

 

Finance Leases

 

The Council does not hold any finance leases as a lessor.

 

 

 

Operating Leases

 

Where the Authority grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Statement of Financial Position (Balance Sheet). Rental income is credited to the relevant line within the ‘Cost of Services’ or ‘Financing and Investment Income’ in the Comprehensive Income and Expenditure Statement. Where material, the rental income is credited on a straight line basis over the life of the lease, even if this does not match the pattern of payments.

 

p)   Overheads and Support Services

 

Costs of overheads and support services are only recharged to services requiring full cost recovery. Apart from these exceptions support services are shown in the Customer Service and Delivery service group within the Comprehensive Income and Expenditure Statement in their own reporting segment, which is in line with the Council’s internal reporting method.

 

q)   Property, Plant and Equipment

 

Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment.

 

Recognition

 

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

 

Measurement

 

Assets are initially measured at cost, comprising:

 

• the purchase price

·         any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management

 

Assets are then carried in the Statement of Financial Position (Balance Sheet) using the following measurement bases:

 

• infrastructure, community assets and assets under construction – depreciated historical cost
• all other assets – current value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV).

Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value.

 

For non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value.

 

Assets included in the Statement of Financial Position (Balance Sheet) at current value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their current value at the year-end, but at a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service.

 

Where decreases in value are identified, they are accounted for as follows:

 

• where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains)
• where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

 

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account.

 

De minimis policy for capital controls and accounting purposes

 

CIPFA have not set specified de minimis levels and it is up to authorities to decide for themselves having regard to their particular circumstances.

 

In order to reduce the administrative burden a general de minimis limit of £10,000 has been set for the recognition of capital expenditure except for:

 

• Vehicles and Plant for which the limit is £7,000
• Loans which have no limit

 

 

 

 

 

 

 

 

 

 

 

Component Accounting

 

The International Financial Reporting Standards (IFRS) code requires separate accounting for depreciation of significant components of assets that are:

 

- acquired on or after 1 April 2010

- enhanced on or after 1 April 2010

- revalued on or after 1 April 2010

 

 Where there is more than one significant part of the same asset which has the same useful life and depreciation method, such parts may be grouped in determining the depreciation charge.

 

Significant components which have different useful lives and/or depreciation methods, will be accounted for separately.

 

Where a component is replaced or restored, the carrying amount of the old component shall be derecognised and the new component reflected in the assets carrying amount, subject to the recognition principles of capitalising expenditure. Derecognition of a component from the Statement of Financial Position (Balance Sheet) takes place when no future economic benefits are expected from its use. Such recognition and derecognition takes place regardless of whether the replaced part has been depreciated separately.

 

Assets eligible to be considered for componentisation are those classified within the following categories:

 

1. Operational Buildings
2. Assets Held for Sale

 

The following will be considered outside the scope for componentisation:

 

1. Non-Depreciable Land
2. Assets Under Construction
3. Investment Properties
4. Infrastructure
5. Plant and Equipment
6. Community Assets
7. Intangible Assets

 

The criteria for components to be separately valued are that:

 

De minimis threshold - The overall gross asset value must be in excess of £400k to be considered for componentisation and

 

Materiality - The component must have a minimum value of £200k or

be at least 20% of the overall value of the asset (whichever is the higher) and

 

Asset lives - The estimated life of the component is less than half of that of the main asset.

All three rules above must be met to consider componentisation.

These rules will apply to revaluations and when replacing components within an asset.

 

Where enhancement is integral to the whole asset then unless there is significant evidence to the contrary, the asset life of the enhancement will have the same remaining life as the existing asset and will not be separately identified as a component.

 

Where assets are material and will therefore be reviewed for significant components, it is recommended that the minimum level of apportionment for the non-land element of assets is:

 

• Plant and equipment and engineering services
• Structure

 

The Valuer will assign to each standard property type a group of significant components common to all property assets within that property type.

 

Where a component is replaced the existing component shall be derecognised and the new component cost added to the carrying amount. The amount derecognised will be estimated based on the cost of the replacement part. This principle will apply to componentised and non-componentised assets.

 

Assets and asset components will be revalued in accordance with the annual valuation schedule agreed with the Valuer. The Valuer will be responsible for providing valuations apportioned in accordance with the assets property type.

 

Impairment

 

Assets are assessed at each year end as to whether there is any indication that an asset may be impaired. This formal impairment review is undertaken by the Council’s Valuer. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall.

 

Where impairment losses are identified, they are accounted for as follows:

 

• where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains)

 

• where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

 

Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised.

Depreciation

 

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

 

Deprecation is calculated on a straight-line allocation over the useful life of the asset. Useful lives are determined on a case by case basis.  Typical and maximum useful lives are:

 

Asset	Typical Useful Life	Maximum Useful life
Buildings	Up to fifty years	Up to fifty years
Infrastructure	Up to forty years	Up to fifty years
Refuse vehicles	Up to seven years	Up to nine years
Light vans	Up to five years	Up to seven years
IT equipment	Up to three years	Up to three years

 

Where an item of Property, Plant and Equipment has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately.

 

Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost, being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

 

Disposals and Non-current Assets Held for Sale

 

When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any losses previously recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on Assets Held for Sale.

 

If assets no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to non-current assets and valued at the lower of their carrying amount before they were classified as Held for Sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as Held for Sale and their recoverable amount at the date of the decision not to sell.

 

Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale.

 

When an asset is disposed of or decommissioned, the carrying amount of the asset in the Statement of Financial Position (Balance Sheet), whether Property, Plant and Equipment or Assets Held for Sale is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account.

 

Amounts received for a disposal in excess of £10,000 are categorised as capital receipts.

 

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

 

r)     Provisions, Contingent Liabilities and Contingent Assets

 

Provisions

 

Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential and a reliable estimate can be made of the amount of the obligation.

 

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

 

When payments are eventually made, they are charged to the provision carried in the Statement of Financial Position (Balance Sheet). Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service.

 

Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received by the Authority.

 

Contingent Liabilities

 

A contingent liability arises where an event has taken place that gives the Authority a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Authority. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

 

Contingent liabilities are not recognised in the Statement of Financial Position (Balance Sheet) but disclosed in a note to the accounts. The Council operates a disclosure de minimis policy for contingent liabilities of £50,000. 

 

Contingent Assets

 

A contingent asset arises where an event has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council.

 

Contingent assets are not recognised in the Statement of Financial Position (Balance Sheet) but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential. The Council operates a disclosure de minimis policy for contingent assets of £50,000. 

 

s)    Reserves

 

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

 

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

 

t)     Revenue Recognition

 

With the adoption of accounting standard IFRS 15, revenue is defined as income arising as a result of the Council’s normal operating activities and where income arises from contracts with service recipients it is recognised when or as the Council has satisfied a performance obligation by transferring a promised good or service to the service recipient. Material revenue sources will be disclosed on the face of the Consolidated Income and Expenditure Statement and as part of Note 2, Material Items of Income and Expenditure.

 

Revenue is measured as the amount of the transaction price which is allocated to that performance obligation. Where the Council is acting as an agent of another organisation the amounts collected for that organisation are excluded from revenue.

 

The analysis carried out to date indicates that there will be no material impact on the revenue recognised in relation to the significant contracts entered into by the Council. A review will take place each year to identify whether any disclosure is necessary.

 

Further details of specific revenue recognition are provided in policies b) Accruals of Income and Expenditure and y) Accounting for Local Taxes.

 

u)   Revenue Expenditure Funded from Capital under Statute (REFCUS)

 

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

 

v)    Section 106 Deposits

 

Developer contributions are initially treated as Capital Receipts in Advance unless a clear capital use is identified in the terms of the agreement, in which case they are defined as Capital Contributions Unapplied.

 

w)  Shared Services

 

West Devon Borough Council and South Hams District Council have been in a shared services arrangement since 2007. Following the implementation of the joint Transformation Programme (T18), all of the Councils’ non-manual workforce are shared across both Councils.

 

Officers have produced a methodology for recharging the salary costs of shared officers based on the most appropriate cost driver and ratio to best reflect the officer’s split of workload between the two Councils. Examples of the cost drivers used are caseloads, call volumes, property numbers, number of claims or cases processed etc., and other methods such as time recording. The work carried out includes establishing from the Heads of Practice/Group Managers the relevant recharge requirements for all of the non-manual workforce. On an annual basis, the Audit Committee approve the methodology for recharging the salary cost of shared officers.

 

x)    VAT

 

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

 

y)    Accounting for Local Taxes

    

Billing authorities act as agents, collecting council tax and business rates on behalf of the major preceptors (including government for business rates) and, as principals, collecting council tax and business rates for themselves. Billing authorities are required by statute to maintain a separate fund (i.e. the Collection Fund) for the collection and distribution of amounts due in respect of council tax and business rates. Under the legislative framework for the Collection Fund, billing authorities, major preceptors and central government share proportionately the risks and rewards that the amount of council tax and business rates collected could be less or more than predicted.

 

Accounting for Council Tax and Business Rates

 

The council tax and business rates income included in the Comprehensive Income and Expenditure Statement is the Council’s share of accrued income for the year. However, regulations determine the amount of council tax and business rates that must be included in the Council’s General Fund. Therefore, the difference between the income included in the Comprehensive Income and Expenditure Statement and the amount required by regulation to be credited to the General Fund is taken to the Collection Fund Adjustment Account and included as a reconciling item in the Movement in Reserves Statement. The Statement of Financial Position (Balance Sheet) includes the Council’s share of the end of year balances in respect of council tax and business rates relating to arrears, impairment allowances for doubtful debts, overpayments and prepayments and appeals.

 

z)    Minimum Revenue Provision

 

The Council is not required to use Council Tax to fund depreciation, revaluation and impairment losses or amortisation of non-current assets. However, it is required to make an annual contribution from revenue towards provision for the reduction in its overall borrowing requirement equal to either an amount calculated on a prudent basis or as determined by the Council in accordance with statutory guidance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40. ACCOUNTING STANDARDS THAT HAVE BEEN ISSUED BUT HAVE NOT YET BEEN ADOPTED

 

The Code of Practice on Local Authority Accounting in the United Kingdom 2022/23 (the Code) introduces changes in accounting policies that will have to be adopted fully by the Council in the 2022/23 financial statements i.e. from 1 April 2022.

 

The Council is required to disclose information relating to the impact of the accounting change on the financial statements as a result of the adoption by the Code of a new/amended standard that has been issued but is not yet required to be adopted by the Council.

 

It was originally envisaged that the financial impact of IFRS16 Leases would need to be disclosed in the 2019/20 Accounts. This standard will require local authorities that are lessees to recognise leases on their balance sheets as right-of-use assets with corresponding lease liabilities. However, CIPFA/LASAAC initially deferred implementation of IFRS16 for local government until 1 April 2022 due to the COVID-19 pandemic. However, following its emergency consultation on exploratory proposals for changing the Code in February 2022, CIPFA LASAAC issued a preliminary decision to defer IFRS16 Leases until 1 April 2024. This was subsequently agreed by the government’s Financial Reporting Advisory Board (FRAB) in April 2022. However, both the 2022/23 and the 2023/24 Codes will allow for adoption as of 1 April 2022 or 2023. There are no plans for the Council to early adopt this standard.

 

Following this deferral to 1 April 2024, it is not yet possible to determine the impact of IFRS16 on the Council’s financial performance or financial position.

 

41. CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

 

In applying the accounting policies set out in Note 39, the Authority has had to make certain judgements about complex transactions or those involving uncertainty about future events. The main critical judgement made in the Statement of Accounts is:

 

• The cost drivers used to apportion Shared Service costs are appropriate and result in recharges which fairly reflect actual workloads and costs. The methodology for the apportionment of costs (predominantly staffing costs) are split on a defined basis which reflects the level of caseload attributable to each individual service. The methodology and mechanisms used to calculate the cost allocations are reviewed and reported to the Audit Committee on an annual basis. The final actual shared services split formulae are adjusted if they exceed a tolerance level of 3% from the original estimate.