Luton Borough Council Statement of Accounts 2015-16 › Council_government_and... · Luton Borough...

Luton Borough

Council

Statement of

Accounts

2015-16

NARRATIVE STATEMENT BY THE CHIEF FINANCE OFFICER

Luton Borough Council Page 1 2015-16 Accounts

The Council’s Statement of Accounts for the year 2015/16 has been prepared in accordance with the Accounts and Audit Regulations 2015 and the Code of Practice on Local Authority Accounting in the United Kingdom issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) for 2015/16. The code incorporates relevant accounting standards, including International Financial Reporting Standards, International Public Sector Accounting Standards and Generally Accepted Accounting Practice (UK). The accounts comprise the following: - Page

Narrative Statement by the Service Director (Finance & Audit) 3 Statement of Accounting Policies 11 Main Financial Statements

- Movement in Reserves Statement 14 summarises the differences between the outturn on the Comprehensive Income and Expenditure Account and the movement on the General Fund Balance, and presents movements in reserves

- Comprehensive Income and Expenditure Statement 17

sets out income and expenditure on services, corporate income and expenditure and other comprehensive income and expenditure

- Balance Sheet 18

sets out the assets and liabilities of the Council on the 31 March 2016

- Cash Flow Statement 20

shows the movements in cash held by the Council's funds for 2015/16, excluding the Pension Fund and Trust Funds

- Notes to the Accounts 21

provide a more detailed analysis of the entries in the statements

Supplementary Financial Statements

- Housing Revenue Account Income and Expenditure Account & Notes 118 show details of income and expenditure relating to Council Housing

- Collection Fund & Notes 123 show the receipt of Council Tax, Business Rates and Government Grants, which are then used to finance services provided by the Council and the Bedfordshire Police Authority and the Combined Luton and Bedfordshire Fire Authority.

Group Accounts & Notes 127 Statement of Responsibilities 145 Annual Governance Statement 146 Independent Auditors Report 161 Glossary 165



Statement of Accounts – Alternative Formats This document can be made available in a range of languages, large print, Braille, electronic and other accessible formats. For further information please contact the Chief Accountant, Finance Division, telephone 01582 546127 or e-mail [email protected]

mailto:[email protected]



Introduction Luton Borough Council provides services for a population of approximately 215,000. The key services and activities of the Council are the provision of education, social services, housing, refuse collection & recycling, planning, building control, environmental health, highways, leisure, council tax and business rate collection, off street car parking and community and voluntary sector support. The statement of accounts present the financial results of the Council’s activities for the year ended 31 March 2016, and summarises the overall financial position of the Council. The Accounting Statements The Council is required by law to complete its accounts in accordance with the CIPFA Code of Practice on Local Authority Accounting and constitutes a ‘proper accounting practice’ under the terms of section 21 (2) of the Local Government Act 2003. The purpose of the statements is set out in the Contents Page (page 1), immediately preceding this report. The code is based upon International Financial Reporting Standards (IFRS). The Code reconciles IFRS with the statutory local government finance framework. This is necessary because there are material differences between what IFRS states should be included in the accounts, and what legislation says should be financed by a local authority and local council taxpayers. There are many entries in the accounts, particularly within the “Comprehensive Income and Expenditure Statement”, which are included as notional items for presentational purposes, and then “reversed out” via the “Statement of Movement in Reserves” so that the bottom line financial performance is consistent with statutory requirements. This Narrative Report sets out the key issues and is intended to give the reader an insight into the Council’s financial performance during 2015/16. Significant Matters in the Accounts In recent years there have been unprecedented falls in Central Government funding to local authorities and Luton Borough Council has not been immune from this. Since 2013 the Council has lost £26million of government funding - a fall of 42%. On the current trajectory of cuts, the main revenue support grant that supports local government expenditure is expected to have been phased out completely by 2020, making the Council more reliant on business rates generation.



The challenge facing the Council is how to generate additional business rates in a borough that is already heavily developed, with limited amounts of land available for business development, and with major housing need. The redevelopment of Junction 10A, together with funding for the Luton Inner Ring Road, is vital to provide the road infrastructure to avoid further objections from the Highways Agency against significant development proposals and hence to enable the realisation of large scale development projects in the limited areas where they are possible. Such developments are now key to the future funding of public services in Luton. Significant business expansion is now key to the delivery of additional funding for Council services. Moreover the Council has been successful in its bid to be granted an Enterprise Zone which means that it should be able to retain up to 100% of the business rates subject to finalisation of the scheme and at the same time attract developers to invest in the enterprise zone. The rise in the number and extent of appeals against rateable values continues to prove challenging and is evident in the rise of the provision against appeals. The Council reported in its 2016/17 budget a need to save an estimated £25.2 million over a four-year period, with £11.4 million required in 2016/17. Delivering the savings will not be easy but the Council has in place a robust transformation programme through which spend will be closely monitored. Notwithstanding the considerable challenges facing the Council, its financial position remains resilient. Prior Period Adjustments In the course of preparing the Statement of Accounts for 2015/16 a number of material misstatements from prior years have been corrected with the result that some amounts presented in the statements differ from the equivalent figures presented in the Statement of Accounts for 2014/15. Explanations of the material differences between the amounts presented in the 2014/15 financial statements and the equivalent amounts presented in the 2015/16 restated financial statements are provided in more detail on pages 21 to 30. Annual Audit of the Accounts As part of the 2015/16 audit, the external auditors have identified some significant deficiencies in the design and operation of internal control that might result in a material misstatement in the Council’s financial statements. This is explained in greater detail in the Audit Results Report and Annual Governance Statement. The report includes the response from Council’s officers and response from management identifying the person responsible to implement the auditors’ recommendations and an implementation date. It is worth noting that considerable progress has been made and all significant errors have been corrected and reflected in 2015/16 Statement of Accounts.



The Section 151 Officer and Monitoring Officer became aware of some potential irregularities in the way Channel 3 Consulting Ltd were procured. As a result an internal audit investigation was undertaken which highlighted concerns over the procurement process. Legal advice was sought which confirmed the contract award to Channel 3 Consulting Ltd was not compliant with the Public Contracts Regulations 2015. Proactive steps have been taken by means of an internal audit investigation; a review of tenders by the Procurement Team; and a lesson learnt exercise. The contract payment, contrary to law, of £250,000 in 2015/16 has been recovered by a credit note. The credit note is expected to be settled during 2016/17. Key Results of the Financial Year: General Fund Revenue Expenditure and Financing In February 2015 the Council approved a net revenue budget for 2015-16 of £143.8 million. The General Fund came in largely on budget in 2015-16. Within this result, underspends across various services offset overspends in Children’s Services and Temporary Accommodation, two areas that continue to pose challenges for the Council. An increase in demand for placements for looked after children and a shortage of private sector housing represent the main underlying pressures. The General Fund balance at 31 March 2016 was £14.0 million, an increase of £2.4 million from the position as at 31 March 2015. General Fund Revenue Expenditure and Financing The Council’s main sources of financing and the expenditure to which it is applied are set out below. Revenue Financing £m

Specific Government Grants 138.1

Fees, Charges, Investments etc 80.3

Housing Rents 35.9

Airport Dividend 6.0

Council Tax 61.8

Business Rates 44.7

Revenue Support Grant 37.4

Dedicated Schools Grant 152.8

557.0

Revenue Expenditure £m

Employees 226.1

Running Costs 295.1

Capital Expenditure from revenue 19.7

Financing Charges 16.1

557.0



General Fund Earmarked Reserves A comparison of 2015-16 changes in budgeted balances for reserves with actual out-turn is shown below: Budget Actual Variation Balance at

31/03/2016

£m £m £m £m

Invest to Save Reserve (0.16) (0.07) (0.09) (3.99)

Pensions Reserve 0.00 (1.11) 1.11 (4.46)

Service Provision Reserve (0.10) 1.87 (1.97) (1.87)

Reorganisation Reserve 0.00 2.31 (2.31) (4.14)

Specific Risk Management Reserve 0.00 0.00 0.00 (2.97)

Welfare Reform & Recession Reserve 0.00 0.11 (0.11) (1.49)

Major Projects Reserve 0.00 0.00 0.00 (8.36)

Investment Reserve 0.00 0.41 (0.41) (1.80)

Insurance Reserve 0.00 0.02 (0.02) (2.78)

Capital Reserve 0.00 0.88 (0.88) (0.75)

Funding Equalisation Reserve 0.00 (1.04) 1.04 (1.04)

Specific Service Reserve 0.00 (1.27) 1.27 (1.27)

Other Reserves (less than £1m) (0.03) (0.12) 0.09 (1.83)

Total GF Earmarked Reserve (0.29) 1.99 (2.28) (36.75)

The main reductions were in reserves set aside for service provision, where there was a significant reduction in budgets being carried forward to 2016/17 compared with carry-forwards from 2014/15 to 2015/16, and in the reorganisation reserve, contributions from which were used to fund a number of one-off investment projects.

Increases in reserves include money set aside to help meet future pension obligations, a reserve for specific services where spend is incurred over more than one year and an equalisation reserve needed to help address future fluctuations in major income sources such as business rates and government grants. Revenue Expenditure treated as Capital under Statute Expenditure in the year totalled £2.9 million and the method of financing is shown within the attached notes.

Funds Available for Capital and Capital Expenditure Plans The Council spent £75.8 million on the provision or refurbishment of its assets during 2015-16. This investment covers all the Council’s services including schools, social services, public buildings, housing stock (both public and private sector) and highways. The total spent on services and the way in which it was financed in 2015-16 is shown in the tables below. The total cost of resources required for projects scheduled to start by 2018 is £153.9 million and the anticipated resources to fund the programme are also shown in the table over the page.



Projects to start

2015-16

by 2018

Programme Area £m

£m

Housing Public Sector 12.5

52.6

Housing Private Sector 3

33.2

Investment in Schools 13.6

20.4

Investment in Public Buildings 29.9

17.9

Highways 9.8

16.5

Social Services 2.7

2.2

Vehicles, Plant and Equipment 3.7

9.5

Other 0.6

1.6

Total 75.8

153.9

Projects to start

Resource 2015-16

by 2018

General Fund £m

£m

Government Grants 18.7

32.1

Usable Capital Receipts 4.7

20.2

Third Party Contributions 1.2

2.1

Internal Funds 6.4

8.6

Prudential Borrowing 32.3

38.3

Housing Revenue Account

HRA Borrowing 1.5

24.0

Major Repairs Allowance 8.1

20.0

Revenue Contribution 0.8

0.0

Right to Buy Receipts 2.1

8.6

Total 75.8

153.9

Housing Revenue Account

The HRA Income and Expenditure Statement shows the economic cost in the year of providing housing services in accordance with generally accepted accounting practices, rather than the amount to be funded from rents. The council charges rents to cover expenditure in accordance with regulations and this may be different from the accounting cost. The increase or decrease in the year, on the basis of which rents are raised, is shown in the Movement on the HRA Statement. The HRA Income and Expenditure Statement is consolidated into the Comprehensive Income and Expenditure Statement. The HRA Movement in Reserves Statement takes the outturn on the HRA Income and Expenditure Statement and reconciles it to the surplus or deficit for the year on the HRA Balance, calculated in accordance with the requirements of the Local Government and Housing Act 1989. It is consolidated into the Movement in Reserves Statement. The Housing Revenue Account expenditure and income for the year resulted in an increase in its revenue reserves of £4.0 million, and a resulting revenue



reserve balance of £8.2 million after a £0.2 million transfer to earmarked HRA reserves (page 118). The Housing Revenue Account came in on budget. Collection Fund

The Collection Fund is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority in relation to the collection from taxpayers and distribution to local authorities and the Government of council tax and non-domestic rates. The figures shown in the Comprehensive Income and Expenditure Statement and the Balance Sheet reflect only the Council’s share of these transactions.

The Collection Fund deficit at the year-end was £7.2 million. This total is made up of a £7.9 million deficit for Business Rates (Council’s share £3.9m) offset by a £0.7 million surplus for Council Tax (Council’s share £0.6m). The Council’s total share will be taken into account when setting the level of Council Tax in future years. The increase in the business rates deficit is mainly due to increases in appeals costs.

The collection rate achieved for council tax was 96.98% against a target of 97.50% and that for business rates was 98.09% against a target of 98.10%.

Pensions Liability and Reserve Financial Reporting Standards require Councils to include their pensions liability, as estimated by the pension fund’s actuary, on the Balance Sheet. The actuary estimates that as at 31 March 2016, the Bedfordshire Pension Fund is in deficit, and Luton’s share of that deficit is £303.9 million (£366.4 million at 31 March 2016). This means that the estimated cost of providing the pension benefits earned to date by both past and present employees is £303.9 million more than the value of the fund’s assets, when assets and liabilities are valued in accordance with generally accepted accounting practice. This is a major long-term liability that continues to be addressed in the Council’s medium term financial strategy. The Council’s contributions are likely to continue at a very high level until the costs are fully funded in the long-term. It should be noted that the level of the deficit is heavily dependent on stock market values (approximately 50.1% of the fund’s assets are in equities), as well as the approach and underlying assumptions adopted by the actuary in carrying out the valuation.

The accounting entries required to show the extent of the pensions liability do not affect the surplus or deficit for the year, or the demand on the Council Tax. The surplus or deficit reflects the actual amounts paid by the Council to the Bedfordshire Pension Fund.



Group Comprehensive Income and Expenditure Statement and Balance Sheet These aggregate the accounts for the Council and London Luton Airport Ltd. The Airport company’s audited profit and loss account showed a £8.9 million profit at the year-end before dividend payments.

Borrowing & Investments

It is the Council’s policy to consider borrowing externally for new capital expenditure, replacing external borrowing repaid, and to cover temporary revenue shortfalls. The requirement to borrow is reduced by utilising usable capital receipts, capital grants, other capital resources held pending their application and where appropriate existing investments and repayment of borrowing. In 2015-16 one PWLB loan of £0.29 million was taken out for housing purposes. Loans totalling £25.0 million were repaid to the PWLB leaving the total loans outstanding at £270.7 million at the year-end. At the year end the Council had cash investments totalling £38.7 million. This is currently managed internally. Two debenture loans of £12 million and £3 million were made to London Luton Airport Ltd in 2015-16. Public Health Public Health was integrated into local government on 1st April 2013, providing an opportunity to plan and deliver services in the context of the broader social determinants of health, such as poverty, education, housing, employment, crime and pollution. The income is matched with the expenditure and is now included as a separate line in the Comprehensive Income & Expenditure Statement. Acquired Operation: 0-5 Children’s Public Health Services The Government transferred responsibility for commissioning 0-5 children’s public health services to Local Government on 1 October 2015. The Council received a ring-fenced grant of £2.114m to fund these services of which £2.071m was spent in-year. The unspent balance of £43k has been carried forward to be spent in 2016/17. Schools Transferring to Academy Status During 2015-16, three Voluntary Aided Schools became Academies and no conversion notices had been signed. At 31 March 2016, there are 53 Council maintained schools included on the Council’s Balance Sheet and 18 schools that are off Balance Sheet. Of these, 3 are Voluntary Aided, 13 are Academies and 2 are Free Schools. There is no impact on the Council’s accounts for the Academies and the Free Schools. The revenue expenditure for Voluntary Aided schools is treated the same as all 53 Council maintained schools but their capital expenditure is controlled by the individual school. The value of the schools that are off Balance Sheet is approximately £111.8m.



Brexit On 23 June 2016 the UK held a referendum on its continued membership of the EU. The decision was taken to leave the EU. A disclosure has been made in the Events after the Balance Sheet date section of the accounts covering this. It is too early to predict the likely medium to long term impact, and therefore the consequences for future settlements. The process of withdrawal does not start until the UK invokes Article 50 in 2017, and it is only then that the future trading relationship of the UK with EU and the rest of the world will start to become clearer.

Dev Gopal ACA, CPFA, FCCA, CMgr MCMI Service Director, Finance & Audit (s151 Officer) 11th April 2017

STATEMENT OF ACCOUNTING POLICIES


The accounting policies in this section cover all areas of the Statement of Accounts. Accounting policies relevant to particular areas of the accounts will be shown with the relevant note. General Principles and Basis of Preparation The Statement of Accounts summarises Luton Borough Council’s transactions for the year ending 31 March 2016. The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit (England) Regulations 2015. The regulations require the accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the following:

The Code of Practice on Local Authority Accounting in the United Kingdom 2015-16

The Service Reporting Code of Practice for Local Authorities 2015-16 and are supported by International Financial Reporting Standards (IFRS). The accounts are prepared on a going concern basis and 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. Basis of Consolidation Subsidiaries are entities that the Council has the power to govern. In the Council’s financial statements, the investment in the subsidiary is carried at cost. In the Group financial statements, the subsidiary is accounted for using the acquisition accounting method where assets, liabilities, revenue and expenditure are added in on a line-by-line basis. The Luton Borough Council Group consists of Luton Borough Council and London Luton Airport Limited, a wholly owned subsidiary. The Group Accounts have been prepared on the basis of a full consolidation; this means that all transactions between the Group entities are eliminated. The Group only includes the one subsidiary and no joint ventures or associates. Income and Expenditure The accounts are maintained on an accruals basis, this means that activity is accounted for in the year that it takes place, not simply when cash payments are made or received. This means that the following applies: Revenue from the sale of goods is recognised when the Council transfers the significant

risks and rewards of ownership to the purchaser and it is probable that economic benefits associated with the transaction will flow to the Council.

Revenue from the provision of services is recognised when the Council can reliably assume that the transaction will be completed and it is probable that economic benefits associated will flow to the Council.



Goods procured by the Council are accounted for when consumed, which is normally when they are delivered. Where there is a gap between delivery of goods and their consumption, they are carried as inventories on the Balance Sheet.

Expenses in relation to services received, including services provided by employees of the Council, are recorded as expenditure when the services are received rather than when payments are made.

Interest receivable on investments and payable on borrowings are 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 in the accounts, but the cash transaction has not yet happened, a debtor or creditor will be recorded in the Balance Sheet for the relevant amount. For debtors where it is doubtful that the amount due will be received, the balance is reduced and a charge is made to revenue for the income that may not be collected.

Revenue relating to such things as council tax, general rates, etc. shall be measured at the full amount receivable (net of any impairment losses) as they are non-contractual, non-exchange transactions and there can be no difference between the delivery and payment dates. Revenue should be recognised when it is probable that the economic benefit will flow to the authority, and the amount of revenue can be measured reliably.

Exceptional items When items of income and expenditure are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance. Prior Period Adjustments, Changes in Accounting Polices 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 Council’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period. Events after the Reporting Period Events after the Reporting Period date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:



Those that provide evidence of conditions that existed at the end of the 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. Interests in Companies and Other Entities The Council has a material interest in London Luton Airport Ltd, which has the nature of a subsidiary and requires the Council to prepare group accounts. In the Council’s own single-entity statements, the interest in London Luton Airport Ltd is recorded as a financial asset, held at historic cost. Overheads and Support Services In accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2015-16 (SeRCOP), the costs of central departments are charged to services broadly on the basis of time spent by officers or an appropriate applicable measurement. Information Management Services are charged on a range of bases such as unit cost for desktop facilities, actual cost for applications, productive hours for application and network support etc. Accommodation is allocated on a floor/desk area occupied basis. The total absorption costing principle is used, the full cost of overheads and support services are shared between users in proportion to the benefits received with the exception of: Corporate and Democratic Core – costs relating to the Council’s status as a multi-

functional, democratic organisation. Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring

early and impairment losses chargeable on Assets Held for Sale. These two cost categories are defined in SeRCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement, as part of Net Expenditure on Continuing Services. Value Added Tax (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. Rounding It is not the Council’s policy to adjust for immaterial cross-casting differences between the main statements and disclosure notes.



Movement in Reserves Statement This statement shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The (Surplus) / Deficit On the Provision of Services Line shows the true economic cost of providing the Council’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance and the Housing Revenue Account for council tax setting and dwellings rent setting purposes. The Net (Increase) / Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the council.

ACCOUNTING STATEMENTS


Restated Note

s

Genera

l F

un

d

Bala

nce

Earm

ark

ed

Genera

l F

un

d

Reserv

es

Schoo

ls R

eserv

es

Housin

g R

eve

nu

e

Account

Earm

ark

ed H

RA

Reserv

es

Capital R

ece

ipts

Reserv

e

Majo

r R

ep

airs

Reserv

e

Capital G

rants

Unap

plie

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eserv

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To

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sab

le

Rese

rve

s

Un

usab

le

Rese

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s

To

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ou

ncil

Rese

rve

s

£000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s

Balance C/Fwd at 31 March 2014

(9,610) (48,540) (20,138) (10,199) 0 (3,093) (1,229) (4,523) (97,332) (391,916) (489,248)

Adjustment to B/Fwd Balance

0 0 0 0 0 0 0 0 0 (15,760) (15,760)

Adjusted Balance B/Fwd at 31 March 2014

(9,610) (48,540) (20,138) (10,199) 0 (3,093) (1,229) (4,523) (97,332) (407,676) (505,008)

Movement in Reserves in 2014-15

(Surplus) / deficit on the provision of services

(8,476) 0 0 (11,310) 0 0 0 0 (19,786) 0 (19,786)

Other Comprehensive Income and Expenditure

0 0 0 0 0 0 0 0 0 43,200 43,200

Total Comprehensive Income and Expenditure

(8,476) 0 0 (11,310) 0 0 0 0 (19,786) 43,200 23,414

Adjustment between accounting basis & funding basis under regulations 7

13,162 0 0 16,193 0 (4,394) 933 (282) 25,612 (25,612) 0

Net (Increase) / Decrease before transfers to Earmarked Reserves

4,686 0 0 4,883 0 (4,394) 933 (282) 5,826 17,588 23,414

Transfers to / from Earmarked Reserves

(6,662) 9,798 (3,019) 1,108 0 (1,225) 0 0 0 0 0

(Increase) / Decrease in 2014-15

(1,976) 9,798 (3,019) 5,991 0 (5,619) 933 (282) 5,826 17,588 23,414


(11,586) (38,742) (23,157) (4,208) 0 (8,712) (296) (4,805) (91,506) (390,088) (481,594)



Note

s

Genera

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un

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Bala

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Earm

ark

ed

Genera

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un

d

Reserv

es

Schoo

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Reserv

es

Housin

g

Revenu

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Account

Earm

ark

ed

HR

A R

eserv

es

Capital

Receip

ts

Reserv

e

Majo

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ep

airs

Reserv

e

Capital G

rants

Unap

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Reserv

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To

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sab

le

Rese

rve

s

Un

usab

le

Rese

rve

s

To

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ou

ncil

Rese

rve

s

£000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s


(11,586) (38,743) (23,157) (4,208) 0 (8,712) (296) (4,805) (91,507) (390,088) (481,595)

Adjustment to B/Fwd Balance

(211) 0 0 0 0 0 0 0 (211) 211 0

Adjusted Balance B/Fwd at 31 March 2015

(11,797) (38,743) (23,157) (4,208) 0 (8,712) (296) (4,805) (91,718) (389,877) (481,595)

Movement in Reserves in 2015-16

(Surplus) / deficit on the provision of services

30,511 0 0 (44,131) 0 0 0 0 (13,620) 0 (13,620)


0 0 0 0 0 0 0 0 0 (101,440) (101,440)


30,511 0 0 (44,131) 0 0 0 0 (13,620) (101,440) (115,060)

Adjustment between accounting basis & funding basis under regulations

7 (28,672) 883 0 39,911 0 (2,542) (1,110) (2,079) 6,392 (6,392) 0

Net (Increase) / Decrease before transfers to Earmarked Reserves

1,839 883 0 (4,220) 0 (2,542) (1,110) (2,079) (7,228) (107,832) (115,060)

Transfers to / from Earmarked Reserves

(4,062) 1,111 2,741 240 (217) 187 0 0 0 0 0

(Increase) / Decrease in 2015-16

(2,223) 1,994 2,741 (3,980) (217) (2,355) (1,110) (2,079) (7,228) (107,832) (115,060)


(14,020) (36,749) (20,416) (8,188) (217) (11,067) (1,406) (6,884) (98,946) (497,709) (596,655)



Comprehensive Income & Expenditure Statement

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

Restated 2014-15

2015-16

Gross Expenditure

Gross Income

Net Expenditure

Note Gross Expenditure

Gross Income

Net Expenditure

£000s £000s £000s £000s £000s £000s

2,992 (1,128) 1,864 Central services to the public 3,151 (1,089) 2,062 7,317 (515) 6,802 Cultural and related services 5 12,124 (486) 11,638

24,554 (6,016) 18,538 Environmental and regulatory services 23,986 (6,435) 17,551 8,473 (3,790) 4,683 Planning services 7,074 (3,357) 3,717

240,217 (190,273) 49,944 Education and children’s services 5 251,332 (196,276) 55,056 4,770 0 4,770 Capital expenditure on off balance sheet Academies 433 0 433

25,953 (5,777) 20,176 Highways and transport services 25,311 (6,821) 18,490 38,536 (38,762) (226) Local authority housing (HRA) 30,085 (39,127) (9,042)

(18,111) 0 (18,111) Impairment Reversal (HRA) (40,187) 0 (40,187) 114,383 (102,312) 12,071 Other housing services 119,292 (107,550) 11,742 73,397 (21,455) 51,942 Adult social care 5 80,340 (23,676) 56,664 14,163 (13,628) 535 Public Health 14,535 (14,823) (288) 7,493 (236) 7,257 Corporate and democratic core 7,297 (230) 7,067 5,424 (144) 5,280 Non distributed costs 13,193 (9,391) 3,802

549,561 (384,036) 165,525 Cost of Services 547,966 (409,261) 138,705 870 Other operating expenditure 9 (569) 10,652 Financing and investment income and expenditure 10 5,897 (196,833) Taxation and non-specific grant income 11 (157,653)

(19,786) (Surplus) or Deficit on Provision of Services (13,620) (21,310) Surplus or deficit on revaluation of Property, Plant

and Equipment assets 21 (26,430)

64,510 Remeasurements of the net defined benefit liability 39 (75,010)

43,200 Other Comprehensive Income and Expenditure (101,440)

23,414 Total Comprehensive Income and Expenditure (115,060)



Balance Sheet

The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the Council are matched by the reserves held by the Council. Reserves are reported in two categories – usable and unusable. Usable reserves, i.e. those reserves that the Council may use to provide services, subject to statutory limitations and the need to maintain prudent levels of reserves for financial stability. Unusable reserves cannot be used to fund Council services.

Restated Restated

01/04/2014 31/03/2015

Notes 31/03/2016

£000s £000s

£000s

Property, Plant & Equipment 12

327,304 349,621 Council dwellings

398,467

383,554 389,558 Other land and buildings

390,966

21,235 17,938 Vehicles, plant, furniture and equipment

16,102

145,254 138,884 Infrastructure assets

182,548

7,057 8,261 Community assets

8,327

23,799 53,574 Assets under construction

14,408

0 0 Surplus Assets

5,634

5,871 5,871 Heritage Assets 12b 5,806

0 0 Intangible Assets

1,246

56,386 71,581 Investment Property 13 79,558

74,170 77,128 Long Term Investments 15 91,099

443 390 Long Term Debtors 15 298

1,045,073 1,112,806 Long Term Assets

1,194,459

38,160 69,938 Short Term Investments 15 16,262

1,920 2,905 Assets Held for Sale 14 0

290 460 Inventories

885

48,824 44,752 Short Term Debtors 16 51,134

93,913 57,104 Cash and Cash Equivalents 17 43,634

183,107 175,159 Current Assets

111,915

(6,496) (8,111) Cash and Cash Equivalents (Bank Overdrawn) 17 (8,806)

(20,345) (27,597) Short Term Borrowing 15 (2,394)

(61,660) (62,536) Short Term Creditors 18 (58,725)

(7,756) (4,347) Short Term Provisions 19 (3,874)

(6,808) (10,150) Receipts in Advance (Revenue Grants) 32b (8,174)

(103,065) (112,741) Current Liabilities

(81,973)

(275,411) (270,411) Long Term Borrowing 15 (270,701)

(24,215) (23,842) Other Long Term Liabilities 15 (23,455)

(3,664) (5,514) Long Term Provisions 19 (10,626)

(287,768) (366,384) Liability related to defined benefit pension scheme 39 (303,904)

(29,050) (27,479) Receipts in Advance (Capital Grants) 32a (19,058)

(620,108) (693,630) Long Term Liabilities (627,744)

505,007 481,594 Net Assets 596,657



(9,610) (11,586) General Fund 20a (14,021)

(48,540) (38,742) Earmarked Reserves – General Fund 20c (36,749)

(20,138) (23,158) Schools Balances 20b (20,417)

(10,198) (4,208) Housing Revenue Account

(8,188)

0 0 Earmarked Reserves – HRA 20c (217)

(3,094) (8,712) Capital Receipts Reserve 20d (11,067)

(1,229) (296) Major Repairs Reserve 20e (1,406)

(4,523) (4,805) Capital Grants Unapplied Account 20f (6,884)

(97,332) (91,507) Usable Reserves

(98,948)

(555,471) (606,019) Capital Adjustment Account (644,364)

(129,169) (135,952) Revaluation Reserve

(146,464)

(17,043) (17,008) Deferred Capital Receipts

(17,960)

1,167 1,152 Financial Instruments Adjustment Account

1,158

1,072 (1,374) Collection Fund Adjustment Account

3,286

287,768 366,383 Pensions Reserve

303,904

4,001 2,731 Accumulated Leave Reserve

2,731

(407,675) (390,087) Unusable Reserves 21 (497,709)

(505,007) (481,594) Total Reserves (596,657)

Re-Certification by the Chief Financial Officer

I certify that the statement of accounts presents a true and fair view of the financial position as at 31 March 2016 and its income and expenditure for the year then ended. These financial statements replace the unaudited financial statements which I certified on 30 June 2016. Dev Gopal ACA, CPFA, FCCA, CMgr MCMI Service Director, Finance & Audit (s151 Officer) 11th April 2017



Cash Flow Statement The Cash Flow Statement shows the changes in cash and cash equivalents of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipient of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’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 Council. Restated

2014-15 Note 2015-16

£000s

£000s

(19,786) Net (surplus) or deficit on the provision of services

(13,620)

(65,317) Adjustments to net surplus or deficit on the provision of services for non-cash movements

(23,434)

47,370 Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities

24,901

(37,733) Net cash flows from Operating Activities 22 (12,153)

79,822 Investing Activities 23 1,186

(3,665) Financing Activities 24 25,132

38,424 Net increase or decrease in cash and cash equivalents

14,165

(87,417) Cash and cash equivalents at the beginning of the reporting period

(48,993)

(48,993) Cash and cash equivalents at the end of the reporting period

17 (34,828)

NOTES TO THE ACCOUNTS


1a. Accounting Policies The general accounting policies adopted in the production of these accounts are outlined in the separate section immediately before the Accounting Statements on pages 9 to11. Accounting policies specific to the notes are outlined before each note that they relate to. 1b. Prior Period Adjustments In the course of preparing the Statement of Accounts for 2015/16 a number of material misstatements from prior years have been corrected with the result that some amounts presented in the statements differ from the equivalent figures presented in the Statement of Accounts for 2014/15. The following tables explain the material differences between the amounts presented in the 2014/15 financial statements and the equivalent amounts presented in the 2015/16 restated financial statements. 1c. SUMMARY OF ADJUSTMENTS

Balance Sheet 31 March 2015 1 April 2014

£000s £000s

Net Assets before Adjustment 469,181 489,247

(i) Council Dwellings Revaluation Reserve 0 0

(ii) Revenue Expenditure Funded From Capital Under Statute 0 0

(iii) Local Enterprise Partnerships 0 0

(iv) Investment in Subsidiary 24,492 24,492

(v) Capital Grants Receipts in Advance (8,732) (8,732)

(vi) Net interest on the net defined benefit liability - HRA 0 0

(vii) Non-Current Assets (VPFE) (3,347) 0

(viii) Accumulated impairment on Assets under Construction 0 0

Net Assets after Adjustment 481,594 505,007

31 March 2015 1 April 2014

£000s £000s

Unusable Reserves before Adjustment (377,674) (391,915)

(i) Council Dwellings Revaluation Reserve 0 0



(iv) Investment in Subsidiary (24,492) (24,492)

(v) Capital Grants Receipts in Advance 8,732 8,732

(vi) Interest on Pension Benefit - HRA 0 0

(vii) Non-Current Assets (VPFE) 3,347 0


Unusable Reserves after Adjustment (390,087) (407,675)



Comprehensive Income and Expenditure Statement 2014/15

£000s

(Surplus) or Deficit on the Provision of Services - Before Adjustment

(1,675)

(i) Council Dwellings Revaluation Reserve (18,111)

(ii) Revenue Expenditure Funded From Capital Under Statute 0

(iii) Local Enterprise Partnerships 0

(iv) Investment in Subsidiary 0

(v) Capital Grants Receipts in Advance 0

(vi) Net interest on the net defined benefit liability - HRA 0

(vii) Non-Current Assets (VPFE) - reverses 0

(viii) Accumulated impairment on Assets under Construction 0

(Surplus) or Deficit on the Provision of Services - After Adjustment

(19,786)

Comprehensive Income and Expenditure Statement 2014/15

£000s

Other Comprehensive Income and Expenditure - Before Adjustment

21,743

(i) Council Dwellings Revaluation Reserve 18,111

(ii) Revenue Expenditure Funded From Capital Under Statute 0

(iii) Local Enterprise Partnerships 0

(iv) Capital Grants Receipts in Advance 0

(v) Investment in Subsidiary 0

(vi) Net interest on the net defined benefit liability - HRA 0

(vii) Non-Current Assets (VPFE) - reverses 3,347

(viii) Accumulated impairment on Assets under Construction 0

Other Comprehensive Income and Expenditure - After Adjustment

43,201



Movement in Reserves Statement - 2014/15 General Fund HRA

£000s £000s

(Surplus) or Deficit on Provision of Services - Before Adjustment

(4,272) 2,597

(i) Council Dwellings Revaluation Reserve 0 (18,111)



(iv) Investment in Subsidiary 0 0

(v) Capital Grants Receipts in Advance 0 0

(vi) Interest on Pension Benefit - HRA (4,204) 4,204

(vii) Non-Current Assets (VPFE) - reverses 0 0


(Surplus) or Deficit on Provision of Services - After Adjustment

(8,476) (11,310)

Movement in Reserves Statement - 2014/15 General Fund HRA

£000s £000s

Adjustment between accounting basis & funding basis under regulations - Before Adjustment

8,958 2,286

(i) Council Dwellings Revaluation Reserve 0 18,111



(iv) Investment in Subsidiary 0 0

(v) Capital Grants Receipts in Advance 0 0

(vi) Net interest on the net defined benefit liability - HRA 4,204 (4,204)

(vii) Non-Current Assets (VPFE) - reverses 0 0


Adjustment between accounting basis & funding basis under regulations - After Adjustment

13,162 16,193

1c. (i) Council Dwellings Revaluation Reserve Council Dwellings have previously been grouped as one item on the Fixed Asset Register and changes in value applied as a whole to the group. This has led to a material misstatement of the revaluation reserve and the level of revaluation movements that have been accounted for through the CIES as individual increases and decreases are not recognised within the overall net movement year by year. An exercise has been undertaken in 2015-16 to group dwellings by beacon property and track the movements of each group from 2007/08 to 2015/16 and treat revaluation movements correctly. Details of the resulting adjustments are below.



Opening 1 April 2014 Balance Sheet

Balance Sheet 2014/15

Statements Adjustments

Made

£000s £000s

Capital Adjustment Account (533,419) (6,292)

Revaluation Reserve (135,461) 6,292

31 March 2015 Balance Sheet



Made

£000s £000s



2014/15 Comprehensive Income and Expenditure Statement

Net Cost of Services 2014/15


Made

£000s £000s

Central services to the public 1,864 0

Cultural and related services 6,802 0

Environmental and regulatory services 18,538 0

Planning services 4,683 0

Education and children’s services 49,944 0

Capital expenditure on off balance sheet Academies 4,770 0

Highways and transport services 20,176 0

Local authority housing (HRA) 144 0

Impairment Reversal (HRA) 0 (18,111)

Other housing services 12,071 0

Adult social care 51,942 0

Public Health 535 0

Corporate and democratic core 6,887 0

Non distributed costs 5,280 0

COST OF SERVICES 183,636 (18,111)



Surplus or deficit on revaluation of Property, Plant and

Equipment assets (42,767) 18,111

Remeasurements of the net defined benefit liability 64,510 0

Other Comprehensive Income and Expenditure 21,743 18,111

2014/15 Movement in Reserves Statement

2014/15


Made

£000s £000s

Adjustment between accounting basis & funding basis under regulations (HRA) 2,286 18,111

Adjustment made on the "Charges for depreciation and impairment of non-current assets" line in the MiRS

1c. (ii) Revenue Expenditure Funded from Capital Under Statute An analysis of the REFCUS balance revealed capital expenditure which had been written off as it did not add value to assets. This has now been classified as miscellaneous capital expenditure and has been treated as additions to assets and then impaired. The portion of expenditure relating to the HRA has been passed through the HRA Income and Expenditure Statement and the Revaluation Reserve. Details of the adjustments are below.

2014/15 Movement in Reserves Statement (Note7)

2014/15


Made (GF) Adjustments Made (HRA)

£000s £000s £000s

Revenue Expenditure funded from Capital under Statute (22,272) 11,626 8,396

Miscellaneous Capital Expenditure 0 (11,626) (8,396)

Net Additions (22,272) 0 0

1c. (iii) Local Enterprise Partnership The Council acts as accountable body for the South East Midlands LEP, its role being that of agent and not principal. Accounting has been done as though the Council were the principal, with transactions being included in the Councils CIES and balances being incorporated into Grant Receipts in Advance. Adjustments have been made to reverse these and reflect the Council’s proper role as an agent. Details of the adjustment are below.






Made

£000s £000s

Short Term Creditors (34,413) (16,241)

Receipts in Advance (Revenue Grants) (21,596) 1,206

Receipts in Advance (Capital Grants) (32,777) 15,035




Made

£000s £000s

Short Term Creditors (35,790) (7,344)

Receipts in Advance (Revenue Grants) (32,195) 520

Receipts in Advance (Capital Grants) (23,448) 6,824




Net Cost of Services 2014/15


Made

£000s £000s

Central services to the public 1,864 0

Cultural and related services 6,802 0

Environmental and regulatory services 18,538 0

Planning services (Expenditure) 9,767 (1,294)

Planning services (Income) (5,084) 1,294

Education and children’s services 49,944 0

Capital expenditure on off balance sheet Academies 4,770 0

Highways and transport services 20,176 0

Local authority housing (HRA) 144 0

Impairment Reversal (HRA) 0 0

Other housing services 12,071 0

Adult social care 51,942 0

Public Health 535 0

Corporate and democratic core 6,887 0

Non distributed costs 5,280 0

COST OF SERVICES 183,636 0

1c. (iv) Investment in Subsidiary The Council holds 44,836,999 ordinary £1 shares in London Luton Airport Limited, equivalent to 100% of the company’s share capital carried at cost. During the 1980s a reduction was made to the carrying value resulting in a figure of £20.345m. It has not been possible to establish the evidence backing this reduction and therefore an adjustment has been made to restore the investment to its original value. Details of the adjustment are below.






Made

£000s £000s

Long Term Investments 49,678 24,492





Made

£000s £000s

Long Term Investments 52,636 24,492


1c. (v) Capital Grant Receipts In Advance In prior years an adjustment was made to the capital grant receipts in advance balance. However this was done as a total and not applied to individual grants. An exercise was carried out to verify the existence of all the individual grant balances. As the provenance of the initial adjustment could not be determined the adjustment was reversed. Details are below.




Made

£000s £000s

Receipts in Advance (Capital Grants) (32,777) (8,732)

Capital Adjustment Account (533,419) 8,732




Made

£000s £000s

Receipts in Advance (Capital Grants) (23,448) (8,732)

Capital Adjustment Account (560,291) 8,732

1c. (vi) Net interest on the net defined benefit liability – HRA In the 2014/15 statements the net interest on the net defined benefit liability was attributed wholly to the General Fund, with no charge to the HRA Income and Expenditure Account. The liability has now been split and the effect shown in the HRA. Details of the adjustment are below.




2014/15


Made (GF) Adjustments Made (HRA)

£000s £000s £000s

(Surplus) / deficit on the provision of services (General Fund) (4,272) (4,204)

(Surplus) / deficit on the provision of services (HRA) 2,597 4,204

(1,675) (4,204) 4,204

Adjustment between accounting basis & funding basis

under regulations (General Fund) 8,958 4,204

Adjustment between accounting basis & funding basis under regulations (HRA) 2,286 (4,204)

11,244 4,204 (4,204)

Adjustment made on the "Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement" line in the MiRS

1c. (vii) Vehicles, Plant, Furniture & Equipment – 5% Estimate A detailed register has not been kept of furniture and fittings relating to mainly schools and a number of administrative buildings. As a proxy, a figure equivalent to 5% of the value of the buildings has been used to represent VPFE in the Fixed Asset Register. The balance has also been incorrectly revalued rather than holding it at depreciated historic cost. The resulting revaluation gain has been written off. Details of the adjustment are below.




Made

£000s £000s

Vehicles, plant, furniture and equipment 21,285 (3,347)

Capital Adjustment Account (560,291) 217



Surplus or deficit on revaluation of Property, Plant and Equipment assets (42,767) 3,347

Remeasurements of the net defined benefit liability 64,510 0





2014/15


Made

£000s £000s


1c. (viii) Impairment of Assets Under Construction and Community Assets

Previously there was a brought forward balance of impairment relating to assets under construction shown on a separate line in note 12. As this figure related to academies and free schools (not the Council’s assets) it would never be reversed. The treatment has now been brought into line and the impairment offset against cost in note 12. The detail of the adjustment is below. A similar adjustment has been made in the case of community assets.




Made

£000s £000s

Assets under Construction - Cost 30,297 (6,498)

Assets under Construction - Accumulated Depreciation and Impairment (6,498) 6,498

Net Book Value 23,799 0

2014/15 Movements



Made

£000s £000s

Assets under Construction - Additions 36,503 (4,770)

Assets under Construction - Impairment losses (4,770) 4,770





Made

£000s £000s

Community Assets - Cost 8,667 (1,610)

Community Assets - Accumulated Depreciation and Impairement (1,610) 1,610




2. Accounting Standards that have been issued but have not yet been adopted 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 standard that has been issued, but is not yet required to be adopted by the Council. The adoption of the following accounting policy changes are expected in the 2015/16 Statement of Accounts: The 2016/17 Code or Practice will adopt the measurement requirements of the CIPFA ‘Code of Practice on Transport Infrastructure Assets’ as amended. Such assets will be measured on a Depreciated Replacement Cost (DRC) basis. The adoption will represent a change in accounting policy from 1 April 2016, with retrospective application in accordance with IAS 8 Accounting Policies, change in Accounting Estimates and errors. However, there will be an adoption to IAS1 in measuring Highways Network Assets, there will be no requirement to restate preceding year information or for an opening balance as at 1 April 2016. The change will be accounted for as an adjustment to the opening 1 April 2016 balance. The Council estimates the value of such assets as at 1 April 2016 to be £1.466 billion.

3. Critical judgements in applying Accounting Policies In applying the accounting policies set out above, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The main critical judgements made in the Statement of Accounts are: Funding There is a high degree of uncertainty about future levels of funding for local government. However, the Council has determined that this uncertainty is not sufficient to provide an indication that the assets of the Council might be impaired as a result of a need to close facilities and reduce levels of service provision. This is because the Council is determined to preserve front line services as far as possible. Group Boundaries The group boundaries have been assessed using the criteria associated with the Code. In line with this, the Authority has identified one material subsidiary (London Luton Airport Ltd) and produced Group Accounts accordingly. Leases The Authority classifies these as either operational or finance leases. It is not always clear which type may be the correct one to use and as such, the Authority uses judgement to determine whether the lease is a finance lease (i.e. it transfers substantially the risks and rewards relating to ownership) or not (in which case it is an operating lease) Schools In accordance with the Code, the Authority recognises schools on the balance sheet where future economic benefits or service potential associated with the school will flow to the Authority. Where the Authority can employ staff and is responsible for the admission criteria, these schools are recognised.



There are several types of school within the Borough with Community Schools and Foundation Schools recognised on the balance sheet. The schools that are not recognised on the balance sheet are Voluntary Aided, Academies and Free Schools. Depreciation The Authority uses the Major Repairs Allowance as a proxy for the depreciation of Council Dwellings on the basis that the Council considers this to be a materially reasonable estimate. The treatment of depreciation is further explained in note 12. HRA Dwelling Disposals The disposals values used are average property values not beacons. The estimate has a negligible effect on the accounts. PFI The PFI contract for the construction, maintenance, and facilities management of Challney Girls School is recognised on the balance sheet. The treatment of the PFI contract is further explained in note 36. Better Care Fund (BCF) In respect of the BCF the terms of the section 75 agreement means that contracts are stand-alone with the financial risk being retained by the lead body. Each partner then manages the contracts with their own providers of BCF services and each partner retains any financial risk relating to those contracts. The BCF is not a separate legal entity and has been accounted for as a pooled budget arrangement (see Note 27), since it is not an entity, joint operation or joint venture. It should be noted that neither party has unilateral control of the BCF, as decisions of the Board need to be made unanimously. 4. Assumptions made about the future and other major sources of estimation uncertainty. The Statement of Accounts, prepared on a going concern basis, contain estimated figures that are based on assumptions made by the Council about the future or 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 Council’s Balance Sheet at 31 March 2016 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:



Property, plant and Equipment

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 Council will be able to sustain its current spending on repairs and maintenance, bringing into doubt the useful lives assigned to assets. For HRA dwellings, the use of the major repairs allowance is used as a proxy for depreciation, which is a reliable estimate reflecting that the Council are at decent standard. HRA disposals are undertaken based on average property value rather than beacon value disposed of.

If the useful lives of assets are reduced, depreciation increases and the carrying amount of the assets falls. It is estimated that the annual depreciation charge for buildings would increase by approximately £200,000 for every year that useful lives had to be reduced. HRA depreciation remains robust reflecting the continued considerable investment in housing stock. The use of average value of dwellings, not beacon, does not have a significant effect on the statement of accounts.

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 actuaries is engaged to provide the Council with expert advice about the assumptions to be applied.

The effects on the net pensions liability of changes in individual assumptions can be measured. However, the assumptions interact in complex ways; during 2015-16, the Council’s actuaries advised that the net pensions liability had decreased by £62.5 million. Please see note 39 for sensitivity analysis.

Debtor Arrears At 31 March 2016, the Council had a balance of just under £23.4 million for non-statutory debts with organisations outside the machinery of government.

If collection rates were to deteriorate, a doubling of the amount of the impairment of doubtful debts would require an additional £1.9 million to set aside as an allowance.

Provisions - NNDR At 31 March 2016, the Council had a provision for NNDR appeals of £7.0 million (49% of £14.3 million of the total appeals provision attributable to the Collection Fund). Please see Provisions Note 19.

Analyse Local provide up to date analyses and projections of appeals based on the latest appeals data released by the Valuation Office. The estimate has increased in each of the last three years, based on settlement experience and new claims.

Provisions - Other At 31 March 2016, the Council had a balance of £0.8 million employee related provisions and £0.2 million in the national personal search fee litigation case. A further £0.2 million is set provided for LA Mortgage Scheme.

Prudent provision is included, and increases will need to be charged to the general fund when recognised.



This list does not include assets and liabilities that are carried at fair value based on a recently observed market price. 5. Material Items of Income and Expense (i) The Council affords various trusts the use of its buildings (including community

centres) to run cultural and leisure services. During 15-16, revaluation losses of £4.5 million were charged to the Cultural and Related Services line in the Comprehensive Income and Expenditure Statement.

(ii) The Council also provided support of £1.7m to the Leisure Trust. In the form of IAS 19 pension costs (£0.6m), redundancy (£0.2m), pension payments (£0.1m), and recharged costs of services provided.

(iii) There were also significant increases in the costs for looked after children (from £13.9m in 2014/15 to £16.0m in 2015/16) and for homeless families and individuals in temporary accommodation (increasing from £1.7m in 2014/15 to £4.3m in 2015/16).

(iv) The increase in looked after children costs was due predominantly to a rise in the cost of non-tripartite cases which are fully funded by the Council, whereas the increase in temporary accommodation costs stemmed from due to an escalation in demand for bed and breakfast accommodation where the full cost is not met by the Local Housing Allowance.

(v) These figures are reflected in the Education and children’s services and Other housing services lines in the Comprehensive Income and Expenditure Statement.

(vi) Council Dwellings have previously been grouped as one item on the Fixed Asset Register and changes in value applied as a whole to the group. This has led to a material misstatement of the revaluation reserve and also the level of revaluation movements that have been accounted for through the CIES. An exercise was undertaken in 2015-16 to group dwellings by beacon property and track their movements 2007/08 to 2015/16. This has resulted in an impairment reversal to the CIES of £26.2million in 2014/15 and £40.2million in 2015/16

6. Events after the Reporting Period The draft Statement of Accounts was authorised for issue by the Service Director (Finance & Audit) on 30 June 2016. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2016, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information. The EU Referendum on whether to continue our membership of the European Union was held on 23rd June 2016. There was a majority decision to leave the EU. This resulted in



initial market shock, compounded by political instability in the immediate aftermath. This included a fall in the value of Sterling and an initial fall in the stock market, particularly property funds. The Bank of England has taken the decision to reduce the base rate to provide fiscal stimulus. The long term consequences of this decision are not yet known as the Prime Minister has indicated that it is not her intention to trigger Article 50 before 2017, which will begin our process of negotiations to leave the EU. Property Funds make up £46m (10%) of Luton BC Pension Fund assets (Note 39 to the accounts), and the total value of property at the balance sheet date is £1.1bn. The initial response from property auctions held after the referendum was that there was no effect on sale prices at auction. A fall in interest rates will impact on investment income, which is not significant for the Council. Borrowing for the council is predominantly fixed rate, and any change in PWLB borrowing rates are linked to the Gilts market rather than the Bank of England base rate. It is not yet clear what the impact of the decision will be on medium to long term public finances and therefore future funding settlements for Councils. At Executive on 17th October 2016, a new debenture loan facility of up to £225million was approved to London Luton Airport Limited in order to fund the construction of the London Luton Airport Mass Passenger Transit system. The approved debenture loan structure schedules drawdowns across the next five financial years resulting in principal repayments maturing on 31st March 2031. It is estimated the full scheme will costs £225million; which includes £197million for civil engineering works and the acquisition and installation of the new operating system, £17million of works at Stirling Place to provide a new over-rail concourse at the station, and £11million in respect of replacement car parks. The Finance Review Group on 17th November 2016 approved the establishment of a wholly owned housing company, called Foxhall Homes, to help solve current housing supply shortages in the local market. Establishing a subsidiary company is a means by which the council could develop a mix of property types of different tenures, maximising council resources to assist in the delivery of much needed homes. Currently the wholly owned housing company is approved to borrow up to £32.3million in the form of debt, and will receive an equity investment of £10.8 million in the form of a land transfer and an additional £1.5million in the form of a cash injection for operating purposes. A contingency has been established to support the cost of borrowing in the short term before the company is able to generate sustainable annual profits to repay the initial investments.



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 Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure.

Usable Reserves

2015-16

Genera

l F

un

d

Genera

l F

un

d

Earm

ark

ed

Reserv

es

Housin

g R

eve

nu

e

Account

Capital R

ece

ipts

Reserv

e

Majo

r R

ep

airs

Reserv

e

Capital G

rants

Unap

plie

d

Mo

vem

en

t in

Un

usab

le

Rese

rve

s

£000s £000s £000s £000s £000s £000s £000s

Adjustments primarily involving the Capital Adjustment Account:

Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement:

Charges for depreciation and impairment of non-current assets (26,810) (9,470) 36,280

Revaluation losses on Property, Plant and Equipment (13,932) 40,187 (26,255)

Movements in the market value of Investment Properties 1,570 269 (1,839)

Revenue Expenditure funded from Capital under Statute (2,366) (527) 2,893

Amortisation of intangible assets (394) 394

Amounts of non-current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

(5,180) (3,189) 8,369

Capital grants and contributions applied to capital financing 10,399 (10,399)

Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement:

Statutory provision for the repayment of debt 7,258 (7,258)

Statutory provision for the repayment of debt (PFI) 336 (336)

Capital expenditure charged against the General Fund and HRA balances 4,963 883 1,010 1,849 (8,705)



Usable Reserves

2015-16

Genera

l F

un

d

Genera

l F

un

d

Earm

ark

ed

Reserv

es

Housin

g R

eve

nu

e

Account

Capital R

ece

ipts

Reserv

e

Majo

r R

ep

airs

Reserv

e

Capital G

rants

Unap

plie

d

Mo

vem

en

t in

Un

usab

le

Rese

rve

s

£000s £000s £000s £000s £000s £000s £000s

Adjustments primarily involving the Capital Grants Unapplied Account:

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

4,806 (4,806) 0

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

2,726 (2,726)

Adjustments primarily involving the Capital Receipts Reserve:

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

4,602 5,201 (9,803) (0)

Use of the Capital Receipts Reserve to finance new capital expenditure 4,702 (4,702)

Contribution from the Capital Receipts Reserve towards administrative costs of non-current asset disposals

(95) 95 0

Contribution from the Capital Receipts Reserve to finance the payments to the government capital receipts pool

(664) 664 0

Transfer from Deferred Capital Receipts Reserve upon receipt of cash

(49)

49



Usable Reserves

2015-16

Genera

l F

un

d

Genera

l F

un

d

Earm

ark

ed

Reserv

es

Housin

g R

eve

nu

e

Account

Capital R

ece

ipts

Reserv

e

Majo

r R

ep

airs

Reserv

e

Capital G

rants

Unap

plie

d

Mo

vem

en

t in

Un

usab

le

Rese

rve

s

£000s £000s £000s £000s £000s £000s £000s

Adjustments primarily involving the Deferred Capital Receipts Reserve:

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

1,000 (1,000)

Adjustment primarily involving the Major Repairs Reserve:

Reversal of Major Repairs Allowance credited to the HRA 9,251 (9,251) 0

Use of the Major Repairs Reserve to finance new capital expenditure 8,141 (8,141)

Adjustment primarily involving the Financial Instruments Adjustment Account:

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

(13) 6 6



Usable Reserves

2015-16

Genera

l F

un

d

Genera

l F

un

d

Earm

ark

ed

Reserv

es

Housin

g R

eve

nu

e

Account

Capital R

ece

ipts

Reserv

e

Majo

r R

ep

airs

Reserv

e

Capital G

rants

Unap

plie

d

Mo

vem

en

t in

Un

usab

le

Rese

rve

s

£000s £000s £000s £000s £000s £000s £000s

Adjustments primarily involving the Pensions Reserve:

Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement (see Note 39)

(29,162) (3,292) 32,454

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

19,364 560 (19,924)

Adjustments primarily involving the Collection Fund Adjustment Account:

Amount by which council tax and NNDR income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

(4,449) 4,449

Adjustment primarily involving the Accumulated Absences Account:

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

0 0

Total Adjustments (28,672) 883 39,911 (2,543) (1,110) (2,080) (6,391)



Usable Reserves

Restated 2014-15

Genera

l F

un

d

Genera

l F

un

d

Earm

ark

ed

Reserv

es

Housin

g R

eve

nu

e

Account

Capital R

ece

ipts

Reserv

e

Majo

r R

ep

airs

Reserv

e

Capital G

rants

Unap

plie

d

Mo

vem

en

t in

Un

usab

le

Rese

rve

s

£000s £000s £000s £000s £000s £000s £000s

Adjustments primarily involving the Capital Adjustment Account:

Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement:

Charges for depreciation and impairment of non-current assets (25,513) (9,282) 34,795

Revaluation losses on Property, Plant and Equipment (18,346) 9,715 8,631

Movements in the market value of Investment Properties 3,529 (3,529)

Revenue Expenditure funded from Capital under Statute (2,250) 2,250

Amounts of non-current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

(8,252) (3,372) 11,624

Capital grants and contributions applied to capital financing 41,673 (41,673)

Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement:

Statutory provision for the repayment of debt 7,652 (7,652)

Statutory provision for the repayment of debt (PFI) 373 (373)

Capital expenditure charged against the General Fund and HRA balances 11,038 9,448 (20,486)



Usable Reserves

Restated 2014-15

Genera

l F

un

d

Genera

l F

un

d

Earm

ark

ed

Reserv

es

Housin

g R

eve

nu

e

Account

Capital R

ece

ipts

Reserv

e

Majo

r R

ep

airs

Reserv

e

Capital G

rants

Unap

plie

d

Mo

vem

en

t in

Un

usab

le

Rese

rve

s

£000s £000s £000s £000s £000s £000s

Adjustments primarily involving the Capital Grants Unapplied Account:

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

3,266 (3,266) 0

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

2,984 (2,984)

Adjustments primarily involving the Capital Receipts Reserve:

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

6,352 5,087 (11,439) 0

Use of the Capital Receipts Reserve to finance new capital expenditure 6,410 (6,410)

Contribution from the Capital Receipts Reserve towards administrative costs of non-current asset disposals

(52) 52 0

Contribution from the Capital Receipts Reserve to finance the payments to the government capital receipts pool

(583) 583 0



Usable Reserves

Restated 2014-15

Genera

l F

un

d

Genera

l F

un

d

Earm

ark

ed

Reserv

es

Housin

g R

eve

nu

e

Account

Capital R

ece

ipts

Reserv

e

Majo

r R

ep

airs

Reserv

e

Capital G

rants

Unap

plie

d

Mo

vem

en

t in

Un

usab

le

Rese

rve

s

£000s £000s £000s £000s £000s £000s

Adjustments primarily involving the Deferred Capital Receipts Reserve:


(35) 35

Adjustment primarily involving the Major Repairs Reserve:

Reversal of Major Repairs Allowance credited to the HRA 9,282 (9,282) 0

Use of the Major Repairs Reserve to finance new capital expenditure 10,215 (10,215)

Adjustment primarily involving the Financial Instruments Adjustment Account:

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

15 (15)



Usable Reserves

Restated 2014-15

Genera

l F

un

d

Genera

l F

un

d

Earm

ark

ed

Reserv

es

Housin

g R

eve

nu

e

Account

Capital R

ece

ipts

Reserv

e

Majo

r R

ep

airs

Reserv

e

Capital G

rants

Unap

plie

d

Mo

vem

en

t in

Un

usab

le

Rese

rve

s

£000s £000s £000s £000s £000s £000s £000s

Adjustments primarily involving the Pensions Reserve:

Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement (see Note 39)

(25,900) (5,279) 31,179

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

16,513 560 (17,073)

Adjustments primarily involving the Collection Fund Adjustment Account:

Amount by which council tax and NNDR income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

2,445 (2,445)

Adjustment primarily involving the Accumulated Absences Account:

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

1,237 34 (1,271)

Total Adjustments 13,162 0 16,193 (4,394) 933 (282) (25,612)



8. Grant Income Government grants and other contributions accounting policy Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Council when there is reasonable assurance that: The Council will comply with the conditions attached to the payments, and The grants or contributions will be received. Amounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. 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. The Council credited the following grants and contributions to the Comprehensive Income and Expenditure Statement in 2015-16: 8a. Credited to Taxation and Non Specific Grant Income

2014-15

2015-16

£000s

£000s

(52,140) Revenue Support Grant (37,352)

(2,330) New Homes Bonus 15/16 (2,982)

(1,690) S31 Business Rates Compensation (1,751)

(161) Grants under £1m (156)

(56,321) Total (42,241)



8b. Credited to Services

Restated* 2014-15

2015-16

£000s

£000s

(162,829) Dedicated Schools Grant (155,492)

(56,087) Rent Allowances (55,464)

(29,582) Rent Rebates (30,015)

(13,065) Public Health Grant (main) (14,447)

(9,996) Pupil Premium Grant (10,317)

(3,711) Education Services Grant (2,914)

(2,811) Challney Girls PFI - EFA Funding (2,811)

(1,519) Infant Free School Meals Grant (2,718)

(454) Troubled Families Initiative (1,111)

(1,294) SEMLEP core funding (1,092)

(1,012) Weekly Collection Support Scheme (Revenue element only) (1,054)

(1,139) HB Admin subsidy (1,039)

(1,004) EFA Grant (398)

(9,412) Total Other Grants & Contributions (8,547)

(293,915)

(287,419)

(350,236)

(329,660)

Included within the Other Grants figure are two Home Office grants, which the Home Office require to be specifically mentioned in the accounts.

IDVA (domestic violence) Grant for £20,000 - used towards the Luton IDVA service provided by Victim Support. IDVAs are trained specialists who provide a service to victims who are at high risk of harm from intimate partners, ex-partners or family members, with the aim of securing their safety and the safety of their children.

MARAC (multi agency risk assessment) Grant for £15,000 - used to employ a

MARAC co-ordinator. MARACs are trained specialists who provide a service to victims, who are at high risk of harm from intimate partners, ex-partners or family members, with the aim of securing their safety and the safety of their children. Serving as a victim’s primary point of contact, MARACs normally work with their clients from the point of crisis, to assess the level of risk, discuss the range of suitable options and develop safety plans.

The Council has received a number of grants and contributions that have yet to be recognised as income as they have conditions attached to them that will require the monies to be returned to the giver. The balances are detailed in Note 32.



9. Other Operating Expenditure

2014-15

2015-16

£000s £000s

102 Levies 107

583 Payments to the Government Housing Capital Receipts Pool 663

185 Gains/losses on the disposal of non-current assets (1,339)

870 Total (569)

10. Financing and Investment Income and Expenditure

2014-15 2015-16

£000s £000s

13,037 Interest payable and similar charges 12,145

12,402 Net interest on the net defined benefit liability 11,728

(4,302) Interest receivable and similar income (3,684)

(8,391) Income and expenditure in relation to investment properties and changes in their fair value

(6,718)

(1,250) Dividends receivable (6,000)

(844) Other investment activity (1,574)

10,652 Total 5,897

11a. Taxation and Non Specific Grant Income

2014-15 2015-16

£000s £000s

(54,458) Council Tax income (60,041)

(30,566) Non-domestic rates (30,940)

(10,550) Non-domestic rates Top Up Payment (10,908)

(52,139) Revenue Support Grant (37,352)

(2,330) New Homes Bonus (2,982)

(1,851) Other grants (1,907)

(44,939) Capital Grants and contributions (13,523)

(196,833) Total (157,653)



11b. Capital Grants and Contributions

2014-15 Credited to Taxation and Non Specific Grant Income 2015-16

£000s

£000s

(2,563) Capital Grants -School Condition Allocation (2,711)

(10,192) Other Capital Grants - Education (8,028)

(2,166) Devolved Formula Capital (1,864)

(19,047) M1 J10a Improvements Scheme (825)

(2,918) Local Transport Plan Block Allocation Grant (2,825)

(5,495) Luton Town Centre Transport Scheme 0

(2,507) Other Government Grants (<£1m) (2,190)

0 Other Non-Government Grants (<£1m) (632)

(51) s106 Developers' Contributions (1,219)

0 Department for Transport Highways Grant Adjustment 6,771

(44,939)

(13,523)

Details of revenue grants credited to the CIES are in note 8. 12. Property, Plant and Equipment Property, Plant and Equipment Accounting Policy 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 of, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that maintains, but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. routine repairs and maintenance) is charged as an expense when it is incurred.

Measurement Property, Plant and Equipment is capitalised if it is capable of being used for more than one year and items individually have a cost of at least £5,000. They are also capitalised if collectively they have a cost of at least £5,000, where the assets are functionally interdependent, they have broadly simultaneous purchase dates and expected disposal dates and are under single managerial control. Assets are initially valued 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.

The Council does not capitalise borrowing costs incurred whilst assets are under construction. The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council. Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-specific Grant Income line of the Comprehensive Income and Expenditure Statement, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in a Donated Assets Account. Where gains are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance to the Capital Adjustment Account in the Movement in Reserves Statement. Assets are then carried in the Balance Sheet using the following measurement bases:

Infrastructure, community assets and assets under construction - historical cost net of depreciation (community assets are not depreciated).

Council dwellings – current value, determined using the basis of existing use value for social housing (EUV-SH) on the basis laid down by the DCLG, i.e. open market value less a specified notified percentage known as the social housing discount.

Council offices – current value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV), except for a few offices that are situated close to the council’s housing properties, where there is no market for office accommodation and that are measured at depreciated replacement cost (instant build) as an estimate of current value

School buildings – current value, but because of their specialist nature, are measured at depreciated replacement cost, which is used as an estimate of current value

Surplus assets – the current value measurement base is fair value, estimated at highest and best use from a market participant’s perspective

All other assets – fair value, determined as the amount that would be paid for the asset in its existing use.

Where there is no market-based evidence of current value because of the specialist nature of an asset, depreciated replacement cost (i.e. the cost of reconstructing the building on a modern equivalent basis less accumulated depreciation), is used as an estimate of fair value. Where non-property assets have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for current value. Assets included in the 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 as a minimum every five years. Increases in valuations are matched by



credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service. Where decreases in value are identified, they are accounted for by: Where there is a balance of revaluation gains for the asset in the Revaluation Reserve,

the carrying amount of the asset is written down against that balance up to the amount of the accumulated gains.

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

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. Impairment Assets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for as follows: If 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).

If 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. Where the conversion notice to Academy status has been signed the asset is impaired to nil value in the balance sheet and disposed of at nil value at the point of conversion. 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). Depreciation is calculated on the following bases:

Buildings - on a straight–line basis over their estimated useful lives. Assets are depreciated over forty years, unless a different period is advised by the Council’s Valuer.



Dwellings - in accordance with guidelines the Housing Revenue Account is charged an amount equivalent to the depreciation on Council dwellings, using the Major Repairs Allowance as a proxy for depreciation. Other Housing properties are depreciated in the normal manner.

Infrastructure - depreciated on the straight-line method using asset lives of up to sixty years.

Vehicles & Equipment - depreciated on a 25% reducing balance method with the exception of general furniture and equipment which is calculated as 5% of the value of the relevant building depreciation which is calculated on a straight line basis.

Newly acquired assets are depreciated from the date of purchase, although assets in the course of construction are not depreciated until the year in which they are brought into use. Where an item of Property, Plant and Equipment asset has a new major component after 1 April 2010 whose cost is significant in relation to the total cost of the item, the component will be depreciated separately. Where significant, components of existing assets are identified as part of the revaluation process. Where a component is replaced or restored, the carrying amount of the old component is derecognised to avoid double counting and the new component reflected in the carrying amount. This recognition and de-recognition takes place regardless of whether the replaced part had been depreciated separately. The de-minimis level for this recognition and de-recognition is £150,000 (based on the capital expenditure of the new component). 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.

The Comprehensive Income and Expenditure Statement therefore fully reflects the use of assets and the consumption of their economic benefits in the provision of services.

Charges to Revenue for Non-Current Assets Services, support services and trading accounts are debited with the following amounts to record the cost of holding non-current assets during the year: Depreciation attributable to the assets used by the relevant service. Revaluation and impairment losses on assets used by the service where there are no

accumulated gains in the Revaluation Reserve against which the losses can be written off.

The Council is not required to raise council tax to fund depreciation, revaluation and impairment losses. However, it is required to make an annual contribution from revenue, known as the Minimum Revenue Provision (MRP), towards the reduction in its overall borrowing requirement. The MRP is calculated on a prudent basis determined by the Council in accordance with statutory guidance. Depreciation, revaluation and impairment losses are therefore replaced by the MRP, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.



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



Movement on Balances

Council

Dw

elli

ngs

Oth

er

La

nd a

nd

Build

ings

Veh

icle

s,

Pla

nt,

Furn

iture

& E

quip

me

nt

Infr

astr

uctu

re A

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£000s £000s £000s £000s £000s £000s £000s £000s £000s

Movements in 2015-16

Cost or Valuation

At 1 April 2015 349,621 390,315 54,598 206,060 8,261 0 53,574 1,062,429 25,359

Additions 9,478 10,956 4,953 607 67 38 20,415 46,514

Additions not adding to value (8) (8,346) (8,354) Additions not adding to value recognised in the Revaluation Reserve

(8,298) (8,298)

Revaluation increases/ (decreases) recognised in the Revaluation Reserve

10,676 9,469 (461)

3,050

22,734

Revaluation increases/ (decreases) recognised in the Surplus/Deficit on the Provision of Services

40,186 (5,806)

34,380

Derecognition – disposals (3,189) (348) (268)

(11)

(3,816)

Assets reclassified other than from Held for Sale

(1,352) (1,640) 4,021

2,368 (4,021) (624)

Assets reclassified (to)/from Held for Sale

190

190

Other movements in cost or valuation*

7,305 48,255 (55,560) 0

At 31 March 2016 398,466 402,193 57,182 258,943 8,328 5,635 14,408 1,145,155 25,359



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£000s £000s £000s £000s £000s £000s £000s £000s £000s

Accumulated Depreciation and Impairment

At 1 April 2015 0 (757) (36,662) (67,176) 0 0 0 (104,595) (1,289)

Depreciation charge (9,251) (12,931) (4,360) (9,219)

(35,761) (667)

Depreciation written out 9,251 2,299 461

12,011

Impairment losses/reversals recognised in the Revaluation Reserve

(18)

(18)

Impairment losses/reversals recognised in the Surplus/ Deficit on the Provision of Services

0 180 (519)

0 (339)

At 31 March 2016 0 (11,227) (41,080) (76,395) 0 0 0 (128,702) (1,956)

Net Book Value

At 31 March 2016 398,466 390,966 16,102 182,548 8,328 5,635 14,408 1,016,453 23,403

At 31 March 2015 349,621 389,558 17,936 138,884 8,261 0 53,574 957,834 24,070



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Restated £000s £000s £000s £000s £000s £000s £000s £000s £000s

Movements in 2014-15

Cost or Valuation

At 1 April 2014 327,304 382,285 53,401 203,925 7,057 0 23,799 997,771 24,392

Additions 18,556 12,743 4,820 4,764 154

31,733 72,770

Additions not adding to value (8,128) (11,893) (20,021)

Revaluation increases/ (decreases) recognised in the Revaluation Reserve

(2,850) 12,255 (3,383)

6,022 967

Revaluation increases/ (decreases) recognised in the Surplus/Deficit on the Provision of Services

18,111 (6,319) (110)

11,682

Derecognition – disposals (3,372) (2,968) (130)

(6,470)

Assets reclassified other than Held for Sale

(2,041)

1,050

(991)

Assets reclassified (to)/from Held for Sale

(2,585)

(2,585)

Other movements in cost or valuation* 0 8,838 (2,629) (1,958) 4,251

At 31 March 2015 349,621 390,315 54,598 206,060 8,261 0 53,574 1,062,429 25,359



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Accumulated Depreciation and Impairment

At 1 April 2014 0 1,269 (32,166) (58,671) 0 0 0 (89,568) (1,612)

Depreciation charge (9,244) (12,538) (4,508) (8,505)

(34,795) (667)

Depreciation written out 9,244 6,398 36

15,678 990

Impairment losses/reversals recognised in the Revaluation Reserve

(379) (10)

(389)

Impairment losses/reversals recognised in the Surplus/ Deficit on the Provision of Services

0 4,493 (14)

0 4,479

At 31 March 2015 0 (757) (36,662) (67,176) 0 0 0 (104,595) (1,289)

Net Book Value

At 31 March 2015 349,621 389,558 17,936 138,884 8,261 0 53,574 957,834 24,070

At 31 March 2014 327,304 383,554 21,235 145,254 7,057 0 23,799 908,203 22,780

* In 2014/15 the Council Dwellings additions were split between the ‘Additions’ line and ‘Other movements in cost or valuation’, this has been corrected in 2015/16 and all additions are shown in the ‘Additions’ line.



Adjustments to prior period figures are also included in the above in respect of expenditure previously classified as revenue expenditure funded from capital under statute. The adjustments made are shown in Note 1b Prior Period Adjustments. The other category in the above tables is broken down into the following subcategories as they are unrelated to any of the other categories. The following table shows which assets have been revalued and those that haven’t due to there being no material movement. Depreciation The following useful lives and depreciation rates have been used in the calculation of depreciation:

Council Dwellings – the Major Repairs Allowance is used as an appropriate measure Other Land and Buildings – 40 years (unless a different life is advised by the valuer) Vehicles, Plant, Furniture and Equipment – 25% applied to the reducing balance Infrastructure – up to 40 years

Capital Commitments At 31 March 2016, the Council has committed to invest £29.3 million in a wholly owned housing company. Revaluations The Council carries out a programme that ensures that all significant classes of Property, Plant and Equipment required to be measured at fair value are revalued. The 2015-16 Investment Properties valuations and some freehold operational properties were carried out in-house by Chartered Surveyors in the Fixed Asset Division, all members of the Royal Institute of Chartered Surveyors, as at 31st March 2016. Other Luton Borough Council freehold operational properties were valued as at 31st March 2016 under the supervision of Edwin Bray MRICS, a valuation partner of Deloitte LLP, who were acting as external valuers. The valuations were prepared in accordance with the requirements of the RICS Valuation – Professional Standards January 2014 (Global and UK Edition). The HRA housing stock valuations were carried out by DVS (Commercial Arm of the Valuation Office Agency). The properties were classified as Property Plant and Equipment and were valued to Current Value in Existing Use using either the depreciated replacement costs methodology (for specialised assets) or the investment method.



Valuations of vehicles, plant, furniture and equipment are based on purchase prices.

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£000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s

Held at Historic Cost

0 0 16,102 182,548 8,327 0 14,408 0 0 0 221,385

Held at Insurance Valuation

0 0 0 0 0 0 0 0 5,806 0 5,806

Valued at Current Value

0

31 March 2016 398,467 39,038 0 0 0 5,634 0 79,558 0 0 522,687

31 March 2015 0 46,564 0 0 0 0 0 0 0 0 46,564 31 March 2014 0 303,296 0 0 0 0 0 0 0 0 303,296 31 March 2013 0 0 0 0 0 0 0 0 0 0 0 31 March 2012 0 1,068 0 0 0 0 0 0 0 0 1,068

Total Cost or Valuation 398,467 390,966 16,102 182,548 8,327 5,634 14,408 79,558 5,806 0 1,100,806



12a. Heritage Assets

2015/16 2014/15

£000s £000s

Opening Balance

5,871 5,871

Additions

0 0

Disposals

(65) 0

Revaluations

0 0

Closing Balance

5,806 5,871

Accounting Policy for Heritage Assets The carrying amounts of heritage assets are based on insurance valuations and are reviewed where there is evidence of impairment for heritage assets, e.g. where an item has suffered physical deterioration or breakage or where doubts arise as to its authenticity. Any impairment is recognised and measured in accordance with the Council’s general policies on impairment. If it is agreed to dispose of any heritage assets the proceeds are accounted for in accordance with the Council’s general provisions relating to the disposal of property, plant and equipment. Disposal proceeds are disclosed separately in the notes to the financial statements and are accounted for in accordance with statutory accounting requirements relating to capital expenditure and capital receipts. The assets held include the Mossman Collection of horse-drawn vehicles, the Shillington Hoard coin collection and the Wenlok Jug. There are various other photographic and furniture collections among the heritage assets held by the Council.

12b. Surplus Assets Fair Value Hierarchy Details of surplus assets and information about the fair value hierarchy as at 31 March 2016 are as follows: -

Recurring fair value measurements using:

Quoted prices in active

markets for identical

assets (Level 1)

Other significant observable

inputs (Level 2)

Significant unobservable

inputs (Level 3)

Fair value as at 31 March

2016

£000s £000s £000s £000s

Surplus 0 5,634 0 5,634

Total 0 5,634 0 5,634

Valuation methods used to determine Level 2 & 3 Fair values for Investment properties

Valuation Inputs



Valuation of all the assets in the ‘Surplus Assets’ category have been based on Level 2 Observable Inputs which rely on assessing values by reference to analysis of similar transactions which have taken place on the open market or are currently listed as available on the open market in the prevailing area of the assets with relatively minor or no adjustments to the comparable evidence save for indexation to account for the timing of the transaction - so that the “observable inputs” (i.e. the comparable evidence) are significant determinants in each valuation. Valuation process for Surplus Assets The fair value of the authority’s surplus assets is carried out internally by qualified RICS Registered Valuers in accordance with valuation methodologies as set out in the Royal Institution of Chartered Surveyors Professional Standards (the ‘Red Book’). The authority’s valuers work closely with the finance officers reporting directly to the Service Director, Finance and Audit on a regular basis regarding all financial matters. 12c. Intangible Assets Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (eg software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council. The Council has no internally generated assets. 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 its useful life to the relevant service lines in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service lines in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve. The Authority accounts for its software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. The intangible assets include only purchased licenses. The value of the licences held by the Council is immaterial, and is written off on a 25% reducing balance basis.



Intangible Assets 2015-16

£000s

Balance at start of year: 0

Gross carrying amounts 0

Accumulated amortisation 0

Net carrying amount at start of year 0

Additions:

Reclassifications from tangible assets 1,640

Amortisation for the period (394)

Net carrying amount at end of year 1,246

Comprising:

Gross carrying amounts 1,640

Accumulated amortisation (394)

Balance at end of year: 1,246

13. Investment Properties

Investment Property Accounting Policy 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. The definition is not met if the property is held for sale. Investment properties are measured initially at cost and subsequently at fair value, being the price that would be received to sell such an asset in an orderly transaction between market participants at the measurement date. As a non-financial asset, investment properties are measured at highest and best use. 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. 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:



2015-16

2014-15

£000s £000s

Rental income from investment property (7,684) (6,045)

Direct operating expenses arising from investment property 2,805 1,183

Net gains/losses from fair value adjustments (1,839) (3,529)

Net gain/(loss) (6,718) (8,391)

There are no restrictions on the Council’s ability to realise the value inherent in its investment property or on the Council’s right to the remittance of income and the proceeds of disposal. The Council has no contractual obligations to purchase, construct or develop investment property or repairs, maintenance or enhancement.

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

2015-16 2014-15

£000s £000s

Opening Balance

71,581 56,387

Additions - Purchases

8,926 14,230

Disposals

(1,620) (3,637)

Total gains/losses for the period included in Surplus or Deficit on the Provision of Services resulting from changes in the fair value

1,839 3,529

Transfers (to/from Inventories or PPE)

(1,168) 1,072

Balance at end of the year

79,558 71,581

Fair Value Hierarchy Details of investment properties and information about the fair value hierarchy as at 31 March 2016 are as follows: -

Recurring fair value measurements using:

Quoted prices in active markets

for identical assets (Level 1)

Other significant observable

inputs (Level 2)

Significant unobservable

inputs (Level 3)

Fair value as at 31 March 2016

£000s £000s £000s £000s

Retail 0 29,325 0 29,325

Leisure 0 3,085 0 3,085

Office Units 0 28,420 0 28,420

Industrial 0 4,782 4,024 8,806

Other 0 0 9,922 9,922

Total 0 65,612 13,946 79,558



Valuation methods used to determine Level 2 & 3 Fair values for Investment properties

Significant Observable Inputs – Level 2 For the Level 2 valuations we have based the valuations on the market-based income and investment approach in all the separate categories, assessing rental values by reference to comparable leasing deals in the locality of each asset, with relatively minor adjustments to unit rental values to cater for individual characteristics of the property being valued. Capitalising income streams at an appropriate valuation yield has also been carried out by reference to comparable sales of investment properties with similar characteristics and adopting the capitalisation yields in those comparable deals. The retail, office and some of the industrial properties have been placed in the Level 2 category as relevant comparable evidence of rental value and investment/capital value such that the level of ‘observable inputs’ is significant. For our offices throughout the south-east of England comparable capital transactions may be in other towns but of similar types of office building. Adjustments have been made to comparable yields to reflect differences in individual property’s features, such as unexpired lease term, strength of tenant covenant, quality of specification and micro location. For a Level 2 valuation we would seek to base valuations on very similar comparable transactions so that the adjustments made in the valuation for these factors are not significant – so that the “observable inputs” (i.e. the comparable evidence) are significant determinants in each valuation. Significant Observable Inputs – Level 3 Those assets that are in the categories of ‘Leisure’, some of the industrial properties, the development sites and all of those categorised as ‘Others’ have been placed in the Level 3 category. The valuation method is largely similar to that used for Level 2 properties, assessing rental values and capital values separately and applying suitable investment yields to income streams, but more significant adjustments to rents and yields deriving from other transactions may have been applied, using the valuer’s experience and judgement of the property investment market, than the minor adjustments made in Level 2 valuations. Where the comparable evidence of similar assets is thin, or where the adjustments we have to make to the valuations using the valuer’s judgement are material, and are thus ‘unobservable inputs’, we would place the valuations in Level 3 categories in the fair value heirarchy. Quantitative information about Fair Value measurement of Investment properties using significant Unobservable Inputs – Level 3

Category As at

31/03/2016 £000s

Valuation method Unobservable

inputs Range Sensitivity

Industrial (Level 3)

4,024 Income and investment yield market approach

Investment yields

5.0%- 11.5% Significant changes in the investment yield used will result in significant change to capital value

Others 9,922 Income and investment yield market approach and site valuation by market

Site values; residential Site values;

£750,000-£850,000 per acre £500,000 per

Significant changes in any of these variables/inputs are likely to have a material impact on fair value capital valuations.



comparable evidence

commercial Investment yields Playing field values Rental value of health centres

acre 7.25%-15% £20,000 per acre £12.00-£12.50 per sq ft

Valuation process for Investment properties The fair value of the authority’s investment property is measured annually at each reporting date. All valuations are carried out internally by qualified RICS Registered Valuers in accordance with valuation methodologies as set out in the Royal Institution of Chartered Surveyors Professional Standards (the ‘Red Book’). The authority’s valuers work closely with the finance officers reporting directly to the Service Director, Finance and Audit on a regular basis regarding all financial matters. 14. Assets Held for Sale Disposals and Non-current Assets Held for Sale Accounting policy

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 re-valued immediately before reclassification and then carried at the lower of the amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on the Assets Held for Sale. Schools held on the balance sheet are disposed for nil consideration when they transfer to Academy status. 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 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. A proportion of receipts relating to housing disposals is payable to the Government. The balance of receipts is required to be credited to the Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the council’s underlying need to borrow (the capital financing requirement). Receipts are appropriated to the Reserve from the General Fund Balance in the movement in Reserves Statement. The written-off value of disposals is not a charge against council tax, as the cost of fixed 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.

2015-16 2014-15

£000s £000s

Balance outstanding at start of year

2,905 1,920

Assets newly classified as held for sale:

Property, Plant and Equipment

153 2,584

Assets declassified as held for sale:

Property, Plant and Equipment

(190) (82)

Assets sold

(2,868) (1,517)

Balance outstanding at year-end

0 2,905

15. Financial Instruments

Financial Instruments Accounting Policy Financial Liabilities Financial Liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised. For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement. Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase / settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio



that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain or loss over the term remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement. The Council has not issued any bonds, entered into any financial guarantees and does not have financial liabilities at fair value through profit or loss (such as derivatives). Financial Assets

Loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market.

Loans and Receivables Loans and receivables are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure statement is the amount receivable for the year in the loan agreement. The Council has not made any soft loans (e.g. interest-free or low interest rate loans to voluntary organisations). Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Any gains and losses that arise on the de-recognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. Categories of Financial Instruments The following categories of financial instrument are carried on the Balance Sheet:



Long-term Current

31-Mar-16

Restated 31-Mar-15

Restated 31-Mar-14

31-Mar-16

Restated 31-Mar-15

Restated 31-Mar-14

£000s £000s £000s £000s £000s £000s

Investments

Loans and receivables 44,423 30,448 27,463 57,044 125,873 130,513

Unquoted equity investment at cost 46,675 46,681 46,707 0 0 0

Total Investments 91,098 77,129 74,170 57,044 125,873 130,513

Debtors

Loans and receivables 298 390 443 0 0 0

Loans and receivables carried at contract amounts 0 0 0 24,136 18,044 23,608

Total Debtors 298 390 443 24,136 18,044 23,608

Cash at Bank/In Hand 2,852 1,170 1,560

Cash Overdrawn (8,806) (8,111) (6,496)

Borrowings

Financial liabilities at amortised cost (270,701) (270,411) (275,411) (2,394) (27,597) (20,345)

Total Borrowings (270,701) (270,411) (275,411) (2,394) (27,597) (20,345)

Other Long Term Liabilities

PFI and finance lease liabilities (22,981) (23,317) (23,690)

Other liabilities (474) (525) (525)

Total Other Long Term Liabilities (23,455) (23,842) (24,215)

Creditors

Financial liabilities at amortised cost (42,073) (40,153) (34,413)

Total Creditors 0 0 0 (42,073) (40,153) (34,413)



Income, Expense, Gains and Losses

2015-16 2014-15

F

inancia

l L

iab

ilities

measure

d a

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cost

Fin

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l A

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: L

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Fin

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:

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Cost

To

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Fin

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Fin

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:

Unqu

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d E

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Investm

en

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Cost£

000s

To

tal

£000s £000s £000s £000s £000s £000s £000s £000s

Interest expense 12,145

12,145 12,563

12,563

Fee expense 18 18 17 17

Total expense in Surplus or Deficit on the Provision of Services

12,163 0 0 12,163 12,580 0 0 12,580

Interest income

(3,683)

(3,683)

(3,267)

(3,267)

Dividend Income

(6,000) (6,000)

(1,250) (1,250)

Fee income (17) (17) (12) (12)

Total income in Surplus or Deficit on the Provision of Services

0 (3,701) (6,000) (9,701) 0 (3,279) (1,250) (4,529)

Net (gain)/loss for the year

12,163 (3,701) (6,000) 2,462 12,580 (3,279) (1,250) 8,051

Fair Values of Assets and Liabilities Financial liabilities, financial assets represented by loans and receivables and long-term debtors and creditors are carried in the Balance Sheet at amortised cost. Their fair value can be assessed by calculating the present value of cash flows that will take place over the remaining term of the instruments, using the following assumptions:

Estimated ranges of interest rates at 31 March 2016 of 1.76% to 2.99% for loans from the PWLB and 3.01% to 3.08% for other loans receivable and payable based on new lending rates for equivalent loans at that date.

No early repayment or impairment is recognised. Where an instrument will mature in the next 12 months, carrying amount is assumed

to approximate to fair value. The fair value of trade and other receivables is taken to be the invoiced or billed

amount.



The fair values calculated are as follows:

31-Mar-16 31-Mar-15 31-Mar-14

Carrying amount

Fair value Carrying amount


Fair value

£000s £000s £000s £000s £000s £000s

Financial liabilities

(281,901) (329,924) (306,119) (346,558) (302,253) (291,979)

Long-term creditors

(23,403) (30,821) (23,842) (31,139) (24,215) (35,276)

The fair value of the liabilities is higher than the carrying amount because the Council’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the prevailing rates at the Balance Sheet date. This shows a notional future gain (based on economic conditions at 31 March 2016) arising from a commitment to pay interest to lenders below current market rates. It should be noted that both the carrying amount and the fair value for both years includes cash overdrawn at the 31 March. The fair value of the long term creditors is higher than the carrying amount reflecting the ability to borrow at a lower interest rate at the balance sheet date.

31-Mar-16 31-Mar-15 31-Mar-14

Carrying amount



Fair value

£000s £000s £000s £000s £000s £000s

Loans and receivables

104,319 139,180 157,491 164,954 159,537 166,267

Long-term debtors

298 298 390 390 443 443

The fair value of the assets is higher than the carrying amount because the Council’s portfolio of investments includes a number of fixed rate loans where the interest rate receivable is higher than the rates available for similar loans at the Balance Sheet date. This shows a notional future gain (based on economic conditions at 31 March 2016) attributable to the commitment to receive interest below current market rates. It should be noted that both the carrying amount and the fair value for both years includes cash in hand at the 31 March.

Shares (representing 100% of the Company’s capital) are carried at a historic cost of £44.8 million and have not been revalued to date. The Council has no current intention to dispose of the shareholding.

Debentures are carried at a historic cost of £42.921 million as the income is not fixed or determinable. The Council has no current intention to dispose of the debentures.

Short-term debtors and creditors are carried at cost as this is a fair approximation of their value.



16. Debtors The outstanding debtors at 31 March 2016 comprised the following:

31-Mar-16 31-Mar-15 31-Mar-14

£000s £000s £000s £000s £000s £000s

Central Government Bodies

8,687

16,880

19,625

Other Local Authorities

General 608

1,629

603

Collection Fund Preceptors 456 1,064 606 2,235 700 1,303

NHS Bodies

7,943

1,093

2

Public Corporations and trading funds

6,301

4,250

7,000

Other entities and individuals

General 12,313

8,983

8,989

Provision for Doubtful Debts (1,955) 10,358 (1,680) 7,303 (1,490) 7,499

Council Tax Payers 18,503

17,961

17,018


NNDR Payers 5,830

5,423

10,230


Tenants (HRA & Temporary) 7,698

6,723

5,706

Provision for Doubtful Debts (7,036) 662 (6,297) 426 (5,000) 706

Housing Benefits Overpayments 9,044

7,858

7,460


Payments in Advance

5,743

4,749

4,846

Total

51,134

44,752

48,824

17. Cash and Cash Equivalents

Cash and cash equivalents Accounting Policy

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 mature in three months and are readily convertible to known amounts of cash with insignificant risk of change in value. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management. The balance of Cash and Cash Equivalents is made up of the following elements:

31-Mar-15

31-Mar-16

£000s

£000s

1,170 Cash held by the Council 2,852

(8,111) Bank current accounts (8,806)

18,479 Short-term deposits with banks 21,816

37,455 Money Market Funds 18,966

48,993 Total Cash and Cash Equivalents 34,828



18. Creditors

31-Mar-16 Restated

31-Mar-15 Restated

31-Mar-14

£000s £000s £000s

Central Government Bodies:

Amounts owed (5,834) (5,645) (7,715)

Other amounts received in advance (1,694) (1,038) (2,323)

Collection fund Amounts owed (3,253) (3,996) 0

Other Local Authorities:

Amounts owed (11,957) (3,104) (48)

Amounts received in advance (207) (7,526) (17,348)

NHS Bodies:

Amounts owed (2,015) (1,529) (27)

Amounts received in advance (66) (247) (1,171)

Other Entities and individuals:

Amounts owed (22,267) (29,875) (26,623)

Amounts received in advance from Council Taxpayers (3,261) (2,652) (2,608)

Amounts received in advance from NNDR payers (1,961) (1,012) 0

Amounts received in advance from Housing Tenants (1,824) (1,301) (788)


Total (58,724) (62,536) (61,660)

19. Provisions Provisions Accounting Policy Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. For instance, the Council may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation. Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Council becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be



required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some or all of the payment required to settle a provision is expected to be recovered from another party (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 if the Council settles the obligation.

Description 31-Mar-15 Additional Provision

Utilised Released 31-Mar-16

£000s £000s £000s £000s £000s

Employee related (1,129) (621) 409 500 (841)

Insurance related (2,717) (983) 620 672 (2,408)

Business Rate Appeals (5,230) (3,622) 1,840 0 (7,012)

Contract related 0 (3,050) 0 0 (3,050)

Other provisions (785) (709) 259 47 (1,188)

Total (9,861) (8,985) 3,128 1,219 (14,499)



£000s £000s £000s £000s £000s

Employee related (5,019) (465) 3,664 691 (1,129)

Insurance related (3,917) (1,064) 605 1,659 (2,717)

Business Rate Appeals (1,742) (3,488) 0 0 (5,230)

Other provisions (743) (83) 41 0 (785)

Total (11,420) (5,101) 4,311 2,350 (9,861)

All provisions are reviewed annually to ensure they are at an appropriate level. Below are further details on material provisions. Employee related – An outstanding income tax issue due to be settled with HM

Revenues and Customs in 2013-14 but referring to payments made to employees in previous years. The severance provision has been made by initially taking the number of post reductions shown in the budget, and refreshing this at the year-end based on the latest information. The provision for the income tax issue has been based on an overall assessment of a 40% tax liability to cover income tax and national insurance, to allow for the employees concerned having been on a variety of tax rates.

Insurance related – The Insurance Fund provision holds the balances set aside for

potential liabilities in respect of payments that fall within the insurance excesses. A review of the insurance provision is carried out annually using an actuarial forecasting approach which is designed to review the appropriateness of the provisions and reserves for the Council's self-insured claims as at the date of the valuation. This valuation takes into account all known and outstanding (unpaid) claims received from 1998 to date, and also makes a calculation for any incurred but not reported claims (IBNR).



Insurance Issues – Due to the fact that many insurance claims are made and/or settled some years after the incident to which they relate, it is not possible to determine when any claims are likely to be settled and hence a provision is made for insurance losses.

There is an existing provision to cover the potential liabilities in relation to the Council’s former Insurers, Municipal Mutual Insurance (MMI). MMI were the insurers for many Local Councils and they collapsed in September 1992. As a mutually created local government insurance company, Councils are responsible for meeting any shortfall on claims. The Supreme Court has determined that employers’ liability insurance cover is triggered at the point of exposure to toxic materials rather than when a disease starts to develop. This means that the number of claimants that may arise in relation to policies written by MMI in the past is very difficult to estimate.

As a result the Council established a provision in 2011/12 for the total maximum potential liability estimated to be faced by the Council. In January 2014 the managers of MMI’s business informed the Council that it should expect a levy charge of 15% of the potential liability, which is £168,000. However, in view of the uncertainty relating to the extent of such claims, the existing provision has been retained in full at this time.

Business Rate Appeals – The Local Government Finance Act 2012 introduced a

business retention scheme that enabled local authorities to retain a proportion of the business rates generated in their area. The new arrangements for the retention of business rates came into effect on 1 April 2013. Luton Borough Council, as a billing authority, is required to make provision for refunding ratepayers who have successfully appealed against the rateable value on their properties. This will include amounts relating to non-domestic rates charged to businesses in 2015/16 and earlier financial years. Assets and liabilities relating to business rates are shared between Government (50%), Luton (49%) and Luton Combined Fire Authority (1%). The provision shown is the Council’s 49% share of the total amount.

The following tables analyse provisions on the basis of the profile of their use, reflecting our best estimates where the information is not known.

Description Less than one

year Between one

and five years Greater than

five years 31-Mar-16

£000s £000s £000s £000s

Employee related (841) 0 0 (841)

Insurance related (1,549) (458) (401) (2,408)

Business Rate Appeals (216) (6,796) 0 (7,012)

Contract related (610) (2,440) 0 (3,050)

Other provisions (657) (531) 0 (1,188)

Total (3,873) (10,225) (401) (14,499)




year Between one



£000s £000s £000s £000s

Employee related (909) (220) 0 (1,129)

Insurance related (1,292) (1,024) (401) (2,717)

Business Rate Appeals (1,840) (3,390) 0 (5,230)

Other provisions (306) (479) 0 (785)

Total (4,347) (5,113) (401) (9,861)


year Between one



£000s £000s £000s £000s

Employee related (4,355) (664) 0 (5,019)

Insurance related (2,577) (761) (579) (3,917)

Business Rate Appeals (631) (1,110) 0 (1,742)

Other provisions (193) (550) 0 (743)

Total (7,756) (3,086) (579) (11,420)

20. Usable Reserves 20a. General Fund – Used for any non-housing purpose of a revenue or capital nature. 20b. Schools Reserves – Schools operating under Local Management Arrangements hold reserves, which are specifically for future use by each individual school and therefore are not available to the Council for general use.

01-Apr-14 31-Mar-15

31-Mar-16

Net Net

Surplus Deficit Net

£000s £000s

£000s £000s £000s

(961) (1,041) Nursery (1,133) 0 (1,133)

(9,230) (10,418) Primary (11,527) 0 (11,527)

(965) (1,155) Secondary (1,999) 58 (1,941)

(1,258) (1,346) Special (1,716) 0 (1,716)

(12,414) (13,960)

(16,375) 58 (16,317)

(957) (935) Foundation (1,487) 0 (1,487)

(1,297) (1,602) Voluntary Aided (945) 0 (945)

(5,470) (6,661) Central (1,667) 0 (1,667)

(20,138) (23,158) Total (20,474) 58 (20,416)



20c. Earmarked Reserves

Reserves Accounting Policy

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 or HRA Balance in the Movement in Reserves Statement; a charge is incurred against council tax / rents at this point. 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 to the General Fund or HRA Balance in the Movement in Reserves statement so that there is no second charge against council tax or rents.

This note sets out the amounts set aside from the General Fund and Housing Revenue Account balances in earmarked reserves to provide financing for future expenditure and the amounts posted back from earmarked reserves to meet General Fund and Housing Revenue Account expenditure in 2015-16.



General Fund Earmarked Reserves Balance at

1 April 2014

Transfers Out

Transfers In

Balance at 31 March

2015

Transfers Out

Transfers In

Balance at 31 March

2016 £000s £000s £000s £000s £000s £000s £000s

Invest to Save Reserve (3,541) 229 (610) (3,922) 906 (974) (3,990)

Specific Risk Management Reserve (2,970) 0 0 (2,970) 0 0 (2,970)

Service Provision Reserve (4,812) 4,350 (3,274) (3,736) 3,588 (1,723) (1,871)

Butterfield Profit Share Reserve (674) 0 (193) (867) 117 (134) (884)

Recession & Welfare Benefits Reserve (1,621) 22 0 (1,599) 113 0 (1,486)

Reorganisation Reserve (5,512) 2,528 (3,462) (6,446) 3,912 (1,603) (4,137)

Major Projects Reserve (15,000) 6,638 0 (8,362) 0 0 (8,362)

Insurance Reserve (2,153) 0 (650) (2,803) 19 0 (2,784)

Capital Reserve (6,759) 11,037 (5,911) (1,633) 7,110 (6,229) (752)

Pension Fund Reserve (3,049) 0 (302) (3,351) 0 (1,108) (4,459)

Public Health Reserve (557) 0 (98) (655) 655 (757) (757)

Investment Reserve (1,697) 50 (557) (2,204) 405 0 (1,799)

Funding Equalisation Reserve 0 0 0 0 0 (1,037) (1,037)

Specific Service Reserve 0 0 0 0 0 (1,265) (1,265)

Other Reserves (196) 0 0 (196) 0 0 (196)

Total (48,541) 24,854 (15,057) (38,744) 16,825 (14,830) (36,749)

HRA Earmarked Reserves

Balance at 1 April

2015

Transfers Out

Transfers In

Balance at 31 March

2016

Transfers Out

Transfers In

Balance at 31 March

2016

£000s £000s £000s £000s £000s £000s £000s

Legal Disputes Reserve 0 0 0 0 0 (217) (217)

Total 0 0 0 0 0 (217) (217)



Details of significant reserves are as follows: Invest to Save This specific reserve is to be utilised for initiatives, which will reduce future revenue costs.

Specific Risk Management Active risk management is increasingly important for all local authorities. As a result, part of the General Reserve has been earmarked to cover potential loss of income, given the importance to the Council of its trading undertakings.

Service Provision This reserve is earmarked for specific budget carry forward requests from 2015/16 to 2016/17. Butterfield Profit Share In accordance with the agreement made with the operator of the Business Innovation Centre, the Council’s share of the profit is held in this reserve for economic development activities. Welfare Reform and Recession The former Recession Reserve has been renamed the Welfare Reform and Recession Reserve and is intended for use for one-off developments and initiatives to prepare for and mitigate the impact of Welfare Reform, as well as local issues arising as a consequence of the recession that impact on the Council’s key priorities. Reorganisation This reserve is to enable the Council to cover the costs of reorganisations required as a result of budget decisions. A number of approved savings will involve reducing staff numbers and whilst the council aims to redeploy staff wherever possible, redundancy and early payment of pension may become due. This reserve is to enable the Council to pay for such costs as they arise. Major Projects A Major Projects Reserve has been established in recognition of the scale of major construction projects, particularly infrastructure projects, being undertaken by the Council, principally on the basis of fixed amounts of grant funding from central government. This also recognises that the conditions of grant could require some repayment. The establishment of such a reserve was a recommendation of the Council’s Finance Review Group, who undertake the financial scrutiny function. Insurance Reserve The Council reduces the cost of external insurance by self-insurance of certain risks and this reserve is held against claims, which may be received in future years. Capital Reserve The General Fund capital reserve holds contributions from the Income and Expenditure Account to fund capital expenditure. The balance at year-end represents those amounts unapplied during 2014-15. These will be carried forward to fund capital expenditure in 2015-16 and future years.



Pension Fund Reserve This reserve is earmarked for reducing future pension liabilities and will be paid to the Bedfordshire Pension Fund. Public Health Reserve This reserve is held for supporting public health functions and is a requirement of the Public Health grant. Investment Reserve This reserve was set up to fund specific investment projects. Almost all the funds are committed. Funding Equalisation Reserve – This reserve was set up to help address future fluctuations in major income sources such as business rates and government grants. Specific Service Reserve – This reserve was set up for specific services where spend is incurred over more than one year and equalisation is required. 20d. Capital Receipts Reserve

This reserve holds proceeds from the disposal of land or other assets. Statute restricts the use of the proceeds to the funding of new or historical capital expenditure. The Council has further ring-fenced a part of these receipts for use by the HRA.

2015-16 2014-15 2013-14

£000s £000s £000s

Balance brought forward 1 April (8,712) (3,094) (208)

Capital receipts in year (9,803) (11,440) (4,187)

Use of capital receipts in year

Payment to CLG – Contribution to pooled capital receipts 664 583 571

Disposal costs 95 52 57

Transfer from Deferred Capital Receipts Reserve (49) 0 0

Financing of capital expenditure 6,551 5,303 1,224

Transfers to / from other reserves for capital purposes 188 (116) (551)

Balance carried forward at 31 March (11,066) (8,712) (3,094)

20e. Major Repairs Reserve

This reserve controls an element of the capital resources set aside for use on HRA assets or for financing historical capital expenditure by the HRA.

2015-16 2014-15 2013-14

£000s £000s £000s

Balance as at 1 April (296) (1,229) (1,648)

Transfer to MRR during the financial year

Depreciation on HRA dwellings (9,251) (9,282) (8,904)

Depreciation on other HRA Assets (219) (175) (222)



Transfer to HRA during the financial year

Depreciation on other HRA assets 219 175 222

Transfer from MRR during the financial year in respect of capital expenditure

8,141 10,215 9,323

Balance as at 31 March (1,406) (296) (1,229)

20f. Capital Grants Unapplied Account This reserve holds the grants and contributions received towards capital projects for which the Council has met the conditions that would otherwise require repayment of the monies, but which have yet to be applied to meet expenditure. The balance is restricted by grant terms as to the capital expenditure against which it can be applied and / or the financial year in which this can take place.

2015-16 2014-15 2013-14

£000s £000s £000s

Balance brought forward 1 April (4,805) (4,523) (988)

Grants transferred to the account in year (4,806) (3,266) (3,586)

Grants applied to capital expenditure 2,727 2,984 51

Balance carried forward at 31 March (6,884) (4,805) (4,523)



21. Unusable Reserves

The summary of movement in unusable reserves is set out in the table below:

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Res

ou

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s

Tra

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fers

Betw

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n R

eve

nu

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Cap

ita

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es

Ad

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to

Cap

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Mo

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en

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ala

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e

Ad

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nt

to o

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nin

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ala

nc

e

Op

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Ba

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Oth

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Ex

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Rev

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Res

ou

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s

Tra

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fers

Betw

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Cap

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Restated1 Apr 2014

CIES

Restated 31 Mar

2015

Restated1 Apr 2015

CIES

31 Mar

2016

£000s £000s £000s £000s £000s £000s £000s

£000s £000s £000s £000s £000s £000s £000s

Capital Adjustment

Account (555,471) 0 8,742 (28,138) (16,625) (14,527) (606,019)

(606,019) 0 6,381 (15,964) (12,843) (15,920) (644,365)

Revaluation Reserve (129,169) (21,310) 0 0 0 14,527 (135,952)

(135,952) (26,430) 0 0 0 15,920 (146,462)

Deferred Capital Receipts

(17,043) 0 0 0 35 0 (17,008)

(17,008) 0 0 0 48 (1,000) (17,960)

Financial Instruments Adjustment Account

1,167 0 (15) 0 0 0 1,152

1,152 0 6 0 0 0 1,158

Collection Fund Adjustment

1,071 0 (2,445) 0 0 0 (1,374) 211 (1,163) 0 4,449 0 0 0 3,286

Pensions Reserve 287,768 64,510 14,105 0 0 0 366,383

366,383 (75,010) 12,531

303,904

Accumulated Leave Reserve

4,002 0 (1,271) 0 0 0 2,731

2,731 0 0 0 0 0 2,731

Total (407,675) 43,200 19,116 (28,138) (16,590) 0 (390,087) 211 (389,876) (101,440) 23,367 (15,964) (12,795) (1,000) (497,708)



21a 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 amortisation are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council 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 Council. The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. The details of movements in the reserve are shown below.

Restated 2014-15

2015-16

£000s

£000s £000s

(555,471) Balance at 1 April

(606,019)

Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement

34,795 Charges for depreciation and impairment of

non-current assets35,761

2,250 Revenue expenditure funded from capital

under statute2,893

0 Amortisation of intangible assets 394

11,624

Amounts of non-current assets written off on disposal or sale as part of the gain/ loss on disposal to the Comprehensive income and Expenditure Statement

8,369

8,632 Revaluation losses on Property, Plant and

Equipment(25,736)

(3,529) Movements on Investment Properties (1,839)

53,772

19,842

(14,527) Adjusting amounts written out of the Revaluation Reserve

(15,920)

39,245

Net written out amount of the cost of non-current assets consumed in the year

3,922



Capital financing applied in the year:

(6,410) Use of the Capital Receipts Reserve to finance

new capital expenditure(4,702)

(10,215)

Use of the Major Repairs Reserve to finance


(41,672)

Capital grants and contributions credited to the

Comprehensive Income and Expenditure Statement that have been applied to capital financing

(10,399)

(2,985)

Application of grants to capital financing from the Capital grants Unapplied Account

(2,727)

(7,652) Minimum Revenue Provision (7,258)

(373) Minimum Revenue Provision (PFI) (336)

(20,486) Capital expenditure charged against the

general Fund and HRA balance(8,705)

(89,793)

(42,268)

(606,019) Balance at 31 March

(644,365)

21b Revaluation Reserve The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its Property, Plant and Equipment. The balance is reduced when assets with accumulated gains are:

revalued downwards or impaired and 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 contains 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. The details of movements in the reserve are shown below.

Restated 2014-15

2015-16

£000s

£000s £000s


(135,952)

(30,000) Upward revaluation of assets (30,332)

8,690 Downward revaluation of assets and impairment losses not charged to the Surplus/Deficit on the Provision of Services

3,902

(21,310) Surplus or deficit on revaluation of non-current assets not posted to the Surplus or Deficit on the Provision of Services

(26,430)

14,527 Amount written off to the Capital Adjustment Account

15,919


(146,463)



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

2014-15 2015-16 £000s £000s

(17,043) Balance at 1 April (17,008)


(1,000)

35 Transfer to the Capital Receipts Reserve upon receipt of cash 48

(17,008) Balance at 31 March (17,960)

There has been a £1million re-classification of the LAMS Lend-a-Hand Deposit as S-T Debtor and Deferred Capital Receipt. Financial Instruments Adjustment Account This reserve absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The Council uses the Account to manage premiums paid on the early redemption of loans. Premiums are debited to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out of the General Fund Balance and Housing Revenue Account (HRA) to the Financial Instruments Adjustment Account in the Movement in Reserves Statement. Over time, the expense is posted back to the General Fund Balance and HRA in accordance with statutory arrangements for spreading the burden on council tax. In the Council’s case, this period is the unexpired term that was outstanding on the loans when they were redeemed (maximum of 10 years on the HRA). As a result, the balance on the Account at 31 March 2016 will be charged to the General Fund over the next 11 years and to the HRA for the next four years.

2014-15 2015-16 £000s £000s

1,167 Balance at 1 April 1,152

(15) Amount by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements

6

1,152 Balance at 31 March 1,158



Collection Fund Adjustment Account This reserve manages the differences arising from the recognition of council tax and business rates income in the Comprehensive Income and Expenditure Statement as it falls due from taxpayers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.

2014-15 2015-16 £000s £000s

1,071 Balance at 1 April (1,374)

(2,445) Amount by which council tax and non-domestic rates income credited to the Comprehensive Income and Expenditure Statement is different from council tax and non-domestic rates income calculated for the year in accordance with statutory requirements

4,660

(1,374) Balance at 31 March 3,286

Accumulated Absences Account This reserve 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. There has been no adjustment for accounted for in the 2015/16 accounts as the variance in the total accumulated absences balance have not moved by a material amount. 22. Cash Flow Statement – Operating Activities The surplus or deficit on the provision of services has been adjusted for the following non-cash movements and investing and financing activities:- Restated 2014-15

2015-16

£000s

£000s

(19,786) Net surplus or deficit on the provision of services (13,620)

Adjustments for non-cash items

(19,502) Depreciation and amortisation (36,674)

(7,608) Impairment and downward valuations 26,255

0 Movements in the market value of investment properties 1,839

(2,699) Increase/(decrease) in creditors 4,427

(14,948) (Increase)/decrease in debtors 5,834

0 Increase/(decrease) in provisions (4,639)

170 (Increase)/decrease in inventories 425

(14,106) Movement in pension liability (12,530)

(11,624) Carrying amount of non-current assets and non-current assets held for sale, sold or derecognised

(8,369)

5,000 Other non-cash items charged to the net surplus or deficit on the provision of services

0

(65,317)

(23,432)



Adjustments for items that are investing and financing activities

(9,008) Proceeds from short-term (not considered to be cash equivalents) and long-term investments (includes investments in associates, joint ventures and subsidiaries)

0

11,440 Proceeds from the sale of property, plant and equipment, investment property and intangible assets

9,802

44,938 Any other items for which the cash effects are investing or financing cash flows

15,099

47,370

24,901

(37,733) Net cash flows from operating activities (12,151)

The cash flows for operating activities include the following items:-

2014-15

2015-16

£000s

£000s

4,394 Interest received 3,888

(12,986) Interest paid (12,472)

6,750 Dividends received 4,250

23. Cash Flow Statement – Investing Activities

2014-15

2015-16

£000s

£000s

52,429 Purchase of property, plant and equipment, investment property and intangible assets

57,458

38,833 Purchase of short-term and long-term investments 23,000

0 Other payments for investing activities 0

(11,440) Proceeds from the sale of property, plant and equipment, investment property and intangible assets

(9,803)

0 Proceeds from short-term and long-term investments (62,687)

0 Other receipts from investing activities (6,782)

79,822 Net cash flows from investing activities 1,186

24. Cash Flow Statement – Financing Activities

2014-15

2015-16

£000s

£000s

(20,000) Cash receipts of short- and long-term borrowing 0

0 Cash payments for the reduction of the outstanding liabilities (finance leases)

387

17,800 Repayments of short- and long-term borrowing 25,000

(1,465) Other payments for financing activities (255)

(3,665) Net cash flows from financing activities 25,132



25. Amounts Reported for Resource Allocation Decisions The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the Service Reporting Code of Practice. However, decisions about resource allocation are taken by the Council’s Executive on the basis of budget reports analysed across departments. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular, the cost of retirement benefits is based on cash flows (payment of employer’s pension’s contributions) rather than current service cost of benefits accrued in the year. The income and expenditure of the Council’s departments recorded in the budget reports for the year is as follows:

Departmental Income and Expenditure

Chief Executives

Children and

Learning

Commercial and

Transform Services

Environment and

Regeneration

Housing and

Community Living

Public Health

Corporate Total

2015-16

£000’s £000’s £000’s £000’s £000’s

£000’s

£’000’s

£000’s Fees, charges & other income

(2,382) (24,847) (51,188) (30,778) (89,808) (1,850) (12,312) (213,166)

Government Grants (524) (176,820) (88,935) (1,260) (1,986) (14,447) 0 (283,973)

Total Income (2,906) (201,667) (140,123) (32,038) (91,795) (16,297) (12,312) (497,139)

Employee expenses 3,015 150,671 17,369 18,276 35,322 1,163 0 225,816

Other service expenses 1,621 100,142 119,771 45,109 111,597 13,277 (22,570) 368,948

Support service recharges

1,641 8,074 13,340 9,273 11,030 1,751 1,059 46,168

Total Expenditure 6,278 258,887 150,480 72,659 157,948 16,191 (21,511) 640,931

Net Expenditure 3,371 57,220 10,357 40,620 66,154 (106) (33,823) 143,792



Departmental Income and Expenditure

Chief Executives

Children and

Learning

Customer and

Corporate Services

Environment and

Regeneration

Housing and

Community Living

Public Health

Corporate Total

2014-15

£000’s £000’s £000’s £000’s £000’s £000’s £000’s £’000’s

Fees, charges & other income

(2,406) (24,164) (50,309) (28,557) (84,181) (1,635) (2,075) (193,327)

Government Grants (604) (182,268) (89,801) (2,465) (759) 0 (13,065) (288,962)

Total Income (3,010) (206,432) (140,110) (31,022) (84,940) (1,635) (15,140) (482,289)

Employee expenses 2,642 151,274 17,044 18,493 31,693

1,300 222,446

Other service expenses 1,510 82,954 105,540 35,324 84,060 1,441 11,963 322,792

Support service recharges 1,858 8,247 14,208 9,506 10,477 72 1,763 46,131

Total Expenditure 6,010 242,475 136,792 63,323 126,230 1,513 15,026 591,369

Net Expenditure 3,000 36,043 (3,318) 32,301 41,290 (122) (114) 109,080



Reconciliation of Departmental Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement This reconciliation shows how the figures in the analysis of departmental income and expenditure relate to the amounts included in the Comprehensive Income and Expenditure Statement.

Restated 2014-15

2015-16

£000s £000s

Net expenditure in the Departmental Analysis 109,080 143,792

Net expenditure of services and support services not included in the Analysis: 0 0

Amounts in the Comprehensive Income and Expenditure Statement not reported to management in the Analysis 69,601 3,802

Amounts included in the Analysis not included in the Comprehensive Income and Expenditure Statement (13,155) (8,892)

Cost of Services in Comprehensive Income and Expenditure Statement 165,526 138,702



Reconciliation to Subjective Analysis This reconciliation shows how the figures in the analysis of departmental income and expenditure relate to a subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

2015-16

De

pa

rtm

en

tal

An

aly

sis

Am

ou

nts

no

t

rep

ort

ed

to

ma

nag

em

en

t

for

decis

ion

ma

kin

g

Am

ou

nts

no

t

inclu

de

d i

n

I&E

Co

st

of

Se

rvic

es

Co

rpo

rate

Am

ou

nts

To

tal

£000’s £000’s £000’s £’000’s £000’s £000’s

Fees, charges and other service income (203,555) 7,267 0 (196,289) 0 (196,289)

Interest and investment income (9,611) 0 9,611 0 (17,277) (17,277)

Income from council tax 0 0 0 0 (57,985) (57,985)

Government grants and contributions (283,973) (1,413) 0 (285,386) (99,668) (385,053)

Total Income (497,139) 5,854 9,611 (481,674) (174,930) (656,604)

Employee expenses 225,816 (12,236) 0 213,580 0 213,580

Other service expenses 339,065 (726) 0 338,339 3,607 341,946

Support Service recharges 46,168 (818) 0 45,349 0 45,349

Depreciation, amortisation and impairment 23,109 0 0 23,109 0 23,109

Interest Payments 6,668 0 (6,668) 0 7,839 7,839

Precepts & Levies 107 0 (107) 0 107 107

Housing Pool Capital Receipts 0 0 0 0 664 664

Net Pensions Interest Cost 0 11,728 (11,728) 0 11,728 11,728

Gain or Loss on Disposal of Non-Current Assets

0 0 0 0 (1,339) (1,339)

Total Expenditure 640,931 (2,502) (18,503) 620,376 22,606 642,982

(Surplus) or deficit on the provision of services

143,792 (3,802) (8,892) 138,702 (152,324) (13,622)



Restated 2014-15 comparative figures

Dep

art

men

tal

An

aly

sis

Am

ou

nts

no

t

rep

ort

ed

to

man

ag

em

en

t fo

r

decis

ion

makin

g

Am

ou

nts

no

t

inclu

ded

in

I&

E

Co

st

of

Se

rvic

es

Co

rpo

rate

Am

ou

nts

To

tal

£000s £000s £000s £000s £000s £000s

Fees, charges and other service income (188,875) 10,097

(178,778)

(178,778)

Interest and investment income (4,452)

(4,452) (14,803) (19,255)

Income from council tax

0 (54,458) (54,458)

Government grants and contributions (288,962) (288,962) (142,657) (431,337)

Total Income (482,289) 10,097 0 (472,192) (211,636) (683,828)

Employee expenses 222,446 (1,105)

221,341

221,341

Other service expenses 289,091 56,325

345,416

345,416

Support Service recharges 46,131 (502)

45,629

45,629

Depreciation, amortisation and impairment 25,332

25,332

25,332

Interest Payments 8,267 4,786 (13,053) 0 13,053 13,053

Precepts & Levies 102

(102) 0 102 102

Net Pensions Interest Cost

0 12,402 12,402

Contribution to Housing Pooled Capital receipts

0 583 583

Gain or Loss on Disposal of Non-Current Assets

0 185 185

Total Expenditure 591,369 59,504 (13,155) 637,718 26,325 664,043


109,080 69,601 (13,155) 165,526 (185,311) (19,785)



26a. Trading Operations

The Council has established a number of trading units where the service manager is required to operate in a commercial environment and balance their budget by generating income from other parts of the council or other organisations. Details of those units with a turnover of greater than £1 million in 2015-16 are as follows:

2015-16

2014-15

£000s £000s £000s £000s

*The Council runs its property maintenance

service on the basis of an agreement between the service manager and the Housing Landlord. The trading objective is to maximise the surplus.

Turnover (16,450)

(14,935)

Expenditure 16,367

14,616

(Surplus) / Deficit

(83) (319)

**The Council has a portfolio of investment

properties in various parts of the Borough which are let to businesses. The trading objective is to maximise the surplus.

Turnover (7,684)

(6,045)

Expenditure 966

(2,346)

(Surplus) / Deficit

(6,718) (8,391)

The Council runs insurance on a trading basis, procuring cover centrally and recharging including a management fee to service units and to schools. The trading objective is to break even.

Turnover (1,516)

(1,622)

Expenditure 1,536

1,572

(Surplus) / Deficit

19 (50)

The Council operates a School Catering Service which trades with local schools. The trading objective is to at least break even, with any surplus being retained within the ring-fenced schools budgets.

Turnover (9,075)

(8,786)

Expenditure 8,679

8,566

(Surplus) / Deficit

(396) (220)

The Council operates a Design and maintenance service for council properties and schools. The trading objective is to break-even

Turnover (1,817) (1,616)

Expenditure 1,321 1,058

(Surplus) / (496) (558)

Deficit

The consolidated results of the other trading units are as follows (Note 26b)

Turnover (2,863)

(2,321)

Expenditure 2,389

1,976

(Surplus) / Deficit

(474)

(345)

Net surplus on trading operations

(8,149)

(9,883)

* The property maintenance operation is Building & Technical Services (BTS), a trading arm of LBC. Although some of the charges are to the HRA, the surplus is maximised to benefit the general fund budgets.

** The purpose of maximising the surplus of investment properties is to provide income for the general fund to relieve the pressure of reducing government grant funding. The main reason for the reduction in surplus is that the net gains/losses from fair value adjustments had reduced by £1.7m in 15/16.

The trading (surplus) / loss is incorporated into the ‘Other Investment Income’ line in note 10, excluding the investment property trading profit which is shown separately.



26b. The breakdown of consolidated results of other trading units is below: -

2015-16

£000s

Grounds Maintenance (31)

Highways Services (1)

Cleansing (4)

Corporate Landlord & Facilities Management Services 60

Human Resources (288)

Communications and Engagement 40

Revenues 1

External Customers (89)

Transportation Strategy (21)

Passenger Transport unit (96)

Customer Contact Centre (35)

Corporate Improvement (10)

(474)

27. Pooled Budgets The council has entered into a pooled budget arrangement with NHS Luton Clinical Commissioning Group, in accordance with Section 75 of the National Health Service Act 2006, with any surplus or deficit generated being the responsibility of the respective partner to whom it is attributable to. In 2015-16 the council hosted three pooled budgets with NHS Luton; the Better Care Fund (BCF), the provision of a range of children’s services and for the provision of learning disabilities services. Details of the income and expenditure for each of the pooled budgets are as follows:

2015-16 2014-15

£000s £000s £000s £000s

Better Care Fund (new 2015-16)

Funding Provided to the Pool

The Council (1,023)

0

NHS Luton (11,998)

0

(13,021)

0

Expenditure

13,021

0

Net (surplus)/deficit arising on the pooled budget

0

0



Community Equipment Store

(included within BCF in 2015-16)


The Council 0

(439)

NHS Luton 0

(439)

0

(878)

Expenditure

0

878


0

0

Children & Young People's Service


The Council (1,843)

(1,545)

NHS Luton (907)

(859)

(2,750)

(2,404)

Expenditure

3,015

2,404


265

0

Children Joint Commissioning - Staffing


The Council (276)

(396)

NHS Luton (98)

(97)

(374)

(493)

Expenditure

293

493


(81)

0

Learning Disability Services – Purchased Care


The Council (1,850)

(1,775)

NHS Luton (1,760)

(1,641)

(3,610)

(3,416)

Expenditure

4,267

3,416


657

0

Learning Disability Services – Staffing


The Council (512)

(443)

NHS Luton (250)

(274)

(762)

(717)

Expenditure

740

717


(22)

0

In respect of the BCF the terms of the section 75 agreement means that contracts are stand-alone with the financial risk being retained by the lead body. Each partner then



manages the contracts with their own providers of BCF services and each partner retains any financial risk relating to those contracts. The BCF is not a separate legal entity and has been accounted for as a pooled budget arrangement (see Note 27), since it is not an entity, joint operation or joint venture. It should be noted that neither party has unilateral control of the BCF, as decisions of the Board need to be made unanimously. In addition there are a number of joint arrangements with NHS Luton CCG where both parties contribute to integrated services. NHS Luton CCG lead the commissioning of Mental Health services from East London Foundation Trust. The Council’s contribution to this in 2015-16 was £1,710,000. The Council also provides ‘Compliments and Complaints’, ‘Equality and Diversity’ and ‘Communications and Engagement’ services to NHS Luton CCG for which the contribution from NHS Luton was £158,325 in 2015-16. 28. Members Allowances The council paid the following amounts to members of the council during the year.

2015-16 2014-15

£000s £000s

Allowances 442 442

Expenses 4 14

Total 446 456

29. Officers Remuneration The Council’s Pay Policy Statement is available on the Council’s website at www.luton.gov.uk. It confirms the following:

Employees on L1a are defined as the Council’s lowest-paid employees. This is because no employee of the Council is paid at a SCP that is lower than a point contained in L1a. This grade band is made up of 3 increments ranging from national SCP 6 to national SCP 7. At 31 March 2016, the full-time equivalent (FTE) annual values of these two SCPs are £14,514 and £14,615. The values of the SCPs in these pay grades are uprated by the pay awards notified from time to time by the National Joint Council for Local Government Services.

The Council does not calculate the remuneration of the Chief Executive/Chief Officers on the basis of a remunerative ratio between lower / median pay and highest pay or any other defined pay multiple, however, the Council is committed to monitoring the remunerative levels of employees of all earning ranges, with a specific focus on the lowest-paid. Consequently the Council publishes the pay of senior employees, including the Chief Executive and Chief Officers in its Annual Statement of Accounts, as laid out below, and the pay of both Chief Officers and the lowest paid in the Pay Policy Statement. A list of posts earning over £50,000 is published annually each April on the Council’s website.

http://www.luton.gov.uk/



The number of council employees (excluding the Senior Officers shown below) whose remuneration, excluding employer’s pension contributions, was £50,000 or more is as follows:

Number of Employees

Remuneration Band 2015-16 2014-15

Total

Retirements & Redundancies

Total

£50,000 to £54,999 40 2 41

£55,000 to £59,999 22 0 25

£60,000 to £64,999 11 0 9

£65,000 to £69,999 2 0 7

£70,000 to £74,999 5 1 2

£75,000 to £79,999 2 2 4

£80,000 to £84,999 3 0 8

£85,000 to £89,999 6 0 0

£90,000 to £94,999 0 0 0

£95,000 to £99,999 0 0 0

£100,000 to £104,999 1 1 0

92 6 96

The overall total includes retirement and redundancies figures. More information about the exit packages paid on termination of employment can be found in Note 37. The number of employees in the Council’s Community Schools whose remuneration, excluding employer’s pension contributions, was £50,000 or more is as follows:

Number of Employees

Remuneration Band 2015-16 2014-15

£50,000 to £54,999 32 23

£55,000 to £59,999 29 26

£60,000 to £64,999 14 11

£65,000 to £69,999 6 11

£70,000 to £74,999 10 8

£75,000 to £79,999 2 6

£80,000 to £84,999 3 2

£85,000 to £89,999 2 2

£90,000 to £94,999 3 0

£95,000 to £99,999 1 2

£100,000 to £104,999 1 0

£105,000 to £109,999 0 0

£110,000 to £114,999 1 1

104 92



The following table sets out the remuneration paid to the Council’s Senior Officers: -:

2015-16

Restated 2014-15

Post Holder information

Salary* (Including

fees & allowances)

Employers Pension

Contributions

Compensation for Loss of

Office

Total Remuneration

incl. Pension

Total Remuneration

incl. Pension

£ £ £ £ £

Chief Executive 193,148 24,418

217,566 202,541

T Holden

Corporate Director Housing &

Community Living 127,593 17,924

145,517 144,704

Corporate Director

Children & Learning (from July 2014)

127,527 17,288

144,815 108,308

Corporate Director**

Environment & Regeneration (to January 2016)

100,584 13,663 44,000 158,247 144,450

Interim Corporate Director

Environment & Regeneration (from September 2015)

68,906 9,344 78,250

Corporate Director

Commercial & Transformation Services

127,600 17,288 144,888 141,489

Corporate Director

Public Health 97,272 13,264 110,536 107,018

Service Director Finance &

Audit (to June 2015) 22,709 3,202 25,911 90,895

Service Director Finance &

Audit (from June 2015) 62,641 8,385 71,026

Service Director Human

Resources & Monitoring Officer 86,290 12,051 98,341 93,840

*Salaries include payments relating to election duties.

**Includes termination payments.

2014/15 totals have been restated to exclude reimbursed expenses as they do not form part of remuneration to be reported as per the 2015/16 CIPFA Code of Practice.

In prior years a disclosure was made in respect of the post of Head of Service Planning Policy & Performance. This was not in accordance with the definition of a senior officer per the Code and therefore has been excluded from the 2014/15 restated figures.



30. External Audit Costs The Council has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections:

2015-16 2014-15

£000s £000s

Fees payable to Grant Thornton with regard to external audit services carried out by the appointed auditor

162

Fees payable to Grant Thornton for the certification of grant claims and returns

37 16

Fees payable to Ernst & Young LLP with regard to external audit services carried out by the appointed auditor

122

Fees payable to Ernst & Young LLP for the certification of grant claims and returns

12

Audit Commission rebate (39)

Total 171 139

31. Dedicated Schools Grant The Council’s expenditure on schools is funded by the Dedicated Schools Grant (DSG) from the Department for Education. An element of DSG is recouped by the Department to fund academy schools in the Council’s area. The grant can only be applied to meet net expenditure properly included with the ring-fenced schools budget, as defined in the Schools Finance (England) Regulations 2011. The schools budget includes the Individual Schools Budget, which is divided into a budget for each school and a budget for a range of services provided on a council wide basis. The two elements are required to be accounted for on a separate basis.

Details of the deployment of DSG receivable for 2015-16 are as follows:

2015-16

Restated*

2014-15

Central Expenditure

Individual Schools Budgets

Total Total

£000s £000s £000s £000s

Final DSG before Academy Recoupment 21,504 181,023 202,527 189,469

Academy figure recouped 0 (49,777) (49,777) (25,852)

Total DSG after Academy Recoupment 21,504 131,246 152,750 163,617

(Over)/Underspend for prior year 3,495 3,166 6,661 5,471

In year adjustments 0 0 0 402

Final budgeted distribution 24,999 134,412 159,411 169,490

Actual expenditure for year (23,332) (132,160) (155,492) (162,829)

DSG (Over)/Underspend carried forward 1,667 2,252 3,919 6,661



*The 2014/15 comparatives differ from those shown in the 2014/15 accounts by £5,471k.

This represents the prior year (2013/14) underspend which was not disclosed in the 2014/15 accounts. 32. Grant Receipts in Advance The following grants and contributions have yet to be recognised as income as they have conditions attached to them that will require the monies to be returned to the giver if not met. 32a. Capital Grant Receipts in Advance 31-Mar-16 31-Mar-15 31-Mar-14

£000s £000s £000s

Basic Needs & LA Maintenance Grants (12,124) (16,988) (17,684)

Growth Area Fund III - Capital Grant 0 (915) (667)

Weekly Collection Support Scheme (3,962) (4,528) (4,248)

M1 J10a Improvements Scheme 0 (1,426) (3,036)

Other Government Grants under £1m (1,121) (816) (839)

Developer contributions (1,851) (2,806) (2,576)

Total (19,058) (27,479) (29,050)

32b. Revenue Grant Receipts in Advance 31-Mar-16 31-Mar-15 31-Mar-14

£000s £000s £000s

Troubled Families Initiative (691) (1,102) (831)

Weekly Collection Support Scheme (Revenue element only) (3,044) (4,098) (1,149)

Government Grants under £1m (3,462) (3,962) (4,540)

Other Grants and Contributions under £1m (979) (989) (288)

(8,176) (10,151) (6,808)

33. Related Parties The Council 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 Council. Central Government Central Government has effective control over the general operations of the Council – it is responsible for providing the statutory framework, within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in the subjective analysis in Note 32 on grant income.



Members Members of the council have direct control over the council’s financial and operating policies. The total of members’ allowances paid in 2015-16 is shown in Note 28. During 2015-16 the council did not have any transactions with organisations that Members had a pecuniary interest in. Officers During 2015-16 the council did not have any transactions with organisations that Officers had a pecuniary interest in. Other Public Bodies (subject to common control by Central Government) Details of payments made to the Bedfordshire Pension Fund (Bedford Borough Council) for employer’s superannuation contributions are shown in Note 38. The Council has a number of pooled budget arrangements with NHS Luton and with South Essex Partnership University NHS Foundation Trust. Details of these arrangements are shown in Note 27. Other Organisations The Council paid £8.0m to 10 other organisations on which it has Member or Officer representation and which share educational, economic development, social and cultural objectives as follows: Account Name 2015-16

£000s

Level Trust 16

Centre for Youth & Community Development 13

Luton Cultural Services Trust* 6,064

Active Luton (Leisure Trust)* 1,669

Luton Foodbank 21

Bangladesh Youth League 8

African Caribbean Community Development Forum 5

You Turn 9

Barnfield College 207

8,012

*Includes costs incurred in the Council’s Comprehensive Income and Expenditure Statement, which the Council has taken a decision to not recharge to the Trust.

Entities Controlled or Significantly Influenced by the Council Details of the Council’s shareholdings and investments in London Luton Airport Limited are disclosed in the introduction to the Group Accounts. The Council is involved with a number of companies whose assets and liabilities are not included in the Council’s single entity statements. Most of these companies are small simple investments and the Council’s interest does not extend to a relationship that could



be classified as a subsidiary, associate or joint venture. None of these companies are included in the group accounts. London Luton Airport Limited This company is a full subsidiary of the Council and the Group Accounts consist of the consolidation of its financial statements with those of the Council’s.

The principal activity of the company is the ownership of airport facilities. In 1998-99 the company entered into a thirty-year concession with London Luton Airport Operations Limited to operate the airport. The Council holds 44,836,999 ordinary £1 shares, equivalent to 100% of the company’s share capital carried at a historic valuation of £44.837 million. It also held debentures totalling £42,921,095 at 31 March 2016. At the year ended 31 March 2016, the company had net assets of £430.545 million (£406.660 million at 31 March 2015). The profit before tax was £30.941 million and after tax was £29.739 million (profit before tax £76.095 million and profit after tax £65.443 million for 2014-15). A dividend of £6.0 million has been declared in 2015/16 and is due to be paid in 2016-17. Debenture interest of £3.266 million was payable by the company to the Council during 2015/16.

Basis of Consolidation The Group only includes the one subsidiary and no joint ventures or associates.

Subsidiaries are entities that are controlled by the Council. In the Council’s financial statements, the investment in the subsidiary is carried at cost. In the Group financial statements, the subsidiary is accounted for using the purchase method where assets, liabilities, revenue and expenditure are added in on a line-by-line basis.

All significant transactions between Group entities are eliminated on consolidation. 34. Capital Expenditure and Capital Financing The total amount of capital expenditure incurred in the year is shown in the table below, together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed in the second part of this note.

2015-16 2014-15

£000s £000s

Opening Capital Financing Requirement - restated 363,520 329,373

Reinstatement re PFI/balance sheet rec (58,836)

304,684 329,373

Capital investment

Property, Plant and Equipment 46,514 72,770

Investment Properties 8,926 14,230

Intangibles 0 0

Revenue Expenditure Funded from Capital under Statute 2,893 2,250

London Luton Airport Limited Debenture Loan 15,000 11,000

Challney Girls School PFI 0 23,317



Sources of finance

Capital Receipts (4,702) (6,410)

Government Grants and Other Contributions (13,126) (44,657)

Major Repairs Reserve (8,141) (10,215)

Sums set aside from revenue:

Direct revenue contributions (8,705) (20,486)

MRP/loans fund principal (7,258) (7,652)

Closing Capital Financing Requirement 336,085 363,520

Underlying increase to borrow (31,401) (34,147)

35. Leases Leases Accounting Policy 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 building, the land and building elements are considered separately for classification. The Council’s policy is not to enter into any new leases, regardless of type. Schools are permitted to enter into operating leases. Arrangements that do not have the legal status of a lease, but convey a right to use an asset in return for payment will be accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets. The Council does not currently have any such arrangements. The Council as Lessee Finance Leases Property, plant and equipment held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred. Lease payments are apportioned between: a charge for the acquisition of the interest in the property, plant or equipment – applied

to write down the lease liability, and a finance charge (debited to the Financing and Investment Income and Expenditure line

in the Comprehensive Income and Expenditure Statement). Property, Plant and Equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Council at the end of the lease period).



The Council is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the movement in Reserves Statement for the difference between the two. Operating Leases Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from the use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease). The Council as Lessor Finance Leases Currently the Council has no lessor leases classified as a Finance Lease. If the Council were to grant a finance lease over a property or an item of plant or equipment, the relevant asset would be written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether, Property, Plant and Equipment, Investment Property or assets Held for Sale) would be written off to the Other Operating expenditure line in the Comprehensive Income and Expenditure statement as part of the gain or loss on disposal. A gain, representing the Council’s net investment in the lease, would be 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), matched by a lease (long-term debtor) asset in the Balance Sheet. Lease rentals receivable would be apportioned between: A charge for the acquisition of the interest in the property – applied to write down the

lease debtor (together with any premiums receivable), and Finance income (credited to the financing and Investment Income and Expenditure line

in the Comprehensive Income and Expenditure Statement). The gain which would be credited to the Comprehensive Income and Expenditure statement on disposal is not permitted by statute to increase the General Fund Balance and is required to be treated as a capital receipt. Where a premium is received, this will be posted out of the General Fund balance to the Capital Receipts Reserve in the Movement in Reserves Statement. Where an amount due in relation to a leased asset is to be settled by the payment of rentals in future financial years, this will be posted out of the General Fund Balance to the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. If the future rentals were received, the element for the capital receipt for the disposal of the asset will be used to write down the lease debtor. At this point, the deferred capital receipts will be transferred to the Capital Receipts Reserve. The written-off value of disposals is not a charge against council tax, as the costs of fixed assets is fully provided for under separate arrangements for capital financing. Amounts would therefore be appropriated to the Capital Adjustment Account from the General Fund balance in the Movement in Reserves Statement.



Operating Leases Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial significant direct costs incurred in negotiating and arranging the lease can be added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income). The Council acts as Lessee Operating Leases The Council has acquired a number of items, mainly vehicles and plant by entering into operating leases with typical lives of 5 years. The future minimum lease payments due under non-cancellable leases in future years are:

31-Mar-16 31-Mar-15

£000s £000s

Not later than one year 216 197

Later than one year and not later than five years 319 279

Later than five years 0 0

535 476

The expenditure charged to services in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was:

2015-16 2014-15

£000s £000s

Minimum lease payments 228 270

228 270

The Council as Lessor Operating Leases The Council leases out property under operating leases for the following purposes:

to generate investment income for the provision of community services for economic development purposes

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

31-Mar-16

Restated 31-Mar-15

£000s £000s

Not later than one year 11,873 6,734

Later than one year and not later than five years 24,901 22,555

Later than five years 159,588 161,542

196,362 190,831



Included in the above is 39.5 acres of land on President Way that the Council rents out to its subsidiary London Luton Airport at an annual rent of £1,924,547. The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2015-16 there are no contingent rents. 36. Private Finance Initiatives and Similar Contracts Accounting Policy PFI and similar contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under PFI schemes, and as ownership of the property, plant and equipment will pass to the Council at the end of the contracts for no additional charge, the Council carries the assets used under the contracts on its Balance Sheet as part of Property, Plant and Equipment. The original recognition of these assets at fair value (based on the cost to purchase the property, plant and equipment) is balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. Non-current assets recognised on the Balance Sheet are re-valued and depreciated in the same way as property, plant and equipment owned by the Council. The amounts payable to the PFI operators each year are analysed into five elements: Fair value of the services received during the year – debited to the relevant service in

the Comprehensive Income and Expenditure Statement Finance cost – an interest charge on the outstanding Balance Sheet liability, debited to

the financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

Contingent rent – increases in the amount to be paid for the property arising during the contract, debited to the Financing and investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

Payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease)

Life cycle replacement costs – proportion of the amounts payable is posted to the Balance Sheet as a prepayment and then recognised as additions to Property, Plant and Equipment when the relevant works are eventually carried out.

Building Schools for the Future PFI Scheme There is a 25 year PFI contract for the construction, maintenance, and facilities management of Challney Girls School. The financial close for the project was achieved on 3 June 2009 and construction commenced almost immediately. The new school building was handed over to the Council on 31 December 2010. The school is one of the Council’s Community Schools.



The contract specifies minimum standards for the services provided by the contractor to the school. The contractor took on the obligation to construct the school and maintain it in a minimum acceptable condition and to procure and maintain the plant and equipment needed to operate the school. The buildings and any plant and equipment installed in them at the end of the contract will be transferred to the Council for nil consideration. The Council only has rights to terminate the contract if it compensates the contractor in full for the costs incurred and future profits that would have been generated over the remaining term of the contract. Property, Plant and Equipment The assets used to provide services at the school are recognised on the Council’s Balance Sheet. Details are given in note 12. Payments The Council makes an agreed payment each year which is increased each year by inflation and can be reduced if the contractor fails to meet availability and performance standards in any year but which is otherwise fixed. Payments remaining to be made under the PFI contract at 31 March 2016(excluding any estimation of inflation and availability/performance deductions) are as follows:

Payment for

Services

Reimbursement of Capital

Expenditure Interest Total

£000s £000s £000s £000s

Payable in 2016-17 1,005 371 2,470 3,846

Payable within two to five years 4,375 1,914 9,458 15,747

Payable within six to ten years 6,579 3,469 10,526 20,574

Payable within 11 to 15 years 6,977 6,645 8,064 21,686

Payable within 16 to 20 years 7,564 10,579 3,528 21,671

Payable within 21 to 25 years 0 0 0 0

Total 26,500 22,978 34,046 83,524

Although the payments made to the contractor are described as unitary payments, they have been calculated to compensate the contractor for the fair value for the services they provide, the capital expenditure incurred and interest payable whilst the capital expenditure remains to be reimbursed. The liability outstanding to pay the liability to the contractor for capital expenditure incurred is as follows:

2015-16 2014-15

£000s £000s

Balance outstanding at start of year 23,317 23,690

Loan repayments during the year (2,842) (2,919)

Interest incurred in the year 2,506 2,546

Balance outstanding at year-end 22,981 23,317



37. Termination Benefits Accounting Policy Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an office’s decision to accept voluntary redundancy and are charged on an accruals basis to the relevant service line in which the employee worked in the Comprehensive Income and Expenditure Statement. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable, but unpaid at the year-end. The will Council will recognise a termination benefit at the earlier of the following dates: when the authority can no longer withdraw the offer of those benefits, and when the authority recognises costs for a restructuring that is within the scope of section

8.2 of the Code and IAS 37 and involves the payment of termination benefits. The Council terminated the contract of a number of employees in 2015-16, liabilities of £0.898 million (£1.234 million in 2014-15). The exit packages included in the accounts are set out below:

Total Number of Exit Packages per Cost Band

Total Cost of Exit Packages per Cost Band Exit Package Cost Band

2015-16 2014-15

2015-16 2014-15

£000s £000s

£0 - £20,000 43 87 357 599

£20,001 - £40,000 10 16 256 450

£40,001 - £60,000 5 1 285 44

£60,001 - £80,000 0 2 0 141

£80,001 - £100,000 0 0 0 0

Over £100,000 0 0 0 0

Total 58 106 898 1,234

This consists of :

Voluntary Exits 15 23 338 297

Compulsory Exits 23 65 327 740

Other Exits 20 18 233 197

58 106 898 1,234



38. Pensions Schemes accounted for as Defined Contribution Schemes Teachers’ Pension Scheme Teachers employed by the Council are members of the Teachers’ Pension Scheme, administered by the Department for Education. The Scheme provides teachers with specified benefits upon their retirement, and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The Scheme is technically a defined benefit scheme. However, the scheme is unfunded and the Department for Education uses a notional fund as the basis for calculating the employers’ contribution rate paid by local authorities. The Council is not able to identify its share of underlying financial position and performance of the Scheme with sufficient reliability for accounting purposes. For the purposes of this Statement of Accounts, it is therefore accounted for on the same basis as a defined contribution scheme. In 2015-16, the Council paid £7.38 million (£7.15 million 2014-15) to Teachers’ Pensions in respect of teachers’ retirement benefits, representing 15.4% (14.08% 2014-15) of pensionable pay. There were £0.985 million contributions remaining payable at the year-end. NHS Pension Scheme This scheme is accounted for as if it were a defined contribution plan, on the recommendation of CIPFA Local Authority Accounting Panel because it is not possible to identify the underlying scheme assets and liabilities for staff transferred who are in the NHS pensions plan In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the council to the Pension Fund, 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 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 are earned by employees. The Council made payments of £91,700 to the NHS Pensions Agency during 2015-16 (£51,200 during 2014-15). 39. Defined Benefit Pension Schemes Accounting Policy - 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 expenses for services in the year in which employees render services to the Council. An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. time off



owed on flexi-time schemes) 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. Post Employment Benefits Employees of the Council are members of three separate pension schemes: The Local Government Pensions Scheme, administered by Bedford Borough Council. The Teachers’ Pension Scheme, administered by the Capital Teachers’ Pensions on

behalf of the Department for Education. NHS Pension Scheme All schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees work for the Council. However, the arrangements for the teachers’ scheme mean that liabilities for these benefits cannot be identified specifically to the Council. The scheme is therefore accounted for as if it were a defined contribution scheme and no liability for future payments of benefits is recognised in the Balance Sheet. The Children’s and Education Services line in the Comprehensive Income and Expenditure Statement is charged with the employer’s contributions payable to Teachers’ Pensions in the year. The Local Government Pension Scheme The Local Government Scheme is accounted for as a defined benefit scheme:

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

Liabilities are discounted to their value at current prices, using a discount rate of 4.5% (based on the indicative rate of return on high quality corporate bonds).

The assets of the Bedfordshire Pension Fund attributable to the council are included in the Balance Sheet at their fair value:

quoted securities – bid value

unquoted securities – professional estimate

unitised securities – bid value

property – market value. The change in the net pension’s liability is analysed into six components:

Service cost comprising:



Current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the CIES 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 yrs of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the CIES 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 CIES – 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 Bedfordshire Pension Fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense.

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 (including teachers) are accrued in the year of the decision to make the award and accounted for using the same polices as are applied to the Local Government Pension Scheme. Participation in Pension Schemes As part of the terms and conditions of employment of its officers, the Council makes contributions towards the cost of post-employment benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments that needs to be disclosed at the time that employees earn their future entitlement. The Council participates in the following:

The Local Government Pension Scheme, administered locally by Bedford Borough Council – this is a funded defined benefit final salary scheme, meaning that the



Council and employees pay contributions into a fund, calculated at a level intended to balance the pensions liabilities with investment assets.

Arrangements for the award of discretionary post-retirement benefits upon early

retirement – this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet these pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due.

Transactions Relating to Post-employment Benefits The Council recognises the cost of retirement benefits 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 the Council is 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 following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in reserves Statement during the year in respect of the Local Government Pension Scheme: 2015-16 2014-15

£000s £000s

Comprehensive Income and Expenditure Statement

Cost of Services:

current service cost (24,362) (18,619)

past service costs (23) (158)

(gain) / loss from settlements 0 0

Financing and Investment Income and Expenditure 3,659

Net Interest Expense (11,728) (12,402)

Total Post-employment Benefits charged to the Surplus or Deficit on the Provision of Services

(32,454) (31,179)

Other Post-employment Benefits Charged to the Comprehensive Income and Expenditure Statement

Remeasurement of the Net Defined Benefit liability comprising:

Return on plan assets (excluding the amount included in the net interest expense)

(10,448) 33,786

Actuarial gains and (losses) arising on changes in demographic

assumptions0 0

Actuarial gains and (losses) arising on changes in financial assumptions 74,417 (104,777)

Other (if applicable) 11,041 6,481

Total Post-employment Benefits Charged to the Comprehensive Income and Expenditure Statement

75,010 (64,510)



Movement in Reserves Statement

Reversal of net charges made to the Surplus or Deficit for the Provision

of Services for post-employment benefits in accordance with the Code32,454 31,179

Actual amount charged against the General Fund Balance for pensions in the year:

Employers contributions payable to scheme 19,061 16,200

Contributions in respect of unfunded benefits 863 873

19,924 17,073

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 plan is as follows:

2015-16 2014-15

£000s £000s

Present value of the defined benefit obligation (774,719) (830,050)

Fair value of plan assets 470,815 463,666

Subtotal (303,904) (366,384)

Other movements in the liability (asset) 0 0

Net liability arising from defined benefit obligation (303,904) (366,384)

Reconciliation of the Movements in the Fair Value of Scheme Assets

Local Government Pension Scheme

2015-16 2014-15

£000s £000s

Opening fair value of scheme assets 463,666 413,183

Interest income 14,880 17,732

Re-measurement gain / (loss):

The return on plan assets, excluding the amount included in the net interest expense

(10,448) 33,786

Other (if applicable)

Contributions from employer 19,061 16,200

Contributions from employees into the scheme 5,250 4,973

Benefits paid (21,078) (22,208)

Other (if applicable) Effect of Settlements (516) 0

Closing fair value of scheme assets 470,815 463,666



Reconciliation of present value of the scheme liabilities (defined benefit obligation):


2015-16 2014-15

£000s £000s

Opening balance at 1 April 830,050 700,951

Current Service Cost 24,362 18,619

Interest cost 26,608 30,134

Contribution from scheme participants 5,250 4,973

Re-measurement (gains) and losses:

Actuarial (gains) and losses arising on changes in demographic

assumptions 0

Actuarial (gains) and losses arising on changes in financial

assumptions(74,417) 104,777

Other (if applicable) (11,041) (6,481)

Past service cost 23 158

Effect of settlements (4,175) 0

Losses / (gains) on curtailment (where relevant)

0

Liabilities assumed on entity combinations

0

Benefits paid (21,941) (23,081)

Liabilities extinguished on settlements (where relevant)

0

Closing balance at 31 March 774,719 830,050



Local Government Pension Scheme assets comprised: Local Government Pension Scheme

Quoted Prices

2015/16 Active Market

Quoted Prices

2015/16 Inactive Market

Total 2015-16

Total 2014-15

£000s £000s £000s £000s

Cash and cash equivalents 11,506 0 11,506 28,870

Equity instruments:

By industry type Consumer 0 0 0 4,337

Manufacturing 0 0 0 3,849 Energy and Utilities 0 0 0 9,024 Financial institutions 0 0 0 9,519 Health and care 0 0 0 9,669 Information Technology 0 0 0 7,312

Other 0 0 0 5,770

Sub-total Equity 0 0 0 49,480

Debt Securities

UK Government 0 40,607 40,607 49,022

Property:

By Type

UK Property 7,876 45,271 53,147 45,908 Overseas Property 0 8 8 27

Sub-total Property 7,876 45,279 53,155 45,935

Other Investment Funds:

Equities 12,372 223,450 235,822 188,370 Bonds 45,327 0 45,327 38,446 Hedge Funds

Commodities

Other 84,398 0 84,398 63,543

Sub-total Other investment funds 142,097 223,450 365,547 290,359

Total Assets 161,479 309,336 470,815 463,666



Basis for Estimating Assets and Liabilities Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc.

Both the Local Government Pension Scheme and discretionary benefits liabilities have been estimated by Hymans Robertson LLP, an independent firm of actuaries, estimates for the Pension Fund being based of the latest full valuation of the scheme as at 31 March 2013.

The significant assumptions used by the actuary have been:


2015-16 2014-15

Mortality Assumptions:

Longevity at 65 for current pensioners:

Men 22.4 22.4

Women 24.3 24.3

Longevity at 65 for future pensioners:

Men 24.4 24.4

Women 26.8 26.8

Rate of increase in salaries 3.2% 3.3%

Rate of increase in pensions 2.2% 2.4%

Rate for discounting scheme liabilities 3.5% 3.2%

The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analyses below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the other assumptions remain constant. The assumptions in longevity, for example, assume that life expectancy increases or decreases for men and women. In practice, this is unlikely to occur, and changes in some of the assumptions may be interrelated. The estimations in the sensitivity analysis have followed the accounting policies for the scheme, i.e. on an actuarial basis using the projected unit credit method. The methods and types of assumptions used in preparing the sensitivity analysis below did not change from those used in the previous period. Impact on the Authority’s Cash Flows The objectives of the scheme are to keep employers’ contributions at as constant a rate as possible. Bedford Borough Council has agreed a strategy with the scheme’s actuary to achieve a funding level of 100% over the next 20 years. Funding levels are monitored on an annual basis. The current triennial valuation based on the position as at 31 March 2016 is underway and is expected to be completed by the end of 2016.



40. Contingent Assets & Liabilities

Accounting Policy

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 Balance Sheet but disclosed in a note to the accounts.

A contingent asset arises where an event has taken place that gives the authority 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 authority. Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential. At 31 March 2016, the Council had no contingent assets or liabilities. 41. Nature and Extent of Risks arising from Financial Instruments

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

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

liquidity risk – the possibility that the Council might not have funds available to meet its 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 rates and stock market movements.

The Council’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund services. Risk management is carried out by a central treasury team, under policies approved by the Council in the Annual Treasury Management Strategy. The Council provides 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.

Credit Risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to 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. The Council uses the creditworthiness service provided by its Treasury advisers Sector, their model combines the ratings of all the three main agencies – Fitch, Moody’s and Standard and Poors. The Annual Investment Strategy also imposes a maximum sum to be invested with a financial institution located within each category. The credit criteria in respect of financial assets held by the council are detailed below:



Group Rating Exposure Maximum Maturity

A Combination scoring method - highest band (all at least AA- with one agency) £25.0 m 24 Months

B Combination scoring method - second band (all at least A+ with one agency) £22.5 m 364 Days

C Combination scoring method - third band (all at least A with one agency) £15.0 m 6 Months

D Combination scoring method - fourth band (all at least A- with one agency) £11.5 m 3 Months

E UK Local Authorities £15.0 m 364 Days

F AAA Rated Money Market Liquidity Funds £22.5 m On call

F1 Part owned or supported under guarantee scheme by UK Government £30.0 m 5 years

Institutions in Groups A to D must all be in countries with a sovereign rating of AAA/AA+.

The Council’s maximum exposure to credit risk in relation to its investments in banks cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. Recent experience has shown that it is rare for such entities to be unable to meet their commitments. A risk of recoverability applies to all the Council’s deposits, but there was no evidence at the 31 March 2016 that this was likely to crystallise.

Customers for goods and services are assessed, taking into account their financial position, past experience and other factors, with individual credit limits being set in accordance with parameters set by the relevant department of the Council.

No credit limits were exceeded during the reporting period and the Council does not expect any losses from non-performance by any of its counterparties in relation to deposits. The Council does not generally allow credit for customers, such that £5.9 million of the £7.0 million sundry debtor balance is past its due date for payment. The past due but not impaired amount can be analysed by age as follows:

31-Mar-16

31-Mar-15

£000s

£000s

Less than three months 5,275

2,966

Three to one year 337

396

More than one year 321 387

5,933 3,749

Liquidity Risk The Council has a comprehensive cash flow management system that seeks to ensure that cash is available as needed. If unexpected movements happen, the Council has ready access to borrowings from the money markets and the Public Works Loans Board. There is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. Instead, the risk is that the Council will be bound to replenish a



significant proportion of its borrowings at a time of unfavourable interest rates. The Council sets limits on the proportion of its fixed rate borrowing during specified periods. The strategy is to ensure that not more than 15% of loans are due to mature within any one year through a combination of careful planning of new loans taken out and (where it is economic to do so) making early repayments. The maturity analysis of financial liabilities is as follows:

31-Mar-16 31-Mar-15

£000s £000s

Up to 12 months 2,394 27,597

12 months to 24 months 0 0

24 months and within 5 years 0 0

5 years and above 270,701 270,411

273,095 298,008

There are a number of Lender Option Borrower Option Loans with maturities over 40 years, some of which have call dates within five years. All trade and other payables are due to be paid in less than one year. Market Risk Interest Rate Risk The Council is exposed to risk in terms of its exposure to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the Council. For instance, a rise in interest rates would have the following effects:

borrowings at variable rates – the interest expense charged to the Surplus or Deficit on the Provision of Services will rise

borrowings at fixed rates – the fair value of the liabilities borrowings will fall investments at variable rates – the interest income credited to the Surplus or Deficit

on the Provision of Services will rise investments at fixed rates – the fair value of the assets will fall.

Borrowings are not carried at fair value, 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. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in Other Comprehensive Income and Expenditure.

The Council has a number of strategies for managing interest rate risk. During periods of falling interest rates, and where economic circumstances make it favourable, fixed rate loans will be repaid early to limit exposure to losses. The risk of loss is ameliorated by the fact that a proportion of government grant payable on financing costs will normally move with prevailing interest rates or the Council’s cost of borrowing and provide compensation for a proportion of any higher costs.



The treasury management team has an active strategy for assessing interest rate exposure that feeds into the setting of the annual budget and which is used to update the budget quarterly during the year. This allows any adverse changes to be accommodated. The analysis will also advise whether new borrowing taken out is fixed or variable. According to this assessment strategy, at 31 March 2016, if interest rates had been 1% higher with all other variables held constant, the financial effect would be

£'000s

Interest cost of 1% increase 356

Less: Interest gain from 1% increase (407)

Net gain from increase in Finance & Investment Income (51)

Impact on HRA of above - borrowing 44

Less interest receivable to the HRA - investment (8)

Impact on HRA 36

Decrease in Fair Value of Fixed Rate Investments (58)

Increase in Fair Value of Fixed Rate Borrowing 43,949

The impact of a 1% fall in interest rates would be as above but with the movements being reversed. Price Risk The Council does not generally invest in equity shares; it’s only current shareholding is in London Luton Airport Limited, where the Council owns 100% of the shares and the shares are not traded. More details regarding this shareholding can be found in the Group Accounts. The Council is therefore not exposed to losses arising from movements in the prices of shares. Foreign Exchange Risk The Council has no financial assets or liabilities denominated in foreign currencies and thus has no exposure to loss arising from movements in exchange rates.

HOUSING REVENUE ACCOUNT


Income and Expenditure Statement The HRA Income and Expenditure Statement shows the economic cost in the year of providing housing services in accordance with generally accepted accounting practices, rather than the amount to be funded from rents. The council charges rents to cover expenditure in accordance with regulations; this may be different from the accounting cost. The increase or decrease in the year, on the basis of which rents are raised, is shown in the Movement on the HRA Statement. The HRA Income and Expenditure Statement is consolidated into the Comprehensive Income and Expenditure Statement. Restated 2014-15

2015-16

£000s

£000s £000s

Expenditure

12,006 Repairs and maintenance 11,985

5,857 Supervision and management 5,879

2,375 Rents, rates, taxes and other charges 2,381

0 Negative HRA Subsidy payable 0

0 Settlement Payment to Government for Self-Financing 0

9,282 Depreciation and impairment of non-current assets 9,470

0 Upward revaluation of non-dwellings (38)

(18,111) Impairment Reversal (40,187)

0 Movement in fair value of Investment Properties (269)

8,396 Revenue Expenditure funded by Capital Under Statute 527

77 Debt management costs 73

543 Movement in the allowance for bad debts 77

20,425 Total Expenditure

(10,102)

Income

(34,119) Dwelling rents (34,534)

(989) Non-dwelling rents (1,052)

Charges for services and facilities

(2,937) Tenants (3,058)

(506) Leaseholders (452)

(211) Contributions towards expenditure (31)

(38,762) Total Income

(39,127)

(18,337) Net Cost of HRA Services as included in the Comprehensive Income and Expenditure Statement

(49,229)

370 HRA services’ share of Corporate and Democratic Core

399

(17,967) Net Cost for HRA Services

(48,830)



HRA Share of the operating income and expenditure included in the Comprehensive Income and Expenditure Statement

(1,716) (Gain) or loss on sale of HRA non-current assets

(1,917)

4,237 Interest payable and similar charges

4,730

(68) Interest and investment income

(73)

4,204 Net interest on the net defined benefit liability

1,982

Capital contributions receivable

(23)

(11,310) (Surplus) or deficit for the year on HRA services

(44,131)

Movement on the HRA Statement This statement takes the outturn on the HRA income and expenditure Statement and reconciles it to the surplus or deficit for the year on the HRA Balance, calculated in accordance with the requirements of the Local Government and Housing Act 1989. It is consolidated into the Movement in Reserves Statement. Restated 2014-15

2015-16

£000s

£000s £000s

(10,199) Balance on the HRA at the end of the previous year

(4,208)

(11,310) (Surplus) or deficit for the year on the HRA Income and Expenditure Statement

(44,131)

16,193 Adjustments between accounting basis and funding basis under statute 39,911

4,883 Net (increase) or decrease before transfers to or from reserves (4,220)

1,108 Transfer to or (from) earmarked reserves 240

5,991 (Increase) or decrease in year on the HRA

(3,980)

(4,208) Balance on the HRA at the end of the current year

(8,188)

For details of Adjustments between accounting basis and funding basis under statute, please refer to Note 7.



Notes to the Housing Revenue Account 1. Housing Stock

Number of Dwellings

Number of Dwellings

2014-15 2015-16

Purpose Build Dwellings

Houses and Bungalows

126 1 Bedroom 130

741 2 Bedrooms 780

2,629 3 Bedrooms 2,652

135 4 or more Bedrooms 132

Flats 0

2,400 1 Bedroom 2,406

1,618 2 Bedrooms 1,611

244 3 Bedrooms 245

118 Acquired Dwellings 0

8,011 Total 7,956

2. Asset Values

2014-15 Type of Asset 2015-16

£000s

£000s

349,621 Dwellings 398,467

6,665 Other Land and Buildings 6,084

55 Equipment 41

5,328 Investment Properties 5,222

361,669 Total 409,814

44 Average Value of Dwellings 50

3. Vacant Possession Values The vacant possession value of dwellings as at 31 March 2016 is £1,019.4 million (£894.3 million in 2014-15). The vacant possession value of a property is defined as an opinion of the best price at which the sale of the property would have been completed unconditionally for cash consideration on the date of the valuation. The difference between the vacant possession value and the balance sheet value shows the economic cost to the Government of providing council housing at less than open market value.



4. Major Repairs Reserve Authorities are required by regulation to establish and maintain a Major Repairs Reserve. The main credit to the account comprises the total depreciation charge for all Housing Revenue Account assets. Capital spending on Housing Revenue Account assets is then funded from the reserve without being charged to the Housing Revenue Account. An analysis of the movement on the Major Repairs Reserve is as follows:

2014-15

2015-16

£000s

£000s

(1,229) Balance as at 1 April (296)

Transfer to MRR during the financial year

(9,282) Depreciation on HRA dwellings (9,251)

(175) Depreciation on other HRA Assets (219)

Transfer to HRA during the financial year

175 Depreciation on other HRA assets 219

10,215 Transfer from MRR during the financial year in respect of capital expenditure

8,141

(296) Balance as at 31 March (1,406)

5. Capital Expenditure

2014-15 2015-16

£000s £000s

Funded from:

662 Prudential Borrowing (Self Financing) 1,537

67 Capital Grant 0

9,448 Revenue Contributions to Capital Outlay 2,859

10,215 Major Repairs Reserve 8,141

20,392

12,537

6. Capital Receipts

2014-15

2015-16

£000s

£000s

(4,977) Sale of Council Houses (5,104)

(receipts less administrative expenses)

0 Shared Ownership – sale of additional shares 0

0 Recovered Discount 0

(5) Mortgage Receipts (3)

(140) Disposal of other interest in land 0

(5,122) HRA Receipts in Year (5,107)

583 Less: Statutory Pooling 664

(4,539)

(4,443)



7. Depreciation

The total charges for depreciation for the land, houses and other property within the HRA were as follows:

2014-15

2015-16

£000s

£000s

Operational Assets

9,282 Dwellings 9,251

157 Other Land and Buildings 205

18 Vehicles, Plant and Equipment 14

9,457

9,470

8. Pensions Reserve

The transfer to the Pensions Reserve in respect of the Housing Revenue Account is £2.732m, as per note 7 to the Core Financial Statements. The background to, and reasons for this adjustment may be found in note 39 to the Core Financial Statements. 9. Rent and Arrears

Since 2001, most rents for social housing (“social rents”) have been set based on a formula set by Government. The formula creates a “formula” rent for each property, which is calculated based on the relative value of the property, relative local income levels, and the size of the property, and landlords were expected to move the actual rent of a property to this formula rent, over time. An aim of this formula-based approach was to ensure that similar rents were paid for similar social rent properties. This approached continued in 2014-15 and as part of the 2013 spending review the Government announced a new policy of ending rent convergence in April 2015 and that CPI plus 1 per cent would form the basis of rent increases for the next 10 years. In 2015-16 rent increased by an average of 3.00%. Following an announcement from the Chancellor, all Councils will be required to reduce housing rents by 1% per year for the next four years.

Type of Dwelling Weekly Rents (50 week year)

Lowest Highest Typical

Purpose Built Dwelling £ £ £

Houses and Bungalows

1 Bedroom 55.22 97.56 80.16

2 Bedrooms 72.28 167.53 89.90

3 Bedrooms 78.15 167.53 97.94

4 or more Bedrooms 94.40 122.31 106.79

Flats

1 Bedroom 47.09 86.15 74.31

2 Bedrooms 57.10 96.39 82.48

3 Bedrooms 87.01 100.55 92.38

Rent arrears at 31 March 2016 were £2.099 million (£2.611 million at 31 March 2015), against which a provision for bad debt of £1.998 million (£2.473 million at 31 March 2015) has been made.

COLLECTION FUND


The Collection Fund Statement

The Collection Fund is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority in relation to the collection from taxpayers and distribution to local authorities and the Government of council tax and non-domestic rates.

2014-15

2015-16

£000s £000s

£000s £000s

NNDR Council

Tax Income NNDR

Council Tax

0 (67,908) Income from Council Tax 0 (73,510)

(69,489) 0 Income collectable from business ratepayers (67,326) 0

0 0 Council Tax Income unrecognised from prior years 0 (1,346)

(69,489) (67,908) Total Income (67,326) (74,856)

Expenditure

Distribution of prior year estimated surplus / (Contribution to prior year deficit)

(1,795)

Central Government 1,336 0

(1,760) 697 Luton Borough Council 1,310 3,812

87 Bedfordshire Police Authority 0 487

(36) 48 Beds and Luton Combined Fire Authority 27 272

(3,591) 832

2,673 4,571

Precepts and Demands

30,025 0 Central Government 33,197 0

29,425 54,458 Luton Borough Council 32,533 57,985

0 6,959 Bedfordshire Police Authority 0 7,446

600 3,889 Beds and Luton Combined Fire Authority 664 4,161

60,050 65,306

66,394 69,592

Charges to Collection Fund

259 0 Costs of Collection 260 0

647 1,770 Write-offs charged to Collection Fund 0 0

1,297 (1,408) Change in allowance for impairment 278 2,551

(506) 0 Appeals charged to Collection Fund (3,754) 0

7,310 0 Change in provision for appeals 7,391 0

1,386 0 Transitional Protection payments 7 0

10,393 362

4,182 2,551

66,852 66,500 Total Expenditure 73,249 76,714

Movement in Collection Fund Balance during year

(2,637) (1,408) Deficit/(Surplus) for year 5,923 1,859

4,622 (1,378) Deficit / Surplus brought forward 1,985 (2,561)

1,985 (2,786) Deficit/(Surplus) carried forward 7,908 (702)

COLLECTION FUND


There has been a correction of £1.8million included in the 2015/16 accounts relating to the Council Tax prepayments accounted for in the 2014/15 Statement of Accounts. A split of the Collection Fund balances share by major preceptor is shown below:

2014-15

2015-16

£000s £000s

£000s £000s

NNDR Council

Tax NNDR

Council Tax

993 0 Central Government 3,954 0

973 (2,346) Luton Borough Council 3,875 (590)

0 (273) Bedfordshire Police Authority 0 (72)

19 (167) Beds and Luton Combined Fire Authority 79 (40)

1,985 (2,786)

7,908 (702)

1. Income from Business Rates There is a national system for Business rates, also known as Non-domestic rates. The Council is a billing authority and collects from local businesses an amount equal to the rateable value of their property, multiplied by the uniform rate set nationally by government. 2013-14 was the first year in which Non-Domestic Rates were retained by the major preceptors. With effect from 1 April 2014 the Non-Domestic Rates yield from a billing authority area will be shared between local and central government. In unitary authority areas such as Luton the Council will retain 49% of the rates yield. There is inherent volatility in the Non-Domestic Rates yield as the tax base is based on notional property rental values. The creation or enhancement of new Non-Domestic properties will increase the tax base whilst demolitions or impairments will reduce the tax base. The Council now benefits from any growth in yield, subject to a levy on disproportionate gains, but also shares the risk of any negative volatility in yield, subject to a national safety net system that will ensure retained yield does not fall below 92.5% of the Council’s baseline funding requirement as determined by the Government. Ratepayers have a right to appeal against the rateable value attributed to their property under certain circumstances. There is a general right of appeal following a revaluation and substantial numbers of appeals remain outstanding following the most recent revaluation in 2010. Ratepayers are required to pay the rates demanded whilst an appeal is outstanding and where an appeal is successful are then entitled to a refund of the resulting overpayment, which in some instances can relate to overpayments in respect of rates paid in previous financial years. The reduction in yield and refund of overpayments due to successful appeals was previously offset against the Council’s contribution to the national pool. Therefore, the Council did not have an established provision for losses on appeal as at 1 April 2013. However, from 1 April 2013, the overall rates yield and, therefore, the Council’s retained share of the rates yield reduces as a result of successful appeals. It is now necessary to establish a provision for the estimated loss in yield, but it is difficult to form an accurate estimate of the potential liability to the Council that will arise due to outstanding rating appeals at 31 March 2016 because appeals are determined

COLLECTION FUND


independently by the Valuation Office Agency or, in some cases, the Valuation Tribunal. The Council’s provision in respect of outstanding appeals at 31 March 2016 is £7.0 million (i.e. 49% of £14.3 million). The total non-domestic rateable value at 31 March 2016 was £166.4 million (£168.8 million at 31 March 2015). The rating multiplier set by central government was 49.3p per £ (48.22p per £ in 2014-15) and the small business multiplier was 48.0p per £ (47.1p in 2014-15). 2. Income from Council Tax The Council’s tax base for 2015-16 was 46,635. This is the number of chargeable dwellings in each of the valuation bands adjusted for discounts and non-collection and converted into an equivalent number of band D properties. Full details are as follows: Band Value at April 1991 Number

of dwellings

Proportion of Tax

Band D equivalent

Council Tax

£ Oct-14 9ths £

A Under 40,000 13 5 5.10 829.05

(entitled to disabled relief) A Under 40,000 16,533 6 6,018.20 994.85

B 40,000 – 52,000 25,751 7 14,060.60 1,160.65

C 52,000 – 68,000 21,507 8 15,570.10 1,326.47

D 68,000 – 88,000 7,528 9 6,621.30 1,492.27

E 88,000 – 120,000 3,340 11 3,732.40 1,823.89 F 120,000 – 160,000 1,035 13 1,411.70 2,155.49

G 160,000 – 320,000 255 15 389.70 2,487.12

H Over 320,000 21 18 30.00 2,984.54

Tax base for Revenue Support Grant

purposes 47,839.10

Tax base for setting Council Tax 46,635

3. Council Tax Precepts and Demands on the Collection Fund The following precepts and demands were made on the Collection Fund:

2014-15

2015-16

£000s

£000s

54,458 Luton Borough Council 57,985

6,959 Bedfordshire Police Authority 7,446

3,889 Beds and Luton Combined Fire Authority 4,161

65,306

69,592

COLLECTION FUND


4. Collection Fund Surplus / (Deficit) At the time of setting the 2016-17 budget, there was an estimated deficit of £220k. The breakdown is below along with equivalent figures for 2014-15 and 2015-16.

16/17 16/17 16-17 15-16 15-16 15-16 14-15 14-15 14-15

£000s £000s £000s £000s £000s £000s £000s £000s £000s

Total NDR C Tax Total NDR C Tax Total NDR C Tax

Luton Borough Council (484) 428 (912) 5,122 1,310 3,812 (1,063) (1,760) 697

Bedfordshire Police Authority (117) 0 (117) 487 0 487 87 0 87

Bedfordshire and Luton Combined Fire Authority

(56) 9 (65) 299 27 272 13 (36) 49

Central Government 437 437 0 1,336 1,336 0 (1,796) (1,796) 0

(Surplus) / Deficit (220) 874 (1,094) 7,244 2,673 4,571 (2,759) (3,592) 833

GROUP ACCOUNTS


Introduction The Council is involved with a number of companies whose assets and liabilities are not included in the Council’s single entity statements. Most of these companies are small simple investments and the Council’s interest does not extend to a relationship that could be classified as a subsidiary, associate or joint venture. None of these companies are included in the group accounts. London Luton Airport Limited This company is a full subsidiary of the Council and the Group Accounts consist of the consolidation of its financial statements with those of the Council’s. The principal activity of the company is the ownership of airport facilities. In 1998-99 the company entered into a thirty-year concession with London Luton Airport Operations Limited to operate the airport. The Council holds 44,836,999 ordinary £1 shares, equivalent to 100% of the company’s share. As at 31 March 2016 the Council also holds debentures totalling £42,921,095. At the year ended 31 March 2016, the company had net assets of £430.545 million (£406.660 million at 31 March 2015). The profit before tax in 2015-16 was £30.941 million and £29.739 million, including a £19.438 million upward revaluation in investment properties after tax (£76.095 million and £65.443 million in 2014-15 including a £65.0 million upward revaluation in investment properties). A dividend of £6.0 million has been declared in 2015-16 and is due to be paid in 2016/17 (£1.25 million in 2014-15, paid in 2015-16). Debenture interest of £3.266 million was payable by the company to the Council during 2015-16 (£2.033 million for 2014-15). Basis of Consolidation The Group only includes the one subsidiary and no joint ventures or associates. Subsidiaries are entities that the Council has the power to govern. In the Council’s financial statements, the investment in the subsidiary is carried at cost. In the Group financial statements, the subsidiary is accounted for using the acquisition accounting method where assets, liabilities, revenue and expenditure is added in on a line-by-line basis.

All significant transactions between Group entities are eliminated on consolidation. Group Movement in Reserves Statement

This statement summarises the differences between the outturn on the Group Comprehensive Income and Expenditure Account and the movement on the General Fund Balance and Housing Revenue Account. It also shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Surplus or (Deficit) On the Provision of Services Line shows the true economic cost of providing the Council’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement.

GROUP ACCOUNTS


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Restated £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s

Balance at 31 March 2014

(9,610) (48,540) (20,138) (10,199) 0 (3,093) (1,229) (4,523) (314,558) (411,890) (390,754) (802,643)

Movement in Reserves during 2014-15

Surplus or (deficit) on the provision of services

(8,476) 0 0 (11,310) 0 0 0 0 (64,193) (83,979) 0 (83,979)


0 0 0 0 0 0 0 0 7 7 43,200 43,207


(8,476) 0 0 (11,310) 0 0 0 0 (64,186) (83,972) 43,200 (40,772)

Adjustment between accounting basis & funding basis under regulations (Note 7)

13,162 16,193 (4,394) 933 (282) 0 25,612 (25,612) 0

Net Increase/Decrease before transfers to Earmarked Reserves

4,686 0 0 4,883 0 (4,394) 933 (282) (64,186) (58,360) 17,588 (40,772)

Transfers to/from Earmarked Reserves (Note 8)

(6,663) 9,798 (3,019) 1,108 (1,224) 0 0 0 0 0 0

Increase/(Decrease) in 2014-15

(1,977) 9,798 (3,019) 5,991 0 (5,618) 933 (282) (64,186) (58,367) 17,588 (40,772)

Balance at 31 March 2015 carried forward

(11,587) (38,742) (23,157) (4,208) 0 (8,711) (296) (4,805) (378,744) (470,250) (373,166) (843,416)

GROUP ACCOUNTS


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£000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s


(11,587) (38,742) (23,157) (4,208) 0 (8,711) (296) (4,805) (378,744) (470,250) (373,166) (843,416)

Adjustment to Bfwd (211) 0 0 0 0 0 0 0 0 (211) 211 0

Revised Balance at 31 March 2015

(11,798) (38,742) (23,158) (4,208) 0 (8,712) (296) (4,805) (378,744) (470,461) (372,955) (843,416)

Movement in Reserves during 2015-16


30,511 0 0 (44,131) 0 0 0 0 (23,739) (37,359) 0 (37,359)


0 0 0 0 0 0 0 (146) (146) (101,440) (101,586)


30,511 0 0 (44,131) 0 0 0 0 (23,885) (37,505) (101,440) (138,945)

Adjustment between accounting basis & funding basis under regulations (Note 7)

(28,672) 883 0 39,911 0 (2,542) (1,110) (2,079) 0 6,392 (6,392) 0

Net Increase/Decrease before transfers to Earmarked Reserves

1,839 883 0 (4,220) 0 (2,542) (1,110) (2,079) (23,885) (31,116) (107,832) (138,945)

Transfers to/from Earmarked Reserves (Note 8)

(4,062) 1,111 2,741 240 (217) 187 0 0 0 0 0 0

Increase/(Decrease) in 2015-16

(2,223) 1,994 2,741 (3,980) (217) (2,355) (1,110) (2,079) (23,885) (31,116) (107,832) (138,945)


(14,021) (36,748) (20,416) (8,188) (217) (11,066) (1,406) (6,884) (402,629) (501,577) (480,786) (982,363)

GROUP ACCOUNTS


Group Comprehensive Income and Expenditure Statement

This statement shows the accounting cost of providing service for the group in accordance with generally accepted accounting practices. Councils raise taxation and other charges to cover expenditure in accordance with regulations which may differ from the accounting cost.

2014-15 Restated 2015-16

Gross Expenditure

Gross Income

Net Expenditure

Gross Expendit

ure

Gross Income

Net Expenditur

e

£000s £000s £000s £000s £000s £000s

2,992 (1,128) 1,864 Central services to the public 3,151 (1,089) 2,062

7,317 (515) 6,802 Cultural and related services 12,124 (486) 11,638

24,554 (6,016) 18,538 Environmental and regulatory services 23,986 (6,435) 17,551

8,473 (3,790) 4,683 Planning services 7,074 (3,357) 3,717

240,217 (190,273) 49,944 Education and children’s services

251,332 (196,276) 55,056

4,770 4,770 Capital expenditure on off balance sheet Academies 433 0 433

25,953 (5,777) 20,176 Highways and transport services

25,311 (6,821) 18,490

38,536 (38,762) (226) Local authority housing (HRA) 30,085 (39,127) (9,042)

(18,111) (18,111) Impairment Reversal (HRA) (40,187) (40,187)

114,383 (102,312) 12,071 Other housing services 119,292 (107,550) 11,742

73,397 (21,455) 51,942 Adult social care 80,340 (23,676) 56,664

14,163 (13,628) 535 Public Health 14,535 (14,823) (288)

7,493 (236) 7,257 Corporate and democratic core 7,297 (230) 7,067

5,424 (144) 5,280 Non distributed costs 13,193 (9,391) 3,802

549,561 (384,036) 165,525 Cost of Services 547,966 (409,261) 138,705

870

Other operating expenditure (Note 9 - single entity accounts)

(569)

(64,193)

Financing and investment income and expenditure (Note 10)

(19,044)

(196,833)

Taxation and non-specific grant income (Note11 - single entity accounts)

(157,653)

(94,631)

(Surplus) or Deficit on Provision of Services

(38,561)

10,652 Tax Expenses of Subsidiary

1,202

(83,979) Group (Surplus) or Deficit

(37,359)

(21,310)

Surplus or deficit on revaluation of Property, Plant and Equipment assets

(26,430)

64,517

Remeasurements of the net defined benefit liability

(75,156)

43,207


(101,586)

(40,772)


(138,945)

GROUP ACCOUNTS


Group Balance Sheet

The group balance sheet shows the value of assets and liabilities recognised by the group. These are funded by the usable and unusable reserves of the Council.

Restated 31 March

2014 £000s

Restated 31 March

2015 £000s

Notes

31 March 2016

£000s

908,203 957,836 Property, Plant & Equipment 12 1,016,452

0 0 Intangible Assets 1,246

468,124 553,595 Investment Property 13 599,083

5,871 5,871 Heritage Assets

5,806

12,412 4,370 Long Term Investments 15 3,341

443 390 Long Term Debtors

298

1,395,053 1,522,062 Long Term Assets

1,626,226

40,260 69,938 Short Term Investments 15 16,262

1,920 2,905 Assets Held for Sale

0

290 460 Inventories

885

48,400 45,989 Short Term Debtors 16 50,714

94,115 69,063 Cash and Cash Equivalents 17 56,038

184,985 188,355 Current Assets

123,899

(6,496) (8,111) Cash and Cash Equivalents (Bank Overdraft) 17 (8,806)

(20,345) (27,597) Short Term Borrowing 15 (2,394)

(72,315) (66,521) Short Term Creditors 18 (61,875)

(7,756) (4,347) Short Term Provisions 19 (3,874)

(6,808) (10,150) Receipts in Advance (Revenue Grants) 32b (8,174)

(113,720) (116,726) Current Liabilities

(85,123)

(275,411) (270,411) Long Term Borrowing 15 (270,701)

(24,215) (23,842) Other Long Term Liabilities 15 (23,455)

(45,329) (59,812) Long Term Provisions 19 (63,432)

(289,669) (368,730) Liability related to defined benefit pension scheme 39 (305,991)

(29,050) (27,479) Receipts in Advance (Capital Grants) 32a (19,058)

(663,674) (750,274) Long Term Liabilities

(682,637)

802,644 843,417 Net Assets

982,365

(9,610) (11,586) General Fund 20a (14,021)

(48,540) (38,742) Earmarked Reserves – General Fund 20c (36,749)

(20,138) (23,158) Schools Balances 20b (20,417)

(10,198) (4,208) Housing Revenue Account

(8,188)

0 0 Earmarked Reserves – HRA 20c (217)

(3,094) (8,712) Capital Receipts Reserve 20d (11,067)

(1,229) (296) Major Repairs Reserve 20e (1,406)

(4,523) (4,805) Capital Grants Unapplied 20f (6,884)

(314,558) (378,744) Profit and Loss

(402,629)

(411,890) (470,251) Usable Reserves

(501,578)

GROUP ACCOUNTS


(555,471) (606,019) Capital Adjustment Account

(644,364)

(129,169) (135,952) Revaluation Reserve

(146,464)

(122) (87) Deferred Capital Receipts

(1,039)


1,158

1,072 (1,374) Collection Fund Adjustment Account

3,286

287,768 366,383 Pensions Reserve

303,904

4,001 2,731 Accumulated Leave Reserve

2,731

(390,754) (373,166) Unusable Reserves

(480,786)

(802,644) (843,417) Total Reserves

(982,365)

GROUP ACCOUNTS


Group Cash Flow Statement

The group cash flow statement shows the changes in the cash and cash equivalents of the Group, classifying cash flows as operating, investing and financing activities for the Group. Operating cash flow shows the funding and expenditure on services for the group. Investing activities shows the extent to which cash outflows are made to contribute to future service delivery of the group. Cash flows from financing activities show payments and receipts for investing and borrowing activities. Restated 2014-15

Note 2015-16

£000s

£000s

(83,979) Net (surplus) or deficit on the provision of services

(37,359)

(7,286) Adjustments to net surplus or deficit on the provision of services for non-cash movements

(3,213)

47,370 Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities

24,901

(43,895) Net cash flows from Operating Activities 22 (15,671)

74,227 Investing Activities 23 4,259

(3,665) Financing Activities 24 25,132

26,667 Net increase or decrease in cash and cash equivalents

13,720

(87,619) Cash and cash equivalents at the beginning of the reporting period

(60,952)

(60,952) Cash and cash equivalents at the end of the reporting period

17 (47,232)

GROUP ACCOUNTS


Notes to the Group Accounts The notes presented here are only those that are materially different for the Group. Readers of the accounts should refer to the single entity statements for all other notes. The numbering is the same as the single entity statements. 1. Accounting Policies The Group Financial Statements for the year ended 31 March 2016 have been prepared on the basis of a full consolidation, with all financial transactions and balances of the council and its subsidiaries consolidated on a line by line basis. To permit consolidation, the Profit and Loss Account of the subsidiary entity have been presented in accordance with the CIPFA ‘Service Reporting Code of Practice’ (SerCOP) Service Expenditure Analysis. All accounting policies of the subsidiary are comparable with the exception of Investment Properties. London Luton Airport Limited has an accounting policy of recognising upward revaluations of Investment Property outside of the surplus or deficit on the provision of services. This is not consistent with the Council’s policies and has been restated accordingly. The Investment Property was revalued at 31 March 2016. 6. Events after the Balance Sheet Date On 23 June 2016 the UK electorate voted to leave the European Union. This decision commences a process that is likely to take a minimum of two years to complete, and during this time the UK remains a member of the European Union. There will be resulting period of uncertainty for the UK economy and real estate markets, with increased volatility expected in financial markets. This does not impact the fair value of assets and liabilities, including investment property, reported at the balance sheet date of 31 March 2016. Prior to the balance sheet date the company has appointed Arup to carry out the detailed design, leading into a planning application and a procurement process for the build contract. The cost of the contract is estimated at £2,000,000. Additionally the company has appointed capita to advise on the development of Stirling Place at an estimated cost of £1,000,000. 10. Financing and Investment Income and Expenditure 2014-15

2015-16

£000s

£000s

13,037 Interest payable and similar charges 12,145

12,402 Pensions interest cost and expected return on pensions assets 11,728

(4,302) Interest receivable and similar income (3,684)

(83,236) Income and expenditure in relation to investment properties and changes in their fair value

(31,659)

(2,094) Other investment activity (7,574)

(64,193) Total (19,044)

GROUP ACCOUNTS


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:

2015-16 2014-15

£000s £000s

Rental income from investment property (37,346) (31,964)

Direct operating expenses arising from investment property 12,141 4,228

Losses/gain (20,883) (3,529)

Charitable Donations 14,823 13,029

Net (gain) / loss (31,265) (18,236)

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

2015-16

2014-15

£000s

£000s

Balance at start of the year:

Single Entity 71,581

56,387

Airport Investment 482,014

411,737

553,595

468,124

Additions:

Purchases

Single Entity 8,926

14,230


5,277

26,999

19,507

Subsequent expenditure

Disposals - single entity

(1,620)

(3,637)

Net gains/losses from fair value adjustments

Single Entity 1,839

3,529


65,000

21,277

68,529

Transfers (to/from Inventories or PPE) - single entity

(1,168)

1,072

Balance at end of the year

599,083

553,595

The main balance for investment properties relates to the airport property investment.

GROUP ACCOUNTS


15. Financial Instruments

Please see note 15 to single entity accounts. The note is not materially different and can be reconciled using the disclosures below.

Breakdown of Long Term Investments

2014-15

2015-16

£000s

£000s

52,637 Single Entity Long Term investments 66,606

(48,266) Single entity investment in Airport company (63,266)

4,371

3,340

Breakdown of Long Term Liabilities

Restated 2014-15

2015-16

£000s

£000s

(23,842) Other long term liabilities - single entity note 15 (23,455)

(366,384) Single entity Pensions Liability (303,904)

(2,346) Airport Company Pensions Liability (2,087)

(392,572)

(329,446)

16. Debtors

31-Mar-16

Restated 31-Mar-15

31-Mar-14

£000s £000s £000s £000s £000s £000s

Central Government Bodies

8,687 16,880

19,625

Other Local Authorities

General 608

1,629 603

Collection Fund Preceptors 456 1,064 606 2,235 700 1,303

NHS Bodies

7,943 1,093

2

Public Corporations and trading funds 301 3,000 7,000

Other entities and individuals

General 17,893

11,470 8,565


Council Tax Payers 18,503

17,961 17,018


NNDR Payers 5,830

5,423 10,230


Tenants (HRA & Temporary) 7,698

6,723 5,706

Provision for Doubtful Debts (7,036) 662 (6,297) 426 (5,000) 706

Housing Benefits Overpayments 9,044

7,858 7,460


Payments in Advance

5,743 4,749

4,846

Total

50,714 45,989

48,400

GROUP ACCOUNTS


17. Cash and Cash Equivalents The balance of Cash and Cash Equivalents is made up of the following elements:

31-Mar-16

Restated 31-Mar-15

£000s £000s

Cash held by the Group 15,256 11,058

Bank current accounts (8,806) (8,111)

Short-term deposits with banks 21,816 20,549

Money Market Funds 18,966 37,456

Total Cash and Cash Equivalents 47,232 60,952

18. Creditors

31-Mar-16

Restated 31-Mar-15

Restated 31-Mar-14

£000s £000s £000s

Central Government Bodies:

Amounts owed (7,036) (16,297) (18,612)


Collection fund Amounts owed (3,253) (3,996) 0

Other Local Authorities:

Amounts owed (11,957) (3,104) (48)

Amounts received in advance (207) (7,526) (17,348)

NHS Bodies:

Amounts owed (2,015) (1,529) (27)

Amounts received in advance (66) (247) (1,171)

Other Entities and individuals:

Amounts owed (24,216) (23,208) (26,381)

Amounts received in advance from Council Taxpayers

(3,261) (2,652) (2,608)

Amounts received in advance from NNDR payers

(1,961) (1,012) 0

Amounts received in advance from Housing Tenants

(1,824) (1,301) (788)


Total (61,875) (66,521) (72,315)

GROUP ACCOUNTS


19. Provisions



£000s £000s £000s £000s £000s

Employee related (1,129) (621) 409 500 (841)

Insurance related (2,717) (983) 620 672 (2,408)

Business Rate Appeals (5,230) (3,622) 1,840 0 (7,012)

Contract related 0 (3,050) 0 0 (3,050)

Airport Deferred Tax Liability

(54,298) 0 1,492 0 (52,806)

Other provisions (785) (709) 259 47 (1,188)

Total (64,159) (8,985) 4,620 1,219 (67,305)



£000s £000s £000s £000s £000s

Employee related (5,019) (465) 3,664 691 (1,129)

Insurance related (3,917) (1,064) 605 1,659 (2,717)

Business Rate Appeals (1,742) (3,488) 0 0 (5,230)

Airport Deferred Tax Liability

(41,665) (12,633) 0 0 (54,298)

Other provisions (743) (83) 41 0 (785)

Total (53,085) (17,733) 4,311 2,350 (64,159)

21. Unusable Reserves

Restated 31-Mar-14

Restated 31-Mar-15

31-Mar-16

£000s £000s £000s

(555,471) (606,019) Capital Adjustment Account (644,363)

(129,169) (135,952) Revaluation Reserve (146,464)


1,158

(122) (87) Deferred Capital Receipts Reserve (1,039)

287,768 366,383 Pensions Reserve 303,904

1,072 (1,374) Collection Fund Adjustment Reserve 3,286

4,002 2,731 Accumulated Absences Account 2,731

(390,754) (373,166) Total Unusable Reserves (480,788)

GROUP ACCOUNTS


Capital adjustment Account

Restated 2014-15

2015-16

£000s

£000s £000s


(606,019)

Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement

34,795 Charges for depreciation and impairment of

non-current assets35,761

2,250 Revenue expenditure funded from capital

under statute2,893

0 Amortisation of intangible assets 394

11,624

Amounts of non-current assets written off on disposal or sale as part of the gain/ loss on disposal to the Comprehensive income and Expenditure Statement

8,369

8,632 Revaluation losses on Property, Plant and

Equipment(25,736)

(3,529) Movements on the market value of investment

properties(1,839)

53,772

19,842

(14,527) Adjusting amounts written out of the Revaluation Reserve

(15,920)

39,245

Net written out amount of the cost of non-current assets consumed in the year

3,922

Capital financing applied in the year:

(6,410) Use of the Capital Receipts Reserve to finance


(10,215)

Use of the Major Repairs Reserve to finance new capital expenditure

(8,141)

(41,672) Capital grants and contributions credited to the

Comprehensive Income and Expenditure Statement that have been applied to capital financing

(10,399)

(2,985)

Application of grants to capital financing from the Capital grants Unapplied Account

(2,727)

(7,652) Minimum Revenue Provision (7,258)

(373) Minimum Revenue Provision (PFI) (336)

(20,486) Capital expenditure charged against the

general Fund and HRA balance(8,705)

(50,548)

(42,268)


(644,364)

GROUP ACCOUNTS


Revaluation Reserve Restated 2014-15 2015-16

£000s

£000s £000s


(135,952)

(30,000) Upward revaluation of assets (30,333)

8,690 Downward revaluation of assets and impairment losses not charged to the Surplus/Deficit on the Provision of Services

3,902

(21,310) Surplus or deficit on revaluation of non-current assets not posted to the Surplus or Deficit on the Provision of Services

(26,431)

14,527 Amount written off to the Capital Adjustment Account

15,919


(146,464)

Pensions Reserve

2014-15

2015-16

£000s

£000s

(287,768) Balance at 1 April (366,383)

(64,510) Remeasurements recognised in Other Comprehensive Income and Expenditure Statement

75,156

Charged to subsidiary profit & loss account (147)

(31,179)

Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement

(32,454)

17,073 Employer’s pensions contributions and direct payments to pensioners payable in the year

19,924

(366,383) Balance at 31 March (303,904)

GROUP ACCOUNTS


22. Cash Flow Statement - Operating Activities The surplus or deficit on the provision of services has been adjusted for the following non-cash movements and investing and financing activities: - Restated 2014-15

2015-16

£000s

£000s

(83,979) Net surplus or deficit on the provision of services (37,359)

Adjustments for non-cash items

(37,613) Depreciation and amortisation (36,674)

(7,608) Impairment and downward valuations 45,693

65,000 Movements in the market value of investment properties 1,839

(2,656) Increase/(decrease) in creditors 5,262

(16,506) (Increase)/decrease in debtors 4,177

0 Increase/(decrease) in provisions (4,639)

170 (Increase)/decrease in inventories 425

(14,082) Movement in pension liability (12,417)

(11,624) Carrying amount of non-current assets and non-current assets held for sale, sold or derecognised

(8,369)

17,633 Other non-cash items charged to the net surplus or deficit on the provision of services

1,492

(7,286)

(3,211)

Adjustments for items that are investing and financing activities

(9,008) Proceeds from short-term (not considered to be cash equivalents) and long-term investments (includes investments in associates, joint ventures and subsidiaries)

0

11,440 Proceeds from the sale of property, plant and equipment, investment property and intangible assets

9,802

44,938 Any other items for which the cash effects are investing or financing cash flows

15,099

47,370

24,901

(43,895) Net cash flows from operating activities (15,671)

GROUP ACCOUNTS


The cash flow for operating activities includes the following items:

2014-15

2015-16

£000s

£000s

2,448 Interest received 714

(13,286) Interest paid (12,472)

23. Cash Flow Statement – Investing Activities Restated 2014-15

2015-16

£000s

£000s

52,429 Purchase of property, plant and equipment, investment property and intangible assets

57,458

27,833 Purchase of short-term and long-term investments 8,000

5,276 Other payments for investing activities 18,073

(11,440) Proceeds from the sale of property, plant and equipment, investment property and intangible assets

(9,803)

0 Proceeds from short-term and long-term investments (62,687)

129 Other receipts from investing activities (6,782)

74,227 Net cash flows from investing activities 4,259

24. Cash Flow Statement – Financing Activities Restated 2014-15

2015-16

£000s

£000s

(20,000) Cash receipts of short- and long-term borrowing 0

17,800 Repayments of short- and long-term borrowing 25,000

0 Other receipts from financing activities 387

(1,465) Other receipts from investing activities (255)

(3,665) Net cash flows from financing activities 25,132

30. External Audit Costs The Group has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections:

2015-16 Restated 2014-15

£000s £000s

Fees payable to PricewaterhouseCoopers with regard to external audit services & taxation services carried out by the Independent Auditor

57 110

GROUP ACCOUNTS


Fees payable to Grant Thornton with regard to external audit services carried out by the appointed auditor

162

Fees payable to Grant Thornton for the certification of grant claims and returns

37 16

Fees payable to Ernst & Young LLP with regard to external audit services carried out by the appointed auditor and the certification of grant claims and returns

122

Fees payable to Ernst & Young LLP for the certification of grant claims and returns

12

Audit Commission rebate

(39)

Total 228 249

33. Related Parties Please see single entity note 33. Key airport management have confirmed that there are no additional related party transactions. 35. Leases All other information regarding leases is unaltered from the single entity statements. The Group as Lessor Operating Leases On 20 August 1998 (‘the concession date’) the company entered into a concession contract with an unrelated entity, London Luton Airport Operations Limited (“LLAOL”). Under the terms of this contract LLAOL was granted a concession to operate the airport for a period of 30 years (‘the concession period’) and a lease over the company’s land and buildings. In return LLAOL undertook to pay an annual concession fee to the company and, subject to the continuing growth of passenger numbers, fund an extensive capital investment programme. At the end of the concession period the assets, liabilities and operations of the airport revert to the ownership and use of the company. In August 2012 a supplemental agreement to the concession contract was reached between LLAL and LLAOL. This agreement commits the operators to undertake a significant programme of development works to increase the Airport’s capacity to handle throughput of up to 18 million passengers per year, in return for an extension of the Concession Period to march 31st 2031. The concession agreement was further amended in January 2014 to provide for a scheme to rebate the Concession Fee Rate payable by the airport operator in certain circumstances, in order to encourage passenger growth. At the concession date the trading assets and liabilities of the company were transferred to LLAOL at book value. No profit or loss arose on the transfer of these assets and liabilities. The employees of the company were also transferred to LLAOL. As the company no longer operates the airport itself, the land and buildings have become investment properties. At the instruction of London Luton Airport Limited, Deloitte LLP have valued the freehold interest in London Luton Airport as at 31 March 2016. The next

GROUP ACCOUNTS


valuation is due to be undertaken as at 31 March 2020; it has, however, been agreed that, given the rate at which passenger numbers are currently growing, and the other developments currently being carried out by the company, the valuation will be reviewed in the intervening periods The excess of the amount of this valuation totalling £401,996,000 (being the net book value of tangible fixed assets re-designated as an interest in an investment property at the concession date) has been recorded within the revaluation reserve. In 1998 London Luton Airport (LLAL) granted a “Concession to Operate” lease of the Airport to London Luton Airport Operations (LLAOL). The future minimum lease payments due in respect of this in future years are detailed below: -

31-Mar-16 31-Mar-15

£000s £000s

Not later than one year 3,000 3,000

Later than one year and not later than five years 12,000 12,000

Later than five years 33,000 36,000

48,000 51,000

STATEMENT OF RESPONSIBILITIES


The Authority's Responsibilities

The Authority is required to:

make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration for those affairs (in this authority, that officer is the Service Director, Finance & Audit).

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

The Council’s constitution states that the Audit and Governance Committee has the duty to approve the Council’s statement of accounts. The Accounts and Audit Regulations 2003 introduced a requirement for the chair or deputy chair of the meeting at which approval is given to sign the accounts. This formally represents the completion of the Council’s approval process of the accounts. Signed on behalf of the Authority Councillor Waheed Akbar Dated: 11th April 2017 Responsibilities of the Service Director (Finance & Audit) The Service Director (Finance & Audit) is responsible for the preparation of the authority's statement of accounts, in accordance with proper practice as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom ('the Code'). In preparing this statement of accounts, the Head of Finance has:

selected suitable accounting policies and then applied them consistently. made judgements and estimates that were reasonable and prudent. complied with the local authority Code.

The Service Director (Finance & Audit) has also:

kept proper accounting records which were up to date. taken reasonable steps for the prevention and detection of fraud and other

irregularities. Signed

Dev Gopal ACA, CPFA, FCCA, CMgr MCMI Service Director (Finance & Audit) Dated: 11th April 2017

ANNUAL GOVERNANCE STATEMENT


Annual Governance Statement 1. SCOPE OF RESPONSIBILITIES 1.1 Luton Borough Council is responsible for ensuring its business is conducted in

accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. The Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

1.2 In discharging this overall responsibility, the Council is also responsible for putting in

place proper arrangements for the governance of its affairs and facilitating the exercise of its functions, which includes ensuring a sound system of internal control is maintained through the year and that arrangements are in place for the management of risk. In exercising this responsibility the Council places reliance on the Chief Executive to support the governance and risk management processes. The Council has approved and adopted a code of corporate governance, which was updated in 2013. It can be found at: http://democracy.luton.gov.uk/cmis5public/Meetings/tabid/70/ctl/ViewMeetingPublic/mid/397/Meeting/4534/Committee/1005/Default.aspx, as item 12 appendix A, or be obtained from the Council’s offices at the following address: Town Hall, Luton, LU1 2BQ.

1.3 This statement explains how the Council has complied with the code and also meets the

requirements of the Accounts and Audit Regulations 2015 in relation to the publication of a statement on internal control.

2 THE PURPOSE OF THE GOVERNANCE FRAMEWORK 2.1 The governance framework comprises the systems and processes, and culture and

values by which the Council is directed and controlled and its activities through which it accounts to and engages with the community. It enables the Council to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost-effective services, including achieving value for money.

2.2 The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable and foreseeable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the Council’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, to manage them effectively, efficiently and economically.

2.3 The governance framework has been in place at the Council for the year ended 31 March 2016 and up to the date of approval of the Statement of Accounts.

http://democracy.luton.gov.uk/cmis5public/Meetings/tabid/70/ctl/ViewMeetingPublic/mid/397/Meeting/4534/Committee/1005/Default.aspx

http://democracy.luton.gov.uk/cmis5public/Meetings/tabid/70/ctl/ViewMeetingPublic/mid/397/Meeting/4534/Committee/1005/Default.aspx



3. THE GOVERNANCE FRAMEWORK – OUTLINE

3.1 This section describes the key elements of the systems and processes that comprise the governance arrangements that have been put in place for the Council and how they are linked to each other.

A. Strategic Planning

3.2 This section describes the Council’s Strategic Planning Framework.

3.3 The Prospectus was produced in 2013 and ‘lay the groundwork for Luton’s path to prosperity’. It provided a financial assessment for the Council and set a number of propositions in relation to ‘business and growth’, ‘education and lifelong learning’ and ‘health and social care’.

3.4 The Prospectus helped to shape the Luton Investment Framework (LIF) which sets out a 20 year strategy for major transformation through inward investment. The Framework was approved by Executive in June 2015 and a major launch was held for business leaders and the media at an event in April 2016. This Framework effectively replaces the Prospectus.

3.5 The next step, subject to Member approval, will be to create a new three year Corporate Plan refreshing the Council’s mission, vision and priorities in light of the Investment Framework, also taking into account new Executive portfolios, senior management structure, organisation development strategy and Council brand. The plan will include key ‘place shaping’ actions, performance measures, risk mitigations and the medium term financial plan. It will include a programme of member, staff and community engagement, and will support the four year budget settlement submission that will be made to the Department for Communities and Local Government in the autumn of 2016. This plan, if approved, will supersede the existing Corporate Plan.

3.6 The new Investment Framework sets out plans to achieve £1.5billion of private investment, upskill our local workforce, create 18,500 new jobs, build 5,700 new homes and two new schools. It sets out plans to improve the health and wellbeing of Luton residents including increased life expectancy and life choices and provides support to 5,000 families in parenting Luton’s young children. The framework includes investment in green travel and carbon reduction. It also sets out investment in the voluntary sector. At the heart of the framework is business growth – attracting new large businesses and improving connectivity by road, rail and air. At the airport an Enterprise Zone is to be created, and there are proposals for a mass passenger transit service to speed up movement from the railway station to the terminal. Further details on the Investment Framework can be found at www.luton.gov.uk.

3.7 The Executive Leader and Deputy Leader presented a report on initial progress on the Investment Framework to Full Council in February 2016. This followed previous annual reports on progress against the Prospectus themes.

3.8 It is proposed that the new Corporate Plan will be underpinned by a refreshed set of Corporate Performance Indicators which will be monitored by Overview and Scrutiny board and the Executive on a quarterly basis.



3.9 On a more detailed level, 3 year service plans (latest update 2016-2019, produced by

each Service Director for their own services), enable the Council to review and manage performance across all areas of Council business. These are monitored by the Chief Executive through quarterly Delivery and Accountability meetings. These plans are especially important in the current financial context in which Luton Borough Council needs to save a further £14 million over the next three years.

3.10 The strategic planning framework will enable a clear and demonstrable line of sight between the Luton Investment Framework, Corporate Plan, service plans, team plans and people’s PPAs when the new Corporate Plan is in place. This is the ‘golden thread’. Measurement and monitoring take place through a range of delivery mechanisms including performance indicators and individual objectives.

B. Ensuring Delivery of Services and the Best Use of Available Resources 3.11 This section explains how the quality of services is measured and how the Council

ensures that they are delivered effectively in accordance with its objectives.

3.12 Service delivery, and the measurement of quality of services, is linked to the Council’s Prospectus themes and Corporate objectives through its service planning processes (as detailed above). Specific performance targets are set in line with these objectives. Service, team and project and delivery plans are also prepared to align with this framework. Objectives for individuals are then linked with those team plans through the Personal Performance Appraisals to ensure consistency of service aims and delivery in line with objectives.

3.13 The measurement of quality of services is linked through the same process, with team

and service performance indicators and targets being set to reflect their expected contributions to meeting corporate objectives and Prospectus themes. The most important performance measures corporately have been (and will continue to be under the new Performance Management Framework) determined by the Council’s Corporate Leadership Management Team, and are reported to Executive and Overview Scrutiny Board on a quarterly basis via a ‘score card’ which includes appropriate targets, commentary and a RAG rating to help monitor and improve performance. In addition, there are a series of indicators mandated by the Government for national assessment of the quality and delivery of key local government services, particularly in relation to children’s services and adult social care. These are measured and the assessment externally verified as part of the audit process.

3.14 The Council’s risk management process is key to ensuring the effective delivery of

service. Consideration of risk in order to develop plans including effective risk mitigation measures is designed to enable the Council to deliver effectively, by planning for risks before they happen. It is also designed to enable the Council to take effective advantage of opportunities in a planned and structured way, by ensuring that opportunities that link directly with the Council’s overall objectives are the ones that are pursued.

3.15 The delivery and accountability meetings referred to above provide an approximately

quarterly review and challenge of service and financial performance, risk management,



and challenge of specific areas such as sickness, overtime and completion of appraisals.

3.16 The budget and medium term planning process is directly linked to the delivery of

services in line with objectives. Proposals for variations to the budget are assessed in terms of their potential impact, and prioritized accordingly.

3.17 The Council’s transformation strategy, Luton Together Phase 3, was put in place for 2013 to 2016. It reflects a focus on income generation and service improvement, and is based on the design principles shown in paragraph 3.10 above. The strategy also includes the savings programme, which is subject to regular updating. Monitoring shows that the vast majority of the 2015/16 savings programme of £15.4 million has been achieved. The 2016/17 budget has been set with £12.7million of savings and additional income, and some options have been put forward in principle that can contribute towards achieving the 2017/18 target. To achieve this, some 100 projects have been identified for 2016/17 and 2017/18 that are either in development or have moved into full implementation. All will be delivered via four bundles (Chief Executive LBC and LLAL, Customer & Commercial, Place & Infrastructure, People and Public Health, Commissioning and Procurement). All projects are carefully coordinated, with progress monitored and scrutinised via savings ‘Trackers’. These savings proposals were developed with members to ensure that all options were considered and prioritised in line with the aims of the Prospectus.

3.18 The Council’s value for money is now assessed by the external auditors each year. A qualified Value for Money ('VFM') opinion was issued in April 2017, which included an except for conclusion due to weaknesses in proper arrangements for reliable and timely financial reporting to support the delivery of strategic priorities and for procuring supplies and services effectively to support of strategic priorities. However the external auditors concluded there is no indication that these weaknesses led to detrimental outcomes for local people. C. Roles and Responsibilities

3.19 The Council’s Constitution sets out the Council’s key functions and who is responsible for them. Part 3 of the Constitution – ‘Responsibility for Functions’ sets out the responsibilities for each Council committee.

3.20 The scheme of delegation to officers is set out in Parts 6 and 7 of the Constitution. 3.21 Part 2 of the Constitution also sets out the Council’s management structure, and the

specific functions of three statutory posts that are an important part of the Council’s governance – the Head of Paid Service (the Chief Executive), the Monitoring Officer (the Service Director Human Resources and Monitoring Officer) and the Chief Finance Officer (the Service Director, Finance & Audit).

3.22 The Constitution also includes Standing Orders and Financial Regulations, which define

how the Council conducts its business in a consistent and appropriate manner. D. Standards of Conduct



3.23 The Council’s Constitution includes codes of conduct for both members and officers that comply with the requirements of the Localism Act 2011.

3.24 Complaints against members are investigated by a subcommittee of the Standards Committee, in conjunction with the Independent Person (IP). There is a panel of seven IPs who can be called upon when required. This was arranged as part of a collaborative process with the other Bedfordshire authorities and Milton Keynes.

3.25 Dependent upon the outcome of the investigation, a complaint may be referred to the Standards Committee for a hearing and sanction. During 2015/16, one complaint made against Members went to an Assessment Panel and was rejected, and a complaint heard in a previous year was referred to an appeal.

3.26 The Council’s Standards Committee is an advisory committee, responsible for the promotion of high standards of conduct. Half of its members are independent members, i.e. not elected members, who are co-opted to serve on the Committee. The Chair and Vice-Chair are both independent members.

3.27 At each formal meeting of the Council, the Executive and the Council’s Committees, members are reminded to declare any pecuniary interests in relation to the business to be discussed and decisions to be taken. As a necessary part of being a member all members are provided with a Members’ Handbook. This contains a section which gives advice on matters relating to compliance with the Code of Conduct.

3.28 The Council has a register of member interests, maintained by the Monitoring Officer, in

which all registrable interests must be entered for both the elected Member and their spouse or partner. Members are reminded on a regular basis of the need to register their interests. Registrable interests include gifts and hospitality received by members.

3.29 Some years ago senior staff participated in the creation of the Council’s values, and

over the last 4 years training has been focussed on the importance of those values. The focus on a values-led organization, rather than simply an organization with values, emphasizes the importance of conduct in line with those values. Managers are required to emphasise the importance of this to their staff.

3.30 Each new member of staff receives an induction pack, which includes the Code of

Conduct for Officers, and the importance of adhering to this Code is emphasised.

3.31 In addition, professional staff are subject to the codes of conduct of their particular professions.

E. Standing Orders, Financial Instructions, Delegations, Contract Regulations and their Update

3.32 The Council’s Standing Orders, including regulations regarding contracts, and Financial Regulations are part of the Council’s Constitution.

3.33 The Council has a Constitution Committee, which meets as necessary to consider

changes to the Constitution and make recommendations to the full Council, which can



also make changes to the Constitution on the recommendation of any of the three statutory officers.

3.34 Updates to a number of parts of the Constitution were approved in 2015/16, these were: Summary and Explanation (part 1), Articles of the Constitution (part 2), Responsibility for Functions (part 3); Standing Orders (part 4), Financial Regulations (part 5), Scheme of Delegation to Officers - Executive Functions (part 6), Scheme of Delegation to Officers – Non Executive Functions (part 7), Joint Arrangements (part 8); Protocol for Member/Officer relations (part 10), Code of Conduct for Employees (part 11), Whistleblowing (part 12), Register of Members (part 150) and Complaints Procedure (part 16).

3.35 Financial Regulations include a section on risk management, and the importance of managing risk within every aspect of management. This is also emphasized in the Risk Management Strategy.

F. Financial Management Arrangements

3.36 The Chartered Institute of Public Finance and Accountancy (CIPFA) published a statement on the role of the Chief Financial Officer in 2010. This statement includes a significant number of governance requirements in relation to financial management in general and the role and responsibilities of the Chief Financial Officer (CFO) in particular. These include the requirement that the CFO ‘should report directly to the Chief Executive and be a member of the Leadership Team, with a status at least equivalent to the other members.’ This is not the case in Luton, and the statement requires the reasons for this to be explained, together with how the arrangements adopted deliver the same impact.

3.37 In Luton, along with a number of other Councils, the role of Chief Financial Officer is at Service Director level, rather than at Corporate Director level. This does ensure that the CFO’s role is focussed on the core financial and strategic responsibilities rather than being diluted by taking on a wider remit. The CFO reports to the Corporate Director Customer and Commercial. However, the CFO attends all meetings of the Corporate Leadership Management Team (CLMT) as a full team member, attends all corporate officer meetings with elected members, as well as being able to go directly to the Chief Executive whenever necessary.

3.38 Luton’s financial management arrangements are in line with the other key governance requirements in the CIPFA statement. A member of the CFO’s staff acts as Chief Financial Officer and Company Secretary for London Luton Airport Limited (LLAL), and another is responsible for the production of LLAL accounts. G. The Role and Functioning of the Audit and Governance Committee

3.39 The Audit and Governance Committee of the Council discharges the functions of the Council as required by the Practical Guidance for Local Authorities on Audit Committees published by the Chartered Institute of Public Finance and Accountancy. The Committee, which meets quarterly, helps improve the corporate focus on the core issues arising from internal control, reporting and management, and receives regular reports on



Internal Audit reviews, as well as reports from external audit, and an annual review of risk management. H. Compliance with Law and Internal Policy and Procedure

3.40 The Chief Executive is responsible for the effective and efficient administration of the Council. The Head of Human Resources and Monitoring Officer as Monitoring Officer is required to ensure that agreed procedures are followed and that the Council conducts its business lawfully and in accordance with all applicable statutes and regulations. If the Monitoring Officer becomes aware that the Council or any Committee or officer on its behalf has or is about to embark upon an unlawful course, then she has a duty to report the matter to either the Full Council or, in the case of executive functions, to the Council’s Executive. The precise scope of this duty is set out in Sections 5 and 5A of the Local Government and Housing Act 1989 (as amended).

3.41 The Service Director, Finance & Audit as Chief Finance Officer is similarly required to report issues of a financial nature to the Council where they may give rise to a breach of requirements, be they statutory or otherwise.

3.42 All papers to be considered by members at formal meetings are scrutinised by the statutory officers, or staff acting on their behalf, to ensure compliance with regulatory requirements. This includes scrutiny by Finance officers to ensure that all expenditure is lawful.

3.43 Service Directors are also required to ensure that their services comply with legislation and regulation. They are aided by numerous professional networks, and they are required to review, at the end of each year, that the service has complied with legislation, regulation, internal policy, including the application and maintenance of internal controls and procedure, as part of their annual assurance Statement of Governance and Controls.

3.44 Each Service Director and Corporate Director is responsible for the effective use of the human, financial, and information technology resources allocated to their services. The assurance statements referred to above also relate to the effective use of resources to deliver services.

I. Whistleblowing and Complaints

3.45 The Council previously sought to ensure that officers are not inhibited in whistleblowing by employing the services of an external company to take any whistleblowing allegations on a confidential basis. However, virtually no allegations were received by this route and the Audit and Governance Committee determined to cease its provision on a value for money basis. Staff can make whistleblowing allegations direct to the Council’s Monitoring Officer on a confidential basis. 11 allegations were received in 2015/16. All were subject to review, and 9 resulted in investigations, some of which involved referrals to other agencies.

3.46 One allegation was made against a senior officer and was investigated by an independent person. The Independent Person Panel concurred with the investigator that



there was no case to answer. However the Independent Person Panel made a number of recommendations which the Council is implementing.

3.47 The Council has set out and published procedures for dealing with complaints, with

target times for complaints to be acknowledged, investigated and responded to, and with each department having a nominated complaints co-ordinator to review progress. J. Development of Members and Senior Officers

3.48 The Council has a member development programme, and a corporate training programme for officers designed to provide training in key corporate requirements. Transformation workshops have been held quarterly for senior officers to ensure the transformation strategy is being applied throughout the organisation. The personal performance appraisal system has been developed as an assessment of performance and competencies, and has recently been revised slightly in light of feedback and evaluation.

3.49 The cross party Member Development Steering Group oversees the learning and

development of councillors. The group has implemented a range of initiatives including a new induction process and Councillor Handbook, personal development plans, workshops and e-learning courses.

3.50 The Council has been awarded the East of England Charter for Elected Member Development until 2016 and has also committed to a process of continuous improvement over this time. The work of the Member Development Steering Group was awarded a silver award in the 2015 Training Journal Awards for “Best Public Sector Programme”. K. Engagement with Communities and Other Stakeholders

3.51 The Council is committed to listening to its citizens and service users. By understanding the views of local people it is able to provide effective services in line with their needs.

3.52 Consultation and community engagement is seen as an integral part of service planning, delivery and decision-making, and this is reflected in the Council’s values.

3.53 A planned and coordinated approach to consultation and engagement activities is essential and is facilitated by:

a corporate team of consultation and engagement practitioners to advise, support and deliver effective and meaningful consultation across the Council.

a collaborative approach to partner consultation and engagement including a range of projects for the Luton Clinical Commissioning Group (including the AMPS GP Services Consultation in collaboration with NHS England and The Luton CCG Staff Survey).

the use of an updated and robust consultation procedure which incorporates internal governance including risk assessing for legal challenge, ensuring consultation is ethical, promoting best practice and quality assurance principles. This is to ensure the Council has an organisational framework in place outlining the corporate standard for consultation activities across the organisation.



further development of the Luton consultation partnership portal on which over 800 residents are registered to take part in a range of consultation and engagement activities.

the use of mixed methodologies (both qualitative and quantitative) to enhance response rates, ensure methods are inclusive and maximising opportunities for a broader and representative population in the local decision making processes. This is supported by greater use of on-line activities, social media and electronic voting.

consultation on a number of large scale/high profile projects have been successfully delivered to inform the Council’s strategic priorities and shape services which include Neighbourhood Governance Residents Survey, JSNA, Fear of Crime and ASB Survey, Skills & Employability consultation with both residents and businesses, several road improvement schemes, Council Tax Review and Children’s Centres.

maintaining a range of corporate and service specific consultation and user engagement mechanisms including registered residents on Luton consultation portal, service-user databases, planned events.

a coordinated approach to undertaking consultation projects to avoid duplication. Over the last two years more than 100 consultation and engagement projects have been delivered and/or supported and several thousands of people have participated/given their views.

3.54 The Council encourages local communities to be involved in action planning and decision-making such as its new Member-led engagement initiative.

3.55 The Council has a good track record of working with its partners in the statutory and third sector on consultation initiatives. Key areas of joint working include the integration of sexual health services, smoking in schools, pharmaceutical needs assessment, Joint Strategic Needs Assessment, Indoor sports Facilities Strategy Domestic Violence and consultation to inform the Family Poverty Strategy.

3.56 With regard to communications, the Council uses a range of approaches to inform and feed back to citizens including its monthly newspaper, Lutonline, and the website – including podcasts, social networking, local media, direct mailings, member surgeries and exhibitions.

3.57 In 2015/16 the Council dealt with over 800 media enquiries, produced over 300 press

releases, delivered a number of high profile communications, marketing and digital campaigns (including the Investment launch, Place Branding, Waste campaign, Prevent, Fostering and Adoption, Community Cohesion, Teacher Recruitment, Stop Smoking, Cancer Screening, Flying Start, Council Tax and Do It Online).

3.58 In recent years resources have been diverted into managing the Council’s profile on social media. This includes growing our online audience to get important messages out about council services and responding very quickly to community feedback which in turn has helped to reduce complaints.



L. Partnerships

3.59 The Council has a large number of collaborative/partnership arrangements with other organisations.

3.60 Partnership working is an essential part of modern local government, and the Council’s partnership register shows just how many collaborative partnerships, of varying sizes, the Council is involved in. The register has been reviewed and updated by service managers during the course of the year and clearly identifies the Council’s key strategic partnerships including funding associated arrangements. This supports coordination across partnerships – for example, collaborative working between the Health and wellbeing Board and the Community Safety Executive.

3.61 Officers have produced partnership guidance to ensure that key issues of risk are taken into account prior to the setting up of partnerships, and to ensure that they set up in line with the Council’s key objectives.

M. Group Governance

3.62 The Council owns or controls the entire issued share capital of London Luton Airport Ltd, the company that, by virtue of the requirements of the Airports Act 1986, owns London Luton Airport. The airport is operated by an unrelated entity, London Luton Airport Operations Ltd., under a Concession Agreement, which terminates on 31st March 2031.

3.63 London Luton Airport Ltd. is controlled by a board a directors, in accordance with its Memorandum and Articles of Association. Professional, operational and company secretarial advice is provided to the company by the Council under a management services agreement. In 2012/13 the company reviewed its governance arrangements, and this included a rewriting of the management services agreements.

3.64 The accounts of London Luton Airport Ltd. are incorporated into the group accounts of Luton Borough Council, and the assessment of governance and controls made by the Service Director of Finance & Audit includes that relating specifically to London Luton Airport Ltd.

3.65 The Council has registered a company, Luton Trading Limited, which undertook some very limited trading in 2015/16.

4. REVIEW OF EFFECTIVENESS

4.1 Luton Borough Council has responsibility for conducting, at least annually, a review of

the effectiveness of the governance framework, including the system of internal control. The review of effectiveness is informed by the work of the Corporate Directors and Service Directors who have responsibility for the development and maintenance of the governance environment, Internal Audit’s annual report, and also by the reviews of the external auditors and other review agencies and inspectorates.

4.2 The Risk and Internal Control Group with responsibility for drafting this Annual

Governance Statement have considered the governance framework and the system of internal controls. This group has involvement in and oversight of the processes



necessary to maintain and reviewing the effectiveness of the governance framework. In producing this statement full regard has been made to the Council’s Risk Registers, corporate and departmental, plus those maintained for major projects and those of partners, the quarterly statements of governance produced by Service Directors addressing areas of potential risk in terms of internal controls, and the Delivery and Accountability meetings held by the Chief Executive, the Director of Commercial and Transformation Services, the Service Director of Policy and Performance, and the Service Director of Finance and Audit with all Service Directors that directly review and challenge performance, finance, sickness and risk in each service area.

4.3 The Council itself maintains overall control of its governance framework. 4.4 The Executive is responsible for all Council functions except as specifically provided

otherwise by law (and this is reflected in the Constitution). 4.5 The Audit and Governance Committee considered external assessments and internal

audit reports throughout the year, as well as reviewing treasury management. 4.6 Overview and Scrutiny Board have reviewed and challenged Executive decisions during

the year. The Board focussed on an evidence-based approach and the use of Task and Finish groups for particular projects.

4.7 There is a Finance Review Group that is responsible for the scrutiny of the budget and

other financial issues. 4.8 The Standards Committee oversees the framework of the Code of Conduct for Members

on an annual basis. 4.9 Internal Audit undertook audits throughout the year using risk-based audit assessments.

The service has reported to management on control issues, and produces an annual report to Audit and Governance Committee, which concluded that an adequate level of assurance could be provided of the Council’s internal control environment. It states that ‘overall there is a low exposure to business risk.’ The Internal Audit service has reviewed itself against the self-assessment checklist in the Public Sector Internal Audit Standards. The Council’s external auditor also carries out an annual review of the Council’s internal audit arrangements.

4.10 The Chief Finance Officer and Monitoring Officer have provided assurances that no

major issues relating to their responsibilities have arisen during 2015/16.

4.11 The external auditor’s annual audit letter confirmed that the Council’s accounts give a

true and fair view of the Council’s financial affairs for 2015/16. The Audit Results Report, published on the website, does however issue an except for VFM conclusion due to identified weaknesses in proper arrangements for reliable and timely financial reporting to support the delivery of strategic priorities and for procuring supplies and services effectively to support the delivery of strategic priorities.

4.12 The Annual Audit Report included a number of recommendations to assist the improvement in financial reconciliations and the production of the financial statements. The report highlighted the importance of development in this area, especially in light of



the faster closure agenda to be realised in 2017/18. The report also highlighted an internal audit investigation which was undertaken on the contract award to Channel 3 Consulting Ltd. The internal audit investigation underlined a number of failings in the procurement process and the significance of implementing the lessons learnt from the exercise.

4.13 The Council introduced a spend moratorium between Christmas 2015 and March 2016 for all but the most essential spending requirements, due to predictions of an overspend if controls had not been introduced.

4.14 The Council was reported to the Pensions Regulator because of delays in submitting complete and accurate end of year data on pensionable pay and contributions to the Bedfordshire Pension Fund for 2014/15 in accordance with the agreed timescales. The Council worked on an improvement plan with its IT provider, and the data was finally provided. Further, the 2015/16 data was provided to the Bedfordshire Pension Fund by the end of April 2016, as required. However, the external auditors have qualified the end of year returns for the separate Teachers Pension Scheme.

4.15 An HMRC audit during 2015/16 found unpaid class 1 national insurance contributions of less than £15,000.

4.16 An unannounced Ofsted inspection of the Council’s Children’s Services found that they ‘require improvement’. This has been the case for 60% of those inspected under the new inspection framework, and is in line with the view of the recently appointed senior management who are currently working to make that improvement. In their report published in March 2016 Ofsted stated that governance arrangements have improved, and that the help and support children are receiving from Luton’s Children’s Services is improving, but that it is not yet good enough. One area was assessed as good, which was the experiences and progress of care leavers. All other areas require improvement. The Council is developing an action plan to deal with the recommendations and issues raised.

4.17 The Council has been recognised in national awards, which are indicative of the strength of the governance arrangements that have facilitated those achievements. They include:

Council website awarded 4 stars in accordance with the Better Connected standard, which puts it in the top 20 in the country.

Gold standard for the provision of geospatial information, as awarded by Geospace.

The Revenues team were finalists in the Public Sector Collections Team of the Year, and were shortlisted by Credit Today for the Collection and Customer Services award.

The Council retained all 7 Green Flags for its public parks.

The Dog Warden service won a good practice award from the RSPCA for the 8th successive year.

4.18 Even though major savings have been required for the last 5 years, the vast majority of the savings proposals included in the budget were delivered in full.

4.19 Outcomes continue to improve in some key areas. The amount of council tax and business rates collected in year, have again improved. This will help maintain vital



services during difficult financial times, even though hard choices will have to be made over the coming years.

4.20 The Council reviewed its management arrangements during 2015/16, and has just implemented Phase 1 of a proposed 2 phase structural change. The number of departments and Corporate Directors has been reduced by 1, and 4 directorates created:

Customer and Commercial

People

Place and Infrastructure

Public Health, Commissioning and Procurement Phase 2 will involve moving a number of functions into a specific trading service.

5 REVIEW OF PROGRESS IN RELATION TO SIGNIFICANT GOVERNANCE AND INTERNAL CONTROL ISSUES IN THE 2014-15 STATEMENT

5.1 Debates arose during 2014/15 about the governance of the licensing function, with concerns raised by licensees, councillors and staff. A review was completed in September 2015 to assess the position and determine practical ways forward. An action plan has been devised and is currently being implemented. The Service was deemed good with some noted elements of exemplar work.

5.2 It was expected that achieving the level of savings required for 2016/17 and future years would be very challenging indeed, and would impact significantly on service provision. However, for 2016/17 the level of savings needed was less than originally anticipated due principally to the increase in Council Tax income. As a result the impact on service provision and employment was relatively low.

5.3 A number of initiatives have been introduced with the aim of keeping staff sickness under control. However, it has not been possible to reduce sickness levels, which remain above the public sector average.

5.4 The independently chaired Luton Safeguarding Children’s Board commissioned 3 serious case reviews which will be published when all related care and criminal proceedings have been concluded, and published a case review on 1 child. The Board noted that the common theme emerging is neglect, and has begun to develop and take forward a programme to understand and address child neglect in Luton.

5.5 The Council was at risk of the imposition of a fine from Her Majesty’s Revenues and Customs in relation to delays in sorting out tax assessments in relation to equal pay. However, after an audit was undertaken the fine was not imposed, and the provision made in the Council’s accounts in 2015/16 was written back in 2016/17.

5.6 There have been incidents impacting on community cohesion in Luton, in terms of marches, protests and counter demonstrations, the ongoing impacts of deaths in custody, and gang-related violence. The Council, along with its partners, continues to tackle these issues through the Community Cohesion Contingency Planning Group, its community mediation model and other problem solving mechanisms.



5.7 Luton is one of up to 50 Prevent areas supported by the Home Office to deliver an intelligence and partner-led Prevent programme to encourage awareness of terrorism and extremism, and to promote, challenge and foster great multi-agency working. The Prevent Duty included in the Counter Terrorism and Security Act 2015 has placed Prevent on a statutory footing for all local authorities. The Council is therefore required to put in place appropriate actions to address threats that arise. Prevent delivery in Luton is based on an assessment of threat which is detailed in the Luton Counter Terrorism Local Profile (Restricted document, December 2015) and the most recent Joint Terrorism Analysis Centre (JTAC) regional assessment (Restricted document, July 2013). The ongoing conflict in Syria and the growing prominence of Daesh remain influencing factors for plans and interventions in Luton.

5.8 Prevent delivery in Luton is overseen by the Prevent Board which is made up of partners from the Local Authority, Office for Security and Counter-Terrorism, Police, Probation, Health and Further and High education. The Local Authority also chairs the Channel Panel, a multi-agency panel which develops appropriate support packages to safeguard those at risk of being drawn into terrorism based on an assessment of their vulnerability.

5.9 Following the publication of initial reports on governance concerns in Rotherham relating

to child sexual exploitation, the Council set up a child sexual exploitation group to review the position in Luton, and create a strategy and action plan. Schools, community and faith groups have been encouraged to sign up to the Luton Pledge in relation to this, and the 2016 Ofsted report noted that there was an increased awareness of the risks at all levels.

5.10 The Council is working with its external partner on a reset of its IT contract, and has strengthened its contract management in this area.

5.11 In their review of the 2013/14 accounts the previous auditors, Grant Thornton, noted that the finance function of the Council required close monitoring and that the central finance team required greater support from the rest of the organisation in order to meet the target of bringing forward accounts closure in 2017/18. The auditor’s report on the 2014/15 noted a significant improvement in the quality of working papers required, but there are still significant developments in efficiency required to meet the challenge of earlier closure in future. The Council has successfully managed the change of Chief Financial Officer that took place in June 2016.

5.12 The previous Secretary of State for Communities and Local Government wrote to the

Council to state that he was minded to issue a direction requiring that its publication of Lutonline be no more than quarterly. The Council continues to publish 10 issues per annum, on the basis that the benefit to the local community outweighed the potential negative impact on local newspapers.

5.13 In view of these assurances, and whilst acknowledging some issues, the overall framework of governance appears to be working reasonably effectively. Significant governance issues are addressed in the following section. These do need to be seen in the overall context of an effective governance system.



6 SIGNIFICANT GOVERNANCE AND INTERNAL CONTROL ISSUES 6.1 There are significant overspends in Children’s Services and Homelessness. These

areas are both under review from a financial and service perspective.

6.2 A detailed programme of savings for 2017/18 and future years has yet to be developed.

6.3 The Teachers Pension Scheme return has been given a qualified audit report by the external auditors. An improvement plan is required to improve the returns.

6.4 In common with most local authorities in the region, the Council is experiencing difficulties in recruiting permanent qualified staff with experience in areas like social work, project management, construction, and planning.

6.5 A new Corporate Plan, as described in Section 3 above, is required to complete the ‘golden thread’ linking the Council’s overall aims with the targets set for individual employees.

6.6 Staff sickness needs to be reduced, which remains above the public sector average.

6.7 The external audit of the financial statements has identified a number of deficiencies in the design or operation of an internal control that might result in a material misstatement of the financial statements.

Signed: Trevor Holden Chief Executive Date: Hazel Simmons Leader of the Council Date:

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF LUTON BOROUGH COUNCIL



Opinion on the Authority’s financial statements We have audited the financial statements of Luton Borough Council for the year ended 31 March 2016 under the Local Audit and Accountability Act 2014. The financial statements comprise the:

Authority and Group Movement in Reserves Statement,

Authority and Group Comprehensive Income and Expenditure Statement,

Authority and Group Balance Sheet,

Authority and Group Cash Flow Statement, and

Housing Revenue Account Income and Expenditure Statement, the Movement on the Housing Revenue Account Statement and related notes 1 to 9 and Collection Fund Statement and the related notes 1 to 4

The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16. This report is made solely to the members of Luton Borough Council, as a body, in accordance with Part 5 of the Local Audit and Accountability Act 2014 and for no other purpose, as set out in paragraph 43 of the Statement of Responsibilities of Auditors and Audited Bodies published by Public Sector Audit Appointments Limited. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Authority and the Authority’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Chief Financial Officer and auditor As explained more fully in the Statement of Responsibilities set out on page 145, the Service Director (Finance & Audit) is responsible for the preparation of the Statement of Accounts, which includes the financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16, and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Authority and Group’s circumstances and have been consistently applied and adequately disclosed; the



reasonableness of significant accounting estimates made by the Service Director (Finance & Audit); and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Statement of Accounts 2015-16 to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements:

give a true and fair view of the financial position of Luton Borough Council as at 31 March 2016 and of its expenditure and income for the year then ended; and

have been prepared properly in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16.

Opinion on other matters In our opinion, the information given in the Statement of Accounts 2015-16 for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we report by exception We report to you if:

in our opinion the annual governance statement is misleading or inconsistent with other information forthcoming from the audit or our knowledge of the Council;

we issue a report in the public interest under section 24 of the Local Audit and Accountability Act 2014;

we make written recommendations to the audited body under Section 24 of the Local Audit and Accountability Act 2014;

we make an application to the court for a declaration that an item of account is contrary to law under Section 28 of the Local Audit and Accountability Act 2014;

we issue an advisory notice under Section 29 of the Local Audit and Accountability Act 2014; or

we make an application for judicial review under Section 31 of the Local Audit and Accountability Act 2014.

We have nothing to report in these respects Conclusion on Luton Borough Council’s arrangements for securing economy, efficiency and effectiveness in the use of resources Authority’s responsibilities The Authority is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and



governance, and to review regularly the adequacy and effectiveness of these arrangements. Auditor’s responsibilities We are required under Section 20(1)(c) of the Local Audit and Accountability Act 2014 to satisfy ourselves that the Authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the National Audit Office (NAO) requires us to report to you our conclusion relating to proper arrangements. We report if significant matters have come to our attention which prevent us from concluding that the Authority has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. We are not required to consider, nor have we considered, whether all aspects of the Authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively. Scope of the review of arrangements for securing economy, efficiency and effectiveness in the use of resources We have undertaken our review in accordance with the Code of Audit Practice, having regard to the guidance on the specified criterion issued by the Comptroller and Auditor General (C&AG) in November 2015, as to whether Luton Borough Council had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people. The Comptroller and Auditor General determined this criterion as that necessary for us to consider under the Code of Audit Practice in satisfying ourselves whether Luton Borough Council put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2016. We planned our work in accordance with the Code of Audit Practice. Based on our risk assessment, we undertook such work as we considered necessary to form a view on whether, in all significant respects, Luton Borough Council had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. Basis for Qualified Conclusion

Informed decision making In the financial year ended 31 March 2016, the Council had weaknesses in its controls, processes, capacity and ability to produce accurate and reliable financial statements with supporting working papers. In addition, the Council, in its Annual Governance Statement, and we identified a significant number of deficiencies in the design and operation of internal controls that did result in material misstatements to the Council’s 2015/16 financial statements. This is evidence of weaknesses in proper arrangements for how the Council uses reliable and timely financial reporting that supports the delivery of strategic priorities.

Working with partners and other third parties In the financial year ended 31 March 2016, the Council incurred expenditure on an ICT contract which was not awarded in accordance with the Public Contract Regulations 2015.



An Internal Audit review and external legal advice also concluded that there were irregularities and weaknesses in the Council’s procurement procedures. This is evidence of weaknesses in proper arrangements for how the Council procures supplies and services effectively to support the delivery of strategic priorities. Qualified conclusion On the basis of our work, having regard to the guidance issued by the Comptroller and Auditor General in November 2015, with the exception of the matters reported in the basis for qualified conclusion paragraph above, we are satisfied that, in all significant respects, Luton Borough Council put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2016. Certificate We certify that we have completed the audit of the accounts of Luton Borough Council in accordance with the requirements of the Local Audit and Accountability Act 2014 and the Code of Audit Practice issued by the National Audit Office. Neil Harris (senior statutory auditor) for and on behalf of Ernst & Young LLP, Appointed Auditor Luton 12 April 2017

GLOSSARY


Accounting Polices Accounting policies define the process whereby transactions and other events are reflected in the financial statements. Accrual Accounting The concept that items of income and expenditure are included in the accounts in the year they are earned or incurred, not when the money is received or paid. Balance Sheet This is a summary of the assets and liabilities, funds and reserves of the Council. It brings together the accounts of the Authority including the General Fund, the Housing Revenue Account and the Collection Fund. Budget This is a statement of the expected level of service to be provided expressed in monetary terms, over a set period of time including both revenue and capital expenditure. Capital Adjustment Account This account was formed on 1 April 2007 from the consolidation the former Capital Financing Account and the Fixed Asset Restatement Account. Transactions on the account since reflect the financing of capital expenditure, the adjustment for the Minimum Revenue Provision and adjustments to the value of assets in the balance sheet which cannot be accounted for in the Revaluation Reserve. This account cannot be used to fund revenue expenditure Capital Expenditure Expenditure on the acquisition of a fixed asset or expenditure, which adds to and not merely maintains the value of an existing fixed asset. Capital Receipts Proceeds from the sale of fixed assets and repayment of advances. These are either set aside for the repayment of loans or used to finance new capital expenditure. Carry Forwards These are year-end under spends which have been approved by Members to be carried forward into the next year to support specific expenditure. CIPFA This is the Chartered Institute of Public Finance and Accountancy, the accountancy body which sets and monitors professional standards and provides guidance for public services accounting. Collection Fund This fund receives all income raised through Council Tax and Non-Domestic Rates. The fund then disperses funds to the Income and Expenditure Account, pays the precepts to the Bedfordshire Police Authority and Bedfordshire and Luton Combined Fire Authority, and transfers the Non-Domestic Rate income to the Central Government national pool for redistribution.

GLOSSARY


Community Assets Assets that the council intends to hold in perpetuity, that have no determinable useful life and that may have restrictions on their disposal. Examples of community assets are parks and works of art. Contingent Liability A contingent liability is a possible obligation arising from past events that will only be confirmed by future events. An example of a contingent liability would be a court case or employment tribunal case, which had commenced, but not concluded at the year-end. Corporate and Democratic Core The corporate and democratic core comprises all activities that the council engages in specifically because it is an elected, multi-purpose authority. The cost of these activities are thus over and above those which would be incurred by a series of independent, single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services. Council Tax This is the means of raising money locally to pay for local authority services. This is a property-based tax where the amount levied depends on the valuation of each dwelling. Creditors Amounts owed by the Council for goods or services that it has received but for which payment had not been made by the balance sheet date of 31 March. Current Assets These are assets that can be readily realised and converted into cash. Current Liabilities These are liabilities that are due for payment immediately or in the short term. Current Service Cost (Pensions) This is the increase in the present value of a defined benefit scheme’s liabilities expected to arise from employee service in the current period. Curtailment For a defined benefit scheme, an event that reduces the expected years of future service of present employees or reduces for a number of employees the accrual of defined benefits for some or all of their future service. Curtailments include the termination of employees’ service sooner than expected and the termination of or amendment to the terms of a defined benefit scheme so that some or all future service by current employees will no longer qualify for benefits or will qualify only for reduced benefits. Debtors Amounts owed to the Council where services have been delivered but for which payment has not been received by the balance sheet date of 31 March.

GLOSSARY


Deferred Grants and Contributions Amounts received or receivable from government and other organisations that has been used to finance capital expenditure. In accordance with the SORP these amounts are written off over the same period as the assets to which they relate are depreciated. Deferred Liabilities These are sums due to be paid by the Council in future periods. Defined Benefit Scheme This is a pension or other retirement benefit scheme other than a defined contribution scheme. Usually, the scheme rules define the benefits independently of the contributions payable, and the benefits are not directly related to the investments of the scheme. The scheme may be funded or unfunded (including notionally funded). Defined Contribution Scheme A pension or other retirement benefit scheme into which an employer pays regular contributions fixed as an amount or as a percentage of pay and will have no legal or constructive obligation to pay further contributions if the scheme does not have sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Depreciated Replacement Cost A method employed in valuing land and buildings where a market value basis is not readily available. For example this method might be used for valuing schools, where there is no market for the asset in its existing use. Depreciation This is the measure of the value of fixed assets, used to provide services, consumed during the accounting period and is based on the expected useful life of the asset. Consumption includes the wearing out, using up or other reduction in the useful life of a fixed asset. Doubtful Debts A provision made for debts which might not be paid, based on the age and particular circumstances relating to the debt. Earmarked Reserves These reserves represent the monies set aside that can only be used for the specified use or purpose.

Emoluments Amounts paid to employees of the council, including expenses or non-monetary benefits that are taxable net of employee pension contributions. Estimation Techniques The methods adopted by the council to arrive at estimated monetary amounts, corresponding to the measurement bases selected, for assets, liabilities, gains, losses and changes to reserves.

GLOSSARY


Events After the Balance Sheet Date Events after the balance sheet date are those events, favourable and unfavourable, that occur between the balance sheet date and the date when the Statement of Accounts is authorised for issue. Exceptional items Material items which derive from events or transactions that fall within the ordinary activities of the authority and which need to be disclosed separately by virtue of their size or incidence to give a fair representation to the accounts. Extraordinary items These are material items, needing a separate disclosure because they are activities that fall outside of the ordinary activities of the authority. Fair Value The fair value of an asset is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Reporting Standards (FRS’s) These are statements of accounting standards issued by the Accounting Standards Board. Accounting standards apply to all companies, and other kinds of entities that prepare accounts that are intended to provide a true and fair view. The extent to which they apply to local authorities is determined by the SORP. Foundation School A school that receives funding from the Council, but where the governing body owns the land and buildings. Many of these schools were formerly grant maintained schools. General Fund This is the council’s main revenue fund to which revenue receipts are credited and from which revenue liabilities are discharged. The movement on the fund in the year represents the excess of income over expenditure. Government Grants Financial assistance provided to the council by government departments, inter-government agencies and similar bodies to enable services to be provided. Gross expenditure Expenditure before deducting any related income. Group Accounts These show the revenue account and balance sheet including regulated companies of the Council. There is only one company that falls within the regulations and that is London Luton Airport Ltd. Historical Cost The value of the capital expenditure originally occurred when the asset was purchased, constructed or enhanced.

GLOSSARY


Housing Revenue Account (HRA) This is the ring-fenced account that records the income and expenditure relating to the provision of council housing. Impairment This is a reduction in the value of a fixed asset below its carrying amount on the balance sheet. Examples would include loss in value due to physical damage or decline in market value due to a general fall in prices. Income Amounts that the Council receives, or expects to receive, from any source. Income includes fees, charges, sales, government grants, Council Tax and Non-Domestic Rates. Infrastructure Assets These are fixed assets that cannot be assigned to others and hence have no value to other entities. Examples of infrastructure assets are highways and footpaths. Intangible Assets This is expenditure that is of a capital nature, but where no tangible asset exists. An example of intangible asset is a computer software licence. International Financial Reporting Standards International Financial Reporting Standards (IFRS) underlie the preparation and presentation of financial statements in a consistent format so that users from different countries can interpret financial information. Local Government produced IFRS compliant accounts for the first time in 2010-11. Inventory The amount of unused or unconsumed inventory (stocks) held by the council in expectation of future use. When use will not arise until a later period, it is appropriate to carry forward the amount to be matched to the use or consumption when it arises. Investment Properties An interest in land and/or buildings where construction work and improvements are complete and it is held for its investment potential, with any rental income being negotiated at arm’s length. Investments (Pensions Fund) The investments of the Pensions Fund are accounted for in the accounts of the Fund, which is administered by Bedford Borough Council. However the council is required to disclose, as part of the disclosures relating to retirement benefits, the attributable share of pension scheme assets associated with their underlying obligations.

Investments (Non-Pensions Fund) A long-term investment is an investment that is held for use on a continuing basis. The council’s long-term investments mainly relate to the capital investment in London Luton Airport Ltd and in land development. In addition long-term investments include surplus

GLOSSARY


funds that are invested for periods in excess of twelve months. Short-term investments, which are classified as current assets, comprise deposits of temporary surplus funds with banks or similar institutions. Liabilities Amounts the authority either owes or anticipates owing to others, whether they are due for immediate payment or not. Liquid Resources Current asset investments that are readily disposable by the authority without disrupting its business and are readily convertible to amounts of cash at or close to the carrying amount, or traded in an active market. Long Term Debtors These are amounts due to the council more than one year after the balance sheet date. Long Term Loans Loans repayable more than one year after the balance sheet date. Major Repairs Allowance (MRA) The MRA is a government subsidy that was introduced to replace the Housing Revenue Account borrowing for repairs. Major Repairs Reserve (MRR) This reserve is for capital expenditure on HRA assets. Minimum Revenue Provision (MRP) This is the minimum amount that must be charged to an authorities income and expenditure account each year, as a notional redemption cost of the authority’s credit liabilities, for example an element of the principal repayment of outstanding loans. Moratorium The mechanism used by the council to postpone new, non-urgent expenditure to offset identified budget overspending.

Net Book Value The amount at which fixed assets are included in the balance sheet, for instance their historical cost or current value less the cumulative amounts provided for depreciation. Net Current Replacement Cost The cost of replacing or recreating the particular asset in its existing condition and in its existing use, for instance the cost of its replacement or of the nearest equivalent asset, adjusted to reflect the current condition of the existing asset. Net Debt This is the council’s borrowing less cash and liquid resources. Net Expenditure This is gross expenditure less directly related income.

GLOSSARY


Non-operational Assets Fixed assets held by the council, but not used or consumed in the delivery of services or for the service or strategic objectives of the council. Examples of such assets include investment properties and assets that are surplus to requirements, pending their sale. Non Domestic Rates (NDR) This is a rate in the pound set by central government at a standard countrywide rate, applied to the rateable value of each premise not being used for domestic purposes. It is collected locally by the council and paid over to central government. Central government then redistribute NDR to council’s by revenue grant in proportion to the population of each authority. Operating Leases This is a method for acquiring the use of fixed assets, mainly vehicles and equipment, where ownership remains with the lessor. Operational Assets Fixed assets held and occupied, used or consumed by the council in the direct delivery of those services for which it has either a statutory or discretionary responsibility or for the service or strategic objectives of the authority. Precept The levy made by other authorities, namely the police authority and the combined fire authority, on the council, requiring the council to collect income from council taxpayers on their behalf. Provisions Provisions represent sums set aside in the accounts to meet future expenditure where the specific liability is known to exist but is of uncertain amount or timing. Prudential Borrowing This is borrowing by local authorities without government financial support, but in accordance with the CIPFA prudential code of local authority borrowing to finance capital expenditure. Public Works Loan Board (PWLB) This is a government body that provides loans to local authorities for financing capital expenditure. Related Parties Two or more parties are related parties when at any time during the financial period one party has direct or indirect control or influence over the other, or the parties are subject to common control from the same source. Related Party Transaction A related party transaction is the transfer of assets or liabilities or the performance of services by, to or for a related party irrespective of whether a charge is made.

GLOSSARY


Revaluation Reserve IFRS compliant account introduced for the first time in 2007-08 that reflects revaluations of assets from 1 April 2007, enabling assets to be shown in the balance sheet at current value. The overall balance is attributable to identifiable assets and impairment can only be charged here if a previous valuation gain was greater than or equal to the impairment being credited to the reserve. This account does not represent additional resource available to the Council. Reserves These monies set aside are mainly available to meet future commitments. Earmarked reserves are allocated for a specific purpose. Three of the reserves, the Capital Adjustment Account, the Pensions Reserve and the Revaluation Reserve cannot be used to meet commitments. Retirement Benefits All forms of consideration given by an employer in exchange for services rendered by employees that are payable after the completion of employment. Retirement benefits do not include termination benefits payable as a result of either an employer’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept voluntary redundancy in exchange for those benefits, because these are not given in exchange for services rendered by employees. Revenue Contributions to Capital Outlay These are contributions from the income and expenditure account to finance capital expenditure. Revenue Support Grant This is the amount of general Central Government grant support for local authority expenditure. In addition there are specified grants directly related to particular services and costs. Scheme Liabilities These are the liabilities of a defined benefit scheme for outgoings due after the date the fund was valued. Scheme liabilities measured using the projected unit method reflects the benefits that the employer is committed to provide for service up to the valuation date. Senior Officer This is as defined in the Local Government and Housing Act 1989 and encompasses the designated head of paid service, the statutory chief officers and the non-statutory chief officers of the council. Settlement An irrevocable action that relieved the employer (or the defined benefit scheme) of the primary responsibility for a pension obligation and eliminates significant risks relating to the obligation and the assets used to effect the settlement. An example of settlement would be the payment of a lump-sum cash payment to scheme members in exchange for their rights to receive specified pension benefits. Specific Grants

GLOSSARY


These are government grants to local authorities in aid of particular projects or services. Specific Reserves These are sums set aside to meet revenue or capital expenditure needs in the future. Statement of recommended practice (SORP) This document constituted ‘proper accounting practice’ under the terms of the Local Government Act 2003 and was developed on an annual basis by CIPFA until the adoption of International Standards, it is now referred to as the “Code of Practice on Local Authority Accounting”. Tangible Fixed Assets These are tangible items that give benefits to the authority for more than one year and include operational buildings, land and equipment, Community Assets, Infrastructure assets and non-operational assets. Trading Accounts These accounts are for areas that provide services to clients, either within the authority or to external organisations, on a basis other than a recharge of cost, for example, quoted price or schedule of rates.

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