Notes to the Core Financial Accounts

1. Exceptional Items

During 2008/09 there was a significant decline in property prices both nationally and locally as the impact of the global recession was felt. This has resulted in an unusually high level of impairment charge in 2008/09 as the value of the Council's property assets diminished and in particular the value of the Council's houses and flats.

 

Due to falling property prices, the valuer advised that opening values (i.e. as at 1 April 2008) on Council Dwellings needed to be reduced by 20% to arrive at an appropriate valuation as at 31 March 2009. Consequently, the value of Council Dwellings reduced by £31.01m.

 

Where there is an impairment due to falling prices, it is normally charged against any previous revaluation gains held on the specific assets affected. £2.2m of the decrease was offset by balances held in the Revaluation Reserve in relation to previous valuation gains. There was further impairments of £148.9k on Other HRA Land and Buildings, of which £101.8k was charged to the Revaluation Reserve, this was due to the demolition of some garages (£67.5k) and a further decrease in prices on garages and other land and buildings (£81.4k).

 

The total impairment on HRA assets for 2008/09 was £31.151m, of which £2.32m was charged to the Revaluation Reserve, leaving the remaining £28.83m charged to the Income and Expenditure Account.

 

Whilst this impairment charge significantly increases the deficit on the Income and Expenditure Account, it is not to be met by council tax payers or rent payers.  The impairment is reversed out in the Statement of Movement on the General Fund Balance to the Capital Adjustment Account.

 

2. Discretionary Expenditure

Section 137 of the Local Government Act 1972 (as amended), empowers local authorities to make contributions to charities and non–profit bodies providing a public service in the interest of the area, part of its area or all or some of its inhabitants.

 

The Council’s actual expenditure for 2008/09 was £237,529 (£252,496 in 2007/08) in respect of assistance to voluntary bodies promoting wellbeing in the local area.

 

3. Undischarged Obligation arising from Long- Term Contracts

In 2009/10 the authority is committed to making payments estimated at £657k in relation to establishment charges under a contract with Mears Ltd. The actual level of payments will depend on the number of voids (empty properties) and the level of work to these voids. If in line with 2008/09 this could be in the region of £2m. This contract expires on 31 March 2010.

 

4. Publicity

Under the provisions of Section 5 of the Local Government Act 1986 the Council is required to record separately the expenditure incurred on publicity. In 2008/09 this totalled £320,720 (2007/08, £340,176).

 

2007/08		2008/09
£’000s		£’000s
39	Recruitment advertising	55
96	Resort marketing and Promotions	93
101	Economic development marketing	104
23	Harbour advertising	14
81	Public notices	55
340		321

 

5. Trading Operations

Under accounting definitions the Council operates some trading operations, including industrial estates, let properties, miscellaneous properties and Building Control functions. The Industrial Units and Miscellaneous and Let properties are maintained by the Council as Investment properties with the aim of generating income from annual rent. The trading objective is to maximise income and property rates are set according to commercial market rates. In 2007/08 these were included within Cultural, Environmental, Regulatory and Planning (£37k) and Interest Receivable and Investment Income (£491k). Due to the size of the impairments detailed below, these trading operations are now considered to be material and are therefore now disclosed separately as (surplus)/deficit on trading undertakings. The 2007/08 figures have been restated to aid comparison.

 

The following table shows the details of the income and expenditure of the trading operations:

 

2007/08		2008/09	2008/09	2008/09
(Surplus) /Deficit	Trading Service	Expenditure	Income	(Surplus) /Deficit
£’000s		£’000s	£’000s	£’000s
(465)	Industrial Estates	157	(533)	(376)
(129)	Let Properties	1,773	(322)	1,451
103	Miscellaneous Properties	1,452	(229)	1,223
(37)	Building Control *	376	(358)	18
(528)		3,758	(1,442)	2,316

 

* The Building Control figures include the FRS17 adjustments of £22k for 2007/08 and £5k for 2008/09, which are excluded from the Building Control note, see Note 6 below.

 

The deficits in this year relate primarily to the impairment of assets as follows:

 

	£’000s
Let Properties	1,620
Miscellaneous Properties	955
	2,575

6. Building Control

The Local Authority Building Control Regulations require the disclosure of information regarding the setting of charges for the administration of the building control function. The statutory requirement for charging services is that income will not be less than expenditure over a three year period from the start of the scheme. Certain activities performed by the Building Control Section cannot be charged for, such as the provision of general advice to the fire authority, other statutory authorities, the public, etc. The following statement shows the income and expenditure of the building control functions, divided between these chargeable and non-chargeable activities.

 

Building Regulations Charging Account 2008/09		Non Chargeable 2008/09	Chargeable 2008/09	Total Building Control 2008/09
Expenditure		£’000s	£’000s	£’000s
Employee expenses		-	275	275
Premises		-	21	21
Transport		-	9	9
Supplies and Services		-	20	20
Central and support service charges		48	56	104
TOTAL EXPENDITURE		48	381	429
Income
Building regulation charges		-	(358)	(358)
Miscellaneous income		-	-	-
TOTAL INCOME		-	(358)	(358)
(Surplus) /Deficit for Year		48	23	71
Comparatives for 2007/08
Expenditure		35	422	457
Income		-	(481)	(481)
(Surplus) /Deficit for Year		35	(59)	(24)
Comparatives for 2006/07
Expenditure		34	413	447
Income		-	(496)	(496)
(Surplus) /Deficit for Year		34	(83)	(49)

 

7.  Harbours

Expenditure on harbours includes the Port of Ramsgate, Ramsgate Royal Harbour, Broadstairs and Margate Harbours and is included under the heading Highways, Roads and Transport Services. The majority of income and expenditure takes place within the Ramsgate operations.

 

 

8. On Street Parking Services

The Council administers and controls the on-street parking services on behalf of Kent County Council. Any surpluses on the account are used by the Council for future investment in the local transport infrastructure within the area.

 

2007/08		2008/09
£’000s		£’000s
	Net Cost of Service
(244)	Brought Forward	(218)
1,051	Gross Expenditure	1,174
125	Movement in Provision for unpaid fines	(37)
(1,150)	Gross Income	(1,052)
(218)	Balance Carried Forward	(133)

 

9. Housing Benefit Payments

The net cost of Housing and Council Tax Benefit is included within General Fund Housing and Central Services to the Public. The net cost, including administration, was £338.5k an increase of £8k from estimates. This includes an adjustment relating to the 2007/08 housing benefit subsidy claim which increased income by £295k.

 

10. Government Grants

The authority received a number of non-ringfenced general grants where no conditions on its use are imposed and therefore are not attributable to a specific service, these are:

 

2007/08 £’000s	Grant	2008/09 £’000s
1,835	Revenue Support Grant	1,591
-	Area Based Grant	1,520
-	Performance Reward Grant	266
1,116	LABGI	315
-	Other	749
2,951	Total	4,441

 

The Revenue Support Grant (RSG) is an amount of money given by Central Government to local authorities each year to meet their priorities.

 

Area Based Grant is paid to the Authority monthly and the figure paid is approximately a twelfth of the total Area Based Grant.  A number of grants are paid across as part of the Area Based Grant and these are:

 

	2008/09
	£’000s
Working Neighbourhood Fund	1,012
Safer Stronger Communities	413
Community Cohesion	72
Climate Change	23
	1,520

 

Performance Reward Grant is money payable by Central Government for the achievement of the first set of Local Area Agreement targets.

 

The Local Authority Business Growth Incentive Scheme (LABGI) sees councils who have encouraged business growth in their area receiving an unringfenced reward from Government.

 

A review of government grants deferred as recommended in Accounting guidance (LAAP bulletin 73) required that all deferred grants should be attributable to an asset.  As part of the exercise undertaken grant totalling £749k was derecognised from the balance sheet as the asset no longer belonged to the authority.

 

11.  Members' Allowances

 

Member allowances are informed by the recommendations of the Independent Remuneration Panel. These allowances are provided to 56 Members.

 

 

12.  Remuneration of Employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows the number of employees whose remuneration exceeded £50,000. Remuneration is defined as the amounts paid to or receivable by an employee, and includes sums due by way of expenses allowance and the estimated money value of any other benefits received by an employee other than cash.

 

13.  Related Party Transactions

FRS 8 requires that the statement draws attention to the possibility that the reported financial position of the Council may have been affected by the existence of related parties and by material transactions with them.

 

Related party transactions can occur where one party has direct or indirect control of the other party, or the parties are subject to common control from a third party, where one party has influence over the financial and operating policies of the other, or where parties entering into a transaction are subject to influence from the same source, inhibiting those parties from pursuing their own separate interests. The transaction must be material to either party to require disclosure.

 

Related Parties can include Central Government, other Local Authorities, Subsidiary and Associated Companies, Joint Venture Parties, Members, the Chief Executive, the Directors and the Council’s Monitoring Officer. Close family within any of the above groups may also be classed as Related Parties.

 

Members of the Council and certain senior officers have direct control over the financial and operating policies of the authority and are therefore in a position of influence. During 2008/09 a questionnaire was distributed to the 56 Members and 4 relevant officers. During 2008/09, works and services to the value of £50,767 were commissioned from companies in which two Members had an interest. Contracts were entered into in full compliance with the Council’s standing orders. Nine Members declared an interest relating to grants paid to voluntary and other organisations totalling £143,690 (of which £77,901 was paid to a Private Sector company which one Member declared an interest in). The relevant Members did not take part in any discussion or decision relating to these grants. £10,602 of income has also been received from external companies that two Members declared an interest in.

 

Related Party Transactions have occurred with the following:

 

Government Departments – Central Government has effective control over the general operations of the Council. It provides the framework within which the Council operates and most of its funding. Details of transactions are put in the Cash Flow Statement

 

14. Audit Fees

The Council incurred the following fees relating to external audit and inspection:

 

2007/08	Fees payable to the Audit Commission	2008/09
£'000s		£'000s
149	External audit services carried out by the appointed auditor	155
22	Statutory Inspection	16
34	Certification of grant claims and returns	22

 

15.  Contribution of Housing Captial Receipts to Government Pool

The treatment of specified housing capital receipts changed in 2004/05 and a proportion of these receipts have to be paid into a Government pool for redistribution. In total the Council paid £131,895 into the pool for 2008/09, with the majority of the payment resulting from payment of 75% of the proceeds from the sale of council houses. The 2008/09 figure is £703k less than the 2007/08 figure due to a reduction in the number of sales.

 

16.  Reconciling items for the Statement of Movement on the General Fund Balance

The Income and Expenditure Account shows the Council’s actual financial performance for the year, measured in terms of resources consumed and generated over the last 12 months. However, the Authority is required to raise Council Tax on a different accounting basis, the main differences being:

 

• Capital investment is accounted for as it is financed, rather than when fixed assets are consumed.
• The payment of a share of housing capital receipts scores as a loss in the Income and Expenditure Account, but is met from the usable capital receipts balance rather than Council Tax.
• Retirement benefits are charged as amounts become payable to pension funds and pensioners, rather than as future benefits are earned.

 

The General Fund Balance shows whether the Council has over or underspent against the Council Tax that it raised for the year, taking into account the use of reserves built up in the past and contributions to reserves earmarked for future expenditure.

 

The following reconciliation statement summarises the differences between the outturn on the Income and Expenditure Account and the General Fund Balance.

 

2007/08		2008/09	2008/09
£’000s		£’000s	£’000s
	Amounts included in the Income and Expenditure Account but required by statute to be excluded when determining the Movement on the General Fund Balance for the year
(4,654)	Depreciation and impairment of fixed assets	(34,359)
(528)	Amortisation of intangible fixed assets	(326)
4,454	Government Grants Deferred amortisation	1,087
(3,906)	Revenue expenditure funded from capital under statute	(5,655)
60	Net gain/loss on sale of fixed assets	15
-	Other income not derived from asset disposal	222
-	Soft Loans	(1)
(3,836)	Net charges made for retirement benefits in accordance with FRS17	(4,541)
(8,410)			(43,558)
	Amounts not included in the Income and Expenditure Account but required to be included by statute when determining the Movement on the General Fund for the year
860	Minimum Revenue Provision for Capital Financing	824
688	Capital expenditure charged in-year to the General Fund Balance	23
(835)	Transfer from Usable Capital Receipts equal to the amount payable into the Housing Capital Receipts Pool	(132)
4,127	Employer’s contributions payable to the Kent Pension Fund and retirement benefits payable direct to pensioners	5,090
4,840			5,805
	Transfers to or from the General Fund Balance that are required to be taken into account when determining the Movement on the General Fund Balance for the year
1,213	Housing Revenue Account balance	3,638
484	Net transfer to or from earmarked reserves	(972)
1,697			2,666
(1,873)	Net additional amount required to be credited to the General Fund Balance for the year		(35,087)

 

17. Capital Expenditure Summary

This statement identifies capital expenditure during the year and how that expenditure was financed.

	2008/09 £’000s	2008/09 £’000s
FIXED ASSETS
Council Dwellings
- Improvements	2,736
- Adaptions for Elderly and Disabled	181
Economic Development	1
Environmental Improvements	39
Operational – Offices	129
Ports and Harbours	23
Sports and Arts Related	247
Waste and Recycling	833
Grounds Maintenance	32
Other	1,663
TOTAL SPENDING ON FIXED ASSETS		5,884
REVENUE EXPENDITURE FUNDED FROM CAPITAL UNDER STATUTE
Disabled Facility Grants	1,037
Other Housing Related Expenditure	1,794
Environmental Enhancement Grants	599
Other Grants	2,737
TOTAL REVENUE EXPENDITURE FUNDED FROM CAPITAL UNDER STATUTE		6,167
TOTAL CAPITAL EXPENDITURE TO BE FINANCED		12,051

 

Revenue expenditure funded from capital under Statute forms part of the deficit on the Income and Expenditure Account.

FINANCED BY:	2008/09
	£’000s
Use of Supported Borrowing	1,703
Use of Unsupported Borrowing	2,859
Application of Capital Receipts	2,183
Capital Grants
- European Regional Development Fund	466
- SEEDA including Single Regeneration Budget	1
- Townscape Heritage Initiative	127
- Private Sector Renewal	1,411
- Disabled Facility Grants	742
- Planning Delivery Grant	24
- Department for Culture, Media and Sport	39
- Safer Stronger Communities Fund	22
- Safer Communities	26
- Kent County Council (including second homes grant)	50
- Big Lottery Fund	60
Major Repairs Allowance	1,191
Revenue	23
Developers Contributions (S106)	716
Capital Project Reserve	408
TOTAL FINANCING	12,051

 

NOTES TO THE STATEMENT OF CAPITAL EXPENDITURE & FINANCING

LEASING

Under the Local Government and Housing Act 1989, finance leases used to purchase fixed assets such as vehicles and equipment count as credit arrangements. As such, they are subject to capital controls and require resources cover.

 

This Council therefore no longer utilises this facility but chooses to use an operational lease facility. This does not permit the Council to own the item at any time and therefore they are not subject to capital controls

 

The revenue effect of utilising operational leases is disclosed in note 20 to the Core Financial Account below.

 

CAPITAL FINANCING REQUIREMENT

	2008/09
	£’000s
Opening Capital Financing Requirement	37,150
Capital Investment:
Operational assets	4,684
Non-operational assets	158
Infrastructure assets	716
Intangible assets	326
Revenue Expenditure funded from Capital under statute	6,167
Sources of Finance
Capital receipts	(2,183)
Grants	(2,968)
Developers Contribution (S106)	(716)
Revenue including Major Repairs Allowance & Provision for Debts (MRP)	(2,445)
Closing Capital Financing Requirement	40,889

 

Capital investment is financed on an accruals basis. The net increase in the requirement to borrow relates entirely to borrowing categorised as being supported by Government financial assistance (£1.703m) and through Prudential Borrowing (£2.859m) supported by the Council’s own net budget, less provision for debts.

 

The Capital Financing Requirement reflects various items in the Balance Sheet, as shown below:

 

2007/08		2008/09
£’000s		£’000s
245,061	Fixed Assets	209,406
(17,941)	Government Grants Deferred	(17,203)
(180,587)	Capital Adjustment Account	(143,269)
(9,383)	Revaluation Reserve	(8,045)
37,150	As at 31 March	40,889

 

SIGNIFICANT COMMITMENTS

The following significant commitments remained outstanding under capital contracts as at 31 March 2009:

 

Description	2009/10 Estimated Expenditure £’000s	2010/11 Estimated Expenditure £’000s
Installation of double glazed windows at the Council Offices, Cecil Street, Margate	114	81

 

As detailed in Note 3, the Council has entered in to a partnering contract with Mears Ltd that expires on 31 March 2010. The Council has previously allocated, under this contract, capital improvement work to Housing Revenue Account dwellings e.g. kitchens and bathrooms. However, no minimum amount for capital improvements is guaranteed in 2009/10 under the terms of the contract. Some of the committed establishment charge of £657k will be apportioned to any capital improvement work undertaken in 2009/10.

 

18.  Information on Assets held

Operational Assets

	Council Dwellings	Other Land and Buildings	Vehicles, Plant and Equipment	Infra-structure	Community	Total
	£’000s	£’000s	£’000s	£’000s	£’000s	£’000s
COST OR VALUATION
As at 1 April 2008	152,960	43,685	6,287	17,211	693	219,100
Restatement	-	(1,736)	-	-	-	-
Revised 1 April 2008	152,960	41,949	6,287	17,211	693	219,100
Additions	2,917	171	1,030	716	566	5,400
Disposals	(92)	-	-	-	-	(92)
Reclassifications	52	(143)	-	292	280	481
Revaluations	-	1,434	-	-	-	1,434
Impairment	(33,217)	(641)	-	(2,823)	-	(36,681)
At 31 March 2009	122,620	42,770	7,317	15,396	1,539	189,642
DEPRECIATION AND IMPAIRMENTS
As at 1 April 2008	-	(7,273)	(1,542)	(4,326)	-	(11,405)
Restatement	-	1,736	-	-	-	-
Revised 1 April 2008	-	(5,537)	(1,542)	(4,326)	-	(11,405)
Charge for 2008/09	(2,210)	(1,707)	(877)	(355)	-	(5,149)
Revaluations	2,210	1,115	-	679		4,004
At  31 March 2009	-	(6,129)	(2,419)	(4,002)	-	(12,550)
Balance Sheet amount at 31 March 2009	122,620	36,641	4,898	11,394	1,539	177,092
Balance Sheet amount at 1 April 2008	152,960	36,412	4,745	12,885	693	207,695
Nature of asset holding
Owned	122,620	36,641	4,898	11,394	1,539	177,092
Finance Lease	-	-	-	-	-	-
PFI	-	-	-	-	-	-
	122,620	36,641	4,898	11,394	1,539	177,092

 

The Other Land and Buildings restatement relates to an error in 2007/08 with prior year adjustments. Although the NBV of assets is correct in these Statements, the split between cost/valuation and depreciation was incorrect by the restated figure.

 

Non-operational Assets
	Commercial and Investment Properties	Assets Under Construction	Surplus Assets, held for disposal	Total
	£’000s	£’000s	£’000s	£’000s
COST/VALUATION
As at 01/04/2008	36,421	783	162	37,366
Restatement	-	-	-	-
Revised 01/04/2008	36,421	783	162	37,366
Additions	158	-	12	170
Disposals	(383)	-	-	(383)
Reclassifications	(928)	(572)	1,019	(481)
Revaluations Impairment	557	-	59	616
	(4,340)	(211)	(423)	(4,974)
As at 31/03/2009	31,485	-	829	32,314
DEPRECIATION
As at 01/04/2008	-	-	-	-
2008/09	-	-	-	-
On Assets Sold	-	-	-	-
As at 31/03/2009	-	-	-	-
NET BOOK VALUE
As at 31/03/09	31,485	-	829	32,314
As at 01/04/08	36,421	783	162	37,366
Nature of asset holding
Owned	31,485	-	829	32,314
Finance Lease	-	-	-	-
PFI	-	-	-	-
	31,485	-	829	32,314

 

Non – Operational assets are held by the Council but not directly occupied or used in the delivery of the Council’s services. 

 

	Number as at 31 March			Number as at 31 March
	Restated			Restated
	2008	2009		2008	2009
Council Dwellings	3,127	3,126	Operational Equipment
Commercial and Investment Properties	275	274	Tractors Vans Boat Hoist	6 29 1	7 32 1
Operational Land and Buildings			Street Cleaning Vehicles Refuse Vehicles	24 18	26 18
Offices	9	9	Air Monitoring Station	1	1
Public Conveniences	33	31	Grounds Maintenance Eqpt	68	72
Lifts	3	3	Community Assets
Industrial Properties	3	3	Fountains & War Memorials	17	17
Leisure & Sporting Facilities	9	9	Cemeteries/Closed Church yards	8	8
Pavilions	5	5	Land & Gardens	41	41
Garages	620	574	Leisure & Sporting Facilities	12	12
Harbours	1	1	Public Clocks	20	20
Car Parks	28	28	Amenity Areas	36	36
Cemeteries	2	2	Car Parks	1	1
Depots	6	6	Allotment Sites	12	12
Other	3	3	Other	1	1

 

The 2008 figures have been restated to reconcile to the opening balances on the asset register.

 

It is anticipated that legal title to the Innovation Centre will be completed during 2009/10. As in previous years the Innovation Centre has been accounted for by including the value of the building within the Council’s accounts, per Financial Reporting Standard 5.

 

The 2008/09 downward valuation of Council Dwellings is due to a general fall in the market value of such assets.

 

19.  Valuation of Fixed Assets

The Asset Valuations in these accounts have been prepared by our internal Estates Surveyor, Julie Steere, Bsc (Hons) MRICS, Chartered Surveyor. The valuations were produced in accordance with guidelines issued by CIPFA, and in accordance with the Royal Institute of Chartered Surveyors current guidance notes for Asset Valuation.

 

The basis for Council dwellings valuations is Existing Use Value for Social Housing (EUV-SH). Under this method the vacant possession value of the dwellings is reduced to 45% of the market value, to reflect the occupation by a secure tenant. All valuations were originally carried out in 1994/95 but a rolling programme exists where 20% of assets (all types) are revalued annually. Council dwellings are always revalued on an annual basis. For those assets not revalued as part of the rolling programme or subject to impairment review, the Council is not aware of any material change in value therefore the valuations have not been updated.

 

The following statement shows the progress of the Council’s rolling programme for the revaluation of fixed assets. The bases for valuation and depreciation are set out in the Statement of Accounting Policies.

 

	Council Dwellings	Other Land and Buildings	Vehicles, Plant & Equipment	Investment Properties (Including Surplus Assets)	Total
	£’000s	£’000s	£’000s	£’000s	£’000s
Valued at historic cost	-	-	4,898	-	4,898
As at Current Value in:
2008/09	(30,340)	4,426	-	5,726	(20,188)
2007/08	2,316	13,308	-	9,570	25,194
2006/07	3,183	2,726	-	5,140	11,049
2005/06	(25,869)	11,592	-	5,004	(9,273)
2004/05	173,330	4,589	-	6,874	184,793
Total	122,620	36,641	4,898	32,314	196,473

 

20.  Finance and Operating Leases

The Authority acquires vehicles through operating leases. The amount paid under these arrangements in 2008/09 was £16,965.

 

There were no operating lease payments for equipment in 2008/09 and there are no more commitments thereafter.

 

The Authority was not committed at 31 March 2009 to make any further payments under operating leases.

 

The last assets acquired through finance leases were during January 2003.There were no finance lease payments in 2008/09 and there are no more commitments thereafter.

 

21.  Movement in Intangible Assets

	Software Licences	Trademarks, Patents and Artistic Originals	Other	Total
	£’000s	£’000s	£’000s	£’000s
Original Cost	-	-	-	-
Amortisations to 1 April 2008	-	-	-	-
Balance at 1 April 2008	-	-	-	-
Expenditure in year	326	-	-	326
Written off to revenue in year	(326)	-	-	(326)
Balance at 31 March 2009	-	-	-	-

 

Expenditure relates to the development of various projects including Document Image Process/Workflow and planning software.

 

22.Analysis of Net Assets Employed

The following analysis identifies the fixed and current assets, and long term and current liabilities from the balance sheet attributable to the General Fund, HRA and trading operations.

 

Restated
31 March 2008		31 March 2009
£’000s		£’000s
(24,986)	General Fund	(38,825)
133,906	Housing Revenue Account	104,295
56,398	Trading Operations	51,934

 

The 2007/08 figures have been restated to reflect the change in the treatment of investment properties (now included in the accounts as trading undertakings instead of investment income).

 

The reduction to net assets employed (£47.914m) is mainly due to the lowering of property values as a result of the current economic crisis (HRA £28.8m and General Fund £4m).

 

23.  Long Term Debtors - Other

Long term debtors - other consists of additional deferred income expected from the disposal of part of Manston Road allotments (£1.333m) and income anticipated from other loans given (car loans (£28k), charitable loans (£2k) and home safety loans (£30k).

 

24.  Stocks

2008		2009
£’000s		£’000s
2	Stocks  -    Museum Merchandising	2
6 32 11	-          VIC Merchandising -          Waste Services Depot -          Parks Depot Stores	10 123 10
5	Stores  -     Printing & Stationery	5
56		150

 

25. Debtors

Restated
2008		2009
£’000s	Amounts falling due in one year	£’000s
5,963	Non-Domestic Rates and Council Tax	7,143
637	Government Departments	4,028
1,001	Public Sector Bodies	70
799	Other Local Authorities	1,049
529	Tenants	673
4,464	Sundry Debtors	5,503
1,017	Payments in Advance	527
75	Holding and Suspense Accounts	137
115	Accountable Body Related	98
444	Collection Fund	292
(4,449)	Less Bad Debt Provision	(5,249)
10,595		14,271

 

The 2008 figures have been restated to reclassify the balance on the leaseholder maintenance account as a sundry debtor, not tenants.

 

A significant part of the increase in Government Department debtors (£2m) relates to subsidy income due in respect of March benefit entitlement paid to claimants in the first week of April 2009.

 

26. Creditors

2008		2009
£’000s		£’000s
2,667	Non-Domestic Rates and Council Tax	2,456
3,676	Government Departments	551
120	Public Sector Bodies	88
1,751	Other Local Authorities	3,169
114	Tenants	109
2,987	Sundry Creditors	7,327
783	Receipts in Advance	270
17	Holding and Suspense Accounts	42
1,325	Capital Creditors	881
421	Accountable Body Related	878
13,861		15,771

A significant part of the increase in sundry creditors (£2m) relates to the accrual of the 2008/09 element of the first Housing Benefit payment run in 2009/10.

27. Deferred Credits

Deferred credits consist of mortgages outstanding (£51k) and additional deferred income expected from the disposal of part of Manston Road Allotments (£1.333m).

 

28.  Financial Instruments Balances

The borrowings and investments disclosed in the Balance Sheet are made up of the following categories of financial instruments:

 

	Long-Term		Current
	31 March 2008	31 March 2009	31 March 2008	31 March 2009
	£’000s	£’000s	£’000s	£’000s
Financial liabilities at amortised cost	27,191	18,647	-	8,556
Financial liabilities at fair value through the I&E	-	-	-	-
Total borrowings	27,191	18,647	-	8,556
Loans and receivables	-	-	9,063	6,936
Available -for-sale assets	-	-	-	-
Financial assets at fair value through the I&E	-	-	-	-
Total investments	-	-	9,063	6,936

 

Under the requirements of SORP, interest due (but not yet paid) on outstanding loans can be reflected under long or short term borrowing in the Balance Sheet. Last years figures have been restated to reflect the accrual as short term in both years for consistency. Interest due on borrowing as at 31 March 2009 totalled £556,444 (Public Works Loan Board £498,588, other £57,856).

 

The Council has three loans due to mature in December 2009 that total £8m.

 

29.  Financial Instruments Gains/Losses

The gains and losses recognised in the Income and Expenditure Account and STRGL in relation to financial instruments are made up as follows:

 

 

Financial Liabilities	Financial Assets		Financial Liabilities	Financial Assets
Liabilities measured at amortised cost	Loans and receivables		Liabilities measured at amortised cost	Loans and receivables
£’000s	£’000s		£’000s	£’000s
2,005	-	Interest expense	2,148	-
-	-	Losses on derecognition	-	-
-	-	Impairment Losses	-	-
2,005	-	Interest payable and similar charges	2,148	-
-	-	Investment Property Income	-	-
-	749	Interest Income	-	558
-	-	Gains on derecognition	-	-
-	749	Interest and investment income	-	558

Investment property income is now reflected under trading undertakings on the face of the Income & Expenditure account.

 

30.FAIR VALUE OF ASSETS AND LIABILITIES CARRIED AT AMORTISED COST

Financial liabilities and financial assets represented by loans and receivables are carried on the balance sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that take place over the remaining life of the instruments, using the following assumptions:

 

• For loans from the PWLB and other loans payable, premature repayment rates from the PWLB have been applied to provide the fair value under PWLB debt redemption procedures;
• For loans receivable prevailing benchmark market rates have been used to provide the fair value;
• No early repayment or impairment is recognised;
• Where an instrument has a maturity of less than 12 months or is a trade or other receivable the fair value is taken to be the principal outstanding or the billed amount;
• The fair value of trade and other receivables is taken to be the invoiced or billed amount.

 

The 2008 Trade Creditor and Trade Debtor figures have been restated to reflect a change in the Balance Sheet that was not shown in the notes.

 

The fair values are calculated as follows:

 

Restated
31 March 2008			31 March 2009
Carrying Amount	Fair Value		Carrying Amount	Fair Value
£’000s	£’000s		£’000s	£’000s
22,633	25,526	PWLB debt	22,644	25,780
4,558	4,813	Other debt	4,559	4,657
27,191	30,339	Total debt	27,203	30,437
4,312	4,312	Trade creditors	8,208	8,208
31,503	34,651	Total Financial Liabilities	35,411	38,645

 

The fair value is greater 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 rates available for similar loans in the market at the balance sheet date.

 

Restated
31 March 2008			31 March 2009
Carrying Amount	Fair Value		Carrying Amount	Fair Value
£’000s	£’000s		£’000s	£’000s
-	-	Car Loans (employee)	28	27
9,063	9,063	Money market loans < 1 year	6,936	6,936
-	-	Money market loans > 1 year	-	-
-	-	Bonds	-	-
4,667	4,667	Trade debtors/Rechargeable works	5,743	5,743
13,730	13,730	Total Loans and Receivables	12,707	12,706

 

The differences are attributable to fixed interest instruments receivable being held by the authority whose interest rate is higher than the prevailing rate estimated to be available at 31 March.  This increases the fair value of financial liabilities and raises the value of loans and receivables.

 

For the bond holding the differences are attributable to fixed interest loans receivable being held by the authority whose interest rate is lower than the prevailing rate estimated to be available at 31 March. 

 

This depresses the fair value of financial liabilities and raises the value of loans and receivables.

 

The fair values for financial liabilities have been determined by reference to the Public Works Loans Board (PWLB) redemption rules and prevailing PWLB redemption rates as at each balance sheet date, and include accrued interest. The fair values for non-PWLB debt has also been calculated using the same procedures and interest rates and this provides a sound approximation for fair value for these instruments. 

 

The fair values for loans and receivables have been determined by reference to the Public Works Loans Board (PWLB) redemption rules which provide a good approximation for the fair value of a financial instrument, and includes accrued interest. The comparator market rates prevailing have been taken from indicative investment rates at each balance sheet date.  In practice rates will be determined by the size of the transaction and the counterparty, but it is impractical to use these figures, and the difference is likely to be immaterial. 

 

The fair value for Trade Creditors and Trade Debtors are both taken to be the invoiced or billed amount.

 

Next page: Notes to the Core Financial Accounts continued

 

Previous page: Cash Flow Statement

• Explanatory Foreword
• Statement of Accounting Policies
• Statement of Responsibilities for the Statement of Account
• Independent Auditors Report
• Income and Expenditure Account
• Statement of Movement on the General Fund Balance
• Statement of Total Recognised Gains and Losses
• Balance Sheet
• Cash Flow Statement
• Notes to the Core Financial Accounts
• Housing Revenue Account
• Collection Fund  
• Annual Governance Statement
• Glossary of Terms 

 

• Download Statement of Accounts 2008-09 (PDF, 353kb)
• Download Statement of Accounts Summary (PDF, 1.5mb)

Financial Services

 

E-mail:

accountancy@thanet.gov.uk

 

Tel: 01843 577000