Appendix 2
Commentary on the
Accounts
Balance Sheet (BS)
The Balance Sheet is particularly technical, which is unavoidable
given the requirement to observe the Code of Practice and the
complex capital accounting, financial instrument and pension
reporting standards. There are explanatory notes to the Balance
Sheet in the Statement of Accounts.
Non-Current Assets
The value of total
non-current assets (including current assets held for sale) has
increased from £2,019.401 million as at 31 March 2019 to
£2,057.388 million as at 31 March 2020. The in-year movement
in non-current assets is detailed in note 9 to the core financial
statements. It should be noted that the valuation of many
non-current assets is subject to a wide range of market factors
and/or assumptions, particularly where no obvious comparator market
or assets exist. The movement of £37.987 million includes the
following:
·
An increase of £92.795 million in respect of capital
expenditure (CAPEX) incurred on Property, Plant & Equipment
(PPE), heritage assets and intangible assets which reflects the
significant capital investments made;
·
Upward revaluations of PPE, heritage and assets held for sale of
£63.784 million;
·
Depreciation, impairment and revaluation losses of £113.771
million;
·
Upward movement in the fair value of investment properties of
£2.049 million;
·
Disposal of non-current assets of £6.870 million.
Borrowing
In accordance with the CIPFA Code on Treasury Management, the
management of the council’s borrowing portfolio is based on a
consolidated approach and not by individual services. At 31 March
2020, the council’s level of borrowing (including the bank
overdraft) was £280.218 million, an increase in the year of
£8.280 million. The council has raised new loans of
£20.303 million and repaid £9.861 million during
2019/20. Note 11 to the accounts provides further information on
borrowings.
Investments
At 31 March 2020, the
council held investments of £149.808 million. Investments are
made by the in-house treasury team and the council’s external
cash manager. The council uses an external cash manager to take
advantage of investment opportunities in specialist markets not
covered by the in-house team, such as government stock.
The level of
investment has decreased in-year by £3.126 million.
Note 11 to the financial statements provides further information on
investments.
Pension Liability
The estimated pension liability (net of
pension assets) for future pension payments decreased in 2019/20 by
£80.849 million
from £353.823 million at 31 March 2019 to
£272.974 million
at 31 March 2020.
There are a number of contributory factors
to the decrease in the pension liability; these are detailed in the
Pensions Liability section of the Narrative Report.
The council also recognises a reserve for
the estimated net pension liability. Therefore, amounts included in
the council’s accounts in relation to post-employment
benefits have no effect on the council tax requirement as the
liability is offset by a Pensions Reserve.
Details of the Pension Liability can be
found in note 24 to the financial statements.
Provisions
Provisions have been
made in the accounts for liabilities existing at the 31 March 2020
that are reasonably certain and can be estimated with reasonable
accuracy. Significant provisions are included for the
following:
·
Voluntary Severance provision
– The provision is to meet the costs of expected severance
packages resulting from a review of the staffing impacts of
approved savings. The provision as at 31 March 2020 is
£0.316 million.
·
Business Rates Appeals provision -
The council has made provision for its share of the amount that it
anticipates to repay ratepayers in the future following successful
appeals against the rating lists. The provision as at 31 March 2020
is £6.201 million.
Reserves
The council holds two categories of reserves:
·
Unusable Reserves – these reserves derive from accounting
adjustments and policies, and are not available to the council to
use to provide services. They include reserves that hold unrealised
gains and losses where amounts would only become available for use
if the assets were disposed of. It also includes reserves for
timing differences between what is required from a statutory
accounting perspective to be charged to the General Fund and HRA
funds and what is required to be funded from council tax, locally
retained non-domestic rates and general grants. These reserves
include the revaluation reserve, pension reserve and the capital
adjustment account. The level of unusable reserves as at 31 March
2020 was £1,425.881 million. Note 7 to the accounts provides
further information on unusable reserves.
·
Usable Reserves – these reserves can be used by the council
for investment or to provide services and/or reduce local taxation,
subject to the need to maintain a prudent level of reserves and any
statutory or contractual limitations on their use. These reserves
include the General Fund and HRA working balance, general reserves,
capital reserves relating to capital receipts and capital grants
received which have not yet been utilised, and earmarked reserves
which have been set aside by the council for specified
purposes.
The level of General Fund working balance and general reserves held
at 31 March 2020 was £8.990 million. The level of working
balance and general reserves deemed appropriate by the
council’s Chief Finance Officer is £9 million,
approximately 4% of net budget or 4 weeks council tax income. In
addition, there are also General Fund earmarked reserves of
£47.101 million as at 31 March 2020.
The level of HRA working balance stands at £7.657 million as
at 31 March 2020, which is in excess of the recommended minimum
level of balances of £3 million. In addition, there are also
HRA earmarked reserves of £2.020 million as at 31 March 2020.
The HRA reserves are primarily ring-fenced for council dwelling
provision.
Notes 6 and 8 to
the accounts provide further information on usable reserves.
Usable reserves and provisions are reviewed during the budget
setting and the accounts closure processes to ensure that there is
both the ongoing requirement for funds to be set aside and that the
levels are adequate and appropriate. The reviews are reported to
members as part of the General Fund budget proposals and, following
the closure of the accounts, in the TBM Provisional Outturn
report.
Collection Fund
The Collection Fund is a separate fund
recording the expenditure and income relating to council tax and
non-domestic rates.
As at 31 March 2020, there was
a deficit of £2.115 million on the Collection Fund in respect
of council tax and a surplus of £4.136 million in respect of non-domestic business
rates.