ANNUAL FINANCIAL REPORT
(INCORPORATING STATEMENT OF ACCOUNTS)
For the year ended 31 March 2003
CONTENTS / PageForeword……………………………………………………………….…………………… / 3
Statement of Responsibilities for the Statement of Accounts……..…………………. / 8
Statement on the System of Internal Financial Control / 9
Auditor’s Report….………………………………………………………………………… / 9
Statement of Accounting Policies……………………………………………………….. / 10
Accounting Statements
Consolidated Revenue Account……………………………………………………… / 13
Housing Revenue Account……………………………………………………………. / 19
Collection Fund………………………………………………………………………… / 21
Consolidated Balance Sheet…………………………………………………………. / 23
Statement of Total Movements in Reserves………………………………………... / 29
Cash Flow Statement………………………………………………………………….. / 30
Appendices
A - Analysis of Capital Expenditure………………………………………………. / 32
B - Memorandum Account...... ………………………………………………. / 34
Glossary of Terms…………………………………………………………………………. / 35
FOREWORD
1. INTRODUCTION
The accounts of Reigate & Banstead Borough Council for the year ended 31st March 2003 are set out on the following pages. The various statements include, where relevant, comparative figures relating to the previous financial year and supporting notes.
2. FINANCIAL STATEMENTS
The various financial statements are prepared on an accruals basis and follow best practice recommended by the Code of Practice on Local Authority Accounting. They summarise the overall financial position of the Council and in particular include the following:
Consolidated Revenue Account
This statement brings together the net cost for the year of the functions for which the authority is responsible and shows how that cost has been financed from general government grants and income from local taxpayers.
Housing Revenue Account
The statutory account in which the transactions relating to the provision and management of Council dwellings are recorded.
Collection Fund
This account reflects a statutory requirement to maintain a separate Collection Fund, which shows the transactions of the Council as a billing authority in relation to non-domestic rates and council tax, and illustrates the way in which these have been distributed to precepting authorities and the Council’s own Consolidated Revenue Account.
Consolidated Balance Sheet
This statement shows the assets and liabilities of all the activities of the Council, excluding trust funds, and the balances and reserves at the Council’s disposal.
Statement of Total Movements in Reserves
This statement brings together all the recognised gains and losses of the authority during the year and identifies those which have not been identified in the Consolidated Revenue Account. The statement separates the movements between revenue and capital reserves.
Cash Flow Statement
This consolidated statement summarises the inflows and outflows of cash arising from transactions with third parties for revenue and capital purposes.
FOREWORD
3. REVIEW OF THE FINANCIAL YEAR
3.1 Overall
Compared with last year and the major Large Scale Voluntary Transfer (LSVT) of our housing stock which took place, this year was less demanding. Whilst the Council transferred its stock in March 2002, we still had to effect all of the accounting transactions prior to transfer for financial year 2002/03. Before obtaining permission to close the Housing Revenue Account (HRA) we also had to work with the Housing Trust on a number of financial issues and ensure that all grant claims had been scrutinised by the External Auditor and approved by the Government.
Careful work has taken place over the 2002/03 financial year to ensure that all potential issues or liabilities have been fully completed and accounted for. The Council has now obtained a formal direction from the Office of the Deputy Prime Minister to close the HRA as at 31st March 2003.
The main difference within the primary statements compared to the statements in 2001/02 is the HRA. The main transaction that occurred was the final additional housing subsidy which became due following the “unwinding” of the HRA. From 2003/04, the Council will no longer need to operate an HRA. The other statements are do not appear materially different from the statements for 2001/02.
Once again the Council has continued to deliver high quality services at a reasonable cost, and has exercised appropriate financial discipline throughout the year.
3.2 General Fund Services
The Council set a net budget of £13.879m, which was to be financed partly from central government support (£5.995m), and the balance from Council taxpayers (£7.884m). The average Council Tax bill for a property in Band D was £962.38 (£863.82 in 2001/2002) of which £140.59 (£124.92 in 2001/2002) was for borough services.
The Council’s net expenditure against the original budget was £13.303m, and the balance of £576,300 was transferred to its reserves. The main reasons for this underspend were additional income from a greater number of Land Searches than expected, plus higher returns from the Council’s investment managers. There were also underspends within Housing, ICT and Parks, Common and Open Spaces.
FOREWORD
Net expenditure for the year was financed from the following sources:
Central Government Support
Share of business rates (national non-domestic rate pool) / 5,138
Revenue support grant / 857
Local Taxpayers
Council Tax / 7,884
Total Income From Central Government & Local Taxpayers / 13,879
3.3 Central Government Support
The Council’s share of Business Rates and Revenue Support Grant has increased by £139,000 compared with 2001/2002, an increase of 2.4%.
3.4 Local Taxpayers
During the year the Council collected £49.869m in Council Tax (net of council tax benefit) on behalf of the Borough, Surrey County Council, the Metropolitan Police and the Surrey Police Authority. This represented 99% of the total amount due.
3.5 Housing Services
The surplus of £425,285, brought forward at 1st April 2002, was transferred to Specific Reserves during 2002/03. On 25th March 2002, the Council’s housing stock was transferred under a large scale voluntary transfer (LSVT) to the Reigate & Banstead Housing Trust, which meant that the Council effectively no longer operated a Housing Revenue Account. The remaining surplus on the HRA, as at 31st March 2003, was transferred to the General Fund.
FOREWORD
3.6 Revenue Reserves and Balances
Revenue reserves and balances at 31 March 2003 were:
Balance at1 April 2002
£’000 / Movement
in year
£’000 / Balance at
31 March 2003
£’000
Specific Reserves
General Fund reserve / 3,320 / (820) / 2,500
Investments Equalisation reserve / 442 / 159 / 601
Insurance reserve / 1,197 / (219) / 978
Organisational Development Fund / - / 1,381 / 1,381
Front Line Initiatives Fund / - / 694 / 694
Project Finance reserve / 250 / (250) / -
5,209 / 945 / 6,154
Housing Revenue Account balance / 425 / (425) / -
3.7 Capital
Local authorities are required to distinguish between revenue and capital expenditure. Revenue expenditure is the day-to-day costs of running Council services. Capital expenditure is all expenditure on the acquisition, creation or enhancement of fixed assets, which yield benefits to the Authority and the services it provides for a period of more than a year. Total capital expenditure for the year was £11.435m; detailed in Appendix A.
97% of total capital expenditure was financed internally (principally from accumulated capital receipts) and the balance from government grants.
FOREWORD
4. FUTURE
Comprehensive Performance Assessment
Comprehensive Performance Assessment (CPA) is a wide-ranging, integrated performance framework designed to help local authorities deliver better services to their communities. The Audit Commission will produce a judgement on every authority based on the quality of its local services, its capacity to improve local services and its corporate and managerial effectiveness.
Prudential Code
Central Government has created “The Local Government Bill” which has yet to complete its passage through Parliament. Part of this bill is the new “Prudential Code” for capital, which is likely to be introduced from 2004/05. The “Prudential Code” will set out the new system of controls on local authority capital investment. This will replace the present complex regulatory frameworks governing local authority capital expenditure. The new system will be one based largely on self-regulation by local authorities themselves, with the basic principal being that local authorities will be free to invest as long as their capital spending plans are affordable, prudent and sustainable.
Best Value
The Local Government Act 1999 has placed a statutory duty on local authorities to secure and demonstrate best value in the provision of services to the community. Best value arrangements replace compulsory competitive tendering (CCT) and also extend to services that were outside the statutory framework of CCT. The Council intend to carry out a series of best value reviews (BVRs) and publish Best Value Performance Plans (BVPPs), which will provide details of performance achievements. BVRs will be subject to external examination by the Audit Commission.
Euro Costs
The Council is monitoring the situation regarding the possibility of future British participation in the EMU. This event could necessitate significant expenditure to adapt the Council’s operations and information systems to accommodate the single currency.
5 FURTHER INFORMATION
Further information about the accounts can be obtained from the Director of Resources at the Town Hall, Castlefield Road, Reigate, Surrey RH2 0SH. Telephone 01737 276551
Paul McCallum, CPFA,
Director of Resources
STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS
The Authority’s Responsibilities
The Authority is required:
¨ to make arrangements for proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this authority that officer is the Director of Resources;
¨ to manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; and
¨ to approve the statement of accounts.
The Director of Resources Responsibilities
The Director of Resources is responsible for the preparation of the authority’s statement of accounts in accordance with the Code of Practice on Local Authority Accounting in Great Britain and Best Value Accounting Code of Practice. These Accounts must present fairly the financial position of authority at the accounting date and its income and expenditure for the year ended 31st March 2003.
In preparing these statements of account the Director of Resources has:
¨ selected suitable accounting policies and applied them consistently;
¨ made judgements and estimates that were reasonable and prudent; and
¨ complied with the Code of Practice.
The Director of Resources has also:
¨ kept proper records which were up-to-date; and
¨ taken reasonable steps for the prevention and detection of fraud and other irregularities.
Certificate of the Director of Resources
I certify that the accounts set out on pages 14 to 33 represent the true position of the Authority as at 31 March 2003 and its income and expenditure for the year then ended.
Paul McCallum, CPFA
Director of Resources
DATE:
Certificate of the Chairman of Executive Committee
I confirm that the accounts were approved by the Executive at the meeting held on 25th September 2003
Signed on behalf of Reigate & Banstead Borough Council
Cllr Mrs Spiers
Chairman of meeting approving the accounts
DATE:
STATEMENT ON THE SYSTEM OF INTERNAL FINANCIAL CONTROL
This statement is given in respect of the Statement of Accounts for Reigate & Banstead Borough Council. We acknowledge our responsibility for ensuring that an effective system of internal financial control is maintained and operated in connection with the resources concerned.
The system of internal financial control can provide only reasonable and not absolute assurance that assets are safeguarded, that transactions are authorised and properly recorded, and that material errors or irregularities are either prevented or would be detected within a timely period.
The system of internal financial control is based on a framework of regular management information, financial procedure rules, administrative procedures (including segregation of duties), management supervision, and a system of delegation and accountability. Development and maintenance of the system is undertaken by managers within the Council. In particular, the system includes:
· comprehensive budgeting systems;
· regular reviews of financial reports which indicate financial performance against the forecasts;
· setting targets to measure financial and other performance;
· the preparation of regular financial reports which indicate actual expenditure against the forecasts;
· clearly defined capital expenditure guidelines; and
· project management disciplines that have been applied where appropriate.
In addition, the authority’s Chief Internal Auditor (Deloitte & Touche) has been given the responsibility to review independently the extent of compliance with best practice in corporate governance. They are also responsible for evaluating and reporting upon the adequacy of the whole system of internal control as a contribution to the proper, economic, efficient and effective use of Council resources, and as an aid to the improvement of risk management and control systems. Internal Audit carries out a full programme of audits in accordance with a formally approved five year Strategic Audit Plan that is based on an assessment of the risks facing the Council and updated yearly.
As part of the reporting to the Overview and Scrutiny Committee, the chief internal auditor provides an independent opinion on the adequacy and effectiveness of the system of internal financial control. For the year ending 31st March 2003 the opinion is that in the areas reviewed by Internal Audit the overall standards of internal control have been satisfactory. Recommendations have been made to improve management controls in some areas, but there were no instances in which control problems created significant risks for Council activities or services.
Our review of the effectiveness of the system of internal financial control is informed by:-
· the work of managers within the Council,
· the work of the internal auditors as described above,
· the external auditors in their annual audit letter and other reports.
Paul McCallum, CPFA
Director of Resources
DATE:
AUDITOR’S REPORT TO REIGATE & BANSTEAD BOROUGH COUNCIL
We have audited the statement of accounts on pages 13 to 34 which have been prepared in accordance with the accounting policies applicable to Local Authorities as set out on pages 10 to 12.
Respective Responsibilities of the Director of Resources and Auditors
As described on page 7, the Director of Resources is responsible for the preparation of the Statement of Accounts. Our responsibilities as independent auditors are established by statute. The Code of Audit Practice issued by the Audit Commission and our profession’s ethical guidance.