Statement of Accounts 2003/04

Statement of accounts 2009/10

The following pages contain the accounts of Salford City Council for the financial year ended 31 March 2010

Summaries of this document can also be provided in large print, audio/electronic and Braille formats by the Equalities Team at Salford City Council, telephone number 0161 793 3536.

Section Page Number

Independent auditor’s report to the members of Salford City Council 1

Foreword by the City Treasurer 5

Statement of responsibilities for the statement of accounts 15

Statement of accounting policies 17

Core financial statements

§ Income & expenditure account 29

§ Statement of the movement on the general fund balance 30

§ Statement of total recognised gains & losses (STRGL) 33

§ Balance sheet 34

§ Cash flow statement 36

Notes to the core financial statements 37

Housing revenue account (HRA) 81

Collection fund 88

Group accounts

§ Introduction 93

§ Group income & expenditure account 97

§ Reconciliation of the single entity deficit to the group deficit 98

§ Group statement of total recognised gain & losses (STRGL) 99

§ Group balance sheet 100

§ Group cash flow statement 102

§ Notes to the group accounts 103

Annual governance statement 109

General statistics 116

Glossary 117

Feedback questionnaire 127

Independent auditor’s report to the members of Salford City Council

[To be inserted following the conclusion of the audit in September]

[This page is intentionally left blank]

Foreword by the City Treasurer

1. Introduction

Welcome to the Council’s accounts for 2009/10, covering the period from 1 April 2009 to 31 March 2010. Thank you for your interest in the Council’s affairs. We hope you find the accounts interesting and informative.

These accounts are extremely detailed and technical, so hopefully this foreword will provide an easily understandable guide to the most significant matters reported. However, if you would prefer to start with a shorter, simpler version of the accounts, rather than the full version contained in this book, we publish a summary in our Life IN Salford magazine, delivered to every household in the city and also obtainable from your local Salford library or Gateway centre, or at http://www.salford.gov.uk/ accounts.htm

2. Description of the various statements of account

The next few paragraphs give a brief explanation of the financial statements that follow, explaining their purpose and the relationship between them.

Statement of responsibilities for the statement of accounts

This statement affirms the respective responsibilities of the Council and the City Treasurer for the production and content of the accounts.

Statement of accounting policies

This explains the basis for the recognition, measurement and disclosure of transactions reported in the accounts. As more than one basis might be acceptable, the accounts can be properly appreciated only if the chosen policies are explained. In general, income, expenditure and balances are measured using UK generally-accepted accounting practice (UK GAAP), essentially the same accounting conventions that a large company would use in preparing its audited annual financial statements.

The core financial statements

Ø The income & expenditure account is fundamental to the understanding of the Council's activities, in that it reports the net cost for the year of all the functions for which the Council is responsible, and demonstrates how that cost has been financed from general government grants and income from local taxpayers. It brings together expenditure and income relating to all of the Council's functions, in three distinct sections, each divided by a sub-total. These sub-totals are the net cost of services, net operating expenditure and net deficit for the year.

Ø The statement of movement on the general fund balance reports amounts, in addition to the deficit on the income and expenditure account, that are required by statute and non-statutory proper practices to be charged or credited to the general fund, thus determining local taxation levels.

Ø The statement of total recognised gains and losses (STRGL) brings together gains and losses from the Council’s balance sheet together with the surplus or deficit on the income and expenditure account to show the total movement in the Council's net worth for the year.

Ø The balance sheet is fundamental to the understanding of the Council's financial position at the year-end. It shows its balances and reserves and its long-term indebtedness, the fixed and net current assets employed in its operations, together with summarised information on the fixed assets held.

Ø The cash flow statement summarises the total cash movements during the year for revenue and capital purposes, allows an assessment of cash-flow performance and provides information that assists in assessing the Council’s liquidity, solvency and financial adaptability.

Notes to the core financial statements

These comprise mandatory disclosures in accordance with proper practice, and additional material items of interest, with the purpose of providing the reader with sufficient information to have a good understanding of the Council's activities.

Housing revenue account (HRA)

This reflects the statutory requirement for authorities to maintain separate records for the income and expenditure on council housing. The account shows the major elements of housing revenue expenditure: maintenance, administration and capital financing costs and how these are met by rents, subsidies and other income.

Collection fund

This reflects the statutory requirement for a billing authority to maintain a separate fund showing its transactions relating to non-domestic rates and the council tax, and illustrates the way in which these have been distributed to preceptors and the General Fund.

Group accounts

For a variety of legal, regulatory and other reasons, the Council may choose or be required to conduct its activities through separate undertakings more or less under its ultimate control, such as public/private partnerships and similar arrangements. The standard financial statements of the Council as a single entity only account for the Council’s interest in other organisations to the extent of its historical investment, and not current performance and balances. For this reason they do not present a full picture of its economic activities or financial position. The group financial statements therefore reflect the extended service delivery and economy under the control of the Council as parent reporting authority. The group accounts contain core financial statements of a similar type to the Council’s single-entity accounts, consolidated with figures for the Council’s subsidiaries, associates and joint ventures.

Annual governance statement

This statement reflects the statutory requirement to conduct an annual review of the effectiveness of corporate governance, including the system of internal control.

General and financial statistics

This section contains some simple, general information about the Council that may be of interest to the reader.

Glossary of Financial Terms

This “jargon-buster” is intended to assist the reader in understanding the specialised accounting terms and possibly unfamiliar public sector concepts that are contained in this document.

3. Financial summary 2009/10

Budget

Government funding provides approximately 59% of the resources required to fund the Council’s net cost of services. Therefore the amount of government grants plays a key part in our budget deliberations. Another key part of the budget is our commitment to maintain a policy of low council tax increases. We aim to keep council tax rises to no more than 3% per annum for the Council’s services. In fact our 2010/11 council tax has been frozen at 2009/10 levels to help people through the recession. The level of Government grant in 2009/10 increased by 2.3% to £128.0m (2008/09 £125.1m) and this, together with the yield from a 3% increase in council tax allowed the Council to set a net budget of £218.3m for 2009/10 (£213.2m in 2008/09). However, this was far below our initial projected expenditure requirements and required new efficiencies of £13.1m and a contribution from our reserves of £2.9m to produce a balanced budget.

Achieving efficiences

The Council has embarked on a three year efficiency programme under the title Think Efficiency to help to contribute to the efficiencies required for the budget. The review delivered £2.3m of efficiencies in 2008/09 and £9.7m in 2009/10. A savings targetof an additional £4.3m is identified for 2010/11 giving an overall cumulativedelivery of£16.3m of cashable efficiencies over the 3 years of the programme.

Alongside other measures, Think Efficiency has ensured that we have consistently achieved our overall “Gershon” and national indicator NI179 efficiency targets. Overall Gershon cashable and non-cashable efficiencies achieved in the three-year period to 2007/08 were £19.9m, significantly exceeding the target of £17.7m. In 2008/09 we exceeded our NI179 target of £5.2m, achieving £6.6m in efficiencies. In 2009/10, we achieved our NI179 target of £19.1m.

Manchester Airport plc

The Council, together with the other nine Greater Manchester authorities, is a shareholder in Manchester Airport group plc. During 2009/10, all ten Councils agreed to restructure various long-term loans that had been made to the airport to finance capital expenditure, the benefit to the councils being that a higher coupon rate is receivable. As a consequence of this change, the loans to the airport that were previously secured loans are now unsecured loans, although this is considered to carry minimal risk. The loan agreement expires in 2055.

Monitoring

The Council's budget scrutiny committee was updated on a monthly basis on spend against budget, savings monitoring, risk assessment and prudential indicator information. This regular monitoring allowed the early identification of spending pressures and suitable corrective response.

The original budget was set in March 2009 at £218.3m and required a contribution from balances of £2.9m. The table below gives a summary of how the Council performed against the original budget:

Original Estimate / Actual / Variance
£000 / £000 / £000
Net Expenditure
· Council Services / 205,673 / 204,150 / (1,523)
· Levies and charges paid to other bodies / 26,144 / 25,448 / (696)
· Interest payable / 15,972 / 15,588 / (384)
General government grants within budget requirement
Ø LABGI / 0 / (263) / (263)
Ø ABG / (26,267) / (26,267) / 0
Contribution to / (from) General Fund Balances / (2,851) / 15 / 2,866
218,311 / 218,311 / 0
Funded by
General Government Grants
· RSG / (23,997) / (23,997) / 0
· NNDR / (103,967) / (103,967) / 0
Local taxpayers / (90,347) / (90,347) / 0
(218,311) / (218,311) / 0

General Fund Balances at 31 March 2010

The level of the Council’s general reserves at 31 March 2009 was £7.6m and allowed for a planned use of reserves in 2009/10 of £2.9m. The net underspend in the year of £2.9m has instead allowed a contribution to reserves of £15,000.

The Council’s strategy for general fund reserves provides for a contribution from reserves to be taken in the 2010/11 revenue budget. Any call on reserves is made in line with an assessment of the minimum level necessary to meet financial risks.

Within the total for general fund reserves is a balance related to schools. At 31 March 2010 school balances were in aggregate in deficit by £1.9m, comprising £5.0m for schools with surplus balances and £6.9m for those with deficits [£1.6m, £5.0m and £6.6m respectively at 31 March 2009]. This represents an increased deficit of £0.3m from the position at 31 March 2009. Schools have action plans in place to avoid deficits or to get back into surplus where they are currently in deficit. Detailed reports are regularly submitted to the budget scrutiny committee for monitoring.

2009/10 budget: at-a-glance summary

The diagrams on the next page show, in broad terms, how revenue expenditure was funded and what it was spent on. They include expenditure and income of the housing revenue account.

Summary of gross revenue expenditure 2009/10

4. Material assets acquired and liabilities incurred

A list of the major capital projects is included under capital financing below. The largest single new addition to the Council’s balance sheet is £4.3m for Willow Tree primary school asset under construction.

5. Pension liability and the council as a going concern

In accordance with proper practice, the Council has adopted financial reporting standard FRS17 “Retirement Benefits”, which recognises the full estimated cost of pension liabilities. This FRS has a substantial impact on the net cost of services although, as the adjustments are reversed out in the statement of movement on the general fund balance, not on the level of local taxation.

More importantly, there is a significant impact on the balance sheet, which shows a pension liability of £473.1m at 31 March 2010 (£191.6m at 31 March 2009), being an estimate of the value of the Council’s commitments under the Local Government Pension Scheme, were all those commitments to be called now. The main cause of the increase in liability is a change in the assumed discount rate from 6.9% last year to 5.5% in 2009/10. Because future liabilities are discounted less under this assumption, their present value is higher than previously estimated.

While the pensions liability has in 2009/10 caused the overall balance sheet net worth of the Council to become negative, there is less cause for concern than might be expected. Statutory arrangements for funding the deficit through increasing contributions over the remaining working life of employees, as assessed by an independent actuary, mean that the financial position of the Council remains healthy.

Furthermore, the annual local government finance settlement and the Council’s budget process provide the resources required to meet the Council’s net service expenditure up to 2009/10. There is no reason to doubt that that future settlements, aligned with the Council’s budget process which drives through efficiency savings, will provide sufficient resources to finance future liabilities. It is therefore appropriate to adopt a going concern basis for the preparation of these financial statements.

6. Material and unusual charges

The accounts conform with proper practice and contain full and frank disclosures of all material sums. There are no charges or credits that might be considered unusual that would require a specific explanation in this foreword.

7. Changes in accounting policies

CIPFA’s statement of recommended practice on local authority accounting in the UK (“SORP”) gives a regulatory framework to local authority accounting. A number of changes to the 2009/10 SORP have been reflected in the accounting policies adopted this year. The consequences of the changes to previously-reported figures are described in the prior period adjustment note to the core financial statements. An estimate of the effect of the changes on the current year’s figures is included within the statement of accounting policies. The changes are outlined below.