Aberdeen City Council Annual Accounts 2003/2004
This page consists of the foreword by the Corporate Director of Finance & ICT.
A full index is available at the bottom of this page, which provides links to the individual documents within the Statement.
All sections of the report require Adobe Acrobat Reader.
Introduction
On an annual basis the Council publishes a set of Financial Statements following recognised Accounting Codes of Practice. The purpose of the Financial Statements is to demonstrate the Council's proper stewardship of the public funds to which it is entrusted.
This foreword provides an explanation of the Council's Financial Statements, along with a summary of the financial out-turn for the year ended 31 March 2004.
Financial Statements
Consolidated Revenue Account
Provides a summary of expenditure and income in delivering services within the City. Information is also provided as to how the net cost of these services is financed from Revenue Support Grant, Non-Domestic Rates and Council Tax. It also identifies the General Fund surplus/deficit and the balance that is to be carried forward to next financial year.
Housing Revenue Account (HRA)
Reflects the statutory requirement to account for local authority housing provision, as defined in the Housing (Scotland) Act 1987. It shows the major elements of housing revenue expenditure and capital financing costs and how these are funded through rents, housing support grant and other income.
Non-Domestic Rate Income and Council Tax Income Accounts with Notes
Provides details of the gross and net income raised from Non-Domestic Rates and Council Tax. The Non-Domestic Rate income account also details the net contribution to the National Non-Domestic Rate Pool.
Consolidated Balance Sheet
This brings together the balances in the Council's Accounts and covers the General Fund, Housing Revenue Account, Loans Fund and the Balance Sheets. It excludes the Pension Funds, Trust Funds, and the Common Good. These are separately accounted for.
Notes to the Consolidated Revenue Account and Consolidated Balance Sheet
Provides additional information on the various financial transactions that are not separately detailed in these statements.
Statement of Total Movement on Funds and Reserves
Provides for the various capital and revenue reserves details of the movements, that is the gains or losses, during the year.
Cash Flow Statement
Provides details of the inflows and outflows of cash, for both revenue and capital items, which arise from transactions with third parties.
Group Accounts
Provides consolidated Revenue Account, Balance Sheet and Movement on Funds and Reserves for accounts of the Council and any subsidiary companies that the Council has a material interest in.
Trading Operations - Summary of Results
Summarises the expenditure and income of the Council's significant trading operations as required under the Local Government Scotland Act 2003. The trading operations fall into seven sections - building maintenance; environmental services (formerly street cleansing and refuse collection); road maintenance; the letting of industrial, commercial and other properties; maintenance of grounds; management of sports and leisure facilities, and the provision and management of car parking facilities.
Pension Funds Accounts with Notes
Provides details of the accounting policies, the financial transactions including the disposition of the funds and the net asset statements at the year-end for the two pension funds that the Council administers.
Trust Funds and Common Good Account
Provides details of expenditure and income, along with the valuation of the respective funds.
Financial Out-Turn 2003/04
Use the links from the index at the foot of this page to obtain further financial information on the topics listed below.
General Fund - Revenue Expenditure
In 2003/04 Aberdeen City Council approved a General Fund revenue budget of £336.864 million. The principal sources of finance to meet this level of expenditure are the Revenue Support Grant (RSG) and non-domestic rate income (NDRI), both of which are determined by the Scottish Parliament. The Non-Domestic Rate poundage being set at 47.8 pence and 48.4 pence for subjects with a rateable value below or in excess of £25,000, respectively.
The balance of funding is met mainly through the Council Tax. For 2003/04 this was set at a level of £1,020.06, for Band D properties, which represented a 4% increase from the prior year equivalent figure of £980.82.
In addition during 2003/04, in order to fund a balanced budget it was also proposed and approved that £8.567 million would be used from reserves and balances. This comprised a sum of £5.356 million from balances on the General Fund Reserve, £500,000 from the Common Good and £2.711 million through a transfer from the Capital Fund.
For all services net expenditure amounted to £325.235 million and once income received from government grants and local tax payers is deducted there was a net favourable movement on the General Fund balance of £493,000.
Within this net favourable movement there are a number of contributing factors both favourable and adverse that effectively balance one another out.
The most significant favourable factors being a lower than budgeted Loans Pool rate resulting from a restructuring of the Council's debt portfolio during the year reflected in a reduction in capital financing costs, lower than expected costs of teaching staff turnover placements along with an increase in establishments DEM (Devolved Education Management) budget carry forwards.
These favourable variances were offset by additional costs in respect of prudent provisions required for bad debts, and from dilapidation costs and rental deficits. Additional factors relate to unexpected costs arising from staff regrading arrears along with a reduction in the overall level of income previously anticipated for Council Tax. Although the total property base has increased annually this reduction is as a result of a change in the percentage of effective properties to total properties reflecting qualifications for exemptions and discounts.
Finally the net position also takes into account the prior intention of the Council to reimburse to the Common Good, £1 million, for contributions made towards the development costs of the Accord Card and a transfer of £3.211 million, only, from other funds, as initially budgeted for.
Taking all of these factors into consideration the net movement of £493,000 has resulted in a balance, on the General Fund Reserve, of £24.006 million as at 31 March 2004.
It should be noted, however, that from this balance on the General Fund reserve there are already a number of significant earmarked commitments totalling £10.193 million that have been set aside for other purposes in 2004/05. Firstly, £5.893 million, as part of the Councils approved budget strategy to support the General Fund Revenue Budget and Council Tax levels for 2004/05.
Furthermore, there is a liability, estimated to be in the order of £4.300 million, to schools for which management has been devolved under the Council's DEM Scheme.
The impact of the foregoing is to in effect leave a working balance of £13.813 million of which it is also proposed to earmark a provision of £1.1 million to meet potential further costs, in excess of budget provisions already made, for pay award negotiations and settlements in 2004/05. This would in effect leave a working balance of £12.713 million.
Housing Revenue Account (HRA)
The Housing Revenue Account, which is based on an average weekly rent of £43.22, generated a net surplus of £3.061 million during 2003/04 and had working balances of £6.233 million at the year-end.
This out-turn position compares favourably with a budgeted out-turn deficit of £59,000 and also a forecast out-turn deficit of £78,000 which would have given working balances of £3.094 million.
The contributing factors relate mainly to lower than forecast out-turn expenditure in respect of capital financing costs; management and administration costs; and the cost of utilities. Benefits also arose from a reduced revenue contribution required to assist in funding the capital programme, a higher than projected level of interest on revenue balances and lower than projected costs in respect of housing repairs and maintenance. Although in overall terms spending on housing repairs and maintenance was still in the order of £17 million as initially budgeted for.
These favourable movements were partially offset by an increase in the level of provision for former tenants' arrears' which is based on 95% of the rent outstanding as at 31 March 2004. Whilst the Council makes such provisions it is policy to pursue all debt owed.
Of these working balances of £6.233 million it is estimated that there are commitments amounting to £1.578 million that will fall to be met. Approximately £350,000 requires to be earmarked as a revenue contribution to capital expenditure to meet commitments for capital projects in 2003/04 but which have cash payments falling to be made after 31 March 2004. A sum of £1.014 million also requires to be set aside to meet commitments for housing repairs and maintenance costs arising from orders placed in 2003/04 but for which work did not progress or commence until after 31 March 2004. Finally a provision of £214,000 is required to meet the unspent balances on members ward budgets from 2003/04.
This effectively leaves a working balance of £4.655 million.
Capital Expenditure
Annually the Council's capital expenditure must be contained within the annual consent limits set by the Scottish Executive. Separate consent limits are issued for the Housing and for the Non-Housing programmes. The Council can, however, enhance its consent by the amount of usable capital receipts generated from the sale of capital assets, for instance.
In addition local authorities are allowed to enhance consent by a margin of 5%, for the Housing programme, and 10%, for the Non-Housing programme, subject to any such enhancement being deducted from the following year's consent.
Total capital expenditure in 2003/2004 was £50.3 million, of which £22.4 million was spent on the Housing Programme and £27.9 million on the Non-Housing Programme. An outline of the main service elements and projects within this programme, in 2003/04, is provided at pages 31 to 32 in the Notes to the Consolidated Balance Sheet.
The majority of costs were funded from a combination of the proceeds from the sale of assets (£14.1 million) and income from grants and contributions (£9.9 million) with the remainder being financed through net borrowing (£9 million) and contributions from the revenue account (£17.3 million). In addition during 2003/04 the Council entered into a consent swap transfer of £3 million with Glasgow City Council.
Taking all of these factors into consideration the out-turn position for capital expenditure was in line with the tolerance limits set by the Scottish Executive.
It should be noted that with effect from 1 April 2004, the current capital expenditure system of funding is replaced by the requirement for local authorities to have regard to the Prudential Code for Finance in Local Authorities.
Internal Trading Accounts
From 1 April 2003 the requirements in respect of trading operations are amended under the Local Government in Scotland Act 2003. In light of this the net balance on the CSD Reserve, as at 31 March 2003, of £4.630 million was transferred to the General Fund.
In its place Councils' are required to maintain statutory trading accounts for "significant trading operations".
In 2003/04 total expenditure amounted to £55.456 million for such trading operations. With turnover of £61.974 million generating a gross surplus of £6.518 million prior to provisions of £1.5 million and refunds to client services. After taking account of the provisions for dilapidation costs and potential rental deficits along with refunds to client services of £475,000 a net surplus of £4.543 million was generated and returned to the General Fund balance.
Each of the seven identified areas of significant trading operations have all in year one achieved a surplus. In terms of the legislation there is a requirement that these operations break even, in aggregate, over a three-year rolling period.
Summarised details of the performance of the Council's significant trading operations are provided on pages 50 to 53 in Trading Operations - Summary of Results.
Pension Funds
The Council administers two pension funds on behalf of employees and former employees, along with a number of scheduled and admitted bodies.
At 31 March 2004 the total value of these funds was £1.195 billion with 19,257 monthly pensioners and deferred members. There are currently 23,867 members i.e. contributors to the Funds.
The total value of the funds has risen by almost 26% since 31 March 2003. This relates mainly to the gain on valuation of equities, both UK and overseas, reflecting the general improvement and upward trend compared to the prior years' position which reflected a substantial fall in world stock markets.
As the investments of the funds are spread across the available range of investment, both by type (equities, bonds, property etc) and geographically the risk of a sharp fall in one particular market having a substantial impact on the whole fund is reduced.
Common Good
The value of the Common Good rose to £31.231 million as at 31 March 2004. This represents a net increase in value of £450,000 from the prior year.
This favourable movement arose from three factors a surplus on revenue expenditure of £155,000, an increase of £252,000 in the valuation of land and property, and the generation of additional funds, of £43,000, from the sale proceeds of land.
Trust Funds
The Council administers a number of trust funds. The value of the trusts fund balances was £4.234 million as at 31 March 2004. This represents a net increase of £109,000 compared to the previous year.
This increase arose from an upwards revaluation of investments of £117,000 and additional new funds of £4,000 which have been offset by a net deficit of £12,000, after deducting income from expenditure.
Financial Position
The detailed financial statements present fairly the financial position of Aberdeen City Council for 2003/04 and its income and expenditure for the year ended 31 March 2004.
Acknowledgements
The production of the Annual Financial Statement is very much a team effort involving many staff from both my own and other services within the Council. I would like to take this opportunity to acknowledge the considerable efforts of all staff in the production of this Financial Statement within the tight timescales.
Gordon Edwards
Corporate Director for Finance & ICT
24 June 2004
Index
Corporate Governance Arrangements
Statement of Accounting Policies
Consolidated Revenue Account
Notes Consolidated Revenue Account
Housing Revenue Account
Non-Domestic Rates income Account
Council tax Income Account
Notes to Council Tax Income Account
Loans Fund
Consolidated Balance Sheet
Notes to the Consolidated Balance Sheet
Statement of Total Movements on Funds and ReservesStatement of Total Movements on Funds and Reserves
Cashflow Statement
Group Accounts
Trading Operations and Accounts
Pension Fund Accounts
Number 2 Pension Fund
Notes to the Pension Fund Account
Common Good Fund
Trust Funds and Endowments
City Improvement Fund
Glossary of Terms
Statement of Responsibilities for the Financial Statements
Audit Certificate
Statement on the System of Internal Financial Control
Performance Indicators
