Aberdeen City Council Annual Accounts 2004/2005
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 2005.
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 StatementProvides 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 and Number 2 Pension Funds Accounts
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 2004/05
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 2004/05 Aberdeen City Council approved a General Fund revenue budget of £356.356 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 48.8 pence and 49.1 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 2004/05 this was set at a level of £1,107.81, for Band D properties, which represented a 8.6% increase from the prior year equivalent figure of £1,020.06.
In order to fund a balanced budget it was also proposed and approved that £9.955 million would be used from reserves and balances. This comprised a sum of £7.044 million from balances on the General Fund Reserve, £200,000 from the Common Good and £2.711 million through a transfer from the Capital Fund. The support from the General Fund Reserve includes £1 million in respect of Social Work Care Management Packages and £421,000 in respect of loss of income arising from the refurbishment of His Majesty's Theatre.
Further to setting and approving a base budget on 12 February 2004 an additional sum of £1.830 million was approved by Council on 30 June 2004, from working balances, for a number of initiatives and projects. This included support for festivals, the establishment of a small grants fund for Culture & Arts, discretionary youth projects, accelerating roads maintenance and supporting Social Work and Education services.
For all services net expenditure amounted to £343.017 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 £953,000.
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 staffing costs from turnover placements, an increase in establishments Devolved Education Management budget carry forwards, and lower provisions for bad debts offset by additional costs in respect of essential property repairs and maintenance, winter maintenance and Social Work services.
Finally the net position takes into account a transfer of £2.911 million, only, from other funds, as initially budgeted for.
Taking all of these factors into consideration and after transferring the net surplus of £953,000 to the General Fund reserve, the balance as at 31st March 2005 stands at £23.966 million. This is prior to known and proposed commitments in 2005/06 and also reflects prior year adjustments required in respect of identified interest payable to the Insurance Fund.
There are already a number of ear-marked commitments that have been set aside for other purposes in 2005/06. Firstly, £2.840 million, as part of the Councils approved budget strategy to support the General Fund Revenue Budget and Council Tax levels for 2005/06, and a sum of £500,000 for the Public Plan Enquiry.
Furthermore, there is a liability, estimated to be in the order of £4.750 million, to schools for which management has been devolved under the Council's Devolved Education Management (DEM) Scheme.
There are a number of additional sums proposed to be ear-marked amounting to £5.1 million and the impact of the above, totalling £13.190 million, is to in effect leave a working balance of £10.776 million.
Housing Revenue Account (HRA)
The Housing Revenue Account, which is based on an average weekly rent of £46.22 generated a net surplus of £460,000 during 2004/05 and had working balances of £6.598 million at the year-end.
This out-turn position compares favourably with the budgeted surplus of £223,000 and has arisen from a number of contributing factors.
Favourable movements relate mainly to lower than budgeted expenditure in respect of capital financing costs, as a result of the pattern of capital spend and debt rescheduling exercises which were undertaken. In addition housing repairs and maintenance was lower than budgeted and interest on revenue balances was higher than projected. Although, in overall terms, spending on housing repairs was less than budgeted it was still significant with spend in the order of £17.8 million which is an increase of £700,000 from the prior year 2003/04.
These favourable movements were partially offset by an increased revenue contribution of £2.850 million to support the capital programme in 2004/05, in order to achieve the Scottish Housing Quality Standard, as approved. Other items included higher than budgeted costs arising from the loss of rent from the level of property turnover/voids and from the provision for former tenants' arrears' which is based on 95% of the rent outstanding as at 31 March 2005. Whilst the Council makes such provisions it is policy to pursue all debt owed.
Of these working balances of £6.598 million it is estimated that there are commitments amounting to £3.431 million that will fall to be met in 2005/06. A sum of £1.255 million requires to be earmarked to support the 2005/06 Housing Revenue Account (HRA) and £1 million for housing investment. In addition £753,000 is required to meet commitments for housing repairs and maintenance for costs arising from orders placed in 2004/05 but for which work did not progress or commence until after 31 March 2005. Finally a provision of £423,000 is required to meet the accumulated unspent balances on members ward budgets. This effectively leaves a working balance of £3.167 million.
Capital Expenditure
With effect from 1 April 2004, the previous capital expenditure system of funding was replaced by the requirement for local authorities to have regard to the Prudential Code for Finance in Local Authorities and considerations, in all years, of affordability and sustainability.
Previously the Council's capital expenditure had to be contained within the annual consent limits set by the Scottish Executive, with separate consent limits issued for the Housing and the Non-Housing programmes.
Total capital expenditure in 2004/2005 was £71.6 million of which £30.8 million was spent on the Housing Programme and £40.8 million on the Non-Housing Programme. An outline of the main service elements and projects within this programme, in 2004/05, is provided at pages 33 to 34.
The majority of costs were funded from a combination of finance through net borrowing (£29.2 million), the proceeds from the sale of assets (£12.7 million) and income from grants and contributions (£10.2 million) with the remainder being contributions from the revenue account (£19.5 million).
Trading Operations
Under the Best Value Requirements in the Local Government in Scotland Act 2003, Councils are required to maintain statutory trading accounts for "significant trading operations".
In 2004/05 total expenditure amounted to £60.739 million for such trading operations and with turnover of £67.395 million a gross surplus of £6.656 million was generated prior to refunds of £1.135 million to client services. After taking account of these refunds, a net surplus of £5.521 million was generated and returned to the General Fund balance.
Although two of the services did not achieve a surplus in 2004/05 all seven of the identified areas of significant trading operations have achieved a cumulative surplus on an aggregate rolling basis over the two year period to date from 1 April 2003.
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 54 to 57.
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 2005 the total value of these funds was £1.352 billion with 19,943 monthly pensioners and deferred members. There are currently 24,447 members i.e. contributors to the Funds.
The total value of the funds has risen by almost 42% since March 2003, with an annual increase of 13 % between 2003/04 and 2004/05. This relates mainly to the gain on valuation of equities, both UK and overseas, reflecting the general continuing 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 £31.881 million as at 31 March 2005. This represents a net increase in value of £650,000 from the prior year.
This favourable movement arose from four factors, an increase of £400,000 in the valuation of Common Good land and property, an increase of £109,000 in investment funds resulting from a revaluation of trust property along with the generation of income of £160,000, from the sale proceeds of land which is offset by a small deficit of £19,000 on revenue expenditure.
Trust Funds
The Council administers a number of trust funds. The value of the trusts fund balances was £4.696 million as at 31 March 2005. This represents a net increase of £462,000 compared to the previous year.
This increase arose from an upwards revaluation of investments of £361,000, additional new funds of £13,000 and a net surplus of £88,000 after deducting income from expenditure.
Financial Position
The detailed financial statements, set out on pages 9 to 68, present fairly the financial position of Aberdeen City Council for 2004/05 and its income and expenditure for the year ended 31 March 2005.
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 & ICT23
June 2005
Index
Corporate Governance Arrangements
Explanatory Foreword
Statement of Accounting Policies
Consolidated Revenue Account
Notes to the 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 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 Improvements Fund
Glossary of Terms
Statement of Responsibilities for the Financial Statements
Audit Certificate
Statement on the System of Internal Financial Control
Performance Indicators
