Annual Report and Statement of Accounts - Oldham Councilcommittees.oldham.gov.uk/documents/s34174/Statement... · Government body to publish their Statement of Accounts for 2011/12,

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Annual Report

and

Statement of Accounts

2012/13

Statement of Accounts 2012 - 2013

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If you require an audio, Braille, large printed or different language version of this document please contact Mel Creighton 0161 770 4251. ________________________________________


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Contents

Pages 1.0 Preface 5 1.1 Introduction to the 2012/13 Statement of Accounts by Councillor Abdul

Jabbar, Cabinet Member for Finance and Human Resources 5

1.2 Explanatory Foreword by the Borough Treasurer 6 2.0 Statements to the Accounts 76 2.1 Statement of Responsibilities for the Statement of Accounts 76 2.2 Auditor’s Statement 77 3.0 Core Financial Statements and Explanatory Notes 81 3.1 Movement in Reserves Statement 82 3.2 Comprehensive Income and Expenditure Statement 83 3.3 Balance Sheet 84 3.4 Cash Flow Statement 85 3.5 Index of Explanatory Notes to the Core Financial Statements 86 3.6 Explanatory Notes to the Core Financial Statements 88 4.0 Supplementary Financial Statements and Explanatory Notes 215 4.1 Housing Revenue Account (HRA) 216 4.1.1 Housing Revenue Account Income and Expenditure Account 216 4.1.2 Statement of Movement in the Housing Revenue Account 217 4.1.3 Index of Explanatory Notes to the Housing Revenue Account 219 4.1.4 Explanatory Notes to the Housing Revenue Account 220 4.2 Collection Fund 224 4.2.1 Collection Fund Income and Expenditure Account 224 4.2.2 Index of Explanatory Notes to the Collection Fund 225 4.2.3 Explanatory Notes to the Collection Fund 226


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Pages 5.0 Other Statements 229 5.1 Annual Governance Statement 229 5.2 Glossary of Terms 240


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1.0 Preface

1.1 Introduction to the 2012/2013 Statement of Accounts by Councillor Abdul Jabbar, Cabinet Member Finance, Human Resources and Strategic Partnerships

Councillor Abdul Jabbar

Welcome to Oldham Council’s Statement of Accounts for 2012/13. Oldham Council continues on its journey of recovery and improvement and there have been many significant changes over the 2012/13 financial year. This has included the approval of an additional £106m capital investment programme which will be absolutely fundamental in supporting the regeneration of the borough. This capital investment includes; Hotel Futures, significant investment in Leisure facilities across the borough, regeneration of the Old Town Hall, development to key ICT systems, Highways and Schools among other further improvements to the town centre. The revenue budget in 2012/13 delivered a net budget saving of £24.493m, this was on top of the £40m in the previous financial year. During 2012/13 I presented to Council a two year budget proposal with savings of £17.735m in 2013/14 and £12.976m 2014/15. Following the Local Government settlement announced in late 2012 it was identified that a further £7.528m was required in 2014/15, totalling £20.504m of savings required in this year. As a Co-operative Council we have continued to work closely with our District Partnerships, residents, partners and staff to identify opportunities to change the way we set priorities for spending and the way that we deliver services. Last year we continued our success in closing our accounts early and being the first Local Government body to publish their Statement of Accounts for 2011/12, on the 25 June 2012. This year has seen a further improvement in this timescale, publishing as we have on the 31 May 2013 and this is a fantastic achievement. I would like to take this opportunity to thank all of our finance and audit staff who have worked particularly hard under very challenging circumstances over the past few months in order to achieve a two year balanced budget and also to close the accounts so quickly and to such a high standard.


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This careful management of our finances enables us to make fully informed decisions about the appropriate use of Council resources and deliver the quality of services that residents have come to expect. Councillor Abdul Jabbar Cabinet Member for Finance, Human Resources and Strategic Partnerships


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1.2 Explanatory Foreword Message from the Borough Treasurer Oldham Council has continued to drive forward its financial transformation and these accounts represent a key element of that greater programme of work. The accounts were completed and handed over for external audit on the 26 April 2013 and were signed off and published on the 31 May 2013, 4 months in advance of the statutory deadline. This level of achievement is only possible because of the dedication of all the finance and internal audit staff who together form the team that continues to deliver sustained and continuous step change improvements across the whole spectrum of financial management. By delivering audited accounts in such a time frame the Council is able to report to all its stakeholders at the earliest opportunity and the resources of the service are then directed towards the fiscal challenges that face the Council for the foreseeable future. The financial standing of the Council is very robust, with a two year budget agreed, sound and improving financial management practices, a financial change programme that aims for excellence in all areas along with developing plans to address the challenges to be faced from 2015/16 and beyond.

Capitalising on the good practice now established in closing the accounts, the style and format of the accounts that has been used for 2012/13 is similar to that used last year. In my report accompanying the financial statements for the year ended 31 March 2013, I have provided an overall explanation of the Council’s financial position both during 2012/13 and into 2013/14, including information about the operation of Oldham Council as well as major influences affecting the accounts. The report is prepared in a style to enable readers to understand and interpret the accounting statements. By producing this report, I aim to give electors, local residents, Council Members, partners, stakeholders and other interested parties confidence that public money which has been received and spent, has been properly accounted for and that the financial standing of the Council is secure.

I have prepared the Explanatory Foreword so that it is structured as follows: 1. An Introduction to Oldham 2. Some Key Facts about Oldham 3. Some Key Facts about Oldham Council 4. Key Issues that Influenced the Financial Position in 2012/13 5. Key Events Affecting the Council in 2012/13 and Influencing Future Years 6. The Impact of the 2013/14 Budget Setting Process 7. Other Issues Affecting Oldham Council with an Impact in Future Years 8. Key Accounting Information for the Financial Year 2012/13 9. Receipt of Further Information 10. Acknowledgements

Steven Mair Borough Treasurer


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1 An Introduction to Oldham Oldham Council is one of the 10 Local Authorities in the Greater Manchester region. The Metropolitan Borough of Oldham occupies a key position between Greater Manchester and the Leeds City Region and provides a gateway to the North West and to Yorkshire and Humberside. It lies in the North East of Greater Manchester and covers an area of approximately 55 square miles (142.365km sq). It is located within the foothills of the Pennines and stretches from the Northern edge of the Peak District National Park (indeed almost a quarter of the borough is within the National Park) to the outskirts of the City of Manchester. It shares its borders with the City of Manchester, the Metropolitan Boroughs of Tameside and Rochdale and to the east, Kirklees and Calderdale. No residential location in the borough is more than two miles away from open countryside.

The borough is strategically located near the M62 and is connected to it by the A627M and the M60. The transport network has now been greatly enhanced with the Metrolink Extension connecting Oldham Mumps, Shaw and Derker to Manchester City Centre, with completion to the town centre due early 2014.

Oldham has a proud industrial heritage but, along with many towns and cities, the industries on which the wealth of the area was built have now declined. Regeneration, both in terms of employment opportunities and physical redevelopment, is recognised as being very important to the future prosperity of the borough and is a key aim of the Administration. The Council has to provide services such that it meets the needs of its citizens, serving both an urban and rural environment and this is influenced by the make up of the population, education, the economy, health and housing issues.

The Council’s ambition is to develop a co-operative future where everyone does their bit to create a confident and ambitious borough.

Oldham is part of the dynamic Sub-Region and works with partners to play a positive role in the future economic success and regeneration of Greater Manchester. The Council plays an active role in shaping the strategic direction of Greater Manchester, both in terms of its formal governance via the Greater Manchester Combined Authority, and also in relation to developing the relationship between the city region and Government. During 2012/13 Oldham Council and its partners have continued to play a key role in developing and delivering the Greater Manchester Strategy delivery plans. The year has also seen the review of the Greater Manchester Strategy which was originally approved in 2009. The revised strategy will be approved during 2013/14.

2 Some Key Facts about Oldham

I have included those key factors that readers of the Statement of Accounts would need to be aware of, in order to appreciate the issues that influence the services provided by Oldham Council. I have set these out as follows, using the most up to date statistical information:


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Population

Office for National Statistics Mid-Year Estimates for 2011 show that Oldham had a total estimated population of 225,200. Within Oldham’s population: � 50,400 were aged 0-15 years (22.4% of Oldham’s population); � 141,600 were aged 16-64 (62.9% of Oldham’s population); � 33,200 were aged 65 or over (14.7% of Oldham’s population).

Oldham has a relatively youthful age structure, with proportionally more people aged 0-15 years (22.4% of Oldham’s population, compared with 18.8% England-wide) and proportionally fewer people aged 65 or over (14.7% compared with 16.5% England-wide).

Oldham’s population is projected to increase to around 237,000 by 2021, with much of this growth due to projected increases in the number of people aged 65 and over.

According to the 2011 Census Population Estimates by Ethnic Group, Oldham has a higher proportion of non-white Black and Minority Ethnic (BME) residents (22.4%) than the North West (9.8%) or England (14.6%). Within Oldham’s population:

� Three in four people (75.6%) are White British; � Pakistani-heritage residents (10.2%) are the second largest group in Oldham; � Bangladeshi-heritage residents (7.4%) are the third largest group in Oldham; � Smaller proportions of Oldham residents are from mixed backgrounds (1.6%), White

Irish (0.7%), Other White (1.3%), Indian (0.7%), Other Asian (0.8%), Black African (0.7%), Black Caribbean and Other Black (0.5%), Chinese (0.3%) and Other backgrounds (0.2%).

Oldham’s population is more ethnically diverse within younger age bands.

Deprivation

According to the Indices of Deprivation 2010:

� More than one in five Oldham residents (21.4%) live in income-deprived households; � Around three in ten Oldham children aged 0-15 (30.1%) live in income-deprived

households (Income Deprivation Affecting Children Index); � More than one in five Oldham residents aged over 60 (23.4%) live in income-

deprived households (Income Deprivation Affecting Older People Index); � Five of Oldham’s twenty wards are among the 5% most income deprived wards in

England (Coldhurst, St. Mary’s, Alexandra, Werneth and Hollinwood); � Almost three in five children aged 0 to 15 (59.4%) in Coldhurst and over half (53.5%)

in St. Mary’s are living in households experiencing income deprivation; and � Almost three in five older people aged 60 and over (59.8%) in Coldhurst live in

income deprived households, as do more than two in five older people in St. Mary’s (46.3%) and Werneth (45.3%).


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Education

In relation to education:

� Around 21.9% of school pupils in Oldham are eligible for free school meals; � 85.8% of school children in Oldham achieved five or more GCSE grades A*-C and

55.9% of school children in Oldham achieved five or more GCSE grades A*-C including English and Maths in 2012 (national average 81.8% and 59.4% respectively).

Economy

Economic data tells us:

� The unemployment rate, (Job Seekers Allowance (JSA)), in Oldham was 5.8% in

October 2012. This was an increase of 5.1% since October 2011, and the rate in Oldham is significantly higher than the national average of 3.8%. Female unemployment had increased by 11.4% since October 2011, such that Oldham had the highest unemployment rates in Greater Manchester in October 2012.

� 5.1% of young people aged 16 to 18 in Oldham were not in education, training or employment (NEET) in October 2012 with the highest ward rates in Alexandra (8.8%) and Hollinwood (8.2%).

� The average household income in Oldham is £32,648, which is less than the Great British average of £35,990.

Housing

Housing information indicates that: � ONS survey- There are 93,025 households. Of these 89,703 households are

inhabited, of which 58,259 (64.9%) are privately-owned, 18,918 (21.1%) are social-rented, 10,944 (12.2%) are privately rented and 1,582 (1.8%) in shared ownership or others. In addition, a total of 3,322 are currently vacant.

� 17% of private homes are in poor repair and 19.8% of households are in fuel poverty. � Over 300 empty homes have been brought back into use in the last year. � The Council has reduced homelessness cases from 961 households in 2003/4 to

only 62 in 2012/13.

3 Some Key Facts about Oldham Council Oldham Council is a multifunctional and complex organisation. Its policies are directed by the Political Leadership and implemented by the Executive Management Team and officers of the Council. In the following section of my report, I present the political and management structures of the Council, the political ethos driving the policy and the agenda of the Council and the means by which these are implemented and managed. I also outline some of the key achievements that have been made by the Council over the past few years, and also highlight the development and continuing improvement in strategic financial management.


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3.1 The Political Structure of the Council in the 2012/13 Municipal Year

Oldham has 20 wards and the Council consists of 60 elected Members and following the local election on 3 May 2012 the political make-up of the Council was:

Labour Party 44 Councillors

Liberal Democrat Party 14 Councillors

Conservative Party 2 Councillors

As a result of the local election, the Labour Party increased their majority and remained in control, continuing with the driving ethos of a Co-operative Council.

The Council has adopted the Leader and Cabinet model as its political management structure arising from the Local Government and Public Involvement in Health Act 2007. The requirements of the Act are such that the Leader of the Council has responsibility for the appointment of Members of the Cabinet, the allocation of Portfolios and the delegation of Executive Functions.

In accordance with the Local Government Act 2000, the Cabinet is not required to be politically balanced. The Executive Portfolios were agreed at the Annual General Meeting on 23 May 2012 and a Cabinet member took responsibility for each one of these Portfolio areas. The Cabinet for 2012/13 was comprised of 8 Labour Party Members, with the following Portfolio areas:

� Strategic Projects and External Relations � Business Skills and Town Centre � Co-operatives and Community � Housing, Transport and Planning � Finance, Human Resources and Strategic Partnerships � Social Services and Community Health � Education and Safeguarding � Neighbourhoods and Devolved Services

Most decisions of the Council were delegated to the Cabinet, which met on a three weekly cycle of meetings. However, there were also meetings of all Council Members every six weeks where major policy decisions were taken such as approving the annual budget and setting the level of the Council Tax.

Cabinet Advisory Panels (CAPs) continued to meet to enable early engagement with non-Executive Members in key policy areas of the Council’s policy framework. These were not formally constituted committees but had been created to inform the Executive Members on appropriate policy issues for eventual decision making. There are five CAPs, namely:

� Housing, Transport and Regeneration � Children, Education and Leisure � Adult Care and Health � Neighbourhood Working and Co-operatives � Finance, Human Resources and Partnerships


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Previous overview and scrutiny arrangements remained and were still aimed at examining and providing challenge to the operation of the Council. To achieve this, scrutiny groups were made up of non-Executive Members. The Council’s Annual General Meeting on 23 May 2012 agreed that there were two bodies, as follows:

� Overview and Scrutiny Board � Performance and Value for Money Select Committee

The Council’s Audit Committee met regularly throughout 2012/13 to consider matters such as the 2011/12 Statement of Accounts, treasury management reports, internal control reports on activities within the Council’s Directorates and feedback from the external auditors. There was also a Standards Committee which met occasionally to consider the ethical agenda for the Council including the compliance with the Code of Conduct by elected Members and five Regulatory Committees, as follows:

� Licensing � Planning � Selection � Appeals � Traffic Regulation Order Panel

3.2 The Management Structure of the Council

Supporting the work of elected Members is the organisational structure of the Council headed by the Executive Management Team (EMT). This is comprised of Oldham Council’s most senior officers, the Chief Executive, the Deputy Chief Executive, three Executive Directors and the Chief of Staff. I attend meetings of the Management Team in my role as Borough Treasurer (the Section 151 Officer) together with the Borough Solicitor as the Monitoring Officer, the Director of Adult Services and the Director of Public Health as required. This ensures that the key Statutory Officers are represented at the most senior level of the Council.

A restructure of the directorates has occurred as at 1 April 2013. The directorates and Executive Management Team for the beginning of 2013/14 financial year are detailed below:

� Charlie Parker – Chief Executive � Carolyn Wilkins - Assistant Chief Executive � Michael Jameson - Executive Director Commissioning (including Director of

Children's Services) � Emma Alexander - Executive Director Commercial Services � Elaine McLean - Executive Director Neighbourhoods � Mark Reynolds – Chief of Staff

For the 2012/13 financial year the Assistant Chief Executive and each of the Executive Directors led a Directorate team that is split into management divisions, each headed by an Assistant Executive Director. The Directorates were:

� People, Communities and Society; � Performance, Services and Capacity; � Economy, Place and Skills; and � Assistant Chief Executive.


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EMT members are not only responsible for managing a range of services, they also direct the overall improvement and future plans for Oldham. They work together to deliver the most effective services possible for the borough’s diverse communities and to ensure that Oldham plays a full part in national, regional and sub-regional activities. The EMT commissions, leads, directs and undertakes programmes/projects to achieve the objectives of the corporate work programme, modernise the Council and address the issues of borough community cohesion.

The EMT works with other local organisations to promote the interests of Oldham including:

� The Public Service Board;

� Local people and businesses; � The voluntary sector; and � Regional Authorities.

Each Executive Director is responsible for leading on some of the main partnership arrangements throughout the borough including key neighbourhood based activity. The organisational structure as at 31st March 2013 is shown in the diagram below.

Chief Executive’s Office:

• Lead for Repositioning Oldham.

• Strategic Health Issues.

• Link between the Executive and Political Leadership.

Charlie Parker Chief Executive

Mark Reynolds Chief of Staff

Michael Jameson Executive Director Commissioning

Emma Alexander Executive Director

Commercial Services

Elaine McLean Executive Director Neighbourhoods

EMT manages the delivery of Council services as well as directing the overall improvements and future plans for Oldham. It provides managerial leadership and supports the elected Members of the Council in:

• Developing strategies.

• Identifying and planning resources.

• Delivering plans.

• Reviewing the authority’s effectiveness with the overall objective of providing excellent services to the public.

Carolyn Wilkins Deputy

Chief Executive

Executive Management Team


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3.2.1 Commissioning

This Directorate has three management divisions as follows:

a) Children, Young People and Families - ensures the Council meets its statutory requirements as a Children’s Services Authority in respect of children and young people. This includes supporting schools in raising educational standards, keeping children safe, looking after children in care and co-ordinating and developing help for children with special needs.

The Children Act 1989 Section 27 imposes a general duty on Local Authorities to safeguard and promote the welfare of children in need in their area, and so far is consistent with that duty to promote the upbringing of children by their families by providing a range and level of services appropriate to the needs of those children. The required functions are implemented by commissioning or directly delivering universal, targeted and specialist services. Services are arranged into three streams - Safeguarding and Vulnerable Children, Family and Youth Support, Learning and Attainment.

b) Adult Social Care - provides a range of care services to some 4,000 older people and disabled people, usually by means of an individual budget to help them choose their own mix of services. It also supports a broader group of 8,000 people who have moderate frailty or disability by means of information, support and preventative services. Similarly, the service provides information, support and respite services to the carers/family members of both these groups.

The service has particular regard to ensuring the protection of vulnerable adults through the Adult Safeguarding Board and the Safeguarding team that investigate individual cases.

The main statutory obligations are to carry out Community Care and Carer assessments and these are completed by the Social Work service, including those who are jointly located with the NHS Mental Health Community teams. Nearly three quarters of care provision is commissioned from the external sector, charities, voluntary organisations and private companies. The remaining quarter is provided by internal services such as Reablement, Employment and Vocation projects, Community Response, Day Services, the Link Centre and Supported Accommodation.

c) Joint Commissioning – this division is continuing to develop a programme of joint commissioning with colleagues in the National Health Service. It identifies those areas where efficiency, effectiveness and quality of service can be improved by jointly commissioning and/or integrating and streamlining service delivery. The work programme covers both children’s and adult’s services and the current workstreams include continuing health care and complex care, out of borough placements and substance misuse (drug and alcohol services).

The Supporting People programme commissions housing-related support services to vulnerable people. The core objective is to enable them to attain and to sustain independent living in the community. Services are preventative and underpin many other service interventions by ensuring people can access and retain a safe, stable and secure home environment.


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3.2.2 Neighbourhoods

The Neighbourhoods Directorate consists of the following four divisions:

a) Strategic Projects, Asset and Facilities Management - provides a series of strategic and operational property, regeneration and inward investment functions, that align the asset base and physical development with the Council’s corporate and financial goals/objectives and Greater Manchester Strategies.

b) Liveability (Environment) - provides the key frontline services of Waste Management, Street Scene, Parks and Countryside, Parking, Street Lighting and Highways Operations.

c) Housing and Public Protection – develops a clear vision for planning and investment in housing, co-ordinating activity around affordable warmth, eliminating homelessness, investment and renewal of private sector housing areas and overseeing the delivery and monitoring of two Private Finance Initiative schemes. The Public Protection services provide regulatory services for Environmental Health, Trading Standards, Licensing and Registrars as well as having responsibility for the Council’s corporate Civil Resilience and First Response functions.

d) Place Shaping (Economic Development and Planning) - helps shape the natural and built environment of the borough. This includes developing the statutory land use planning framework, co-ordinating the physical regeneration of the borough and developing transport strategy and delivery plans. It also processes planning applications, takes enforcement action on planning contraventions, helps protect local heritage and conservation areas, and is responsible for supporting growth of local businesses, increasing local skill levels and the employment rate.

3.2.3 Commercial Services

The Commercial Services Directorate consists of the following five divisions:

a) Borough Solicitor – provides legal advice and representation for the Council, including Monitoring Officer duties, constitutional services and democratic services to support the Committees of the Council, Elections, Land Charges services and Members services.

b) Borough Treasurer – my division leads the financial planning process and provides financial management information and advice to elected Members, governors and managers, ensuring optimum use of available resources and management of revenue and capital budgets. I also have responsibility for treasury and cash flow management, the Internal Audit service, safe custody of assets/risk management, insurance, income collection and payment services and the client management function for the Unity Partnership Service for debtors, creditors and payroll.

c) Customer and Business Change – provides services including Customer Services including strategy, implementation and delivery, complaints handling, including Ombudsman complaints and Freedom of Information advice and monitoring. It also provides Value for Public Money strategy and implementation, strategic ICT


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(excluding schools) and the client function for the Unity Partnership for business relationships for the ICT Service.

d) Internal Services – provides the Business Support Service, Facilities Management, including catering and cleaning (schools and non-schools), performance monitoring including the Overview and Scrutiny performance management framework and the co-ordination of external reviews.

e) Procurement – ensures all goods and services are procured in an open and transparent manner to ensure the most cost effective and commercial solution, manages the tendering process in line with the rules and regulations and manages supplier relationships and contracts to deliver best value.

3.2.4 Deputy Chief Executive’s Directorate

The Deputy Chief Executive’s (DCE) Directorate consists of the following seven divisions:

a) Corporate Policy and Research – provides policy and research information to the Council by analysing the national and regional landscape and developing the Council’s approach to policy and strategy across a wide range of areas that impact on all Directorates in the Council.

b) Communication and Marketing – manages the reputation and communication needs of Oldham Council. It is responsible for media relations handling approximately 2,000 queries per year and issuing around 40 press releases per month. It also handles the design requirements of the Authority and its partners, it manages and maintains the content and design of the Council’s website and employee intranet, and manages the marketing of Council services and facilities. The team is also responsible for internal communications and employee engagement, including events and employee communication channels. An increasing area of focus for the team is the use of social media to market the borough and communicate with local residents.

c) Community Cohesion – leads work across Oldham Council and the Oldham Partnership to manage community tensions and build good community relations. It contributes to work to build a strong voluntary, community and faith sector, and to tackling inequality, for example through commissioning legal and advice services which meet the needs of residents.

d) Customer Services – is responsible for the development and implementation of the Council’s Customer Services Strategy which influences the way services are designed and delivered, ensuring they are accessible to customers and are delivered through the most cost effective channels. It is also responsible for managing the business relationship with the Unity Partnership for Customer Services, Revenues and Benefits and undertaking statutory functions retained by the Council in relation to these services, such as monitoring benefit claims processing to ensure accurate and timely payment of benefit.

e) DCE Management and Administration – incorporates the administrative support for the Directorate and is a fully recharged service.


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f) Neighbourhoods Service – co-ordinates local service delivery across each of the six District Partnerships covering the borough. The service works with elected Members, partners and local service providers to connect with local citizens so that they play an active role in shaping, influencing and delivering services that meet local priorities. The Neighbourhoods service also includes libraries, arts and heritage services and works with a range of local, regional and national partners to provide a wide range of accessible leisure, learning and information opportunities. Services and activities are delivered in Council facilities and community settings, and are tailored to be accessible and relevant to all ages and sections of the community.

g) People Services – provides strategic guidance to the organisation of all people related matters as set down within the People Framework. Putting mechanisms in place to ensure the business has the right people with the right capabilities in the right role, with appropriate terms and conditions of employment and the ability to advise and guide managers at all levels on any people related issue.

3.3 Repositioning to a Co-operative Borough Following a period of recovery in 2009, through two years of intensive improvement the Council has made a great deal of changes - but this is just the beginning of our journey. The council now faces a significant reduction in its funding and, after having to make savings of over £100 million over the last four years, has an additional £38 million to find over the next two years.

Alongside these financial challenges, the Council has a new ambition – to become a Co-Operative Council. This means working more closely with residents, partners and businesses to improve Oldham. To meet these challenges we need to change the way we do business, by working smarter and delivering services differently we will not only become more efficient and cost effective, we will also change the way in which we are viewed by our customers and the residents of our borough.

Repositioning Oldham has four overall objectives which will enable us to deliver the programme and in doing so will help us on our way to achieving our ambition to becoming a Co-Operative Council. These objectives are key to the programme - some of you will have heard me talking about them at staff conferences or may have come across them on the intranet.

The Repositioning diagram gives a high level overview of each of the objectives. All of the Council's change activity should contribute to at least one of the Repositioning objectives.


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3.4 Neighbourhood working and devolution

A key aspect of both the Co-operative Council and the Repositioning Oldham agenda is a programme of devolution towards a neighbourhood delivery model.

The Council is committed to changing its relationship with citizens, partners and staff. This means being recognised as a receptive council that listens, responds and engages as locally as possible and has strong civic and community leadership through a strengthened role for local leaders. In addition, the budget proposals for 2013/14 and 2014/15 have been developed within the context of the Council's commitment to greater devolution of services, decisions and resources to a more local level. Rather than identify savings proposals for specific areas at a council/corporate level, it is being considered that District Partnerships themselves consider future delivery options in relation to a range of key service areas. These delivery options will also incorporate a review of Council buildings/facilities from which services are delivered in the District, as well as identifying an overall reduction in total support costs following introduction of new delivery/operational arrangements.

It is intended that each District Partnership identifies and agrees their preferred future delivery arrangements. In doing so, all District Partnerships will need to operate within the agreed neighbourhood settlement in order that devolved working contributes to the required budget reductions.

This vision of enhanced neighbourhood working will bring about improved outcomes for residents through increased ownership and co-production of key services. It may also generate efficiencies by allowing the Council to redesign central management and reporting


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structures across devolved services. Some initial work launched in 2012/13 saw youth services budgets devolved to District Partnership areas.

The objectives of devolution have been agreed as:

� Strengthened relationship between the Council and citizens and places; � Greater recognition of Councillors as civic and community leaders; � Improved integration across services and partners at a local level; and � Greater citizen involvement in local decisions as well as design, commissioning and

delivery of local services.

The four key work areas within the Council’s devolution agenda are:

� Neighbourhood Teams and local service delivery; � District Town Halls and local identity; � Local involvement and engagement: including decision making and the Co-operative

agenda; and � Strengthening democracy including member development and support.

3.5 Oldham Council’s Corporate Plan One of the key strategic documents that frame the actions of the Council is the Council’s Corporate Plan. This is a working document that exists to help elected Members, staff and partners work together to deliver the vision for Oldham. Its primary purpose is to set out our story of place and our priorities for Oldham - what we are doing and why we are doing it.

Our new corporate ambition and objectives were agreed at Full Council on 23 May 2012.

Our ambition is to deliver a co-operative future where everyone does their bit to create a confident and ambitious borough.

There are three corporate objectives that underpin the delivery of the ambition. They are:

1. A productive place to invest where business and enterprise thrive. 2. Confident communities where everyone does their bit. 3. A co-operative council creating responsive and high quality services.

The objectives have been developed to reflect the key priorities of the Council including economic growth and regeneration, strong local leadership and delivering value for money services.

3.6 Managing Performance

Proactively and effectively managing performance is central to delivering the Council’s service improvements, statutory obligations, greater value for public money and the strategic objectives of the Corporate Plan.

The business planning processes have also been strengthened to meet local requirements, and created in such a way to ensure robust links between both political obligations and the strategic objectives of the Council, through the development of a Corporate Plan and internal business plans. The table below sets out this business planning framework that the Council works to:


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As the Council’s key planning document, the Corporate Plan is the backbone of the Performance Management Framework and supporting the delivery of the Corporate Plan are the comprehensive business plans for each of the Council’s Directorates. These set out the medium term priorities for each Directorate, and are supported by the Divisional and Operational Plans that identify how each Service and Business Unit within the Council will contribute to the achievement of key objectives.

Operational Plans translate the key objectives of the Directorate and Divisional Plans into more detailed objectives, and all staff receive a performance appraisal through which each individual’s contribution to delivering these objectives and priorities are identified and agreed.

Reports on performance are used by senior managers and elected members to ensure that services are delivered and offer value for money which meet the needs of all the Oldham communities. By adopting a systematic approach, which includes regular performance reports at various levels of detail, the Council constantly reviews service delivery and the expected/achieved outcomes for citizens. In this way, the strengths in a particular area can be identified and good practice shared. Equally areas of concern can be identified to facilitate appropriate action where necessary, to ensure that the best possible outcomes are delivered.

Part of the performance management framework is the consideration by Cabinet of financial monitoring reports outlining financial performance from months 3 to month 9 so that Members are advised of all key issues that may affect the outturn for the year. This allows any necessary remedial action to be taken. 3.7 The Council’s Key Achievements

Oldham is well positioned to be able to adapt and adjust to meet some of the new challenges. Since 2008, the Council has been on a journey of recovery and improvement

Corporate Plan 2012-2015

Directorate Business Plans

Appraisal

Operational Plans

Informed by:

•District Plans

•GM Strategy

•Statutory Plans

•External Inspection

Medium Term

Financial Strategy

Divisional Plans


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that has led to a number of positive outcomes and achievements recognised through the Most Improved Council Award in March 2012. The improvement journey has also provided a firm base from which to reposition the Council. This means developing different ways of working and preparing for how the Council will deliver services in future, for example, moving from being a provider of services to more of a commissioner.

The Council’s key achievements over the last year include:

� Found savings of £26.601m to balance the budget in 2012/13 (a net budget reduction

of £24.493m after the financing of investments). � First local government body to publish its 2011/12 accounts and likely to remain so

with an earlier date in 2012/13. � Introduction of employee volunteering scheme. � GCSE results improved for the twelfth consecutive year (56% of all children gained 5

A* - C qualifications including Maths and English in 2012 up from 55% in 2011). � Over 300 empty homes have been brought back into use in the last year. � Metrolink Extension brought the first trams to Oldham in June 2012 with further

expansion taking place. � Introduced the living wage for staff. � Introduced Greater Manchester’s first local authority mortgage scheme. � Introduced ‘Open Council’ sessions with questions being submitted by the public

through a range of channels including twitter and email, and live web streaming of the meetings.

� Undertook a highly successful Invest in Oldham event in London. � Winner of Britain in Bloom Best City award. � Created 172 apprenticeships in just 100 days.

3.8 Strategic Financial Management

The Council continues to improve its strategic financial management. Finance services have been transformed over the past three and a half years. Integral to the Council’s wider programme of improvement and transformation, the finance service is now instrumental in delivering the innovation and change which have transformed Oldham into one of the highest achieving councils in the country. Building on this success, the Finance team has continued to deliver exceptional results over the past year, including:

� Accurately forecasting the savings required for 2010/11, 2011/12 and 2012/13

budget through an intelligence-led and realistic approach to current financial challenges, better enabling the organisation to identify and prepare for these savings ahead of their implementation.

� Assisting Council services to identify budget options by November 2012 of £14.863m against a target of £17.735m for 2013/14 and £12.693m against an original target of £12.976 for 2014/15. Full proposals for the two years were approved by Council on 17 April 2013.

� Ensuring the Council’s 2011/12 accounts were closed, audited and published with unprecedented speed and accuracy, being the first Council ever to publish audited accounts in June and doing so with a balanced budget. This achievement has been lauded by the Audit Commission, who ensure that the Council’s key financial systems are fully audited regularly during the view to support the focus on sound financial management and control.


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� Continuing the accurate monthly monitoring reporting of the 2012/13 revenue budget, building on improved budgetary processes.

� Continuing the reduction in the Council’s net overall debtor arrears. This has enhanced the Council’s balance sheet position, reducing exposure to bad debts and ensuring that managers focus on cash collection in addition to income generation.

� Providing on-going financial advice for major capital initiatives, particularly those that were approved at the 11 July 2012 Council meeting financed by prudential borrowing investment of £105.556m. This included the transformation of Oldham Town Centre and other major regeneration schemes.

� Issuing fully detailed budget and financial advice packs in February, enabling schools to access financial information and advice much earlier in the budget cycle, thus facilitating earlier and better-informed financial planning.

� Instigation of a systems integration programme to enhance financial and related information and improve efficiency and effectiveness.

� Fully comprehensive monthly closedowns as part of the continuous improvement in the Council’s accounts.

� Enhanced budget and accounting information through to EMT and members � Revised training programme and contracts for all finance staff and trainees, as

appropriate.

The improvement will of course continue and develop in 2013/14, hence the accelerated production of these accounts for 2012/13. 4 Key Issues that Influenced the Financial Position in 2012/13 Having introduced you to the Council and its operating ethos, I would now like to explain the key financial issues that have framed 2012/13. In my role as Borough Treasurer, it is my responsibility to ensure that Members of the Council receive robust and timely information to enable them to approve the budget for each financial year. I therefore prepared a range of reports for the Council to consider at its meeting of 22 February 2012. There were three budget reports covering the revenue budget, capital programme and the Housing Revenue Account (HRA) budget and also the Capital Strategy, Treasury Management Strategy, Medium Term Financial Plan and the Chief Financial Officer’s report setting out the recommended level of general balances and reserves. The key budgetary issues for 2012/13 are set out as follows. 4.1 Revenue Budget

The Council was always aware that the 2012/13 budget process would, in many respects, be just as challenging as that for 2011/12. Although the savings target was lower (£24.493m compared to £39.560m) it would be a harder test to propose achievable savings proposals. The information issued in the Comprehensive Spending Review (CSR) and confirmed by the Chancellors Autumn Statement and the Local Government Finance Settlement, highlighted that there would be a considerable savings target for 2012/13 but that future years would also be challenging. The 2012/13 revenue budget process was therefore influenced and framed by the need to make radical reductions in expenditure, whilst still aiming to address priority issues for the Council. The financial pressures building up the budget gap for 2012/13 are set out below.


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Build up of the Initial Budget Gap

Initial Budget Gap 2012/13 Cash

Impact

£m

Increase in Costs

Pension Increase notified by GMPA 0.500

Levy Increase - GMWDA 2.521

Levy Increase - GMCA 0.668

Approved Growth for Youth Zone 0.300

Policy/Funding, one off saving proposals and other emerging issues 2.600

Pay Award and Contractual/operational inflation and pressures such as

carbon tax

4.236

Anticipated Reduction in NHS related funding 0.130

Increased cost of New Burdens transfer 0.060

Total Increased Costs 11.015

Changes in Funding

Loss of Government Funding 11.213

Council Tax 0.370

One off Use of Reserves for 2011/12 2.521

Anticipated use of Reserves (0.956)

Reduction in Collection Fund Surplus 0.330

Total Loss of Funding 13.478

Initial Budget Gap 24.493 There would be an extensive exercise to prepare budget proposals and examine these via a Star Chamber process. The process by which the savings target for 2012/13 was addressed developed from several perspectives with savings proposals being put forward: � A traditional Directorate based approach (necessary to maintain accountability and

the current structure of the accounts). � Better procurement processes. � Improving business processes including reducing red tape and bureaucracy. � Using our buildings more effectively. � Partnership working across AGMA and across the public sector. � Service re-design through channel shift to less expensive customer management. � Income generation / cost reduction from review of ‘traded services’ and a more

commercial approach. � Savings from Unity activity – existing and future. � Reductions in corporate services in response to the changing shape of the

organisation. � Continuing to align service delivery and the neighbourhood agenda; reducing tiers of

management and introducing new ways of working. � Rationalising Council owned assets; disposing of vacant buildings, thereby making

savings on revenue costs and generating capital receipts. � Maximising income generation through charging for discretionary services and

trading services on behalf of other authorities. � Working with other authorities to save costs by reducing overlap and duplication. � Efficiencies arising from changing government policy and local priorities around co-

operative working. � Early Intervention and Prevention.


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� New Ways of Working. � Integrated Commissioning. � Partnership Working with health and schools.

There was a considerable build up to setting the revenue budget with the first formal report to Members presented on 17 November 2011 at the meeting of the Overview and Scrutiny Performance and Value for Money (PVFM) Select Committee. There then followed a series of other reports, culminating in the approval of the budget and 2012/13 Council Tax at the Council meeting on 22nd February 2012. The key stages in the revenue budget process are set out as follows.

The Overview and Scrutiny Performance and Value for Money (PVFM) Select Committee Meeting was presented with a report to advise Members that there was likely to be a £24.493m gap in the resources available to meet demands, and therefore best estimates at the time were that savings of £24.493m would be required. The revenue spending forecast was based on a range of assumptions about the level of income and expenditure required to deliver services, but was also influenced by the anticipated Local Government Finance Settlement and expected increases in the levies to be paid to the Greater Manchester Waste Disposal Authority (GMWDA) and Greater Manchester Integrated Transport Authority (GMITA).

The report advised that a major exercise had been instigated to review the budget and numerous work streams had been initiated to consider potential savings options. These had been subject to examination via a Star Chamber process. Indeed, prior to the Select Committee, there had been a number of Star Chamber meetings and as a consequence £24.493m of savings proposals were put forward for scrutiny split by Directorate. The Members of the Select Committee requested that ten of these savings be reconsidered and, as a result, £1.949m of savings were withdrawn by the Administration for further consideration and not approved at the Council meeting on 14 December 2011. In addition, a further £431k of savings were also withdrawn bringing a total of £2.380m of savings to be reconsidered.

On 14 December 2011 at the Council Meeting, the Council approved the revision to the Council’s 2011/12 net revenue budget to £232.346m to reflect changes to funding arrangements since the start of the financial year, the budget proposals totalling £22.113m detailed in the report be approved and further consideration be given to the £2.380m of budget proposals. The PVFM Select Committee meeting in January received further information about the £2.380m budget proposals, responses to other issues raised at the PVFM meeting of 17 November 2011 and any further savings proposals required to bridge any remaining budget gap, the outcome of which to be reported to the Council budget meeting in February 2012. At the 3 January 2012 Cabinet meeting, the Cabinet approved a report which set out the revised Tax Base for 2012/13 at 63,180. On the basis of no change in Council Tax, Members were advised that this would result in additional Council Tax income of £268k for the Council.

Work to review existing budget proposals and their service impact continued throughout January and early February and a further examination of consultation comments took place so that, where appropriate, they were taken into account in budget decisions. At the 24 January 2012 Overview and Scrutiny Performance and Value for Money (PVFM) Select


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Committee Meeting, the Members were asked to consider the savings totalling £2.380m, to bridge this remaining budget gap. These were then agreed at the Cabinet meeting on 6 February 2012. Cabinet recommended to Council for approval:

a) acceptance of the Council Tax Freeze Grant; b) savings proposals of £2.380m; c) the total budget for Council services for 2012/13 be set at £225.354m subject to

confirmation of precepts and levies; d) the total draw on the Collection Fund for borough wide services of £97.476m,

with £85.031m for Council services subject to confirmation of precepts and levies;

e) the Council Tax, subject to confirmation from preceptors, be set at the same level as for 2010/11.

Cabinet approved that the Cabinet Member for Finance and Human Resources and the Borough Treasurer in conjunction with the Leader of the Council, the Chief Executive and the Executive Director for Performance Services and Capacity be authorised to make any adjustment to the Budget for submission to Council.

Closing the Budget Gap

The approved overall budget for Council Services for 2012/13 together with financing is set out below:

Initial Budget

2012/13

Budget £000

£000

Directorate budget requirements 250.803

Budget options other than use of reserves (24.368)

Budget options from use of reserves (0.125)

Use of Reserves (0.956)

Base Budget Forecast 225.354

This would be funded by:

Total Formula Grant 115.146

Early Intervention Grant 14.861

Housing Benefit and Council Tax Administration Grant 2.100

Learning Disability and Health Reform Grant 5.335

LSSG 0.462

New Homes Bonus 0.294

Council Tax Freeze Grant 2.125

Council Tax 85.031

Total Budget for Council Services 225.354

The table below shows the source of the funding for Council services in 2012/13 as a percentage contribution.


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Revenue Budget Funding £m

%

Contribution

Total Formula Grant 115.146 51.10

Early Intervention Grant 14.861 6.59

Housing Benefit and Council Tax Administration Grant 2.100 0.93

Learning Disability and Health Reform Grant 5.335 2.37

LSSG 0.462 0.21

New Homes Bonus 0.294 0.13

Council Tax Freeze Grant 2.125 0.94

Council Tax 85.031 37.73

Budget Funding 225.354 100

4.2 Capital Strategy and Capital Programme 2012/13 to 2015/16

I also prepared the Capital Strategy and Capital Programme reports which were approved at the Council meeting of 22 February 2012.

The Capital Strategy’s overarching aim is to provide a framework within which the Council’s Capital Investment plans will be delivered. The plans are driven by the Council’s Corporate Plan, the Council’s Co-operative ethos and Repositioning Oldham agenda and alignment with the Council’s Property Strategy and the Asset Management Plan.

The table below sets out the overall level of available resources by category for the period 2012/16. This shows that in total, funding for the capital programme for the period was £76.185m. However, of this, £16.812m relates to the BSF/Academies grant, £9.609m relates to other Government grants with the balance being from other grants and contributions, revenue contributions, prudential borrowing (including the £19m for new investment) and capital receipts.

2012/13 2013/14 2014/15 2015/16

£000 £000 £000 £000

Government Grants 26,421 2,865 4,857 -

Other Grants and Contributions 2,680 - - -

Capital Receipts 4,387 3,830 1,877 -

2011/12 Carried Forward Resources 541 - - -

Prudential Borrowing 36,342 9,335 (1,877) -

Revenue contribution (CERA) 5,814 3,150 3,695 -

Total 76,185 19,180 8,552 -

Capital Programme Funding

Following previous practice, I prepared the Capital Programme so that it balanced over a pre-determined timeframe, in this instance, four years from 2012/13 to 2015/16 to mirror the timeline of the Medium Term Financial Strategy. Capital Proposals for 2012/13 to 2015/16

The table below summarises the approved Capital Programme approved in February 2012 on a Directorate basis:


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2012/13 2013/14 2014/15 2015/16

£000 £000 £000 £000

Corporate Expenditure 1,149 1,000 0 0

Assistant Chief Executives 720 360 360 360

Economy Places & Skills 47,843 19,520 8,552 0

People, Communities & Society – Schools 2,220 0 0 0

People, Communities & Society – Adults Social

Care

400 400 400 400

Performance, Service & Capacity 215 180 180 180

Resources to Allocate 19,478

Total Expenditure 72,025 21,460 9,492 940

Total Funding (76,185) (19,180) (8,552) 0

Balance of Resources available by year -

(Over)/under programming

(4,160) 2,280 940 940

Cumulative balance of resources available for

new projects.

(4,160) (1,880) (940) 0

Proposed Capital Spending

Investment Programme Updates

Since the capital programme was approved on 22 February 2012 reports were presented to Cabinet which approved the allocation of the previously unallocated resources (circa £19m) as follows:

� Investment in the Leisure Estate. � Investment in the Regeneration Sites. � Investment in schools condition works.

In addition there was a significant change to the investment programme in July. A revised investment plan was put forward identifying a selected number of key regeneration projects, which will stimulate private sector investment and economic growth, by investing directly in those projects, and also to invest in the infrastructure which supports our local communities such as roads, schools, adult care and the leisure offer. This is in line with the Council’s determination to positively address the economic challenges and ensure that Oldham’s economy grows despite the financial pressures.Through a focused programme of Council investment it has been seen as an opportunity to show real Community Leadership to lead the regeneration of the borough and make Oldham a borough of opportunity and growth.

Projects that were included fall into the following categories: � Town Centre Regeneration � Other Priority Projects � The Leisure Estate � Investment in Schools � Investment in ICT � Investment in Highways � Neighbourhood Town Halls � Strategic Acquisitions � Adult Social Care � Addressing the Housing Market Renewal Legacy


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In total the capital expenditure proposed for the period 2012/13 to 2016/17 is £105.655m. It was highlighted that some of the costs of the projects still needed to be confirmed which may lead to cost increases, however, the Council could also potentially receive grants, capital receipts and other contributions which could conversely reduce the costs. Anticipated additional costs associated with financing the capital expenditure would be addressed through the revenue budget planning process. Further to this, it was proposed that in accordance with established procedures, the CIPB (Capital Investment Programme Board) leads on the review and schemes and that expenditure is not finally committed until the CIPB is satisfied that the objectives of the project are achievable and the project is financially robust.

4.3 HRA Budget 2012/13

The HRA Budget report was presented for approval at the Cabinet of February 6th 2012 and the Council meeting of 22 February 2012.

Following on from the transfer on 7 February 2011 of the non PFI housing stock to a Registered Social Landlord (First Choice Homes Oldham), the HRA budget has been prepared so that it only deals with properties within the two PFI Schemes and so should remain fairly balanced on an annual basis. Eligible debt will continue to be met from subsidy, with rents and other subsidy allowances effectively passed through to the PFI reserves.

April 2012 marked the most significant change in a generation to the way that council housing is financed; the Localism Act which received royal assent on 15 November 2011 delivered a new local devolved system which replaced the current subsidy regime. In practical terms the HRA is now a self-sufficient ring fenced account which will retain and use rental income, and in the case of Oldham, PFI credits to meet all its management, maintenance and repairs commitments, including the respective unitary charges. The aim of the reforms was to enable councils to manage their housing stock for the benefit of local residents in a transparent, accountable and cost effective way. The determination for Oldham was in line with predictions and the Council received a payment from Central Government of £20.227m. This was received on 28 March 2012.

The HRA reserve is a consolidation of a general HRA fund and separate reserves for each of PFI 2 and PFI 4. The estimated balance on the combined HRA reserve as at 31 March 2013, the first year of the HRA self-financing regime was £9.774m. The estimated consolidated balance, in the context of the HRA self-financing business plan was considered sufficient to meet future possible financial pressures as identified in the risk assessment that accompanied the business plan.

HRA Budget

for 2012/13

£000

Income (27,631)

Expenditure 30,925

Other Charges /Income (152)

(Surplus)/Deficit for the Year on HRA Services 3,142

HRA Balance Brought Forward (12,916)

HRA Balance Carried Forward (9,774)


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Since its introduction in 2002/03, the Council has applied Government rent restructuring (convergence) guidance to calculate dwelling rents. This aims to equalise rent charges between Local Authorities and housing associations over ten years. Based on the guideline rent increase, it was estimated that the average rent increase on 4 April 2012 would be 7.40% (£4.69 [from £63.41 to £68.10], on a 48 week basis). This is summarised in the table below:

Rent Increase Dwelling Average

Numbers Increase

6.00 to 6.99% 295 £4.26

7.00 to 7.99% 1290 £4.66

8.00 to 8.99% 168 £5.57

9.00 to 9.33% 12 £6.27

1,765 £4.69

Therefore, in line with my advice these rent increases were applied for 2012/13.

4.4 Treasury Management Strategy 2012/13

I prepared the Treasury Management Strategy 2012/13 for consideration and approval by Members at the Council meeting of 22 February 2012. In writing the Strategy I ensured that it complied with the Local Government Act 2003 and supporting regulations which require the Council to ‘have regard to’ the Prudential Code and to set Prudential Indicators that ensure that the Council’s capital investment plans are affordable, prudent and sustainable. My report also set out the treasury strategy for borrowing and the annual investment strategy.

Key issues in relation to the 2012/13 strategy were the:

� Authorised Limit

This represents the legislative limit on the Council’s external debt under the Local Government Act 2003. I recommended the authorised limit for 2012/13 be set at £694.653m but later in the year recommended it decreased to £519.000m to reflect the revised housing finance position.

� Operational Boundary This reflects the maximum anticipated level of external debt consistent with budgets and forecast cash flows. I recommended the operational boundary for 2012/13 be set at £684.653m but as above, later in the year recommended it decreased to £509.000m also to reflect the revised housing finance position.

� Borrowing Strategy The borrowing strategy was set in consideration of the reducing Capital Financing Requirement, impending option dates on £54m of Lender Option Borrower Option Loans (LOBO’s), interest rate forecasts, bonds, Local Authority Mortgage Scheme and minimising the revenue costs of borrowings.

� Investment Strategy I prepared this Strategy having regard to the relevant guidance, with the Council’s investment priorities being the security of capital and the liquidity of its investments, but also assuming that the optimum return could be achieved commensurate with


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proper levels of security and liquidity. Given the low interest rates available because of the economic climate, I anticipated that investments were to be kept short term.

4.5 Medium Term Financial Strategy for 2012/13 to 2015/16 including the Projected

Level of Balances

My aim was to align the Medium Term Financial Strategy (MTFS) for 2012/13 to 2015/16 to the objectives set out in the Corporate Plan. The MTFS was also approved at the Council meeting on 22 February 2012 and it set the framework to enable the Council to determine an appropriate course of action to address significant financial challenges not only for 2012/13 but for future financial years.

The revenue spending reductions included in the MTFS highlighted that the Council would have to continue the programme to significantly reconfigure its business and organisational arrangements for 2012/13 onwards, in order to continue to provide value for public money services.

The MTFS projected that, in addition to the £24.493m savings for 2012/13 the Council would have to find another £18.418min 2013/14, £14.043m in 2014/15 and £15.000m in 2015/16 and a further £15.000m in 2016/17. It also identified that in line with the previous year, considerable reductions in the level of Government funding for the capital programme would mean that there would be much reduced opportunities for capital spending for 2012/13 and future years, unless the Council itself financed new investment.

Following the Local Government Finance Settlement received in December 2012, the £12.976m 2014/15 saving figure was increased by a further £7.528m.

One important issue that was significant both in relation to the MTFS and also the 2012/13 budget was the assumption about the level of balances that the Council would require to address any unexpected spending pressures. These balances need to reflect spending experience and risks to which the Council might be exposed. I prepared a report for consideration at the 23 February Council meeting, recommending that balances for 2012/13 should be £15.650m, rising to £16.839m in 2013/14 and £16.764m in 2014/15. The Council approved this recommended approach.

5. Key Events Affecting the Council in 2012/13 and Influencing Future Years

In addition to the impact of the Council’s own budget setting arrangements which were heavily influenced by National Government policy, there were several significant local and national issues that have a bearing on the financial position for 2012/13 and future years. In the following section, I set out those issues which I consider to be of most relevance in the context of the 2012/13 accounts. 5.1 Transformation of Oldham Town Centre A key Council policy is the transformation of the town centre and recent years have seen the completion of high profile cultural, health and education development. The Council is committed to a positive and pro-active ‘Town Team’ approach to place making, shaping, enabling, investing and delivering development proposals that will deliver a vibrant Town Centre.


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This encompasses 5 large scale projects outlined below, the financial implications of which total £48.634m beginning in 2012/13 and phased over the financial years to 2016/17. Through a co-operative, ‘Town Team’ approach, the Council will work with partners to ensure realisation of the long term vision for a more economically, socially and environmentally connected Oldham of the future. At the heart of Oldham is the Town Centre where there is great capacity for growth. Metrolink, ultrafast next generation broadband and vastly improved public realm will create the setting for new development and investment opportunities. The Council has already committed resources to make sure this happens and is now working with development and investor partners who are leading edge, creative and keen to work with a Co-operative Council on key development projects including:

a) Hotel Futures

The Council, together with the Manchester Hoteliers Association and The Oldham College has entered into a Memorandum of Understanding to work co-operatively to deliver a National Hospitality Training Academy (NHTA).

The development in Oldham will form a blueprint for the proposed expansion of the initiative throughout the UK. The Academy will provide a unique opportunity for students to gain training in the hospitality industry through a combination of structured courses and on-the-job training in the professional and commercial environment of an upscale hotel and convention centre, designed and constructed specifically to accommodate the NHTA. The NHTA will be designed to provide world-class training facilities and skills development in a high quality professional and commercial environment. It is expected to attract students and apprentices from across the UK and throughout the world, as well as furthering careers for existing hospitality industry employees.

The project will entail the financing, design, construction and operation of a circa 120 upscale bedroomed hotel incorporating the Queen Elizabeth Hall as a convention centre. The Hotel will be run on a commercial basis with paying guests served by a combination of full time trained staff, together with students and apprentices enrolled in the NHTA training and apprenticeship programmes.

b) Oldham Town Hall

Redevelopment of the Oldham Town Hall is a key Town Centre development opportunity. Extensive work has previously been carried out to stabilise the building and make it weather tight. Planning approvals have been secured for a new use. It is planned that the development will include cinema, retail and restaurant uses. Work is continuing to complete a final business plan and the aim is that the development will be completed in 2014/15. Planning permission has been granted for the scheme to progress for which full designs are being progressed.

c) Heritage Centre / Relocation of the Coliseum Theatre

The capital project combines the re-location of the Coliseum Theatre and the creation of a resource to promote the heritage of Oldham and allow the bringing together of heritage materials held in a number of different locations. This is to be based around the Old Library to minimise new build and to bring efficiencies.


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It is planned that the new theatre will provide a 600 seat traditional proscenium theatre with fly tower, a 150 seat studio theatre, foyers with catering for all day use, dedicated education spaces, rehearsal room, production and office space and dressing rooms. Some of these facilities can be shared with the heritage centre and provide a more flexible use of space.

The Council has recently been successful in securing external grant funding of £1.08m (a grant of £615k was confirmed by The Heritage Lottery Fund on 13 December 2012 and on 18 January 2013 ACE confirmed a grant of £465k). The funding will be utilised in 2013/14 for further development of the scheme to Full Business Case.

d) Public Realm

New public realm infrastructure investment is vital to the realisation of the Council’s ambitions. It will provide the glue to bring together the old and the new, creating a cohesive, compact and attractive Town Centre with all the right conditions for stimulating growth. Delivery of this infrastructure concurrently with Metrolink work will produce a ‘big bang’ effect and a real Oldham sense of place.

A transformational Public Realm Implementation Framework has been produced which sets out how the Council’s ambitions for a regenerated public realm can be realised. This covers landscaping, feature lighting projects, public art and statues, and overall improvements of connecting areas. Further public realm improvements will be incorporated into new developments including Metrolink, the Old Town Hall, Hotel Futures and Alexandra Retail Park. There is also a bid currently under consideration for Townscape Heritage Initiative funding to improve the Conservation area which, as referred to above, has already been highlighted within the Councils capital strategy.

e) Eastern Gateway

The eastern gateway into the Town Centre has secured a budget of £1.5m for redevelopment. A full Masterplan is under development to fully utilise the opportunities for investment following the arrival of Metrolink to the area.

f) Strategic Acquisitions within Oldham Town Centre

The Council is keen to take a pro-active approach to regenerating Oldham Town Centre, taking advantage of the current market conditions to acquire properties. In the longer-term, it is hoped that an increased land holding could be used to influence and stimulate development within the Town Centre and separately, allow the Council to benefit from any general market improvements and Metrolink added value. The plan is to acquire what are perceived to be ‘strategic’ properties, those which could potentially be opportune and, post Metrolink, would either be;

� best placed to benefit from any scheme value or; � may benefit the Town Centre by adding value in other areas, or; � adjoin existing Council owned land.

The July 2012 Council capital report included a capital budget to facilitate an acquisition programme over 2012/13 and 2013/14. Some of the resources have been reallocated to the Royton Town Centre project and this has left a balance of £6.734m available for 2013/14.

g) Regeneration Development - FCHO


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The Council is selling an area of land at Union Street / Phoenix Street to First Choice Homes Oldham (FCHO) and will work jointly with FCHO in facilitating the construction of a new landmark office headquarters building.

5.2 Other priority regeneration projects

There are several other priority regeneration projects that the Council has agreed to support. These will require investment of £7.118m over the financial years 2012/13 to 2016/17.

a) Hollinwood / Langtree

This is a proposed redevelopment of vacant sites surrounding junction 22 of the M60 motorway at Hollinwood. The scheme is being brought forward in conjunction with the appointed Strategic Development Partner, Langtree Plc, as well as other key land owners and the stakeholders at this location, via the Hollinwood Board and the establishment of a newly formed Hollinwood Partnership. The Council’s capital costs outlay, to assist in accelerating delivery, is over the period 2012/13 to 2016/17. This, however, will result in capital receipts as end users are secured and developments on Council owned sites are completed, thus minimising the actual net capital contribution required by the Council.

b) Alexandra Retail Park

This scheme will lead to the redevelopment of the existing retail park and adjacent vacant Council owned land. The scheme is in conjunction with the private owners Brookhouse Group. The Council’s capital outlay is expected to be over the period 2012/13 to 2016/17 to fund pre construction fees but there will be costs in kind in relation to land. Further capital investment will be funded through the sale of the Council’s shareholding in Oldham Property Partnerships.

c) Lancaster Club Site

The acquisition of the Lancaster Club by the Council is to facilitate the redevelopment of the site and further redevelopment of the Boundary Park site. The anticipated investment will secure the future of the club within the borough. It is planned that some of this will be self financed, but to be prudent, the impact in the overall position has not relied on the self financing.

The Council has received outline planning permission for the site and is actively seeking developers to acquire all or parts of the residential element of the site and an occupier for the planned commercial unit fronting Broadway. The timing of the capital receipts and the Council's return on investment would be dependent on developer interest, although third party agents have indicated that demand should be present.

d) Working Smarter with Assets

The Council already has programmes for asset rationalisation and asset disposal in place and expenditure required from 2014/15 to 2016/17 is to continue with the initiatives. A fairly modest sum is required to enable the Council to achieve revenue savings, including contributing to targets already in the budget and also generate capital receipts to support the capital programme.


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e) Foxdenton

A Local Development Framework (LDF) for Foxdenton was adopted on 9 November 2011. There has been a site allocation of c.130 acres (including around 10 acres of Council owned land) and this has now been confirmed in planning policy terms as a Business Employment Area. The LDF also accepts the principle that there will be up to 25% residential development on the site in order to help cross-subsidise the provision of infrastructure etc. and to make the wider development viable. A Transport Study for Oldham, including Foxdenton has now been commissioned.

There is the potential for the development to deliver in the region of 300 new homes, over 1m square feet of new business space and the creation up to 1500 jobs over the next 5-10 year period.

f) Neighbourhood Town Halls

In line with the Co-operative Council ethos, a priority for the Council is investment in neighbourhoods, in particular the creation of hubs around neighbourhood town halls. It has been agreed that two developments will be taken forward, although only one has a resource requirement at present:

West Oldham District Partnership has agreed that for the moment the Civic Centre will be utilised as the District Town Hall for West Oldham. A wider asset review is underway across the District looking at where assets can be rationalised and where opportunities arise for the co-location of services. This asset review will inform the decision by Members on the long-term location of the West Oldham District Town Hall and as such, whilst this is a strategic priority project, no capital allocation has been made as yet. This position can be revised when further information becomes available.

Royton Town Hall - it is estimated to cost in excess of the £1m with contributions potentially coming from planning gain. This project will therefore be programmed for 2014/15.

g) Royton Town Centre Development

It is planned that Royton Town Centre should benefit from private sector investment over the period 2013/15 which will create a 25,000sq. ft. food retail outlet, refurbishment and reconfiguration of the Royton Precinct together with improvements to the car parking and public realm. Total investment is likely to be in region of £20 - £25m. This is likely to create around 150 new jobs at the food store. The Council is in the process of working with developers to facilitate the project but has had to make a capital programme provision of £2.552m in 2013/14 should it be unable to finalise an appropriate commercial agreement. It is therefore anticipated that some/all of the resources in the 2013/14 capital programme may be released if negotiations with the developer are successful.

h) Leisure Estate

Following an independent review of leisure services in Oldham undertaken during the winter of 2010/11, the Council agreed to reconfigure the leisure estate in order to both reduce the revenue burden on the Council and improve the leisure offer to the public. It also supported the view that an overall leisure estate of fewer, high quality public sector facilities,


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well distributed across the borough with a town centre facility at its heart, alongside private and voluntary sector provision would be a realistic way forward.

Cabinet considered reports on the leisure review during 2011 and an extensive consultation exercise was run between September and November 2011. This culminated in Cabinet on 13 March 2012, approving the reconfiguration of the leisure estate including the replacement of four existing facilities, with the provision of two new facilities within the new leisure operating contract in Oldham Town Centre and Royton Town Centre.

Detailed work has been undertaken on the cost of assembling sites and constructing leisure facilities on the preferred sites, with a vision to deliver facilities with an Olympic legacy in Oldham. The overall project costs that have been prepared covering the period 2012/13 to 2015/16 amount to £13m, net of the element that is financed by savings from the greater efficiencies from the new estate. On 17 December, Cabinet approved the recommendation to appoint OCL as the preferred bidder for the new 15 year operating contract, with a potential break at year 10, which will commence in April 2013. Work with the preferred bidder during the final quarter of the financial year has developed the contract and agreed performance management. 5.3 Building Schools for the Future (BSF) and Academies The Council was successful in its bid for BSF funding although the final scheme reflects a reduced programme of works as a result of the Government cutting back the national BSF programme in 2010/11 as part of its public spending review to address the level of national debt. The Oldham BSF programme features a PFI school, a design and build school and the three Academies, all of which are design and build projects. The PFI school (The Blessed John Henry Newman School) opened in Sept 2012 with a capital value of £35.8m. This is privately financed and paid for through the unitary charge, the construction element of which is funded by PFI grant. The design and build school (North Chadderton) is a refurbishment with a capital cost of £23.8m. There is a phased handover with construction scheduled to be fully completed in Summer 2013 and is entirely funded by BSF capital grant. The overall values and the actual/estimated opening dates of the three Academies are tabulated below. All of the construction costs are met by Central Government grants from the sponsoring Department.

Open to Pupils Planned Project

Expenditure

£000

OASIS September 2012 25.5

Waterhead November 2012 26.4

Oldham Academy North April 2013 16.8


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In addition there is an ICT managed service contract that will deliver ICT equipment across the two programmes to the value of £8.3m, again wholly supported by Central Government grant. 5.4 Private Finance Initiative Projects

There are three PFI schemes that are currently in train which are enabling the Council to support capital projects/expenditure which it would have been unable to do without the option of PFI funding. These are:

a) Housing PFI 4

The Gateways to Oldham PFI 4 scheme reached financial close on 30 November 2011 and will see the refurbishment of 315 existing properties and the creation of 317 new homes, with a total capital value of £77m. The Council has entered into a 25 year contract with Inspiral Oldham who will use private finance to fund the construction works and manage and maintain the properties for the duration of the contract through to October 2036. Construction is currently behind programme but the contractor expects to catch up by the end of the financial year. By the end of the financial year it is estimated that approximately 200 refurbishments and 50 new properties will have been completed. To assist with overall programme affordability the Authority is making a capital contribution in the sum of £12.026m payment which is being phased as dwellings are commissioned.

b) Housing PFI 2

PFI 2 was signed in 2006 to provide 1,435 sheltered accommodation dwellings in a mixture of bungalows and group schemes with construction finishing behind schedule in May 2012. The operational contract runs to September 2036. The total construction value is £105m, all of which is payable through the annual unitary charge and funded by the annual PFI grant. The project has a lengthy dispute profile. On three occasions the Authority’s right to levy deductions has been referred to Adjudication, the last of which was in May 2012, and in all cases the Authority has been successful in defending its rights. Discussions are ongoing with Housing 21 (H21) to establish what remaining rectification works are required and then to establish a credible programme of works to be undertaken (by H21) that does not compromise tenant welfare. In addition a number of compensation claims (most of which are considered to be without foundation) have been resubmitted by H21. There is obviously a residual financial and operational risk until all these issues are resolved, however, the Housing Revenue Account budget for 2013/14 has been prepared on the assumption that ongoing payments to H21 will remain as currently contracted.

c) Street Lighting PFI

The joint approach between Oldham and Rochdale Council resulted in both authorities entering into a Street lighting PFI contract with its service provider Community Lighting Partnership. The financial close was achieved in April 2011 and the operational element of the contract provides for the management and maintenance of the entire lighting stock commenced in July 2011 and running through to July 2036. The capital element of the contract will see the replacement of approximately 22,786 lighting columns within the borough with a capital value of £30.5m. Construction commenced in October 2011 and is estimated to be completed by July 2016.


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5.5 Transport and Infrastructure

Recognising that improvement in the borough’s highways network is one of the Council’s priorities, a major capital project was approved in 2010/11. This involves investing £10m over four years between 2010/11 to 2013/14 to enable the highways network to be brought up to the Greater Manchester standard of repair and to reduce the maintenance backlog by 25%. The main programme was initiated in 2011/12 with a spend of £3.1m. Out of the £4.2m available in 2012/13 - £2.8m has been spent, leaving £1.4m to be carried forward into 2013/14 to add to the £2.5m programmed.

£2.5m has been contributed to Metrolink scheme of works as part of an agreed £5m contribution that Oldham Council is making towards the cost of the design and construction of the Oldham Town Centre Metrolink Extension. The contribution acknowledges that certain works ancillary to the construction of the Metrolink line, in particular street lighting, site acquisition, demolition, paving, highways works, landscaping and utilities diversions, will result in the provision of an improved infrastructure in the area adjacent to the Oldham Town Centre Extension. Additional minor schemes relating to accessing Metrolink points started in 2012/13 and £40k was spent in year. These schemes are expected to be completed in 2013/14 at a cost of £584k.

In addition, a further £2m has been approved for minor network repairs. Out of the £0.5m allocated to this scheme in 2012/13 £0.3m will be rolled forward to add to the £1.5m earmarked to be spent in 2013/14.

£11k was spent on bus routes and cycle schemes in 2012/13. £286k is expected to be spent on bus routes as part of the Better Bus area Fund project in 2013/14 and £872k on cycle routes as part of the Local Sustainable Transport Fund project in 2013/14. 5.6 Business Units

In line with taking forward the Repositioning Oldham agenda, during 2011/12 the Council instigated a new initiative to establish Business Units, in order to change the way the Council delivers services. The objective of the initiative is to promote accountability but provide teams delivering services with greater freedoms and flexibilities, thus reducing bureaucracy and creating a more commercial culture with an enhanced drive to achieve value for money, encouraging innovation and a greater focus on improving the customer experience.

The Council successfully launched a phase 1 pilot programme, consisting of 9 services with effect from 1 April 2012. To help managers of the pilot services, new management information tools have been introduced together with a management development programme, which covers areas such as leadership, performance management, business intelligence and value for money.

In 2012/13 the Council evaluated the phase 1 Business Unit initiative, and due to requests, enhanced the training programme in order to launch phase 2. During 2012/13 additional services were trained therefore increasing the total number of services given the Business Units management information tools to 51, exceeding the proposed target of 50.

5.7 Troubled Families


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In March 2012, Oldham Council successfully applied to be one of the initial tranche of Local Authorities asked by Government to deliver their Troubled Families agenda. The Troubled Families agenda allows resources to be targeted at those families that are facing a multitude of challenges and consequently places most strain on the public sector purse.

Under the new plans the Government has contributed to the costs of working more closely with these troubled families, on a payment by results basis with an initial attachment fee paid upfront and an amount withheld pending Payment by Results objectives being met. Success is determined through a range of specific criteria including: � Getting children back into school; � Reducing their criminal and anti-social behaviour; � Getting parents back into employment; � Reducing the costs to the taxpayer and Local Authorities.

During the last 12 months, Oldham Council has achieved some significant milestones with its work on the Troubled Families agenda, namely: � The fostering of much closer links with its local partners, e.g. First Choice Homes

Oldham (FCHO), Clinical Commissioning Group (CCG). � The development of an Oldham-wide Troubled Families Strategy agreed by local

partners. � The agreement and subsequent roll-out of a prototype Troubled Families Team to

test new ways of working with troubled families in January 2013. The prototype approach working within the Failsworth and Hollinwood localities.

� Developing a financial model that will ultimately result in a joint partner investment agreement.

6. The Impact of the 2013/14 Budget Setting Process Having considered events and key influences affecting the financial year 2012/13, it is also important to consider the 2013/14 budget round, as the preparation for 2013/14, took place throughout most of 2012/13 and set the framework within which the Council operated in during the latter part of 2012/13. I have therefore, presented information in the following paragraphs on all aspects of the budget, including revenue, capital and the HRA. 6.1 Revenue Budget 2013/14 and 2014/15

This budget was set within the context of significant on-going economic and policy challenges and changes at a national level. I prepared a budget which covered the next 24 months to ensure a further underpinning of the Council’s medium term financial plan, to deliver financial stability and investment opportunities, via implementing a long term efficiency programme based on sound financial management arrangements for Oldham Council.

The meeting of the PVFM Select Committee on 13 November 2012 considered budget options totalling £28.074m for the two financial years 2013/14 & 2014/15 (£15.203m and £12.871m respectively). The PVFM scrutinised the proposals and agreed that there were no proposals it would ask to be reconsidered. The savings were then approved by both Cabinet on 3 December and Council on 12 December 2012. One option initially scrutinised by PVFM was subsequently deferred to the February Council cycle to allow consultation to be fully


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completed. This reduced the savings taken through Council on 12 December 2012 to £27.556m. This left a shortfall before the effects of the Provisional Local Government Finance Settlement were known of £3.155m (£2.872m in 2013/14 and £0.283m in 2014/15), giving total savings of £30.711m (£17.735m in 2013/14 and £12.976m for 2014/15).

The Star Chamber meeting on 13 December 2012 was presented with options that bridged the gap between the options presented to the December Council meeting and the targeted savings (prior to any changes to be introduced through the Local Government Finance Settlement).

PVFM on 28 January 2013 scrutinised the proposals contained within the report, and agreed that there were no proposals it would ask to be reconsidered other than asking Cabinet to reconsider the charges to the public for the treatment of public health pests. It can be confirmed that there is no increase with Response Services option for these treatments.

Cabinet on 18 February commended the budget to Council, subject to any changes resulting from the final Local Government Finance Settlement and any other recent amendments that would be delegated to the Borough Treasurer in conjunction with the Chief Executive, Leader and Cabinet Spokesperson for Finance, HR and Strategic Partnerships.

The Settlement announced on 19 December was a complex and challenging one, which reset boundaries between Central and Local Government with substantial change in the risks around funding transferring towards Local Government. Additional problems resulted from inaccurate releases of information, including overall control figures, which were only amended in the Final Settlement.

The Final Settlement, anticipated to be at the end of January 2013, was actually released on 13 February. As a result of the Settlement and finalisation of the levies figures for GMWDA and GMCA the proposals will result in a balanced budget for 2013/14 and a shortfall in 2014/15 of £7.528m which will be dealt with in Spring 2013. This gives a total saving of £38.239m over the two years (£17.735m in 2013/14 and £20.504m in 2014/15).


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The overall budget approved for 2013/14 is demonstrated below:

2013/14

Funding: £m

Revenue Support Grant 85.080

Retained Business Rates 27.739

Business Rates Top Up 28.863

Housing Benefit and Council Tax Administration Grant 2.001

New Homes Bonus 1.188

Other grant funding 0.233

Council Tax 70.038

Total Budget for Council Services 215.142

As a result of the implementation of the Localism Act in November 2011, the Council was required to consider budget information that highlighted the increase in Council Tax attributable to the Council itself and that attributable to the levying bodies, Greater Manchester Waste Disposal Authority (GMWDA), GMCA and the Environment Agency. This is because any percentage increase in Council Tax for Council services (excluding levies) in excess of a level specified by the Secretary of State for Communities and Local Government (3.5%) would require citizens of Oldham to be subject to a referendum to approve the increase in Council Tax.

The Act also introduced two new concepts, the Council Tax Requirement and a Relevant Basic Amount (RBA) of Council Tax. These were to be compared year on year to demonstrate the percentage increase in Council Tax at Band D attributable to the Council and hence, whether a referendum would be triggered. The Council did not accept the Council Tax Freeze Grant, the Council Tax policy was to increase the Oldham Council element by 3.5%. This did not exceed the referendum trigger.

6.2 Capital Strategy and Capital Programme 2013/14 to 2016/17

I prepared the Capital Strategy and Capital Programme reports for approval at the Council meeting of 27 February 2013. The Capital Strategy provided the framework, within which the Council’s capital investments plans were to be delivered, but the reduced level of Government resources available and the uncertainty about the level of resources for future years, influenced the shape and size of the proposed 2013/17 Capital Programme.

The Capital Programme for 2013/14 to 2016/17 was prepared to mirror the timeframe of the MTFS so that over the four years 2013/17, resources available to the Council matched planned expenditure.

The table below sets out the overall level of available resources by category for the period 2013/17. This shows that, in total, funding for the Capital Programme in 2013/14 was £88.232m. However, of this, £4.863m relates to the BSF/Academies ring-fenced grants, with other Government grants totalling £4.594m, with the balance being from other grants and contributions, revenue contributions, prudential borrowing and capital receipts. It also shows that it was difficult to project any resources for 2016/17.


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Total Resources Available for the Capital Programme

Funding 2013/14 2014/15 2015/16 2016/17

£000 £000 £000 £000

No Revenue Consequences

Government Grants 9,457 2,939 396 0

Capital Receipts 9,183 10,013 1,382 0

Other Grant/Contributions 615 0 0 0

Resources Carried Forward 1,858 0 0 0

Total No Revenue Consequences 21,113 12,952 1,778 0

With Revenue Consequences

Prudential Borrowing 62,177 20,429 15,861 9,400

Revenue Contribution (CERA) 4,942 2,353 0 0

Total With Revenue Consequences 67,119 22,782 15,861 9,400

Total 88,232 35,734 17,639 9,400

The table below summarises the proposed 2013/14 Capital Programme and the indicative programme for 2013/17 on a Directorate basis and highlights the balanced position over the four years.

Approved Capital Programme 2013/14 to 2016/17

2013/14 2014/15 2015/16 2016/17

£000 £000 £000 £000

Corporate 850 0 0 0

Neighbourhoods 67,924 29,680 16,457 9,400

Commissioning 16,243 3,611 400 0

Commercial Services 2,680 2,180 180 180

Resources to Allocate 604 616 0 0

Total Expenditure 88,301 36,087 17,037 9,580

Total Funding (88,232) (35,734) (17,639) (9,400)

Balance of Resources available by

year – (Under)/Over programming (69) (353) 602 180

Cumulative balance of resources

available for new projects (69) (422) 180 0

Approved Capital Spending

When I undertook a review of the Capital Programme and capital plans, it highlighted that there was already a range of commitments for 2013/14 and future years which needed to be factored into the programme. As a consequence, these commitments utilise most of the capital resources available for 2013/14, which leaves £604k in 2013/14 and £616k in 2014/15 for new priority investment.

The Capital Strategy identified the following new projects for which funding could be allocated. These projects are:


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� HMR legacy issues – to address any needs that cannot be financed from ring fenced capital receipts;

� Town Centre Conservation Area – matched funding of £500k for a Townscape Heritage Initiative grant bid;

� Energy Efficiency projects – to support the Council individually as well as in relation to AGMA initiatives in its pursuit of the green agenda and address carbon reduction requirements;

� Markets – capital investment in terms of infrastructure, mechanical, electrical, and environmental improvements;

� Werneth Music Rooms – to bring the music rooms back into use; � Place Marketing – to support the public realm improvements, Metrolink extension and

development objectives for sites at Mumps, Oldham Central and King Street; � Greater Manchester Greenways/A62 – to improve radial routes into the regional core; � Sharp – In conjunction with Manchester City Council, expanding the digital and

media “Sharp Project” into Oldham; � West Street Civic Centre Roundabout – to improve pedestrian access whilst still

retaining appropriate vehicular movement; � Foxdenton – although funded by private sector partners, public sector investment for

infrastructure may be require. Avenues will be explored for funding including RGF/ERDF;

� Investment in Schools – to undertake additional work to improve condition of schools and increase capacity of schools, particularly two year old education provision in line with new statutory entitlement from September 2013;

� Pinch Point Grant for Transport Schemes – matched funding for a bid to the Department of Transport, designed to promote economic growth through highway developments;

� Equity Loans Initiative – to enable the Council to progress the scheme, in line with its position as lead within the AGMA initiative;

� Former School Site – to dispose of a number of sites, capital funding required to ensure land is suitable for commercial redevelopment.

Each of these projects would need to be progressed by the submission of detailed and a fully costed business case demonstrating how they take forward corporate priorities.

The position may evolve as the Government is likely to introduce a range of grant funding opportunities for which bids may have to be submitted at short notice, and some of which may have a match funding requirement. The Council will respond as it considers appropriate to bidding arrangements.

6.2.1 Local Sustainable Transport Fund

The Local Sustainable Transport Fund (LSTF) is a Government funding stream to support enhanced packages of transport measures that support economic growth and reduce carbon. TfGM was invited by the Department for Transport (DfT) to submit a detailed business case for funding by December 2011 with an emphasis on encouraging economic growth and access to jobs. A £34m bid entitled “Let’s Get to Work” was submitted to DfT in January 2012 which included approximately £1 million of direct capital investment in pedestrian and cyclist infrastructure in Oldham. The bid was successful and Greater Manchester was allocated £32.46m, slightly less than the full amount bid for, which includes an allocation for capital schemes in Oldham of £1.05m for Oldham (£986k capital and £69k revenue). TfGM has allocated Oldham a grant of £863k (£800k capital and £63k revenue) to deliver four capital schemes in Oldham and is also holding £192k as a contingency for us


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to draw down through a ‘change control process’ application should we need to do so. Feasibility and design work has been undertaken in 2012/13 using the revenue element of the grant. Delivery of the capital elements will be undertaken in 2013/14. 6.2.2 Better Bus Area Fund

In December 2011 the DfT announced the Better Bus Area Fund, which is a sister fund to the LSTF, with the purpose of supporting bids from local Councils of up to £5 million for bus-related measures. TfGM submitted a bid for £5 million in February 2012 on behalf of all 10 Greater Manchester Councils, which included direct investment in Oldham of £290k to improve local bus routes in 2012/13 (£189k capital and £101k revenue). The GM bid was approved on 23 March 2012 and is being met in full. Feasibility and design work has been undertaken in 2012/13 using the revenue element of the grant. Delivery of the capital elements will be undertaken in 2013/14.

6.3 HRA Budget 2013/14

Also approved at the 27 February Council meeting was my report on the HRA budget with revised estimates for 2012/13 together with the HRA budget for 2013/14 strategic budget and projections for 2014/15 to 2016/17. It also set out the dwelling, non dwelling rents and services charges increases to be applied from 1 April 2013.

Due to the stock transfer in February 2011 and the signing of the PFI 4 contract in November 2011, the HRA as at the time of the budget setting had 1,765 properties with all but 20 now being managed under two PFI schemes (details of the PFI4 scheme is set out in Section 5.4).

The approved HRA budget for 2013/14 is shown below. It was based on some key assumptions and includes all balances, income and expenditure met from the two PFI reserves. At the end of 2013/14 it is expected that balances will be £2.881m.

Based on the recommended levels of guideline rent increase, it was estimated that the average rent increase on 4 April 2013 would be 4.35% (£2.96 [from £68.10 to £71.06], on a 48 week basis). Based on my advice, Members approved the recommended rent increases for 2013/14.

Budget

for

2013/14

£000

Income (27,371)

Expenditure 30,650

Other Charges /Income 15

Deficit for the Year on HRA Services 3,294

HRA Balance Brought Forward (6,175)

HRA Balance Carried Forward (2,881)

A continuing issue which must be considered in the context of the HRA is that the Council has been making unavailability deductions from the PFI2 service provider as the project has run behind schedule. There have been a number of disputes during the construction period


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and despite having been successful at a number of adjudication hearings, action is still ongoing and a number of compensation claims (most of which are considered to be without foundation) have been resubmitted and are being assessed. There is obviously a residual financial risk to the HRA until all these issues are resolved.

6.4 Treasury Management Strategy 2013/14

I prepared the Treasury Management Strategy 2013/14 for consideration and approval by Members at the Council meeting of 27 February 2013.

The key influences on the borrowing strategy were: � The increasing Capital Financing Requirement. � Impending Option dates on £61.5m of Lender Option Borrower Option Loans

(LOBO’s) in 2013/14. � Interest rate forecasts which projects increases from December 2014. � Aiming to minimise revenue costs to minimise the impact on Council Tax. � The impact of the Council’s Investment Programme. � The introduction of the Local Authority Mortgage Scheme (LAMS). � AGMA Green Deal Scheme.

Due to the low interest rates on investment and high counterparty risk, the Council is currently maintaining an under-borrowed position, but will need to take out a significant amount of new borrowings to support the capital programme. Any new borrowing taken out will be completed with regard to the limits, indicators and interest rate forecasts. The key influences on the investment strategy remain the security of capital and the liquidity of investments with the aim of receiving an optimum return on investments commensurate with proper levels of security and liquidity. Given the low interest rates available because of the economic climate, I expect that investments will be kept short term.

6.5 Medium Term Financial Strategy for 2013/14 to 2016/17 and Projected Level of

Balances When I prepared the MTFS covering the period 2013/14 to 2016/17, which was approved at the Council meeting on 27 February 2013, it reflected the continuing downward movement in Central Government funding and therefore the consequent need for additional budget savings. The projected level of revenue savings required from 2014/15 to 2016/17 is set out below, and whilst these are lower than for 2013/14, they are nonetheless significant and, in many respects, present an even harder challenge as more radical budget proposals are likely to be required.


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Projected

Savings

Requirement

£m

2013/14 17.735

2014/15 12.976

2014/15

additional

7.528

2015/16 15.000

Year

Further savings were identified for consultation in April for the 2014/15 financial year in line with the confirmed Local Government Settlement of £7.528m giving a total required saving of £20.504m. These figures are, of course, subject to change as more detailed information becomes available over time but provide a planning base from which the Council can develop its future operational arrangements. A key issue for financial planning is the major change to the Welfare Reform, together with the overall level of change to the operation of the Council, driven by both local and national initiatives. These introduce even more uncertainty and make projecting into the future much more tentative.

A key component of the 2013/14 budget papers I prepared for the 27 February Council meeting, was the projection of balances going forward. I advised Members that on a risk assessed basis, resources of £15.917m would be required at the end of 2012/13 to support the 2013/14 budget. I also advised that balances in 2014/15 and 2015/16 should rise to £16.098m and £16.648m respectively and recommended this level of balances as it would help the Council withstand any pressures arising from the harsh economic climate and future reductions in Central Government support.

The 2012/13 balances figure included in the accounts is £15.805m. This is approximately in line with the budgeted balance included in the MTFS.

7. Other Issues Affecting Oldham Council with an Impact in Future Years

I am, of course, aware that there are a range of other initiatives which will impact on the Council in future years. Some of these were in train during 2012/13, others have been developing over the last few years. I have included some information on those issues that I consider to be the most important in the following section. It should be noted that some of these issues are Government directed initiatives to which Oldham is determining the most appropriate local response, and others are local to Oldham and are therefore under the direct control of the Council.

7.1 Future Changes in Local Government Finance

7.1.1 Universal Credit Universal Credit (UC) is one of the key benefit changes introduced by the Welfare Reform Act 2012. This will see the introduction of a single benefit to replace six benefits currently paid by DWP, HMRC and local authorities. This includes Housing Benefit currently paid by local authorities. The introduction of UC will have a significant impact on the residents of the borough as they will need to adjust to receiving a single monthly benefit payment which will include an element to cover their housing costs. They will need to manage their finances on


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a monthly basis, pay their rent to their landlord and apply and manage their benefit claim online.

UC will have an impact on the Council as it will no longer be responsible for the payment of Housing Benefit, on partners such as FCHO who will no longer receive Housing Benefit paid directly to them, and on advice services who are likely to see a significant increase in enquires from residents affected by the introduction of UC and other welfare reforms.

To support our residents in preparing, Oldham is one of four Pathfinders who will introduce UC ahead of the national roll out. New claims in Oldham will commence from July 2013. Our Pathfinder activities will focus on ensuring residents can access support to apply and manage their online claims, and where required receive money advice and personal budgeting support to assist with managing their changing finances.

7.1.2 Local Government Resource Review

In March 2011, the Government announced the Local Government Resource Review (LGRR). The Review was to “consider the way in which Local Authorities are funded, with a view to giving Local Authorities greater financial autonomy and strengthening the incentives to support growth in the private sector and regeneration of local economies.” A consultation process took place during the summer/autumn of 2011 with the Council submitting a detailed response by the due date of 24 October 2011.

The Government published the results of this consultation in December 2011 along with the Local Government Finance Bill to introduce legislation through 2012 to effect the changes, although some issues are still to be fully clarified.

The Government abolished the previous Local Government finance system, and with the aim of allowing Councils to keep elements of their business rates. The changes focussed on the distribution of business rate tax revenues, rather than changes to the system of business rate taxation. Some of the key changes are:

� Abolition of the current system, whereby Government allocates resources via Total

Formula Grant (TFG); � Establishment by Government of a baseline from which a future level of funding via

the new system will be calculated, this was clarified in the Final Local Government Settlement in January 2013;

� Continued collection of business rates by Councils in their respective areas but this will be subject to either a top up if this sum is below the calculated baseline or a tariff if it is above the baseline. Oldham is a top up Authority;

� Establishment of a safety net to protect Authorities where there are substantial downward movements in the business rate base due to changes in the local economy (set at 7.5% of the baseline figure); and

� Imposition of levies on “disproportionate” gains which will be specific to each Authority and will fund the safety net. As a top up Authority Oldham will not be subject to a levy.

These changes will introduce a range of volatility in funding that has not been experienced previously. I will be leading the Finance Team on a programme of work to ensure that the impact on the Council is clearly understood and planned for.

7.1.3 Council Tax Localisation


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The Comprehensive Spending Review (CSR) 2010 included proposals to localise support for Council Tax from the beginning of the financial year 2013/14. The Government issued a Consultation Paper in August 2011 setting out proposals for the changes. The Council submitted a detailed response to the Government in order that its views could be considered.

The DCLG has issued a formal response to the consultation process. This outlined the intention to introduce the requirement that billing Authorities introduce a Council Tax Discount Scheme to replace Council Tax Benefit. In May and June 2012, a range of further papers were issued by the DCLG relating to the new arrangements. The main change for the Council is that a grant will be paid to the General Fund to replace the current Council Tax Benefit paid into the Collection Fund. The major change for recipients is that the grant will cover only around 90% of the current benefits and Local Authorities were expected to introduce revised local benefit schemes that in total reduces benefits by 10% overall (total circa £2m for Oldham), or alternatively fund the reductions through other means. This will not be a uniform reduction as certain recipients (pensioners) will be legally excluded from the reduction. Therefore some current benefit recipients will be required to pay a higher contribution towards their Council Tax bill.

I have prepared a scheme and this has been adopted by Council for the statutory deadline of 31 January 2013, with new processes ready to operate from the implementation date of 1 April 2013. There was a wide consultation exercise with stakeholders in order that their views be taken into account in the finalised scheme. Council Tax bills have now been sent to residents based on the agreed Local Scheme.

Linked to this change is the introduction of the “Universal Credit” a new system for Housing Benefit payments, which is to be introduced from October 2013 but piloted in Oldham from April 2013. The financial implications for the Council who administer Housing Benefit on behalf of the Department for Work and Pensions, will become clearer as the detailed proposals are developed.

7.1.4 Technical Reforms of Council Tax

The DCLG issued a consultation paper in October 2011 outlining some reforms to Council Tax. These changes were included within the Local Government Finance Bill and will gave the Council local discretion from April 2013, as follows:

� The application of exemptions to Council Tax where, for example, improvement

works make the building uninhabitable; � To introduce an empty homes premium; and � To abolish the second homes discount.

The Council approved its Local Scheme in December 2012 to apply from 1st April 2013 which took advantage of those changes which will increase the level of Council Tax that is raised and mitigate some of the potential effects of the Localisation changes.

7.1.5 Academy Funding Transfers 2013/14 From 2013-14, new funding arrangements for education services will apply for Local Authorities.


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When a school becomes an Academy, it receives a grant called the Local Authority Central Spend Equivalent Grant (LACSEG) to cover the cost of services previously provided by the Local Authority. The services provided by the Local Authority to schools have previously been funded through a combination of Dedicated Schools Grant (DSG) and Total Formula Grant (TFG).

From 2013, the LA Block LACSEG for academies and the corresponding element of local government revenue funding will be replaced by the new Education Services Grant (ESG) The ESG will be allocated on a simple per-pupil basis to Local Authorities and academies according to the number of pupils for whom they are responsible.

Funding will be transferred from Local Authorities ESG on a simple per-pupil basis. The ESG is allocated using the same per-pupil rates. Local Authorities will receive £15 for all pupils for the statutory duties that do not transfer to academies. The per-pupil rate for pupils in mainstream schools is £116 per pupil. LA’s receive £116 for all pupils in schools they maintain. The grant is paid for all pupils aged 3-19. Pupils in a Pupil Referral Unit are weighted 3.75 and Special Schools 4.25. The grant is not ringfenced.

As part of the Local Government Resource Review the funding for these services hasbeen transferred from the Formula Grant into the ESG; which is part of the Dedicated Schools Grant. Oldham has had £1.08m funding removed. As the likelihood is that the number of Academies will increase during 2013/14 this funding will be reduced further.

7.1.6 Changes to School Funding Arrangements

Funding for schools and other pupil related services is provided via the Dedicated School Grant.

In March 2012, the Department for Education made a clear commitment to reform the school funding system and end the inequalities and inconsistencies that built up over many years. They want a system which is up to-date and reflects the current demographics of pupils across the country; targets additional monies to pupils who need extra support to achieve; is consistent and pupil led so that, wherever a pupil goes to school, they will attract similar levels of funding; is transparent so that parents, headteachers, governors and tax-payers can see clearly how funding has been distributed, and why, and gives pupils genuine choice.

They will introduce a national funding formula in the next spending review period but will take a gradual approach to ensure they get it right.

In 2013-14 some improvements have been made to the current system so there is greater focus on needs of pupils and greater consistency across local areas.

The changes made have been:

� Simplified and rationalised the formula factors Local Authorities can use when

allocating funding to schools, in order to move away from overly complex and opaque formula. This means schools will be funded using up to 12 clearly defined factors which represent circumstances under which schools should attract additional funding e.g. deprived pupils, pupils with low attainment, or those operating on a split site and these represent the likely direction of a national funding formula;

� Ensured the maximum amount of money is passed on to schools as each authority sees fit;


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� Put in place more transparent and comparable process for funding academies; � Reformed the funding arrangements for pupils with high needs by introducing a

‘place-plus’ system. This ensures schools have clear identifiable budgets for pupils with special educational needs (SEN ) and LA’s take a consistent approach to funding needs over and above these budgets;

� Strengthened the local decision making process by ensuring Schools Forum operate more transparently, and that school and academy representatives have a greater say about how money is distributed.

These changes affect schools on an individual basis and the changes to what can be retained by the Council has had an adverse impact on the overall funding position of the Council.

The government is currently examining whether the 2013-14 arrangements are simplifying the system and securing greater consistency between local areas with the aim of moving towards a national funding formula. 7.1.7 Single Fraud Investigation Service

The Welfare Reform Act 2012 established a multi-agency approach to tackling fraud and error across Welfare Benefits. The Single Fraud Investigation Service (SFIS) is tasked with carrying out these legal responsibilities and will combine fraud and error resources from Local Authorities, the Department for Work and Pensions (DWP), Her Majesty’s Revenue and Customs (HMRC) and other agencies, including the Police.

Oldham Council will play a key role in the development of the SFIS by participating as a “pilot” site. The potential benefits to the Council in taking part in this pilot are considered to be significant, including its alignment with the following strategic objectives:

� It provides an opportunity to influence how fraud is delivered in the future.

� It is aligned to the Council’s Neighbourhood agenda, working collaboratively with key local partners.

There are currently four pilot areas (Glasgow, Wrexham, Corby and Hillingdon) and agencies in these areas are developing and evaluating the relevant SFIS processes.

By participating in this pilot programme, Oldham would be the only pilot site across the AGMA region. The DWP are very keen to work with Oldham Council as the Council is already an agreed Universal Credit pilot/pathfinder site, and there are potential synergies arising from aligning the two programmes.

The Audit and Counter Fraud Team in the Council’s Borough Treasurer’s service has specific resources to investigate this type of fraud and, in addition to its on-going activities, it will continue to collaborate with the DWP and other agencies to establish a fully functional SFIS pilot site and to manage progress against key milestones. 7.2 Other Government Initiatives with Implications for the Future Funding and

Operation of the Council 7.2.1 Public Health Transfer


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The Health and Social Care Act 2012 has provoked the most radical restructuring of the NHS since its inception. As part of its implementation Primary Care Trusts (PCTs) have been abolished and replaced with Clinical Commissioning Groups (CCG). One of the key outcomes of this move has been to transfer Public Health responsibilities to Local Authorities from April 1st 2013.

This places a responsibility on the Authority to secure services to prevent disease, prolong life and promote health. To support the commissioning of Public Health services the Authority will receive £13.6m as a ring fenced grant in 2013/14. This figure will increase to £14.9m in 2014/15. I have already included this within the MTFS and I am working with colleagues to ensure the best value for this investment is achieved.

Work to integrate the new responsibilities has now been completed to ensure a smooth transition to the new operating model, with the process being managed through strategic planning and delivery groups and detailed action plans. The Director of Public Health has been based within the Council offices for some time and is a fully integrated member of the Senior Leadership Team of the Council.

As the service further embeds the Council will benefit from synergies between existing Council arranged services and those previously secured by NHS Oldham. This is expected to deliver not only cost efficiencies but also better outcomes for residents of Oldham. 7.2.2 Non-Domestic Rate Income From 1 April 2013 the regime around the income that Local Authorities collect from National Non Domestic or Business Rates (NNDR) changes from one where the Authority collects purely on behalf of Central Government to one where this income is shared between Central Government, Local Authorities and major precepting bodies (the Greater Manchester Fire and Rescue Authority (GMFRA) in Oldham’s case). This change affects the retention of that income collected and also carries a risk to the Council for failure to collect rates in comparison with a pre-determined “Start-Up” funding assessment. Risks of non-collection include rates billed from 1 April, but also those not yet collected from prior years and also appeals that were not resolved before that date. In relation to Oldham’s NNDR there is a general risk of non-collection and also the potential losses on appeal was estimated at £2.6m for prior year appeals as at 31 March 2013. Oldham’s share of these potential losses is 49%, with the balance being Government 50%, GMFRA 1%. This amounts to a potential loss to Oldham of around £1.3m. These are potential losses at the point of change and if these losses are exceeded then the Council will further bear its share of that excess. 7.2.3 Localism Act 2011 The Localism Act received royal assent on 16 November 2011. It was intended to give Councils the freedom and flexibility to be creative and entrepreneurial acting directly in the interest of their communities and in their own financial interest. It included wide ranging changes aimed at empowering communities to have more control and involvement in their local areas, including enabling delivery of services at a grass roots level.


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In addition to the Council Tax referendum and HRA self financing initiatives, some other examples of the changes and new powers the Council will have in the future are set out below.

� General Power of Competence – this is a new power that gives Councils the same

broad powers as an individual to do anything unless it is prohibited by statute. � Transfer and delegation of functions to Councils – a Local Authority will be eligible to

make an application to take over other local public functions that are a high community priority.

� Community right to challenge - this gives voluntary and community groups, Parish Councils and Council employees the right to express an interest in taking over the running of a Council service.

� New community rights – this will require the Council to maintain an accurate Register of Assets of Community Value (both in private and public ownership) and communities will have the ‘Right to Bid’ to purchase assets included within the list of properties should they become vacant. The Council has an adopted Community Asset Transfer Strategy, which facilitated the first such transfer in the Borough of Springhead Community Centre to the Springhead Community Association during 2011/12. Discussions are taking place with a number of groups who have applied to acquire assets in Council ownership but they will be required to develop a robust Business Plan as a core requirement for successful transfer.

� Neighbourhood planning – there is a new right for local communities to shape new development by coming together to draw up a neighbourhood plan.

Themes within the Localism Act are therefore closely aligned with the Council’s Co-operative Council ethos and the Council will be developing its Repositioning Oldham agenda so that service delivery complies with the requirements of the Localism Act.

7.3 Local Initiatives Impacting on the Future Funding and Operation of the Council

The Council is currently engaged in a wide range of local initiatives taking forward the Repositioning and Neighbourhood agendas. I have therefore set out in the following paragraphs, some of those initiatives which reflect the ambition of the Council and the changes being undertaken by the Council during 2013/14 and future years.

7.3.1 Housing Policy

The Council is working with partners to improve the quantity, quality and access to housing for Oldham’s citizens. To achieve this, the Council is focussing on 5 key priorities: � Supporting development that meets economic need � Making better use of existing homes � Addressing fuel poverty and energy efficiency � Preventing homelessness and supporting communities � Improving neighbourhoods.

The track record for housing delivery in difficult economic times was recognised when the Council was named Strategic Local Authority of the Year at the 2012 UK Housing Awards. The Council was seen as providing strong leadership, delivering difficult decisions and excellent partnership working with residents, housing providers, developers and the voluntary sector.


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The Council is working with developers and housing providers to improve the choice of new housing in the borough through building 1,000 new homes between 2012/13 and 2014/15, around 600 of which will be for affordable rent. This includes the £113 million Gateways to Oldham scheme which will result in the building and refurbishment of over 700 homes across 4 estates. Council-owned land is being used to kick start comprehensive housing developments across the borough, including 160 new homes in Derker and a custom-build scheme in Werneth.

In April 2012, the Council launched the 'Oldham Mortgage' in partnership with Lloyds TSB to help first time buyers on to the housing ladder. This innovative scheme will help around 50 first time buyers access housing by May, with a further phase to follow into next year.

As part of the Empty Homes Plan, working with partners Aksa Homes and Great Places Housing Group, the Council intends to bring over 100 empty homes back into use this year, including a £2.2 million scheme in Werneth.

Through supporting communities, with partners, we prevented 1,338 households from becoming homeless and developed a single route for residents to access social housing through the 'common allocations framework'. Last year, the Council secured over £1.2 million to help prevent fuel poverty in the borough and in 2013/14 will be working with partners on the country's first 'Joint Investment Agreement' which aims to help 1,000 people out of fuel poverty.

7.3.2 Regional Working across Greater Manchester

The last few years have seen significant developments both in ambition and joint working arrangements across Greater Manchester. The first Greater Manchester Strategy (GMS) approved in 2009 set out a clear, shared agenda around the vision for 2020 of a new model for sustainable economic growth based around a more connected, talented and greener sub-region where the prosperity secured is enjoyed by the many and not the few. These ambitions have not changed but Greater Manchester (GM) recognises that the economic context within which to achieve this vision had shifted significantly so the GMS has undergone significant review. The review has also, importantly, taken account of how Greater Manchester uses the new financial and policy “tools” which were granted by the Manchester “city deal” announced in March 2012 by the Chancellor in his Budget statement. The city deal included a highly innovative mechanism for GM to ‘earn back’ part of the national tax revenues generated by GM investment, as well as significant investment in regional transportation schemes and broadband technology.

The draft GMS, which will be approved during 2013/14, is still focused upon how we achieve high economic growth, but also places far greater emphasis upon how GM needs to respond to Public Sector Reform and how we better address the rising levels of unemployment. The need to support the restructuring of our Town Centres and develop the low carbon economy is also more explicit in the reviewed GMS.

The Council’s 2013/17 Capital Strategy has been prepared so that Oldham has regard to the GMS when making its investment proposals. The Council is playing a full and active role in the GM agenda, recognising the strong connections between the economic future of the sub-region and the borough and is directing resources where possible to support regional initiatives.


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Oldham Council will be working with the GMCA and other GM Councils to ensure that the benefits of this opportunity are maximised both locally and regionally.

7.3.3 Adult Social Care Trading Company

One of the proposals that was approved in setting the 2012/13 budget was the creation of an arm’s length Adult Social Care Trading Company. A detailed business case was presented and then approved at Cabinet on 17 December. The Trading Arm is expected to enable the adult provider services to redesign services and provide significant efficiencies to achieve the required savings over the forthcoming years.

There will be two Companies (Company A and Company B) established which will both be wholly owned by the Council. The services that the Council currently provides will be transferred to Company A whilst Company B will enter into new markets. The Council has received Cabinet funding in relation to the Trading Arm to explore mutual options and ensure that stakeholder engagement is maximised within the new companies.

The Trading Arm is expected to be operational by the second quarter of 2013/14. An interim Chief Executive was appointed in March and the consultation with staff in relation to TUPE transfer has commenced which are both significant project milestones.

7.3.4 Asset Management/Accommodation Strategy

A key strand of the revenue budget planning processes from 2010/11 onwards has been the effective management of the Council’s capital assets to enable it to be more efficient and to plan for future service requirements. As part of this development, a £6.542m upfront investment was approved in 2010/11, to rationalise the Council’s property estate and operational accommodation, to produce buildings and land that drive financial efficiencies and value for money, as well as helping to facilitate the Council’s service transformation agenda.

This initiative will see the sale (and hence generation of capital receipts), or relinquishing of leases, of underutilised and non-strategic properties. The improved office accommodation will see better space utilisation and ensure that more staff are located in fewer buildings. In 2013/14 the scope of assets has been increased through the Smarter Working programme, additional funding of £570k is identified within the capital programme. Combined with the remaining committed balance of £1.892m from the accommodation strategy programme, the available budget for 2013/14 is £2.462m.

7.3.5 Customer Led Service Redesign

In line with the Council’s Customer Strategy, the Council is championing new ways of working and more efficient service delivery by increasing the number of interactions with customers through lower cost channels, such as the internet. This reduces the number of more expensive face to face and telephone contacts, and consequently reduces office accommodation requirements thus linking into the corporate asset management/accommodation strategy.

This is an on-going initiative and work is continuing to ensure that the website is the channel of choice for both customer and staff, where all information is up to date and easy to find and the customer is guided step by step through the completion of transactions and advised


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of progress as they go. Some areas where this work has already led to improvements are in waste management, highways and revenues and benefits.

7.4 Contribution of the Finance Team to taking Forward New Initiatives

My report has highlighted the extensive range of both local and national initiatives that are at various stages of development within the Council. As previously indicated, local initiatives can be directed and controlled by the Council. The way forward on national initiatives is largely dictated by Central Government with, in some instances, opportunities for local interpretation at implementation.

Given the amount of change and the background of continuing reductions in Government funding to support Oldham and the rest of the public sector in its work, this continues to be a very challenging time.

The Finance Team facilitated the closedown of its 2011/12 accounts on 25 June 2012, a month ahead of any other council and three months ahead of the statutory deadline. The Council received high praise from the Audit Commission, and further to this, CIPFA approached the Council to present at the Finance Advisory Network conferences. We presented at a number of conferences throughout the country, delivering sessions around methodology to achieve a quicker closedown and the wider financial management benefits of improved closure of the accounts. These sessions were very well received.

The early closure of the accounts has been achieved by focussing on step change improvements in the standards of financial management and control, this enabled the Finance Team to focus earlier on future year’s budget management. It is increasingly important given the year on year cuts in funding for us to address the future as far as possible, and by way of example the Finance Team put together a two year budget, identifying savings requirements for 2013/14 and 2014/15 largely by December 2012, completing on the 17 April 2013. The Service is represented on working groups for key strategic projects such as the transformation of the town centre, the Hotel Futures project and the creation of an arm’s length Trading Company for adult social care. The Service has good working relationships with partners and works closely in collaboration to jointly facilitate progress whilst ensuring that the Council’s position is safeguarded.

Work is also taking place within the Finance Team to strengthen expertise and utilise the financial management system to its fullest advantage, so that even more timely and accurate financial information is available to all officers within the Council, to facilitate informed decision making about the general running of the Council and its involvement in new initiatives.

8. Key Accounting Information for the Financial Year 2012/13

The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit (England) Regulations 2011 which require the accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the Chartered Institute of Public Finance and Accountancy (CIPFA), Local Authority (Scotland) Accounts Advisory Committee (LASAAC) Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 (the Code), and the Service Reporting Code of Practice for Local


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Authorities 2012/13 (SeRCOP), supported by International Financial Reporting Standards (IFRS).

Having presented key information about Oldham Council to enable the reader to understand key issues that have influenced the financial performance of the Council in 2012/13 and those matters that will impact on it in future years, it is important to move onto the presentation of the 2012/13 accounts. These summarise the Council’s transactions for the 2012/13 financial year and its position at the year end of 31 March 2013.

I therefore set out information on the purpose of the various statements included in the 2012/13 accounts, followed by details of the Core and Supplementary Financial Statements that present the overall financial position of the Council. 8.1 Summary of the Purpose of the Various Statements Included in the 2012/13

Accounts

The Statement of Responsibilities for the Statement of Accounts

This Statement sets out the respective responsibilities of the Council and the Chief Financial Officer (Borough Treasurer) for the accounts.

The Auditor’s Statement

This is the Independent Auditor’s Report to Members of Oldham Council including the Conclusion on Arrangements for Securing Economy, Efficiency and Effectiveness in the Use of Resources.

The Annual Governance Statement

This gives a public assurance that the Council has proper arrangements in place to manage all of its affairs. It summarises the Council’s responsibilities in the conduct of its business, the purpose and key elements of the system of internal control and the processes applied in maintaining, reviewing and developing the effectiveness of those control systems.

8.2 Core Financial Statements

Movement in Reserves Statement

This statement shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The surplus or (deficit) on the Provision of Services line shows the true economic cost of providing the Council’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. This is different from the statutory amounts required to be charged to the General Fund Balance and the Housing Revenue Account for council tax setting and dwellings rent setting purposes. The Net (Increase)/Decrease before Transfers to Earmarked Reserves line, shows the statutory General Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.

Comprehensive Income and Expenditure Statement


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This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations but this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

Balance Sheet

The Balance Sheet summarises the Council’s financial position at 31 March 2013. The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use, for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt. The second category of reserves are those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses, for example the Revaluation Reserve, where amounts would only become available to provide services if the assets are sold, and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’.

Cash Flow Statement

The Cash Flow Statement shows the changes in the Council’s cash and cash equivalents during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income, or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital, i.e. borrowing, to the Council.

8.3 Supplementary Financial Statements

Housing Revenue Account (HRA)

The HRA is a record of revenue expenditure and income relating to the Council’s housing stock. Its primary purpose is to ensure that expenditure on managing tenancies and maintaining dwellings is balanced by rents charged to tenants. Consequently, the HRA is a statutory account, ringfenced from the rest of the General Fund so that rents cannot be subsidised from Council Tax or vice versa.

The HRA Income and Expenditure Statement shows the economic cost in the year of providing housing services in accordance with generally accepted accounting practices, rather than the amount to be funded from rents and government grants. Authorities charge rents to cover expenditure in accordance with regulations; this may be different from the accounting cost. The (increase) or decrease in the year, on the basis of which rents are raised, is shown in the Movement on the HRA Statement.


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Collection Fund

This account is maintained separately as a statutory requirement. The Collection Fund is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority in relation to the collection from taxpayers, and distribution to Local Authorities and the Government of Council Tax and non-domestic rates.

8.4 Underlying Accounting Principles

I have used four underlying principles in order to prepare the accounts so that they demonstrate:

a) Understandability The accounts are based on accounting concepts, treatments and terminology that assume that a reader has:

� A reasonable knowledge of the business of Local Authorities and the ways in which

services are provided; � A reasonable knowledge of accounting; and � A willingness to study the information required with reasonable diligence.

However, every effort has been made to use plain language and where technical terms are unavoidable they have been explained in the glossary of terms.

b) Relevance The accounts provide information about the Authority’s financial performance and position that is useful for assessing the stewardship of public funds and for making economic decisions. Information is presented so that it will assist readers to understand the Council’s current financial position or to make predictions about its financial trends.

The relevance of information contained in the accounts is affected by its nature and materiality (whether its mis-statement or omission might reasonably be expected to influence assessments of the Council’s stewardship, economic decisions or comparisons with other organisations based on financial statements) and therefore a judgement has been made about the levels of materiality to ensure that relevant issues are disclosed.

c) Reliability The financial information within the accounts has been prepared so that it:

� Can be depended upon to represent faithfully what it either purports to represent or

could reasonably be expected to represent and therefore reflects the substance of the transactions and other events that have taken place;

� Is free from bias (i.e. it is neutral); � Is free from material error; � Is complete within the bounds of materiality and cost; and


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� Under conditions of uncertainty, it has been prudently prepared (i.e. a degree of caution has been applied in exercising judgement and making the necessary estimates).

d) Comparability

Comparability (i.e. the ability to compare the Council’s performance between financial years and with other organisations), is an important mechanism for ensuring the usefulness of financial information (and is an essential of the best value accounting framework).

The application of the terms, accounting policies and requirements of the CharteredInstitute of Public Finance and Accountancy Code of Practice on Local Authority Accounting in England (2012) Statement of Recommended Practice and the Service Reporting Code of Practice is the way in which the Council has ensured consistency of financial information in the financial statements leading to comparability.

8.5 Preparation of the Accounting Statements

The 2012/13 Statement of Accounts have taken into account the following changes :-

A prior period adjustment has been included for the 2011/12 comparative year: there was a review during the year of the asset register system and it was identified that there had been no amendment to the net book value. This has resulted in Note 12 Property, Plant and Equipment being restated for the following amendments:- � Council Dwellings Gross Value has been increased by £85,505k and impairment &

depreciation has been increased by the same amount. � Other Land & Buildings gross value has been increased by £31,936k and impairment

& depreciation has been increased by the same amount.

Note 44 – PFI and similar contracts has also been amended to reflect the changes above. � Total Gross Values of assets within the note have reduced by £66,300k � Depreciation and impairment has increased by £66,300k

This restatement does not impact the core statements or the Council’s financial position. Amounts reported for Resource Allocation Decisions On reviewing working practices and improving reporting information an amendment has been made to Note 30 Amounts reported for Resource Allocation to show depreciation, amortisation and impairment separately and allocate support service recharges. The amendments are as follows:- � Depreciation and Impairment line has been increased by £68,592k; � Fees and Charges has been increased by £72,352k; � Government Grant income has been reduced by £43,524k; � Other Service Expenses has been reduced by £39,765k; � HRA other operating expenses has been increased by £19,484k; � HRA other support services recharges has been has been reduced by £19,484k.


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This restatement does not impact the core statements or the Council’s financial position.

8.6 Retirement Benefits

The Council is required to include information on retirement benefits within the Statement of Accounts which must be in accordance with the International Accounting Standard 19. Therefore I have summarised the treatment of pensions and other forms of retirement benefits below.

The majority of non-teaching staff who work for the Council are members of the Greater Manchester Pension Fund (GMPF). Tameside MBC administers this fund on behalf of the ten Greater Manchester Councils. Figures contained in the Statement of Accounts are based on the latest full valuation of the scheme as at 31 March 2010 and the IAS19 actuarial valuation report as at 31March 2013 by Hymans Robertson LLP, an independent firm of actuaries. This stated that the Fund’s liabilities were more than its assets. The Council’s proportion of this net liability was estimated at £289.400m at 31 March 2013 compared to £230.100m at 31 March 2012. The increase in the pension liability of £59.300m is primarily because of the financial assumptions at March 2013 were less favourable than those at March 2012.

Within these figures there is an unfunded element of a total of £46.200m which has increased when compared with the £41.000m at 31March 2012. The £46.200m is comprised of £26.400m for non-teaching staff and £19.800m relating to teachers’ discretionary payments as the Council is also responsible for the costs of any additional benefits awarded upon early retirements which are outside the terms of the Teachers’ scheme.

The liabilities show the underlying commitments that the Council has in the long run to pay retirement benefits. The total liability of £289.400m has a substantial impact on the net worth of the Council as recorded in the Balance Sheet.. However, the statutory arrangements for funding the deficit mean that the financial position of the Council remains healthy and the deficit on the fund will be made good by increased contributions over the remaining working life of employees as assessed by the scheme actuary. Finance is only required to be raised to cover discretionary benefits when the pensions are actually paid.

It should be noted that the pension fund’s accounts have still to be audited so the figures upon which these accounts have been based might be subject to change.

Teachers employed by the Council are members of the Teachers’ Pension Scheme administered by the Department for Education and it is not possible for the Council to identify its share of the underlying liabilities. For the purposes of the Statement of Accounts, it is accounted for on the same basis as a defined contribution scheme.

8.7 Events after the Reporting Period The Code requires the disclosure of the date that the financial statements were authorised for issue and therefore the date after which events will not have been recognised in the Statement of Accounts. This date is set at 31May 2013, in respect of the preparation of the audited Statement of Accounts for 2012/13.

I have determined that there are no events after the reporting period that require disclosing.


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8.8 An Explanation of the Financial Position for 2012/13 8.8.1 Revenue Expenditure

The final net revenue expenditure budget for 2012/13 was £225.989m. This equated to a Council Tax Band D of £1,345.85 for Council services. After adjusting for recognised capital grants and contributions of £32.427m, PFI grant income of £7.237m, and the Collection Fund deficit in year of £0.382m in accordance with the IFRS the budget increased to £265.270m, the financing of which is set out in the table below.

The Comprehensive Income and Expenditure Statement sets out the cost of services that the Council provides in accordance with the requirements of published accounts. This does not completely align to the way in which financial information is managed in-year. Therefore, set out below is the 2012/13 financial position in accordance with the Directorate structure, under which the Council operates, and the in-year financial monitoring information that is presented to officers and Members.

A comparison of budget and outturn is therefore set out below with the actual spend as reported against the budget for each Directorate for 2012/13 as follows:

Revenue Outturn Compared to Budget

Revised

Budget

Actual Over

(Under)

spend

£000 £000 £000

Net Expenditure

Deputy Chief Executive 21,475 21,122 (353)

Capital Treasury and Technical

Accounting 24,846 23,081 (1,765)

Corporate and Democratic Core 5,767 5,767 0

Corporate Management 896 774 (122)

Neighbourhoods 84,899 84,441 (458)

Commissioning 124,579 124,485 (94)

Commercial Services 2,524 2,878 354

Parish Precepts 288 288 0

Transfer to Balances 0 2,304 2,304

Grand Total 265,274 265,140 (134)

Financed by:

Council Tax income (84,937) (84,937) 0

Total Formula Grant (115,146) (115,146) 0

PFI Grants (7,237) (7,237) 0

Early Intervention Grant (EIG) (15,124) (15,124) 0

Learning Disability and Health Care

Reform Grant (5,335) (5,350) (15)

Council Tax Freeze Grant (2,125) (2,126) (1)

Other Non-Ringfenced Government

Grants (840) (841) (1)

Capital grants and contributions (32,427) (32,455) (28)

TOTAL FUNDING (263,171) (263,216) (45)

Corporate Under spend/

Contribution to General Fund

balance

2,103 1,924 (179)


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In overall terms, the Council achieved a surplus of £178k at the end of the financial year, which is close to the final monitoring information for the year, based on an overall revenue budget of £225.989m that was presented to Members at the 25th March 2013 Cabinet meeting. This projected a £0.017m under spend by the year-end.

There were no material variances at the year end as many issues that had been reported to Members during the year had been addressed by budget adjustments.

8.8.2 Schools

Schools may carry forward any surplus/deficit in net expenditure for the year from one financial year to the next. At the end of 2012/13, there were 92 schools (6 secondary, 84 primary and 2 special) for which the year end balances were included within the Balance Sheet of the Council.

Schools balances for 2012/13 reduced from 2011/12 figure by £2.710m to £8.861m.

The Oldham scheme for financing schools also allows ‘excess balances’ to be carried forward. An excess balance is, any balance that represents more than a given percentage of the schools budgets share for the following year:

� for secondary schools the relevant percentage is 5% � for primary and special schools the relevant percentage is 8%

Schools may only request excess balances to be carried forward when there is appropriate plan in place to utilise the funds. At the end of 2012/13 there were 16 schools with excess balances totalling £2.088m (4 secondary and 12).

During 2012/13, 2 schools converted to academies and 2 primary schools amalgamated.

8.8.3 Material Items of Income and Expenditure

The material items of expenditure relate to the disposal of land and buildings relating to School transfers to Academy status. The Council transferred land and buildings following schools moving to academy status and finalisation of the BSF Program.

2012/13

£000

Material Items of Expenditure

Disposal of land and buildings relating to School transfers to

Academy status:

New Bridge School (8,866)

Oasis Academy (27,553)

Oldham Academy North (16,984)

The Blessed John Henry Newman RC School (35,820)

Waterhead Academy (28,391)


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8.8.4 Capital Expenditure

The Council spends money on capital projects in accordance with the definition of capital expenditure as in the Local Authorities (Capital Finance and Accounting) Regulations 2003. This relates essentially to spending on assets that have a life of more than one year.

The Council spent £80,628 on its capital programme in 2012/13 which is shown in the table below by Directorate area. The financing of the capital programme is also presented and shows that the major funding source was from Prudential Borrowing and Government grants and contributions.

As can be seen, there was a variation between the forecast capital programme and the final outturn. The majority of the expenditure will, however, reprofile into 2013/14 together with the financing and does not therefore present any financial issues for the Council to address.

2012/13

Forecast

Capital

Programme

£m £m £m

Expenditure

Neighbourhoods 27.500 18.489 (9.011)

Commissioning 11.174 7.907 (3.267)

Commercial Services 9.966 4.440 (5.527)

Deputy Chief Executive 4.716 0.025 (4.691)

Regeneration and Development 61.927 49.769 (12.159)

Total Expenditure 115.284 80.628 (34.656)

Resources

Government Grants & Other

Contributions 61.435 47.906 (13.529)

Prudential Borrowing 41.385 25.830 (15.555)

Revenue 6.184 4.187 (1.996)

Capital Receipts 6.281 2.705 (3.576)

Total Resources 115.284 80.628 (34.656)

Outturn

Position

Over

(Under)

spend

The capital programme is made up of a large number of individual projects which it is impracticable to list. The most significant projects and spending areas in 2012/13 are set out below.

Capital Expenditure - Neighbourhoods

Overall capital expenditure within the Neighbourhoods Directorate totalled £18.489m. The major areas of expenditure were transportation, capital contributions to the PFI4 housing construction programme and fleet replacement. The table below presents some detail about these programme areas/projects.


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£m

Fleet Replacement

The Fleet Replacement programme started in 2012/13 and

during this year 40 Vehicles were purchased costing

£2.573m out of the prudential borrowing budget allocation

of £3.463m.

Local Authority Mortgage Scheme

As part of the scheme, the Council provides an indemnity

to Lloyds TSB to allow suitable first time buyers to access

the housing market with a 5 % deposit instead of a usual 25

% deposit. In effect, the Council provides a 'cash backed'

indemnity to Lloyds TSB to cover the 20% of the mortgage

price in the event of a default within the first 5 years of the

mortgage period.

PFI4 Housing

Capital contribution to construction of dwellings

Development Acquisition Fund

Metrolink support fund- assists in development of metrolink

Home Improvement Equity Release

Offers homeowners the opportunity to have essential repair

works carried out by borrowing the funds against available

equity within their property. The funding is repaid to the

Council upon sale or transfer of the land registry.

Transportation Programme

The transportation capital programme is presented to

Cabinet for approval on an annual basis. The final outturn

for 2012/13 showed expenditure of £8.012m compared to a

budget of £11.949m. The major areas of expenditure were:

� Minor works, covering areas such as

improvements to the public rights of way network,

cycle structure improvements, school safety zones,

local safety schemes and street lighting - £1.964m

� Highway Investment schemes (part of £10m

overall prudential borrowing allocation) - £3.025m

� Retaining walls programme - £0.183m

� Metrolink - £2.907m

Housing Market Renewal Initiative

This was a Government initiative to support failing or weak

housing markets to reconnect them to regional markets.

The Government cancelled the programme at 31 March

2011 but during 2012/13 the Council continued the

completion of those projects that were in progress at the

end of 2010/11 and also the management of legacy issues.

In 2012/13, major scheme spending included:

� Derker residential acquisitions - £0.252

� Derker demolitions - £0.083m

� Werneth residential acquisitions - £0.217m

� Werneth redevelopment - £0.343m

� Other redevelopment - £0.021m

8.013

0.916

Neighbourhoods- Capital Expenditure

2.573

1.000

3.701

1.004

0.423


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Capital Expenditure – Commissioning

Overall capital expenditure within the Commissioning Directorate totalled £7.907m. The major areas of expenditure were Disabled Facilities Grants and Schools spending. The table below presents some detail about these programme areas/projects.

£m

Schools Expenditure

In overall terms, expenditure on schools projects was £6.575m.

Whilst there was a significant number of individual schemes, the

major projects/areas were:

� Royton & Crompton- Portacabin Structure Work -

£0.598

� The extension, remodelling and refurbishment of

Kingfisher special school - £0.357m

� Essential Condition Works - £1.528m

� Primary Schools- other alterations / refurbishment /

ICT - £3.073m

� Secondary Schools- other alterations /

refurbishment / ICT - £0.818m

� Special Schools- other alterations / refurbishment /

ICT - £0.201m

Commissioning- Capital Expenditure

Disabled facilities adaptations to private sector homes

1.394

6.575

Capital Expenditure – Commercial Services

Expenditure in the Commercial Services Directorate totalled £4.440m, the major programme being the rationalisation of the property portfolio and improved office accommodation


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£m

Asset Management / Office Accommodation

An initiative that will see the disposal or

relinquishing of leases, of under utilised and

non strategic properties. The improved office

accommodation will see better space

utilisation and ensure that more staff are

located in fewer buildings.

IT Developments

An initiative that see the continual refesh of IT

hardware and software, as well as

development of Performance Management

Systems.

Commerical Services- Capital Expenditure

2.891

0.202

Capital Expenditure – Regeneration and Development

Capital expenditure within the Neighbourhoods Directorate totalled £49.769m. The major areas of expenditure were the BSF and Academies programme, the acquisition of the Lancaster Club, the Leisure Review and the upgrade of the Coliseum theatre. The table overleaf presents some detail about these programme areas/projects.


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£m

The BSF and Academies programme.

Transformation of secondary schools provision in the borough.

The expenditure in 2012/13 was:

� North Chadderton - £8.816m

� Waterhead Academy - £11.322m

� Oasis Academy - £5.991m

� Oldham Academy North - £8.379m

� Infrastructure demolition- £4.509m

Dunwood Park

Part of an overall project to undertake parkland conservation

work and restoration works to buildings at Dunwood park in

Shaw.

The scheme was funded in part via council resources and direct

funding from the Heritage lottery fund parks for peoples

programme.

Old Town Hall Restoration Works

Redevelopment of the Oldham Town Hall is a key Town Centre

development opportunity. Options under consideration include

cinema, retail and restaurant uses. The expenditure incurred in

2012/13 relates to professional fees and design work for this

project.

Coliseum Upgrade

The condition of the existing Coliseum Theatre building has

deteriorated significantly over the past few years. To ensure that

the life of this historic building is extended and the building has

been restored to a better condition, works completed on the

building in Autumn 2012.

Town Centre Public Realm

Town Centre Public Realm infrastructure investment is vital to

the realisation of the Council’s long term ambitions. Delivery of

this investment work is expected to contribute to the positive

socio-economic changes that the Metrolink project is likely to

bring to Oldham.

This aim of this project is to enhance the strategically placed

Metrolink stops within the Borough to realise maximum benefits.

The expenditure of £343k in 2012/13 relates to funds spent to

enhance Metrolink stops.

Lancaster Club

Part of the ongoing Regeneration of the Borough.

Leisure Review 2.292

4.070

Regeneration & Development- Capital Expenditure

39.017

0.500

1.101

1.600

0.343


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8.8.5 Other Major Programmes of Expenditure

Oldham Library and Lifelong Learning Centre

The contract for this project was awarded to Information Resources (Oldham) Ltd, a consortium led by the Kier Group Ltd for the construction, maintenance and operation of Information Technology (IT) and Facilities Management (FM) services for 25 years for the Library and Lifelong Learning Centre. Services commenced in February 2006 and opened to the public in April 2006; thus making 2012/13 the eighth year of operation of the contract.

The building and any plant and equipment installed in it will transfer to the Council at the end of the contract period for nil consideration. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including the repayment of any of the contractor’s outstanding debt attributable to the contract. During 2012/13, there have been no changes to any aspect of the arrangements that are in place.

The Unitary Charge remaining at 31 March 2013 is £59.156m, comprising of repayment of liability (£13.795m), interest (£15.272m) and service charges (£30.089m) being met from Government Grant and Council contributions, with an expiry date of January 2031.

Sheltered Housing The contract for the provision of sheltered and warden supported properties in the Housing Revenue Account was awarded to Oldham Retirement Housing Partnership Limited (ORHP), a wholly owned subsidiary of Housing 21. It covered demolition, and new build, refurbishment and the provision of management and maintenance services, and commenced fully on 19 January 2007. As such, 2012/13 marks the seventh year of the 30 year PFI contract with an expiry date of October 2036.

The dwellings will transfer to the Council at the end of the contract period for nil consideration. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including the repayment of any of the contractor’s outstanding debt attributable to the contract. During 2011/12, there have been no changes to any aspect of the arrangements that are in place.

The Unitary Charge remaining at 31 March 2013 is £383.987m comprised of repayment of liability (£93.041m), interest (£138.930m) and service charges (£152.016m), the costs being met from Government Grant and other income contributions.

Schools The contract for the removal of two split site secondary schools at Failsworth and Radclyffe (Chadderton) was awarded to Academy Services for a 25 year period. It also covers the construction and maintenance (including the provision of Information Technology (IT) and Facilities management (FM) of two single site 11 – 16 ‘state of the art’ secondary schools for 1,500 pupils which opened in February 2008, thus making 2012/13 the fifth year of the PFI contract. The schools and any plant and equipment installed in them will transfer to the Council at the end of the contract period for nil consideration. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including the repayment of


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any of the contractor’s outstanding debt attributable to the contract. During 2012/13, there have been no changes to any aspect of the arrangements that are in place. The Unitary Charge has an expiry date of January 2033. The charge remaining at the 31 March 2013 is £174.802m comprised of repayment of liability (£48.318m), interest (£47.348m) and service charges (£79.136m) and will be met by Government Grant, school budgets, and Council contributions. Chadderton Wellbeing Centre The financial year 2012/13 marked the fourth year of the LIFT Lease Plus Agreement (which is similar to a PFI) to build and maintain the Chadderton Health and Wellbeing Centre which incorporates a library, sports centre, café and community rooms. The agreement is with Community First Oldham. The Council has the option to purchase the Wellbeing Centre for less that the asset’s market value at the end of the contract and the Council has judged itself reasonably certain to exercise the options, and the cost of the eventual purchase has been factored into the Minimum Lease Payment. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including the repayment of any of the contractor’s outstanding debt attributable to the contract. During 2012/13 there have been no changes to any aspect of the arrangements that are in place. The contract continues until 2039/40 and the charge remaining at the 31 March 2013 is £46.317m comprised of repayment of liability (£8.781m), interest (£24.037m) and service charges (£13.499m) and will be financed by Council contributions. Street Lighting The financial year 2012/13 was the second year of a 25 year PFI contract that the Council has agreed jointly with Rochdale Council with Community Lighting Partnership (Oldham) Ltd. This is for the replacement of approximately 23,000 streetlights in Oldham in the first five years and the ongoing management and maintenance of the streetlights over the life of the contract. The Council has rights under the contract to detail the specification of the streetlights and they will transfer to the Council at the end of the contract for nil consideration. The contract specifies minimum standards for the services to be supplied by the contractor, with deductions from the fee being payable if performance is below the minimum standards. The contractor took on the obligation to replace and maintain the streetlights over the life of the contract. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including the repayment of any of the contractor's outstanding debt attributable to the contract. The Unitary Charge continues until 2036/37 and the charge remaining at the 31 March 2013 is £107.089m comprised of repayment of liability (£23.456m), interest (£32.706m) and service charges (£50.926m) and will be met by Government grant and Council contributions.


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Gateways to Oldham Housing The financial year 2012/13 was the second year of a 25 year PFI contract for the management of 633 HRA dwellings with Inspiral Oldham Limited (Inspiral). Inspiral will be responsible for demolition, new build and refurbishment of the dwellings together with their management and maintenance. The contract also includes minor works to external fabric of 145 leaseholder/owner occupied properties, for which the majority of associated costs will be met by the leaseholders/owner occupiers. The Council has rights under the contract to specify arrangements around the demolition, new build and refurbishment of the dwellings together with the tenancy management services to be supplied. The contract specifies minimum standards for the services to be supplied by the contractor, with capacity for the Council to levy deductions from the fee payable if facilities are unavailable or performance falls below the minimum standards. The contractor has taken on the obligation to demolish and rebuild/refurbish the dwellings and to maintain them in a minimum acceptable condition over the life of the contract. The management of the dwellings within the HRA will transfer back to the Council at the end of the contract for nil consideration unless a separate contract is entered into either with Inspiral or an alternative contractor. The Council has rights to terminate the contract in the event of non performance but will be required to compensate the contractor, potentially including the repayment of any of the contactor's outstanding debt attributable to the contract. The Unitary Charge continues until 2036/37 and the charge remaining at the 31 March 2012 is £218.812m comprised of repayment of liability (£66.784m), interest (£79.008m) and service charges (£73.020m) and will be met by Government grant and HRA contributions. Building Schools for the Future 2012/13 was the first year of a 25 year PFI contract for the construction and maintenance of a secondary school, The Blessed John Henry Newman RC Secondary School; along with provision of Facilities Management services over the life of the contract. The council has rights under the contract to specify the opening times of the school. The contract specifies minimum standards for the services to be provided by the contractor, with deductions from the fee being made if the facilities are unavailable or performance is below minimum standards. The contractor was obliged to construct the schools and to maintain them to a minimum acceptable condition, and to procure and maintain the plant and equipment needed to operate the facility. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including repayment of any of the contractors’ outstanding debt attributable to the contract. The Unitary Charge continues until 2037/38 and the charge remaining at the 31 March 2012 is £135.933m comprised of repayment of liability (£35.820m), interest (£50.837m) and service charges (£49.276m) and will be met by Government grant and HRA contributions.


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8.8.6 Movement in Reserves Statement This statement shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The usable reserve balance at 31 March 2013 was £109.813 m (£109.575m 31 March 2012) which is made up of the general fund balance, HRA balance, earmarked reserves, capital receipts reserve and capital grants unapplied reserve. The unusable reserves balance at 31 March 2013 was positive £169.881m (positive£21.832m 31 March 2012), made up of the revaluation reserve, pensions reserve, capital adjustment account, financial instrument adjustment account, Collection Fund adjustment account, short term compensated absences account and deferred capital receipts reserve. These are detailed in Note 26.

8.8.7 Balance Sheet

In 2012/13 the Council’s Net Assets were in a credit position i.e. a net liability, this was due to a number of technical accounting treatments: � Accounting treatment for Voluntary Aided & Academy schools – In 2012/13 a number

of secondary school new builds were completed, as these were either Voluntary Aided or Academy schools the Council does not control the economic benefits flowing from the assets and therefore does not recognise the asset in the balance sheet. In the case of the one PFI school the authority has to account for the whole life principal repayment liability arising from the build cost of the asset this has the net effect of increasing liabilities without increasing asset values, whilst academy status requires the authority to dispose of the asset for nil consideration thus reducing asset values.

� Pension Fund Accounting requires the authority to recognise the potential liability over the full life of the pension fund this is valued using an actuarial valuation and can fluctuate dependent on external factors. The current actuarial review has increased this liability from previous years.

It is extremely unlikely that either of these liabilities will fall to the Council as PFI principal repayments are covered by PFI credits given by Central Government however under current accounting conventions the authority is not allowed to recognised future income streams until they become receivable. The calculation and explanation of the pension fund liability is fully explained in Note 49 Defined Benefit Pension Schemes. Statutory requirements for funding the pension scheme mean that the financial position of the Authority remains very healthy. Payments only fall due when employees retire and contributions to the scheme during up to that period will ensure that the cost of the pensions can be fully financed.

8.8.7.1 Assets

a) Property, Plant and Equipment The net book value of Property, Plant & Equipment decreased during the year from £569.761m to £530.887m. The opening and closing position by category was as follows:


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31 March 2012 31 March 2013

£m £m

Council Dwellings 31.435 32.658

Other Land and Buildings 363.372 358.573

Vehicles, Plant and Equipment 5.915 4.943

Infrastructure 121.571 134.113

Community Assets 0.112 0.086

Property, Plant and Equipment under Construction 47.340 0.497

Surplus Assets 0.016 0.016

569.761 530.887

Category

The principal movements during the year are shown in the table below:

Movement in year £m

Closing Position at 31 March 2012 569.761

Additions 137.652

Revaluations 8.555

Disposals -125.398

Depreciation in year -23.010

Impairment -34.896

Transfers From PP&E -1.776


Additions totalled £83.1m during the year with the major items shown in the following table:

Additions £m

Gateways to Oldham PFI 28.950

Infrastructure 12.447

Waterhead Academy 11.322

Oasis Academy 5.991

Oldham Academy North 8.379

Blesssed John Henry Newman RC School 35.820

Street Lighting 6.136

Lancaster Club 4.069

Other Additions less than £4m 23.538


The Council has a rolling programme of valuing its properties and in 2012/13 the programme revealed net gains of £17.400m, with the largest gain arising from the revaluation of Burnley Brow Community School (£1.800m).

Impairment

During 2012/13 the Council has recognised impairment losses of £34.965m of which £1.992m was offset against previous revaluation gains and the balance of £32.973m was charged to the Surplus/(Deficit) on the provision of services.

The impairment of additions due to the Gateway to Oldham Housing PFI Scheme amounted to £25.142m, £24.740m of which was charged to the Surplus/(Deficit) on the Provision of Services and £0.402m was offset against previous revaluation gains. There were no other individual assets impaired by more than £4.000m. See Note 45 for further detail.


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Revenue Expenditure Funded from Capital under Statute (REFCUS)

The total expenditure under this category was £32.200m with the largest item being the remodelling expenditure at North Chadderton School (£8.800m). There were no other such charges in excess of £1.000m.

b) Investment properties

Investment properties are valued at £16.026m (£16.203m 2011/12), with a net reduction of £0.654m of assets being acquired/disposed in the year and a net increase of £0.475m as part of the revaluation/reclassification of the properties being the major contributors in the reduction.

c) Intangible Assets Intangible assets consist of purchased software licences and the balance at 31 March 2013 was £1.668m (£3.138m at 31 March 2012) with additions of £0.097m being more than offset by amortisation and impairment of £1.567 m.

d) Investments At the end of 2012/13, long term investments had a balance of £31.624m compared to £12.539m at the end of 2011/12. At the end of 2012/13, short term investments stood at £25.112m compared to £10.108m at the end of 2011/12.

e) Cash and Cash Equivalents Total cash and cash equivalents at 31 March 2013 were £39.327m compared to £57.087m at 31 March 2012. This was made up of £0.107m of cash, £44.413m held in current bank accounts offset by £5.193m of bank overdraft.

f) Debtors The total balance of short term debtors at 31 March 2013 was £25.898m. This has fallen £11.648m from £37.546m at the end of 2011/12. Part of the change in the overall debtors value was due to the continued initiative to improve the Council's cash management activities, even though the year started with Oldham Council in a respectable performance position compared to similar Authorities.

g) Inventories These have decreased by £0.226m in the year from £0.708m to £0.482m caused largely by disposal of the Street Lighting stock as part of the Street Lighting PFI.


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8.8.7.2 Liabilities

a) Council Borrowing The authorised limit for external debt for the Council for 2012/13 was £519.000m. The actual level of outstanding long and short term debt, including long term liabilities at the year end totalled £391.264m. At 31 March 2013, the Council had £148.659m of long term borrowing (2011/12 was £136.623m), comprising £142.058m of long term loan stock, repayable from 2016 to 2078 and £6.601m of 12.4% redeemable loan stock repayable in 2022. During 2012 the Council took out £15.000m additional loans from the PWLB. In addition the Council had £2.005m (2011/12 £16.971m) of short term borrowing (loans repayable within 12 months) of which £1.404m consisted of interest due on long term loans. The remaining balance is in relation to Charities, Trust Funds and Bonds. The decrease of £14.966m of short term borrowings relates to a switch to additional long term borrowings from the PWLB as mentioned above. The Council paid £20.735m (2011/12 £26.321m) of interest and similar charges in year and received £3.462m (2011/12 £2.783m) of interest and investment income. The fall in interest payable in 2012/13 is directly related to the HRA self-financing reform introduced on 1 April 2012, as the Council no longer has any debt attributable to the HRA. The increase in interest receivable was due to the Council having greater average cash balances invested in year, in line with the Treasury Management Strategy and increased dividends received.

b) Creditors The short term creditor balance at the end of March 2013 was £52.658m compared to £58.522m at the end of March 2012. Further details can be found in Note 23.

c) Provisions Provisions represent amounts set aside to meet potential future liabilities. The total balance of £25.404m is allocated to short-term (£8.379m) and long-term (£17.025m) provisions. The total balance has decreased by £3.658m from £29.966m at 31 March 2012. See Note 24 for further detail.

d) Other Long Term Liabilities PFI, Finance Lease Liabilities, Deferred Credits and Transferred Debt – the balance of £2232.020m (£181.070m at 31 March 2012) is made up of three main elements: � The outstanding liability relating to the PFI and LIFT schemes totalling

£223.709m; � Finance Leases totalling £0.332m; and � Transferred debt in respect of former Greater Manchester Council services

totalling £7.946m. � Deferred Credits of £0.033m.


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Pensions - the balance at 31 March 2013 is £289.400m (£230.100m at 31 March 2012) which is the Oldham Council share of the liability of the Greater Manchester Pension Fund and is discussed at Section 8.6.

8.8.7.3 Reserves a) Earmarked Reserves

At 31 March 2013, the earmarked reserves held by the Council totalled £55.419m, an increase of £3.890m over the balance at 31 March 2012 of £51.529m. These reserve balances include:- Balances held by Schools under a Scheme of Delegation These totalled £8.861m and relate to individual schools and are not available to the Council for general use. This has decreased by £2.710m from £11.571m at the end of 2012/13.

b) Unusable Reserves At 31 March 2013, unusable reserves held by the Council totalled positive £169.880m (positive £21.832m 31 March 2011). Revaluation Reserve This reserve holds the accumulated gains on the fixed assets held by the Council arising from increases in value. The balance at 31 March 2013 was £100.549m (£98.268m restated at 31 March 2012). Capital Adjustment Account The balance on this account represents timing differences between the amount of the historical cost of fixed assets that has been consumed and the amount that has been financed. The balance at 31 March 2013 was £15.141m (£125.576m restated at 31 March 2012). Financial Instruments Adjustment Account This is a reserve account through which the accounting consequences of early redemption of financial instruments are released to the General Fund over the years which remain to the original future redemption date. The balance at 31 March 2012 was a positive £10.113m (positive £10.440m at 31 March 2011). Pensions Reserve This reserve holds the accumulated pension liability for the Council. The positive balance at 31 March 2012 was £289.400m (positive £230.100m at 31 March 2011). Short Term Compensated Absences Account This is a reserve account required under IFRS that accounts for annual leave entitlement carried forward at the year end, which must be shown separately from the General Fund balance. At the end of the year the balance was a positive £6.050m (positive £6.460m at 31 March 2012). Available for Sale Financial Instrument Reserve This reserve holds the accumulated gains from revaluations of Financial Instruments. The reserve has a balance at 31 March 2013 of £19.086m. This is a newly created


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reserve in the 2012/13 financial year following the revaluation of the Councils shareholding in Manchester Airport.

8.8.8 Cash Flow Statement

The Cash Flow Statement shows the changes in cash and cash equivalents of the Council during the reporting period. The net cash flow for the Council was an decrease in cash and cash equivalents of £17.760m from £57.087m to £39.327m at 31 March 2013.

8.8.9 Housing Revenue Account (HRA)

The HRA balance at the 31 March 2013 is £19.262m, an increase of £8.837m in the year from £10.425m.

8.8.10 Collection Fund

The Collection Fund is maintained separately from the Council’s General Fund specifically to record income and expenditure associated with Council Tax and National Non Domestic Rates.

During 2012/13 income of £150.881m was received by the Collection Fund, of which £77.584m was from Council Tax payers, £22.188m from Council Tax Benefits and £51.109m from Business Rate payers. Total Collection Fund expenditure was £151.319m leaving a deficit for the year of £0.438m.

At the end of 2012/13, the Collection Fund accumulated balance was therefore £0.198m which is a decrease of £0.438m from the accumulated balance of £0.636m at the end of 2011/12. This is mainly due to a revision of bad and doubtful debts provision to ensure the collection fund is providing adequately for any outstanding debts. More detailed information about the Collection Fund is contained in the Supplementary Statements and Notes C1 to C5.

9 Receipt of Further Information

If you would like to receive further information about these accounts, please do not hesitate to contact me at the Borough Treasurer’s Department, Performance, Services and Capacity Directorate, Oldham Council.

10 Acknowledgements

The production of the Statement of Accounts would not have been possible without the exceptionally hard work and dedication of staff across the Council. I would like to express my gratitude to all colleagues, from the Borough Treasurer’s team and other services, who have assisted in the preparation of this document. I would also like to thank them for all their support during the financial year.

S J Mair BA (Hons) CPFA MBA Borough Treasurer


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2.0 Statements to the Accounts

2.1 Statement of Responsibilities for the Statement of Accounts 2.1.1 The Authority’s Responsibilities

The Authority is required to: i. Make arrangements for the proper administration of its financial affairs and to secure

that one of its officers has the responsibility for the administration of those affairs. In Oldham Council, that officer is the Borough Treasurer;

ii. Manage its affairs to secure economic, efficient and effective use of resources and

safeguard its assets; and iii. Approve the Statement of Accounts.

2.1.2 The Borough Treasurer’s Responsibilities The Borough Treasurer is responsible for the preparation of Oldham Council’s Statement of Accounts in accordance with proper practices as set out in the Chartered Institute of Public Finance and Accountancy/Local Authority (Scotland) Accounts Advisory Committee 2012/13 Code of Practice on Local Authority Accounting in the United Kingdom (the Code). In preparing this Statement of Accounts, the Borough Treasurer has: i. Selected suitable accounting policies and then applied them consistently; ii. Made judgements and estimates that were reasonable and prudent; iii. Complied with the Code of Practice on Local Authority Accounting; iv. Kept proper accounting records which were up to date; and v. Taken reasonable steps for the prevention and detection of fraud and other

irregularities.

2.1.3 Certification of Accounts I certify that the Statement of Accounts gives a true and fair view of the financial position of Oldham Council at 31 March 2013 and its income and expenditure for the year then ended. Signed Steven Mair

Borough Treasurer, Section 151 Officer. Dated 31 May 2013


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Approval of Accounts In accordance with the Accounts and Audit Regulations 2012, I certify that the Statement of Accounts was approved by the Audit Committee on 31 May 2013. Signed Alec Cross Chair of Audit Committee Dated 31 May 2013


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Section 2 Auditor’s Statement to input


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Core Financial Statements and Explanatory Notes


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3.0 Core Financial Statements and Explanatory Notes 3.1 Movement in Reserves Statement

This Statement shows the movement in the year on the different reserves held by the Council, analysed into 'usable reserves' (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The ‘Surplus or (Deficit) on the provision of services’ line shows the true economic cost of providing the Council’s services, which is shown in more detail in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance and Housing Revenue Account for Council Tax setting and dwellings rent setting purposes. The ‘Net Increase / Decrease before Transfers to Earmarked Reserves’ line shows the statutory General Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.

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£000 £000 £000 £000 £000 £000 £000 £000 £000

Balance at 31 March 2011 carried forward (9,560) (56,452) (11,354) (5,244) - (31,288) (113,898) (28,924) (142,822)

Movement in reserves during 2011/12

Surplus or (deficit) on provision of services (14,869) - (14,066) - - - (28,935) - (28,935)

Other Comprehensive Income and Expenditure - - - - - - - 84,015 84,015

Total Comprehensive Income and Expenditure (14,869) - (14,066) - - - (28,935) 84,015 55,080

Adjustments between accounting basis and

funding basis under regulations Note 7 16,026 - 14,994 1,633 - 605 33,258 (33,258) -

Net Increase/Decrease before Transfers to

Earmarked Reserves 1,157 - 928 1,633 - 605 4,323 50,757 55,080

Transfers to/from Earmarked Reserves Note 8 (4,923) 4,923 - - - - - - -

(Increase)/Decrease in Year (3,766) (4,923) 928 1,633 - 605 4,323 50,757 55,080

Balance at 31 March 2012 carried forward (13,326) (51,529) (10,426) (3,611) - (30,683) (109,575) 21,833 (87,742)

Usable Reserves

2011/12

General Fund

Balance

Earm

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Fund Reserves

Housing Revenue

Account

Capital Receipts

Reserve

Major Repairs

Reserve

Capital Grants

Unapplied Account

Total Usable

Reserves

Unusable Reserves

Total Authority

Reserves

£000 £000 £000 £000 £000 £000 £000 £000 £000

Balance at 31 March 2012 carried forward (13,326) (51,529) (10,426) (3,611) - (30,683) (109,575) 21,833 (87,742)

Movement in reserves during 2012/13

Surplus or (deficit) on provision of services 114,585 11,960 126,544 126,544

Other Comprehensive Income and Expenditure 21,266 21,266

Total Comprehensive Income and Expenditure 114,585 - 11,960 - - - 126,544 21,266 147,810

Adjustments between accounting basis and

funding basis under regulations Note 7 (120,953) (20,796) (1,720) (153) 16,841 (126,782) 126,782 -

Net Increase/Decrease before Transfers to

Earmarked Reserves (6,368) - (8,836) (1,720) (153) 16,841 (238) 148,048 147,810

Transfers to/from Earmarked Reserves Note 8 3,890 (3,890) - - - - - - -

(Increase)/Decrease in Year (2,478) (3,890) (8,836) (1,720) (153) 16,841 (238) 148,048 147,810

Balance at 31 March 2013 carried forward (15,804) (55,419) (19,262) (5,331) (153) (13,842) (109,813) 169,881 60,068

Usable Reserves

2012/13


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3.2 Comprehensive Income and Expenditure Statement

Gross

Expend

Gross

Income

Net

Expend

Gross

Expend

Gross

Income

Net

Expend

£000 £000 £000 Note £000 £000 £00088,256 (24,056) 64,200 Adult Social Care 88,778 (26,088) 62,690

59,371 (37,026) 22,345 Central Services 54,800 (39,067) 15,7336,284 - 6,284 Corporate and Democratic Core 5,767 - 5,767

284,116 (206,017) 78,099 Children's and Education Services 264,499 (196,355) 68,14423,614 (1,571) 22,043 Culture and Related Services 13,827 (2,521) 11,30620,267 (6,532) 13,735 Environment and Regulatory Services 22,363 (5,905) 16,45818,297 (3,936) 14,361 Planning Services 13,326 (3,725) 9,60126,546 (5,230) 21,316 Highways, Roads and Transport Services 19,645 (4,919) 14,72626,021 (18,723) 7,298 Local Authority Housing (HRA) 32,655 (26,073) 6,58189,487 (76,743) 12,744 Other Housing Services 85,841 (82,061) 3,780

920 - 920 Non Distributed Costs 1,305 - 1,305

643,179 (379,834) 263,345 Cost Of Services 30 602,807 (386,715) 216,092

35,083 Other Operating Expenditure 9 152,682

25,427 Financing and Investment Income and Expenditure 10 23,086

(318,882) Taxation and Non-Specific Grant Income 11 (265,315)

(33,908) HRA Capital Grant 11 -

(28,935) (Surplus) or Deficit on Provision of Services 30 126,544

Other Comprehensive Income and Expenditure

(7,886) Revaluation (gains)/losses (13,248)

(Surplus) or Deficit on Revaluation of available for sale financial assets (19,086)

91,900 Actuarial (gains)/losses on pension assets/liabilities 49 53,600

55,079 Total Comprehensive Income and Expenditure 147,810

2011/12 2012/13


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3.3 Balance Sheet

31 March Note 31 March

2012 2013

£000 £000

569,760 Property, Plant & Equipment 12 530,886

19,389 Heritage Assets 13 19,405

16,203 Investment Property 14 16,025

3,138 Intangible Assets 15 1,668

12,539 Long Term Investments 17 31,624

8,837 Long Term Debtors 17 9,791

629,866 Long Term Assets 609,399

10,108 Short Term Investments 25,112

708 Inventories 18 482

37,547 Short Term Debtors 20 25,898

57,087 Cash and Cash Equivalents 21 39,327

438 Assets held for sale (<1yr) 22 388

105,888 Current Assets 91,207

(16,971) Short Term Borrowing 17 (2,005)

(58,522) Short Term Creditors 23 (52,658)

(10,645) Short Term Provisions 24 (8,378)

(6,698) Short Term Liabilities 16 (8,613)

(92,837) Current Liabilities (71,654)

(16,321) Long Term Provisions 24 (17,025)

(133,623) Long Term Borrowing 17 (148,658)

(404,513) Other Long Term Liabilities 16 (521,420)

(717) Capital Grants Receipts in Advance 40 (1,916)

(555,174) Long Term Liabilities (689,019)

87,743 Net Assets (60,067)

(109,576) Usable Reserves 25 (109,813)

21,832 Unusable Reserves 26 169,880

(87,743) Total Reserves 60,067


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3.4 Cashflow Statement

2011/12 2012/13

£000 Note £000

28,935 Net surplus or (deficit) on the provision of services (126,544)

87,028 Adjustment to surplus or deficit on the provision of services for

non cash movements

27 200,194

(84,677) Adjust for items included in the net surplus or deficit on the

provision of services that are investing and financing activities

27 (34,923)

31,286 Net Cash flows from Operating Activities 38,727

15,767 Net Cash flows from Investing Activities 28 (119,681)

(15,677) Net Cash flows from Financing Activities 29 63,194

31,376 Net increase or (decrease) in cash and cash equivalents (17,760)

25,711 Cash and cash equivalents at the beginning of the reporting

period

57,087

57,087 Cash and cash equivalents at the end of the reporting

period

21 39,327


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3.5 Index of Explanatory Notes to the Core Financial Statements

Note Page Note no.

Accounting Policies 88 1

Accounting Standards Issued, Not Adopted 109 2

Acquired and Discontinued Operations 156 31

Adjustments between Accounting Basis and Funding Basis under Regulations 116 7

Agency Services 163 33

Amounts Reported for Resource Allocation Decisions 153 30

Assets Held for Sale 140 22

Assumptions Made about the Future and Other Major Sources of Estimation Uncertainty 113 4

Capital Expenditure and Capital Financing 178 42

Capitalisation of Borrowing Costs 189 46

Cash and Cash Equivalents 139 21

Cash Flow Statement – Financing Activities 152 29

Cash Flow Statement – Investing Activities 151 28

Cash Flow Statement – Operating Activities 150 27

Construction Contracts 137 19

Contingent Assets 201 51

Contingent Liabilities 197 50

Creditors 141 23

Critical Judgements in Applying Accounting Policies 110 3

Debtors 138 20

Dedicated Schools Grant (DSG) 170 39

Defined Benefit Pension Schemes 192 49

Events after the Reporting Period 115 6

External Audit Costs 169 38

Financial Instruments 132 17

Financing and Investment Income and Expenditure 122 10

Grant Income 171 40

Heritage Assets 128 13

Heritage Assets: Further Information on the Museum’s Collections 210 54

Heritage Assets: Three Year Summary of Transactions 209 53

Impairment Losses 188 45

Intangible Assets 130 15

Inventories 136 18

Investment Properties 129 14

Leases 179 43

Material items of Income and Expenditure 114 5

Members’ Allowances 166 36

Nature and Extent of Risks Arising from Financial Instruments 203 52

Officers’ Remuneration 167 37

Other Long Term and Current Liabilities 131 16

Other Operating Expenditure 121 9

Pension Schemes Accounted for as Defined Contribution Schemes 191 48

PFI and Similar Contracts 182 44

Prior Period Adjustments, Changes in Accounting policies and Estimates and Errors 214 56

Pooled Budgets 105 35

Property, Plant and Equipment 124 12

Provisions 142 24

Related Parties 174 41

Road Charging Schemes 164 34

Taxation and Non Specific Grant Income 123 11

Termination Benefits 190 47

Trading Operations 157 32


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Note Page Note no.

Transfers To/From Earmarked Reserves 119 8

Trust Funds and Third Party Assets 213 55

Unusable Reserves 144 26

Usable Reserves 143 25


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3.6 Explanatory Notes to the Core Financial Statements Introduction

The financial statements have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2012 (the Code) and the accounting policies set out at Note 1. The notes that follow (1 to 56) set out supplementary information to assist readers of the accounts. 1. Accounting Policies

1.1 General Principles

The Statement of Accounts summarises the Council’s transactions for the 2012/13 financial year and its position at the year end of 31 March 2013. The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit (England) Regulations 2011 which require the accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 (the Code) and the Service Reporting Code of Practice for Local Authorities 2012/13 (SeRCOP), supported by International Financial Reporting Standards (IFRS). The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments.

1.2 Accruals of Income and Expenditure

Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular:

� Revenue from the sale of goods is recognised when the Council transfers the significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Council.

� Revenue from the provision of services is recognised when the Council can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Council.

� Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption they are carried as inventories on the Balance Sheet.

� Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made.

� Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument, rather than the cash flows fixed or determined by the contract.

Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where


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debts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.

1.3 Carbon Reduction Commitment Scheme

The Council is required to participate in the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. This scheme has completed its introductory phase and the second phase of the scheme will start in April 2013. The Council is required to purchase allowances retrospectively, on the basis of emissions (i.e. carbon dioxide produced as energy is used). As carbon dioxide is emitted (i.e. as energy is used), a liability and an expense are recognised.

The liability is measured at the best estimate of the expenditure required to meet the obligation, normally at the current market price of the number of allowances required to meet the liability at the reporting date. The cost to the Council is recognised and reported in the cost of the Councils services and is apportioned to services on the basis of energy consumption.

1.4 Cash and Cash Equivalents

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management.

1.5 Charges to Revenue for Non-Current Assets

Services, support services and trading accounts are debited with the following amounts to record the cost of holding non-current assets during the year:

� Depreciation attributable to the assets used by the relevant service. � Revaluation and impairment losses on assets used by the service where there are no

accumulated gains in the Revaluation Reserve against which the losses can be written off.

� Amortisation of intangible fixed assets attributable to the service.

The Council is not required to raise Council Tax to fund depreciation, revaluation and impairment losses or amortisation. However, it is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis, determined by the Council in accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisation are therefore replaced by the contribution in the General Fund Balance (Minimum Revenue Provision (MRP)), by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.


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1.6 Employee Benefits

Benefits Payable during Employment

Short-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits for current employees, and are recognised as an expense for services in the year in which employees render service to the Council. An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. time off in lieu) earned by employees but not taken before the year-end which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs.

Termination Benefits

Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy. They are charged on an accruals basis to the relevant services lines in the Comprehensive Income and Expenditure Statement, when the Council is demonstrably committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy.

Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund Balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve, to remove the notional debits and credits for pension enhancement termination benefits, and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end.

Post Employment Benefits

Employees of the Council are members of two separate pension schemes:

� The Teachers’ Pension Scheme, administered by Capita Teachers’ Pensions on behalf of the Department for Education (DfE).

� The Greater Manchester Local Government Pensions Scheme, administered by Tameside Metropolitan Borough Council.

Both schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees working for the Council.

However, the arrangements for the teachers’ scheme mean that liabilities for these benefits cannot ordinarily be identified specifically to the Council. The scheme is therefore accounted for as if it was a defined contribution scheme and no liability for future payments of benefits is recognised in the Balance Sheet. The Children’s and Education Services line in the Comprehensive Income and Expenditure Statement is charged with the employer’s contributions payable to Teachers’ Pension Scheme in the year.


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The Greater Manchester Local Government Pension Scheme

The Greater Manchester Local Government Pension Scheme is accounted for as a defined benefits scheme.

The liabilities of the Greater Manchester Pension Fund attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc. and projections of future earnings for current employees.

Liabilities are discounted to their value at current prices, using a discount rate of 4.5% (based on the indicative rate of return on a basket of high quality corporate bonds, Government gilts and other factors).

The assets of the Greater Manchester Pension Fund attributable to the Council are included in the Balance Sheet at their fair value:

� Quoted securities – current bid price. � Unquoted securities – professional estimate. � Unitised securities – current bid price. � Property – market value.

The change in the net pensions liability is analysed into seven components:

Current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked.

Past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs.

Interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

Expected return on assets – the annual investment return on the fund assets attributable to the Council, based on an average of the expected long-term return – credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

Gains or losses on settlements and curtailments – the result of actions to relieve the Council of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs.

Actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Pensions Reserve.


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Contributions paid to the Greater Manchester Pension Fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the General Fund Balance to be charged with the amount payable by the Council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees.

Discretionary Benefits

The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.

1.7 Events after the Balance Sheet Date

Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:

Adjusting Events

Those events that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts is adjusted to reflect such events.

Non-adjusting Events

Those events that are indicative of conditions that arose after the reporting period – the Statement of Accounts is not adjusted to reflect such events, but, where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and either their estimated financial effect or a statement that such an estimate cannot be made reliably.

Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts.

1.8 Exceptional Items

When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance.


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1.9 Financial Instruments

Financial Liabilities

Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective rate of interest is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised.

For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest), and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement.

Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase / settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan. The write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate.

Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. When a premium or discount has been incurred and paid in full by a grant from an external body it is accounted for in full in the year that the grant is received. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

Financial Assets

Financial assets are classified into two types:

� Loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market.

� Available-for-sale assets – assets that have a quoted market price and/or do not have fixed or determinable payments.

Loans and Receivables

Loans and receivables are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair


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value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement.

Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate.

Any gains and losses that arise on the derecognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

Available-for-Sale Assets

Available-for-sale assets are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Where the asset has fixed or determinable payments, annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the Council.

Assets are maintained in the Balance Sheet at fair value. Values are based on the following principles:

� Instruments with quoted market prices – the market price. � Other instruments with fixed and determinable payments – discounted cash flow

analysis. � Equity shares with no quoted market prices – independent appraisal of company

valuations.

Changes in fair value are balanced by an entry in the Available-for-Sale Reserve and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available-for-Sale Financial Assets. The exception is where impairment losses have been incurred – these are debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any net gain or loss for the asset accumulated in the Available-for-Sale Reserve.

Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made (fixed or determinable payments) or fair value falls below cost, the asset is written down and a charge made to the Financing and


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Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. If the asset has fixed or determinable payments, the impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Otherwise, the impairment loss is measured as any shortfall of fair value against the acquisition cost of the instrument (net of any principal repayment and amortisation).

Any gains and losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any accumulated gains or losses previously recognised in the Available-for-Sale Reserve.

Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses).

Instruments Entered Into Before 1 April 2006

The Council entered into a number of financial guarantees that are not required to be accounted for as financial instruments. These guarantees are reflected in the Statement of Accounts, to the extent that provisions might be required or a contingent liability note is needed under the policies set out in the section on Provisions, Contingent Liabilities and Contingent Assets.

1.10 Foreign Currency Translation

Where the Council has entered into a transaction denominated in a foreign currency, the transaction is converted into sterling at the exchange rate applicable on the date the transaction was effected.

1.11 Government Grants and Contributions

Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Council when there is reasonable assurance that:

� The Council will comply with the conditions attached to the payments, and � The grants or contributions will be received.

Amounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor.

Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants and contributions) or Taxation and Non-Specific Grant Income (non-ringfenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement.


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Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Reserve. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Reserve are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure.

Business Improvement Districts

A Business Improvement District (BID) scheme was applied across Oldham town centre to March 2012. The scheme was funded by a BID levy paid by town centre non-domestic ratepayers. The Council acted as principal under the scheme and accounts for income received and expenditure incurred (including contributions to the BID project) within the relevant services in the Comprehensive Income and Expenditure Statement.

1.12 Heritage Assets

Tangible and Intangible Heritage assets The Council’s Heritage Assets are assets that are held by the Council principally for their contribution to knowledge and/or culture. They are recognised and measured including treatment of revaluation gains and losses in accordance with the Councils accounting policies on Property, Plant and Equipment. However, some of the measurement rules are relaxed in relation to heritage assets as detailed below. The heritage assets held by the Council are the collections of assets and artefacts either exhibited or stored in the Council’s Gallery Oldham. The three principal collections of heritage assets held in the Gallery include: � Natural History This collection is substantially of local origin and some items date back to the early 19th century. There is an extensive vertebrate and invertebrate collection as well as: � Biological Records – with 40,000 records of species occurrence throughout

the borough dating back to the mid 19th century and some current material. � Geology – with a collection of over 2,000 specimens including British fossils,

a representative collection of world minerals and a small collection of local rocks.

� Social History This collection consists of around 24,500 items of mainly domestic and household items and is of value as evidence of the social history of Oldham and its people. The specific collections are: � Industrial History – with artefacts from the local textile industry as well as

traditional crafts. � Archaeology – with local Mesolithic and Neolithic flint tools and items from the

Roman period. � Costume/Fabric – with a large range of costume and workwear, and everyday

domestic fabrics. � Ephemera – with over 6,000 collected to represent every day life in the

borough.


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� Fine and Decorative Art. � Fine Art – this collection consists of over 450 oil paintings, watercolours,

prints and photographic prints. � Decorative Arts – this collection consists of glass, studio pottery,

miscellaneous ceramics including commemorative pottery, domestic wares and figures, some oriental pottery and art metalwork.

The Council also has a collection of Civic Regalia which is either stored or displayed at the Civic Centre. The Council has recognised its art collection and civic regalia on the Balance Sheet using as its base the detailed insurance valuations (which are based on market values) held by the Council in respect of the collection. The Council is unlikely to be able to recognise the majority of the ceramics, porcelain work, figurines, pottery, machinery, ephemera, photography, biological and geological records and specimens, books and manuscripts in future financial statements. This is due to the fact that obtaining valuations for the vast majority of these collections would involve a disproportionate cost of obtaining the information in comparison to the benefits to the users of the Council’s financial statements. The Council also holds information on the value of the art collection assets (for insurance purposes) supplied by an internal valuer (the Council holds two paintings by William Orpen and one by each of J W Waterhouse, Stanhope Forbes and A J Munnings which have values above £1 million). The Council estimated that the value of the art collection, from its insurance records was £18.7 million as at 1 April 2010. The Civic Regalia is currently insured for a value of £677k. There has been no subsequent revaluation of these assets. There is no depreciation charged on the heritage assets because it has been estimated that the assets have a useful life of such length that any depreciation charge on the asset will be negligible and can be ignored on the basis of materiality. The Council considers that the heritage assets held by the Council will have indeterminate lives and a high residual value; hence the Council does not consider it appropriate to charge depreciation for the assets. There will therefore be no change to the depreciation charged in the financial statements in relation to the Council’s heritage assets.

1.13 Intangible Assets

Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council.

Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase (research expenditure cannot be capitalised).

Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services.


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Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. In practice, no intangible asset held by the Council meets this criterion and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement.

Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.

1.14 Interests in Companies and Other Entities

The Council does not have any material interests in companies and other entities that have the nature of subsidiaries, associates and jointly controlled entities and require it to prepare group accounts.

1.15 Inventories and Long Term Contracts

Inventories are included in the Balance Sheet at the lower of cost and net realisable value. The cost of inventories is assigned using the First in First Out costing formula.

Long term contracts are accounted for on the basis of charging the Surplus or Deficit on the Provision of Services with the value of works and services received under the contract during the financial year.

1.16 Investment Property

Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale.

Investment properties are measured initially at cost and subsequently at fair value, based on the amount at which the asset could be exchanged between knowledgeable parties at arm’s length. Properties are not depreciated but are revalued annually according to market conditions at the year-end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal.

Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the


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Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.

1.17 Jointly Controlled Operations and Jointly Controlled Assets

Jointly controlled operations are activities undertaken by the Council in conjunction with other venturers that involve the use of the assets and resources of the venturers rather than the establishment of a separate entity. The Council recognises on its Balance Sheet the assets that it controls and the liabilities that it incurs, and debits and credits the Comprehensive Income and Expenditure Statement with the expenditure it incurs and the share of income it earns from the activity of the operation.

Jointly controlled assets are items of property, plant or equipment that are jointly controlled by the Council and other venturers, with the assets being used to obtain benefits for the venturers. The joint venture does not involve the establishment of a separate entity. The Council accounts for only its share of the jointly controlled assets, the liabilities and expenses that it incurs on its own behalf or jointly with others in respect of its interest in the joint venture and income that it earns from the venture.

1.18 Leases

Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases.

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification.

Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.

The Council as Lessee

Finance Leases

Property, Plant and Equipment held under finance leases are recognised on the Balance Sheet at the commencement of the lease at their fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred.

Lease payments are apportioned between:

� A charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability, and

� A finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).


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Property, Plant and Equipment recognised under finance leases are accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Council at the end of the lease period).

The Council is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation, revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

Operating Leases

Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease).

The Council as Lessor

Finance Leases

Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. A gain, representing the Council’s net investment in the lease, is credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal), matched by a lease (long-term debtor) asset in the Balance Sheet.

Lease rentals receivable are apportioned between:

� A charge for the acquisition of the interest in the property – applied to write down the lease debtor (together with any premiums received), and

� Finance income (credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

The gain credited to the Comprehensive Income and Expenditure Statement on disposal is not permitted by statute to increase the General Fund Balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the General Fund Balance to the Capital Receipts Reserve in the Movement in Reserves Statement. Where the amount due in relation to the lease asset is to be settled by the payment of rentals in future financial years, this is posted out of the General Fund Balance to the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. When the future rentals are received, the element for the capital receipt for the disposal of the asset is


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used to write down the lease debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts Reserve.

The written-off value of disposals is not a charge against council tax, as the cost of non-current assets is fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

Operating Leases

Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income.

1.19 Overheads and Support Services

The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2012/13 (SeRCOP). The total absorption costing principle is used – the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:

� Corporate and Democratic Core – costs relating to the Council’s status as a multi-functional, democratic organisation.

� Non Distributed Costs – changes in past service costs and impairment losses chargeable on Assets Held for Sale.

These two cost categories are defined in the SeRCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement as part of Net Expenditure on Continuing Services.

1.20 Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment.

Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.


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Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period.

1.21 Private Finance Initiative (PFI) and Similar Contracts

PFI and similar contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under its PFI schemes, and as ownership of the property, plant and equipment will pass to the Council at the end of the contracts for no additional charge, the Council carries the assets used under the contracts on its Balance Sheet as part of Property, Plant and Equipment.

The original recognition of these assets at fair value (based on the cost to purchase the property, plant and equipment) was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. For the Schools PFI (Radclyffe and Failsworth), the liability was written down by an initial capital contribution of £2m. The social housing PFI scheme ('PFI4') has an initial capital contribution which is linked to the progress of the contract over the build phase.

Non current assets recognised on the Balance Sheet are revalued and depreciated in the same way as property, plant and equipment owned by the Council.

The amounts payable to the PFI operators each year are analysed into five elements:

Fair value of the services received during the year – debited to the relevant service in the Comprehensive Income and Expenditure Statement.

Finance cost – an interest charge is raised on the outstanding Balance Sheet liability and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The interest rate is calculated for each scheme so that the Balance Sheet liability is zero at the end of each contract. The interest rates applicable to the Council’s PFI schemes range from 6.5% to 9.3%.

Contingent rent – increases in the amount to be paid for the property arising during the contract, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

Payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease).

Lifecycle replacement costs – are split between revenue and capital costs. Revenue Lifecycle costs are debited to the relevant service in the Comprehensive Income and Expenditure Statement. Capital lifecycle costs are debited to Property, Plant and Equipment to reflect the enhancement of the PFI Asset.

1.22 Property, Plant and Equipment

Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected


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to be used during more than one financial year are classified as Property, Plant and Equipment.

Recognition

Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred. The Council has a £10,000 deminimus limit for the recognition of Capital Expenditure.

Measurement

Assets are initially measured at cost, comprising:

� The purchase price. � Any costs attributable to bringing the asset to the location and condition necessary

for it to be capable of operating in the manner intended by management. � The initial estimate of the costs of dismantling and removing the item and restoring

the site on which it is located.

The Council does not capitalise borrowing costs incurred whilst assets are under construction.

The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council.

Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-Specific Grant Income line of the Comprehensive Income and Expenditure Statement, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Account. Where gains are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance to the Capital Adjustment Account in the Movement in Reserves Statement.

Assets are then carried in the Balance Sheet using the following measurement bases:

� Infrastructure, community assets and assets under construction – depreciated historical cost.

� Dwellings – fair value, determined using the basis of Existing Use Value for Social Housing (EUV-SH).

� All other assets – fair value, determined as the amount that would be paid for the asset in its existing use (Existing Use Value – EUV).

Where there is no market-based evidence of fair value because of the specialist nature of an asset, Depreciated Replacement Cost (DRC) is used as an estimate of fair value.


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For non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value.

Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Surplus or Deficit on the Provision of Services where they arise from the reversal of a loss previously charged to a service. Where decreases in value are identified, they are accounted for as follows: � Where there is a balance of revaluation gains for the asset in the Revaluation

Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains).

� Where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account.

Impairment

Assets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall.

Where impairment losses are identified, they are accounted for as follows:

� Where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains).

� Where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised.

Depreciation

Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land and certain Community Assets) and assets that are not yet available for use (i.e. assets under construction).

Deprecation is calculated on the following basis:


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� Dwellings and other buildings – straight-line allocation over the useful life of the property as estimated by the valuer.

� Vehicles, plant, furniture and equipment – straight-line allocation over the useful life of the asset as estimated by a suitably qualified officer.

� Infrastructure – straight-line allocation up to 40 years.

Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately.

Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

Components have been recognised in the financial year 2012/13 where: � There has been a revaluation of assets. � There has been an acquisition of assets within the financial year. � Enhancement expenditure has been incurred within the financial year.

Components have also been depreciated over different lives than the host (main) asset and recognised where they have a significant value when compared to the value of the host assets.

Disposals and Non-current Assets Held for Sale

When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale.

Assets held for Sale Assets are assets where the: � Asset is immediately available for sale. � Sale is highly probable. � Asset is actively marketed. � Sale is expected to be completed within 12 months.

The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on Assets Held for Sale.

If assets no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to non-current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as Held for Sale and their recoverable amount at the date of the decision not to sell.


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Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale.

When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account.

Amounts received for a disposal in excess of £10,000 are categorised as capital receipts. A proportion of receipts relating to housing disposals (75% for dwellings, 50% for land and other assets, net of statutory deductions and allowances) is payable to the Government. The balance of receipts is required to be credited to the Capital Receipts Reserve and can then only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow (the capital financing requirement). Receipts are appropriated to the Capital Receipts Reserve from the General Fund Balance in the Movement in Reserves Statement.

The written-off value of disposals is not a charge against Council Tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

1.23 Provisions, Contingent Liabilities and Contingent Assets

Provisions

Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential and a reliable estimate can be made of the amount of the obligation. For instance, the Council may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation.

Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Council becomes aware of the obligation and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service.

Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim) it is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Council settles the obligation.


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Provision for Back Pay Arising from Unequal Pay Claims

The Authority has made a provision for the costs of settling claims for back pay arising from discriminatory payments incurred before the Authority implemented its equal pay strategy. However, statutory arrangements allow settlements to be financed from the General Fund in the year that payments actually take place, not when the provision is established. The provision is therefore balanced by an Equal Pay Back Pay Account created from amounts credited to the General Fund Balance in the year the provision was made or modified. The balance on the Equal Pay Back Pay Account will be debited back to the General Fund Balance in the Movement in Reserves Statement in future financial years as payments are made.

Contingent Liabilities

A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.

Contingent Assets

A contingent asset arises where an event has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council.

Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential.

1.24 Reserves

The Council sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred it is charged to the appropriate service in that year to score against the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against council tax for the expenditure.

Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments, retirement and employee benefits and do not represent usable resources for the Council – these reserves are explained in the relevant policies.


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1.25 Revenue Expenditure Funded from Capital under Statute (REFCUS)

Expenditure incurred during the year that may be capitalised under statutory provisions but that does not result in the creation of a non-current asset that has been charged as expenditure to the relevant service in the Comprehensive Income and Expenditure Statement in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the level of council tax.

1.26 VAT

Value Added Tax payable is included as an expense only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income.


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2. Accounting Standards Issued, Not Adopted

The Code of Practice on Local Council Accounting in the United Kingdom 2012/13 (the Code) has introduced several changes in accounting policies which will be required from 1 April 2013, the following changes are not considered to have a significant impact on the Statement of Accounts as demonstrated below: � IAS 1 Presentation of Financial Statements – The changes require authorities to

disclose separately the gains or losses reclassifiable into the Surplus or Deficit on the Provision of Services. The gains and losses are separately identified on the Comprehensive Income and Expenditure Statement and therefore no further disclosure required.

� Service Concession Arrangements, clarifications for the recognition criteria for assets under construction or intangible assets – There are two schemes that this could potentially affect, the housing PFI scheme and the Street Lighting PFI which are asset under construction. This has been recognised as an asset on the balance sheet, in line with the recognition criteria, the change will therefore not impact the Statement of Accounts.

� IAS 12 Income taxes – This change in the accounting policy particularly affects investment properties. It is not considered that this change will affect the Statement of Accounts

� IFRS 7 Financial Instruments: Disclosures – The change in accounting policy is in relation to the offsetting of financial assets and liabilities. Within the cash and cash equivalents line on the balance sheet there is a bank overdraft, note 21 provides a breakdown of this item.

There have been several significant changes in relation IAS 19 Employee Benefits. IAS19 is changing for accounting years starting on or after 1 January 2013 and this will affect the budgeted pension expense for the next financial year. The key change affecting LGPS employers relates to the expected return on assets. Advance credit for anticipated outperformance of return seeking assets (such as equities) will no longer be permitted. The expected return on assets is currently credited to profit and loss, however from 2013 this is effectively replaced with an equivalent figure calculated using the discount rate (as opposed to that calculated using the Expected Return on Assets assumption). For 2012/13 this would result in a £4.8m expense increase in the CIES.


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3. Critical Judgements in Applying Accounting Policies

The following are significant management judgements in applying the accounting policies of the Council that have the most significant effect on the financial statements. Critical estimation uncertainties are described in Note 4. Accounting for Schools – Balance Sheet Recognition of Schools The Council recognises Schools in line with the provisions of the Code of Practice, consequently schools are recognised on the balance sheet only if the future economic benefits or service potential associated with the school will flow to the Council. The Council regards that the economic benefits or service potential of a school flows to the Council where the Council has the ability to employ the staff of the school and is able to set the admission criteria. There are currently 5 types of schools within the borough: � Community schools � Voluntary controlled (VC) schools � Voluntary Aided (VA) schools � Foundation/Trust schools � Academies

Community schools’ staff are appointed by the Council and the Council sets the admission criteria. These schools are, therefore, recognised on the Council’s Balance Sheet. Voluntary controlled schools’ staff are also appointed by the Council and the Council sets the admission criteria. However, the legal ownership of the school land and buildings belongs to a charity, normally a religious body. Regardless of the legal ownership of the school the Council considers that it is receiving the economic benefit/service potential of the school and the schools are recognised on the Council’s Balance sheet. Foundation Trust, Voluntary aided and Academy schools staff are appointed by the schools’ governing body, who also set the admission criteria. As a consequence the Council does not receive the economic benefit or service potential of these schools and does not recognise them on the Council’s balance sheet. The table below illustrates the number and type of schools within the borough split by Primary and Secondary schools.

Type of School No. of Primary Schools

No. of Secondary Schools

Community 47 1

Voluntary Controlled 7 -

Voluntary Aided 31 1

Foundation Trust 1 4

Academies 2 7 (including 1 special school that provides both primary and secondary provision)

TOTAL 88 13


111

Accounting for Schools - Transfers to Academy status When a school that is held on the Council’s balance sheet transfers to Academy status the Council accounts for this as a disposal for nil consideration, on the date that the school converts to Academy status, rather than as an impairment on the date that approval to transfer to Academy status is announced. Where the Council has entered into construction contracts for replacement schools on behalf of an Academy, the Council charges the cost of construction against Assets Under Construction (part of Property, Plant and Equipment), whilst the Academy is constructed. Once the construction is complete the asset is transferred to Other Land and Buildings (within Property Plant & Equipment), on the date of transfer to academy the Council accounts for this as a disposal for nil consideration. As at 31 March 2013, the Council held £2.0m in respect of St Chad’s C of E Primary School where approval to transfer has been received but the transfer had not occurred. Leases The Council has examined its leases, and classified them as either operational or finance leases. In some cases the lease transaction is not always conclusive and the Council uses judgement in determining whether the lease is a finance lease arrangement that transfers substantially all the risks and rewards incidental to ownership. In reassessing the lease the Council has estimated the implied interest rate within the lease to calculate interest and principal payments. Arrangements that contain a lease - Implied Leasing In applying the classification of implied leasing the authority has assessed three of its outsourced contracts. The IT services contract with Unity Partnership has been considered to be an operating lease as it provides IT services and desktop IT equipment which would not be included in the Council’s balance sheet. The Council also has a service contract for printing services with Unity Partnership. This covers the multifunction devices used for copying and printing. Due to the economic life of these assets and their value, these assets have been considered to be an implied lease. The Council also has a contract for a number of high value fleet vehicles which it considers to be an implied lease. This is a contract hire agreement for 5 years in which the vehicles are used solely by Oldham Council and the Oldham Council logo is displayed on the vehicles. Funding There is a high degree of uncertainty about future levels of funding for local government. However, the Authority has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Authority might be impaired as a result of a need to close facilities and reduce levels of service provision.


112

Group Boundaries The group boundaries have been estimated using the criteria associated with the Code of Practice. In line with the Code the Council has not identified any companies within the group boundary that would require it to complete Group Accounts on grounds of materiality. Investment Properties Investment properties have been estimated using the identifiable criteria under IFRS of being held for rental income or for capital appreciation. These properties have been assessed using these criteria, which is subject to interpretation.


113

4. Assumptions Made about the Future and Other Major Sources of Estimation Uncertainty

Property, Plant and Equipment Assets are depreciated over useful lives that are dependent on assumptions about the level of repairs and maintenance that will be incurred in relation to individual assets. The current economic climate makes it uncertain that the Council will be able to sustain its current spending on repairs and maintenance bringing into doubt the useful lives assigned to assets. If the useful life of assets is reduced, depreciation increases and the carrying amount of the assets falls. It is estimated that the annual charge for buildings would increase in these circumstances. PFI and Similar Arrangements PFI and similar arrangements have been considered to have an implied finance lease within the agreement. In reassessing the leases the Council has estimated the implied interest rate within the leases to calculate interest and principal payments. In addition the future RPI increase within the contracts has been estimated as remaining constant throughout the remaining period of the contract. Provisions The Council has estimated its short term insurance provisions based on the value of claims settled in previous years. Other short term provisions represent amounts calculated and expected to be paid within the next 12 months. Debt Impairment At 31 March 2013 the Council had a balance of debtors of £45.525m. A review of significant balances suggested that an impairment of doubtful debts of £19.627m was appropriate. However, in the current climate it is not certain such an allowance would be sufficient. If collection rates were to deteriorate an increase in the amount of the impairment of the doubtful debts would be required. Pensions The estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discounts used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries is engaged to provide the Council with expert advice about the assumptions to be applied. During 2012/13 the Council’s actuaries advised that the net pension liability had increased by £59.300m. This is made up of: � £53.600m actuarial loss; and

� £5.700m loss arising from employer contributions (£17.500m) being less than pension obligations (£23.200m).


114

5. Material Items of Income and Expense

For the purposes of this note the Council considers material items to be those greater than £6m. Where material items are not disclosed on the face of the Comprehensive Income and Expenditure Statement they are detailed below.

2012/13

£000

Material Items of Expenditure

Disposal of land and buildings relating to School transfers to

Academy status:

New Bridge School (8,866)

Oasis Academy (27,553)

Oldham Academy North (16,984)

The Blessed John Henry Newman RC School (35,820)

Waterhead Academy (28,391) The Council has transferred land and buildings following five Oldham Schools moving to academy status during the year.


115

6. Events after the Reporting Period

The Statement of Accounts was authorised for issue by the Borough Treasurer on 26 April 2013. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2013, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information. It has been agreed that there are no non-adjusting events after the balance sheet date.


116

7. Adjustments between Accounting Basis and Funding Basis under Regulations This note details the adjustments that are made to the total Comprehensive Income and Expenditure recognised by the Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure.

2012/13

Genera

l Fund

Bala

nce

Housin

g

Revenue

Account (H

RA

)

Capital

Receip

ts

Reserv

e

Majo

r R

epair

s

Reserv

e

Capital G

rants

Unapplied

Movem

ents

in

Unusable

Reserv

es

£000 £000 £000 £000 £000 £000

Adjustments primarily involving the Capital Adjustment

Account:

Reversal of items debited or credited to the

Comprehensive Income and Expenditure Statement:

Charges for depreciation and impairment of non-current

assets (29,089) (26,883) 55,972

Revaluation losses on Property, Plant and Equipment (5,750) (935) 6,685

Movements in the fair value of Investment Properties (1,579) (22) 1,601

Amortisation of intangible assets (1,567) 1,567

Capital grants and contributions applied 26,267 (26,267)

Income in relation to donated assets

Revenue expenditure funded from capital under statute (13,152) (50) 13,202

Amounts of non-current assets written off on disposal or sale

as part of the gain/loss on disposal to the Comprehensive

Income and Expenditure Statement (125,746) (73) 125,819

Insertion of items not debited or credited to the


Statutory provision for the financing of capital investment 6,822 (6,822)

Voluntary provision for the financing of capital investment 18,795 3,031 (21,826)

Large Scale Voluntary Transfer Debt set aside

Capital expenditure charged against the General Fund and

HRA balances 172 3,812 (3,984)

Usable Reserves

2012/13

Genera

l Fund

Balance

Housin

g

Revenue

Account (H

RA)

Capital

Receip

ts

Reserv

e

Majo

r Repairs

Reserv

e

Capital Gra

nts

Unapplied

Movem

ents in

Unusable

Reserv

es

£000 £000 £000 £000 £000 £000

Adjustments primarily involving the Capital Grants

Unapplied Account:

Capital grants and contributions unapplied credited to

the Comprehensive Income and Expenditure

Statement 6,219 (6,219)

Application of grants to capital financing transferred to

the Capital Adjustment Account 23,060 (23,060)

Adjustments primarily involving the Capital

Receipts Reserve:

Transfer of cash sales proceeds credited as part of the

gain/loss on disposal to the Comprehensive Income

and Expenditure Statement 2,265 150 (2,415)

Use of the Capital Receipts Reserve to finance new

capital expenditure 3,837 3,837

Contribution from the Capital Receipts Reserve to

finance the payments towards administrative costs of

non-current asset disposals - -


finance the payments to the Government capital

receipts pool - -

Repayment of OEE loan (2,351) (2,351)

Transfer from Deferred Capital Receipts reserve upon

receipt of cash (769) 769

Adjustments primarily involving the Deferred

Capital Receipts Reserve:

Transfer of deferred sale proceeds credited as part of

the gain/loss on disposal to the Comprehensive

Income and Expenditure Statement 734 (734)

Adjustments primarily involving the Major Repairs

Reserve:

Reversal of Major Repairs Allowance credited to the

HRA (1,976) 1,976

Use of Major Repairs Reserve to finance new capital

expenditure 2,130 (2,130)

Usable Reserves


117

2012/13

Genera

l Fund

Bala

nce

Housin

g R

evenue

Account (H

RA)

Capital Receip

ts

Reserv

e

Majo

r Repairs

Reserv

e

Capital G

rants

Unapplied

Movem

ents

in

Unusable

Reserv

es

£000 £000 £000 £000 £000 £000

Adjustments primarily involving the Financial

Instruments Adjustment Account:

Amount by which finance costs charged to the

Comprehensive Income and Expenditure Statement are

different from finance costs chargeable in the year in

accordance with statutory requirements 328 (328)

Adjustments primarily involving the Pensions

Reserve:

Reversal of items relating to retirement benefits debited or

credited to the Comprehensive Income and Expenditure

Statement (see Note 49) (23,200) 23,200

Employer's pension contributions and direct payments to

pensioners payable in the year 17,500 (17,500)

Adjustments primarily involving the Collection Fund

Adjustment Account:

Amount by which Council Tax income credited to the

Comprehensive Income and Expenditure Statement is

different from council tax income calculated for the year in

accordance with statutory requirements (382) 382

Adjustments primarily involving the Accumulated

Absences Account:

Amount by which officer remuneration charged to the

Comprehensive Income and Expenditure Statement on an

accruals basis is different from the remuneration

chargeable in the year in accordance with statutory

requirements 409 (409)

Total Adjustments (120,953) (20,796) (1,721) (153) 16,841 126,782

Usable Reserves

2011/12

Genera

l Fund B

alance

Housin

g R

evenue

Account (H

RA)

Capital Receip

ts

Reserv

e

Majo

r Repairs R

eserv

e

Capital Gra

nts

Unapplied

Movem

ents

in

Unusable R

eserv

es

£000 £000 £000 £000 £000 £000


Adjustment Account:

Reversal of items debited or credited to the

Comprehensive Income and Expenditure

Statement:

Charges for depreciation and impairment of non-

current assets (33,459) (12,978) 46,436

Revaluation losses on Property, Plant and Equipment (18,587) (2,110) 20,697

Movements in the fair value of Investment Properties (1,034) (2) 1,036

Amortisation of intangible assets (1,459) 1,459

Capital grants and contributions applied 68,519 (68,519)

Income in relation to donated assets

Revenue expenditure funded from capital under

statute (24,970) (1,552) 26,522

Amounts of non-current assets written off on disposal

or sale as part of the gain/loss on disposal to the

Comprehensive Income and Expenditure Statement (12,924) 12,924

Insertion of items not debited or credited to the

Comprehensive Income and Expenditure

Statement:

Statutory provision for the financing of capital

investment 7,157 (7,157)

Voluntary provision for the financing of capital

investment 10,036 2,166 (12,202)

Large Scale Voluntary Transfer Debt set aside

Capital expenditure charged against the General Fund

and HRA balances 1,599 (1,599)

Usable Reserves


118

2011/12

Genera

l Fund

Balance

Housin

g

Revenue

Account (H

RA)

Capital

Receip

ts

Reserv

e

Majo

r Repairs

Reserv

e

Capital Gra

nts

Unapplied

Movem

ents

in

Unusable

Reserv

es

£000 £000 £000 £000 £000 £000

Adjustments primarily involving the Capital Grants

Unapplied Account:

Capital grants and contributions unapplied credited to


Statement 12,227 (12,227)

Application of grants to capital financing transferred to

the Capital Adjustment Account 12,832 (12,832)


Receipts Reserve:

Transfer of cash sales proceeds credited as part of


Income and Expenditure Statement 3,915 33,925 (37,840)

Use of the Capital Receipts Reserve to finance new

capital expenditure 5,800 (5,800)


finance the payments towards administrative costs of

non-current asset disposals


finance the payments to the Government capital

receipts pool

HRA self financing - Debt Repayment (4,631) 33,908 (29,277)

Transfer from Deferred Capital Receipts reserve upon

receipt of cash (235) 235

Adjustments primarily involving the Deferred

Capital Receipts Reserve:

Transfer of deferred sale proceeds credited as part of


Income and Expenditure Statement 769 (769)

Adjustments primarily involving the Major Repairs

Reserve:

Reversal of Major Repairs Allowance credited to the

HRA 173 (173) -

Use of Major Repairs Reserve to finance new capital

expenditure 173 (173)

Usable Reserves

2011/12

Genera

l Fund

Bala

nce

Housin

g R

evenue

Account (H

RA)

Capital Receip

ts

Reserv

e

Majo

r Repairs

Reserv

e

Capital G

rants

Unapplied

Movem

ents

in

Unusable

Reserv

es

£000 £000 £000 £000 £000 £000

Adjustments primarily involving the Financial

Instruments Adjustment Account:



are different from finance costs chargeable in the year

in accordance with statutory requirements 328 (328)

Adjustments primarily involving the Pensions

Reserve:

Reversal of items relating to retirement benefits

debited or credited to the Comprehensive Income and

Expenditure Statement (see Note 49) (16,900) 16,900

Employer's pension contributions and direct

payments to pensioners payable in the year 20,100 (20,100)

Adjustments primarily involving the Collection

Fund Adjustment Account:


Comprehensive Income and Expenditure Statement is

different from council tax income calculated for the

year in accordance with statutory requirements (77) 77

Adjustments primarily involving the Accumulated

Absences Account:

Amount by which officer remuneration charged to the


on an accruals basis is different from the

remuneration chargeable in the year in accordance

with statutory requirements 786 (786)

Total Adjustments 16,026 14,994 1,633 - 605 (33,258)

Usable Reserves


119

8. Transfers to/from Earmarked Reserves

This note sets out the amounts set aside from the General Fund and HRA balances in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund and HRA expenditure in 2013/14.

Balance

31 March

2011

Transfers

Out

2011/12

Transfers

In

2011/12

Balance

31 March

2012

Transfers

Out

2012/13

Transfers

In

2012/13

Balance

31 March

2013

£000 £000 £000 £000 £000 £000 £000

General Fund

Balances held by schools under a

scheme of delegation

(9,299) 2,791 (5,063) (11,571) 11,645 (8,935) (8,861)

Area Based Grant Reserve (667) 252 - (415) - - (415)

BSF Reserve (1,017) - (782) (1,799) 117 - (1,682)

Budget Reserve (2,674) 1,815 (1,625) (2,484) 418 (2,075) (4,141)

Business Unit Reserve - - - - - (171) (171)

Childrens' Reserve (400) - (250) (650) - - (650)

District Partnerships Reserve (365) 363 (462) (464) 209 (532) (788)

Efficiency Reserve (3,600) - - (3,600) 3,600 (2,029) (2,029)

Fiscal Mitigation Reserve - - - - - (3,555) (3,555)

Future Liabilities Reserve (4,642) 1,339 (500) (3,803) 2,123 (6,702) (8,383)

Insurance Reserve (8,950) 1,676 - (7,274) 75 - (7,199)

LPSA Reward Grant (1,217) 1,217 - - - - -

Partnership Reserve (254) - - (254) - - (254)

PFI Reserve - - (3,489) (3,489) - (1,615) (5,104)

Revenue Grants Reserve (18,019) 18,019 (8,474) (8,474) 8,474 (2,285) (2,285)

Special Projects Reserve (3,069) 1,000 (2,249) (4,319) 829 (2,864) (6,354)

Waste Smoothing Levy Reserve (1,929) - (355) (2,284) - (516) (2,800)

Winter Maintenance Reserve (350) - (300) (650) - (100) (750)

Total (56,452) 28,472 (23,549) (51,530) 27,491 (31,380) (55,420)

Balances Held by Schools Under a Scheme of Delegation are detailed in Note 39 The Area Based Grant Reserve represents the amount of grant which was unspent at 31 March 2013. The BSF Reserve is the cumulative balance to date carried forward to meet the commitments of the BSF programme in future years. The Budget Reserve has been provided to fund specific revenue expenditure items in 2013/14 as part of the financial strategy of the Council. The Business Unit Reserve is for the agreed carry forward of underspends relating to those Council services which operate as Business Units. The Childrens' Reserve represents sums set aside to ensure, if numbers of looked-after children increase, adequate funding is available. The District Partnership Reserve represents sums set aside to finance projects agreed by the six District Partnerships.


120

The Efficiency Reserve has been established to provide for any exceptional costs of implementing the Council’s budget requirements. The Fiscal Mitigation Reserve has been established to fund future costs expected to arise due to changes in the Council Tax and Business Rates systems. The Future Liabilities Reserve has been established to fund a number of liabilities which are expected to arise due to changes in Central Government funding and legislation. The Insurance Reserve has been established in order to finance costs (e.g. claims and premium payments) associated with insurable risk. In addition to maintaining an Insurance Fund the Authority has established an Insurance Reserve to meet expenditure relating to various types of claim which are not covered by the Insurance Fund. The Local Public Service Agreement (LPSA) Reward Grant represents the sum awarded to the Council as an incentive by the DCLG as a result of hitting targets included in the LPSA. This amount has been fully utilised in 2011/12. The Partnership Reserve has been created after a partnership governance risk assessment was carried out. The outcome of which was reported to the Audit Committee in March 2010. This assessment highlighted instances within partnership arrangements whereby the Council could incur additional costs. This reserve has been established to fund these costs and the risk assessment together with this reserve will be reviewed regularly. The PFI Reserve has been established to provide for future costs relating to the various PFI schemes within the Council. The Revenue Grants Reserve represents income from Government Grants received which have no conditions attached but which have been set aside for use in providing specific services. The Special Projects Reserve represents sums set aside to fund various invest to save and performance improvement initiatives. The Waste Smoothing Levy Reserve represents sums set aside to cover the increased levy in future years resulting from the Greater Manchester Waste Disposal Authority’s Private Finance Initiative. The Winter Maintenance Reserve represents sums set aside to cover the cost of winter maintenance of Oldham’s roads due to unforeseen adverse weather conditions.


121

9. Other Operating Expenditure

2011/12 2012/13

£000 £000

271 Parish Council precepts 288

27,631 Levies 29,052

- Payment to Government Housing Capital Receipts Pool -

7,181 (Gains)/losses on the disposal of non-current assets 123,342

35,083 Total 152,683


122

10. Financing and Investment Income and Expenditure

2011/12 2012/13

£000 £000

26,231 Interest payable and similar charges 20,735

1,100 Pensions interest cost and expected return on pensions

assets

6,200

(1,783) Interest receivable and similar income (2,230)

879 Income and expenditure in relation to investment properties

and changes in their fair value

(387)

(1,000) Other investment income (1,232)

25,427 Total 23,086


123

11. Taxation and Non Specific Grant Income

The Council raises Council Tax and receives grants from central government each year to support revenue expenditure which is not attributable to specific services. The grants and Council Tax received for 2012/13 were:

2011/12 2012/13

£000 £000

(85,422) Council Tax Income (84,937)

(122,416) Total Formula Grant (inc RSG) (115,145)

(14,464) Early Intervention Grant (15,124)

(5,206) Learning Disability and Health Reform Grant (5,350)

(2,120) Council Tax Freeze Grant (2,126)

(2,873) Other Non Ringfenced Government Grants (2,941)

Capital Grants and Contributions:

(5,635) Private Finance Initiative (PFI) (7,237)

(80,746) Other Capital Grants and Contributions (32,455)

(33,908) HRA Capital Grants -

(352,790) Total (265,315)


124

12. Property, Plant and Equipment Movements on Balances

Council

Dwellings

Other Land

& Buildings

Vehicles,

Plant &

Equipment

Infrastructur

e Assets

Community

Assets

Surplus

Assets

PP&E Under

Construction

Total

PP&E

£000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2012 54,285 435,725 23,683 177,882 3,674 314 47,341 742,905

Additions 28,950 60,999 2,940 18,583 6 - 26,173 137,652

Donations

Revaluation

Increases/(decreases) to

Revaluation Reserve (8,109) (11,233) - - (15) - - (19,357)

Revaluation

Increases/(decreases)

recognised in the

Surplus/Deficit on the

Provisions of Services (909) (5,774) - - (2) - - (6,685)

Derecognition - disposals - (133,682) - - - - - (133,682)

Derecognition - other -

Assets Reclassified to/from

Held for Sale (370) (370)

Other Reclassifications 80 71,483 - - (23) - (73,017) (1,477)

At 31 March 2013 74,298 417,149 26,623 196,466 3,640 314 497 718,987

Accumulated Depreciation

and Impairment

At 1 April 2012 22,850 72,353 17,768 56,312 3,562 299 1 173,145

Depreciation Charge 1,992 11,060 3,912 6,041 5 - - 23,010

Depreciation written out to the

Revaluation Reserve (672) (6,848) - - (18) - - (7,537)


Surplus/Deficit on the Provision

of Services -

Impairment losses/(reversals)

recognised in the Revaluation

Reserve (7,270) (17,798) - - - - - (25,068)


recognised in the

Surplus/Deficit on the Provision

of Services 24,740 8,159 - - 6 - - 32,905

Derecognition-Disposals - (8,283) - - - - - (8,283)

Derecognition-Other -

Eliminated on reclassification

to Held for Sale -

Reclassifications (69) - - (2) - (1) (72)

At 31 March 2013 41,640 58,574 21,680 62,353 3,554 299 - 188,099

Net Book Value

At 31 March 2013 32,658 358,575 4,943 134,113 86 16 497 530,888

At 31 March 2012 31,435 363,372 5,915 121,571 112 16 47,340 569,761

Property, Plant & Equipment


125

Comparative Movements in 2011/12 (Restated)

Restated Property, Plant and

Equipment note for 2011/12

Council

Dwellings

Other Land

& Buildings

Vehicles,

Plant &

Equipment

Infrastructur

e Assets

Community

Assets

Surplus

Assets

PP&E Under

Construction

Total

PP&E

£000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2011 73,623 442,327 21,724 162,885 3,404 50 9,105 713,118

Additions 8,896 16,410 1,959 17,339 274 - 38,237 83,114

Donations

Revaluation Increases/(decreases) to

Revaluation Reserve (26,126) 6,584 - - (4) 14 - (19,532)

Revaluation Increases/(decreases)

recognised in the Surplus/Deficit on the

Provisions of Services (2,108) (18,564) - - (24) - - (20,695)

Derecognition - disposals - (10,417) - (2,342) - - - (12,759)

Derecognition - other -

Assets Reclassified to/from Held for

Sale (345) (345)

Other Reclassifications - (270) - (0) 24 250 - 4

At 31 March 2012 54,285 435,725 23,683 177,882 3,674 314 47,341 742,905

Accumulated Depreciation and

Impairment

Adjusted 1 April 2011 balance 38,864 52,411 12,829 51,160 42 - - 155,307

Depreciation Charge 2,013 14,472 4,872 5,294 8 2 - 26,660


Revaluation Reserve (701) (7,785) - - (4) - - (8,490)


Surplus/Deficit on the Provision of

Services -


recognised in the Revaluation Reserve (25,086) 6,177 - - - 0 - (18,909)


recognised in the Surplus/Deficit on the

Provision of Services 7,760 7,302 66 799 3,516 298 1 19,742

Derecognition-Disposals - (190) - (941) - - - (1,131)

Derecognition-Other -

Eliminated on reclassification to Held for

Sale -

Reclassifications - (33) - - - (2) - (35)

At 31 March 2012 22,850 72,353 17,768 56,312 3,562 299 1 173,145

Net Book Value

At 31 March 2012 31,435 363,372 5,915 121,571 112 16 47,340 569,761

At 31 March 2011 34,759 389,915 8,895 111,726 3,361 50 9,105 557,811

Property, Plant & Equipment

The Property, Plant and Equipment note has been restated for 2011/12, see note 56 for further details. Depreciation The following useful lives and depreciation rates have been used in the calculation of depreciation: Council Dwellings Up to 50 years Other Land and Buildings Up to 50 years Vehicles, Plant, Furniture and Equipment 3 -10 years Infrastructure up to 40 years Capital Commitments


126

At 31 March 2013 the Council had entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment which in 2013/14 and 2014/15 is budgeted to cost £45.500m (similar commitments were £47.000m at 31 March 2012). The major commitments are:

2013/14 2014/15

£000 £000

13,921 Leisure Estate 5,895

10,121 BSF and Academies programme 14

4,917 PFI 4 Housing (Oldham Council Capital Contribution to

build)

2,353

4,352 Fleet Replacement Programme

3,947 Highway Investment Programme

37,258 Total 8,262 Effects of Changes in Estimates In 2012/13 the Council made no material changes to its accounting estimates for Property, Plant and Equipment.

Revaluations The Council carries out a rolling programme which ensures that all Property, Plant and Equipment required to be measured at fair value is revalued at least every five years. All valuations were carried out by the Unity Partnership. Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. Valuations of vehicles, plant, furniture and equipment are based on current prices where there is an active second hand market or latest list prices adjusted for the condition of the asset. The effective date of each revaluation is the date that the revaluation was produced. The significant assumptions applied in estimating the fair values are:

� That good title can be shown and all valid planning permissions and statutory approvals are in place;

� That the property is connected and has a right to use mains services and that sewers, main services and roads giving access to it have been adopted;

� That an inspection of those parts not inspected would not reveal defects that would affect the valuation;

� That the testing of electrical or other services would not reveal defects that would cause the valuation to alter; and

� That there are no deleterious or hazardous materials or existing or potential environmental factors that would affect the valuation.


127

Council

Dwellings

Other Land

and Buildings

Vehicles,

Plant,

Furniture and

Equipment

Infrastructure

Assets

Community

Assets

Surplus

Assets

Assets under

Construction

Total

£000 £000 £000 £000 £000 £000 £000 £000

Carried at historical cost 73 1,452 26,623 196,466 3,640 497 228,750

Valued at fair value as at:

31 March 2013 73,815 84,754 158,569

31 March 2012 - 63,517 314 63,831

31 March 2011 165 84,858 85,023

31 March 2010 - 82,882 82,882

31 March 2009 245 99,686 99,931

Total Cost or Valuation 74,298 417,149 26,623 196,466 3,640 314 497 718,987


128

13. Heritage Assets

Civic

Regalia

Art

Collection

Total

Assets

£000 £000 £000

Cost or Valuation

1 April 2011 678 18,711 19,389

Additions -

Disposals -

Revaluations -

Impairment Losses/(reversals) recognised in

the Revaluation Reserve -


Surplus or Deficit on the Provision of Services -Depreciation -

31 March 2012 678 18,711 19,389

Cost or Valuation

1 April 2012 678 18,711 19,389

Additions 73 73

Disposals -

Revaluations -


the Revaluation Reserve -


Surplus or Deficit on the Provision of Services (57) (57)

Depreciation -

31 March 2013 694 18,711 19,405

Civic Regalia (including Civic Crests and War Memorials) The Council’s Civic Regalia is reported in the Balance Sheet at insurance valuation and insured sum for 2012/13 is £0.678m. The Council's Civic Regalia is held at the Civic Centre. During 2012/13 £0.016m was spent on new Civic Crests, this was treated as an addition and £0.057m was spent on war memorials which was not considered to increase the value of the war memorial. Museum and Art Collection The Council has had the art collection valued by external valuers Bonhams Auctioneers and Valuers. The valuation was on an insurance basis assessed at £18.711m.


129

14. Investment Properties

The following items of income and expense have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

2011/12 2012/13

£000 £000

(2,901) Rental income from investment property (2,564)

1,704 Direct operating expenses arising from investment property 1,675

(1,197) Net gain/(loss) (889)

There are no restrictions on the Council’s ability to realise the value inherent in its investment property or on the Council’s right to the remittance of income and the proceeds of disposal. The Council has no contractual obligations to purchase, construct or develop investment property or repairs, maintenance or enhancement. The following table summarises the movement in the fair value of investment properties over the year:

2011/12 2012/13

£000 £000

18,378 Balance at 1 April 2012 16,203

Additions:

111 purchases

- construction

- subsequent expenditure 18

Disposals:

(1,236) Net gains/(losses) from fair value adjustments (671)

Transfers:

286 to/from Land and Buildings 1,406

(300) to/from Non-Operational Surplus

(1,036) Other changes (930)

16,203 Balance at 31 March 2013 16,026


130

15. Intangible Assets

The Council accounts for its software as intangible assets to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. The intangible assets cover purchased licences only and there is no internally generated software. All software is given a finite useful life based on assessments of the period that the software is expected to be of use to the Council. The useful lives assigned to the major software suites used by the Council range between and two and eight years. The carrying amount of intangible assets is amortised on a straight line basis. The amortisation of £1.567m charged to revenue in 2012/13 (£1.459m 2011/12) was charged as an overhead across all the service headings in the Net Expenditure of Services. It is not possible to quantify exactly how much of the amortisation is attributable to each service heading. There have been no changes in accounting estimates during the year. The movement on Intangible Asset balances during the year is as follows:

2011/12 2012/13

£000 £000

Balance at 1 April 2012:

7,626 gross carrying amounts 8,140

(3,513) accumulated amortisation (5,002)

4,113 Net carrying amount at 1 April 3,138

Additions:

513 purchases 97

(29) Impairment losses recognised in the Surplus/Deficit on the

Provision of Services

-

(1,459) Amortisation for the year (1,567)

- Other changes -

3,138 Total 1,668

Comprising:

8,139 gross carrying amounts 8,237

(5,001) accumulated amortisation (6,569)

3,138 Balance as at 31 March 2013: 1,668


131

16. Other Long Term and Current Liabilities

Long Term Current Total

£000 £000 £000

2012/13

Pension Liability 289,400 - 289,400

PFI 223,709 7,267 230,976

Finance Leases 332 578 910

Transferred Debt 7,946 768 8,714

Deferred Credits 33 - 33

Total 521,420 8,613 530,033

2011/12

Pension Liability 230,100 - 230,100

PFI 164,471 4,686 169,157

Finance Leases 1,184 1,284 2,468

Transferred Debt 8,717 728 9,445

Deferred Credits 41 - 41

Total 404,513 6,698 411,211


132

17. Financial Instruments

Categories of Financial Instruments The following categories of financial instrument are carried in the Balance Sheet:

Long Term Current Long Term Current

31 March

2012

31 March

2012

31 March

2013

31 March

2013

£000 £000 £000 £000

Investments

67,195 Loans and Receivables 64,439

12,539 - Available for sale financial assets 31,624

12,539 67,195 Total Investments 31,624 64,439

Debtors

8,837 17,318 Loans and receivables 9,791 10,482

8,837 17,318 Total included in Debtors 9,791 10,482

Borrowings

133,623 16,971 Financial liabilities at amortised cost 148,659 2,005

133,623 16,971 Total included in Borrowings 148,659 2,005

Other Long Term Liabilities

174,372 6,698 PFI and finance lease liabilities 231,987 8,613

174,372 6,698 Total Other Long Term Liabilities 231,987 8,613

Creditors

- 44,655 Financial liabilities at amortised cost 35,517

- 44,655 Total Creditors - 35,517 The following shows an analysis of borrowing by type of debt:

Long Term Current Long Term Current

31 March

2012

31 March

2012

31 March

2013

31 March

2013

£000 £000 £000 £000

Borrowings

723 4 PWLB 15,723 98

126,299 1,305 LOBO's 126,335 1,306

6,601 15,662 Other market debt 6,601 601

133,623 16,971 Total Borrowings 148,659 2,005 Income, Expense, Gains and Losses


133

The gains and losses recognised in the Comprehensive Income and Expenditure Statement in relation to financial instruments are made up as follows:

Fin

an

cia

l L

iabilit

ies m

easu

red

at

am

ort

ised

cost

Fin

an

cia

l A

ssets

: L

oan

s a

nd

Receiv

able

s

Fin

an

cia

l A

ssets

: A

vailable

fo

r

Sale

Assets

an

d L

iabilit

ies a

t Fair

Valu

e th

rou

gh

pro

fit an

d L

oss

Tota

l

Fin

an

cia

l L

iabilit

ies m

easu

red

at

am

ort

ised

cost

Fin

an

cia

l A

ssets

: L

oan

s a

nd

Receiv

able

s

Fin

an

cia

l A

ssets

: A

vailable

fo

r

Sale

Assets

an

d L

iabilit

ies a

t Fair

Valu

e th

rou

gh

pro

fit an

d L

oss

Tota

l

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

(26,231) - - - (26,231) Interest expense (20,735)

(26,231) - - - (26,231)

Total expense in Surplus or

Deficit on the Provision of

Services (20,735) - - - (20,735)

- 1,783 1,000 - 2,783 Interest income 2,230 1,232 3,462

- 1,783 1,000 - 2,783

Total income in Surplus or Deficit

on the Provision of Services - 2,230 1,232 - 3,462

(26,231) 1,783 1,000 - (23,448) Net gain/(loss) for the year (20,735) 2,230 1,232 - (17,273)

2012/132011/12

Fair Value of Assets and Liabilities carried at Amortised Cost Financial liabilities and financial assets represented by loans and receivables are carried on the balance sheet at amortised cost (in long term assets/liabilities with accrued interest in current assets/liabilities). Their fair value can be assessed by calculating the present value of the cash flows that take place over the remaining life of the instruments, using the following assumptions:

� For loans receivable prevailing benchmark market rates have been used to provide the fair value;

� No early repayment or impairment is recognised;

� Where an instrument has a maturity of less than 12 months or is a trade or other receivable the fair value is taken to be the carrying amount or the billed amount; and

� The fair value of trade and other receivables is taken to be the invoiced or billed amount.


134

The fair values calculated are as follows:

Carrying

amount

Fair

value

Carrying

amount

Fair

value

£000 £000 £000 £000

149,223 154,096 Financial liabilities 149,261 157,903

- - Long-term creditors - -

44,655 44,655 Short-term creditors 35,517 35,517

193,878 198,751 184,778 193,420

31 March 201331 March 2012

The fair value is greater than the carrying amount because the Council’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the rates available for similar loans in the market at the balance sheet date.

Carrying

amount

Fair

value

Carrying

amount

Fair

value

£000 £000 £000 £000

67,036 67,257 Loans and receivables 60,033 60,257

8,837 8,837 Long-term debtors 9,791 9,791

17,318 17,318 Short-term debtors 10,482 10,482

93,191 93,412 80,306 80,530

31 March 201331 March 2012

The differences are attributable to fixed interest instruments receivable being held by the Council whose interest rate is higher than the prevailing rate estimated to be available at 31 March 2013. This increases the fair value of financial liabilities and raises the value of loans and receivables. The fair values for loans and receivables have been determined by reference to similar practices, as above, which provide a reasonable approximation for the fair value of a financial instrument and include accrued interest. The comparator market rates prevailing have been taken from indicative investment rates at each balance sheet date. In practice, rates will be determined by the size of the transaction and the counterparty, but it is impractical to use these figures and the difference is likely to be immaterial. Short term debtors and creditors are carried at cost as this is a fair approximation of their value.


135

The Council has the following financial instruments that are classed as available for sale.

31 March

2012

31 March

2013

£000 £000

Manchester Airport Holdings Limited

10,214 3.22% Shareholding 29,300

Oldham Education Enterprise Limited

100% Shareholding

57 £1 shares 57

Meridian Development Company Limited

27.15% Shareholding

- 199 £1 "B" ordinary shares -

1,311 1,311,021 £1 "B" voting shares 1,311

Oldham Property Partnership Limited

18.9% Shareholding

757 757,380 £1 preference shares 757

Community 1st Oldham (Chadderton)

Limited

200 20% Shareholding 199

12,539 31,624 During 2012/13, Manchester Airport Group acquired Stansted Airport, resulting in a change of structure. The Council’s shareholding in Manchester Airport Holdings has reduced from a 5% holding to 3.22% of the airports capital as a result of the restructure. This change in structure has enabled the shareholding to be subject to a valuation using, the earnings based method and discounted cash flow method. The figure above in relation to Manchester Airport is now carried at fair value. The value as at 31 March for Manchester Airport is held at historic cost. Valuers have confirmed that it is impracticable to provide a retrospective fair valuation. All other long term investments are carried at historic cost, as a fair value cannot be established. In accordance with the Code of Practice on Local Authority Accounting in the UK, this would prompt the Council to value the shares as the original cost without impairment.


136

18. Inventories

2011/12 2012/13 2011/12 2012/13 2011/12 2012/13

£000 £000 £000 £000 £000 £000

Balance at 1 April 476 400 270 308 746 708

Purchases 1,368 1,259 110 35 1,478 1,294

Recognised as an expense in the

year (1,444) (1,422) (71) (98) (1,515) (1,520)

Written off balances - (1) - (1) -

years - - - - - -Balance at 31 March 400 237 308 245 708 482

Total

Consumable

Stores

Maintenance

Materials


137

19. Construction Contracts

The Council has not entered into any construction contracts in the financial year 2012/13 (in 2011/12 the Council had no construction contracts in progress).


138

20. Debtors The Council’s debtors (net of the provision for bad and doubtful debts) are as follows:

31 March

2012

31 March

2013

£000 £000

9,047 Central Government Bodies 7,040

759 Other Local Authorities 555

1,258 NHS Bodies 500

3,622 Capital Debtors 748

18,832 Other entities and individuals 14,842

4,028 Payments in Advance 2,213

37,546 Total 25,898


139

21. Cash and Cash Equivalents

31 March

2012

31 March

2013

£000 £000

6,331 Cash held by the Authority 107

63,160 Bank Current Accounts 44,413

(12,404) Bank Overdraft (5,193)

57,087 Total 39,327


140

22. Assets Held for Sale

Current Current

2011/12 2012/13

£000 £000

163 Balance outstanding at 1 April 438

Assets newly classified as held for sale:

345 Property, Plant and Equipment 370

Revaluation losses

Revaluation gains

Assets declassified as held for sale:

Property, Plant and Equipment

(60) Assets sold (420)

(10) Other movements

438 Total 388


141

23. Creditors

The Council’s creditors are as follows:

31 March

2012

31 March

2013

£000 £000

(4,607) Central Government Bodies (8,166)

(456) Other Local Authorities (672)

(365) NHS Bodies (161)

(9,544) Capital Creditors (4,068)

(32,202) Other entities and individuals (29,520)

(6,460) Accumulated Absences (6,050)

(4,888) Receipts in Advance (4,021)

(58,522) Total (52,658)


142

24. Provisions

Insurance

Provision

Beal

Valley

Provision

Pay and

Reward

Provision

Other

Provisions Total

£000 £000 £000 £000 £000

Balance at 1 April 2012 4,794 25 3,691 2,135 10,645

Additional provisions made in 2012/13 - - - 1,225 1,225

Amounts used in 2012/13 (869) - (2,578) (44) (3,491)

Balance at 31 March 2013 3,925 25 1,113 3,316 8,379

Insurance

Provision

Beal

Valley

Provision

Pay and

Reward

Provision

Other

Provisions Total

£000 £000 £000 £000 £000

Balance at 1 April 2012 9,872 - 6,069 380 16,321

Additional provisions made in 2012/13 1,454 - - - 1,454

Amounts used in 2012/13 - - (750) - (750)

Balance at 31 March 2013 11,326 - 5,319 380 17,025

Short Term

Long Term

The Insurance Provision covers all legal liability claims including personal accident risks to employees whilst carrying out their duties, public and all other liability claims, the losses arising from the inability of contractors to fulfil obligations, the fire fund (property claims under £100k) and all other claims under the policy excess, which is £50k. The Beal Valley Compensation Provision provides for the cost of reimbursing the developer for additional operating expenses in the extra years consequential to the Deed of Variation. This is required until the scheme is finalised. The Pay and Reward Provision has been set up to provide for the future increase in payroll costs resulting from the implementation of the new pay and grading structure from January 2011. The Other Provisions represent amounts set aside to meet potential future liabilities.


143

25. Usable Reserves Movements in the Council’s usable reserves are detailed in the Movement in Reserves

Statement and in Notes 7 and 8.


144

26. Unusable Reserves

31 March

2012

31 March

2013

£000 £000

(98,268) Revaluation Reserve (100,549)

- Available for Sale Financial Instruments Account (19,086)

(125,575) Capital Adjustment Account (15,141)

10,440 Financial Instruments Adjustment Account 10,113

230,100 Pensions Reserve 289,400

(769) Deferred Capital Receipts Reserve (734)

(555) Collection Fund Adjustment Account (173)

6,460 Short Term Compensated Absences Account 6,050

21,834 Total Unusable Reserves 169,879

(a) Revaluation Reserve The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its property, plant and equipment. The balance is reduced when assets with accumulated gains are: � Revalued downwards or impaired and the gains are lost; � Used in the provision of services and the gains are consumed through depreciation;

or � Disposed of and the gains are realised.

The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.

£000 £000 £000 £000

(96,372) Balance as 1 April (98,268)

(20,366) Upward revaluation of assets (17,399)

12,480

Downward revaluation of assets and impairment

losses not charged to the Surplus/Deficit on the

Provision of Services 4,151

(7,886)

Surplus or deficit on revaluation of non-current

assets not posted to the Surplus/Deficit on the

Provision of Services (13,248)

5,650

Difference between fair value depreciation and

historic cost depreciation 2,451

340 Accumulated gains on assets sold or scrapped 8,516

5,990

Amount written off to the Capital Adjustment

Account 10,967

Other Adjustments

(98,268) Balance at 31 March (100,549)

2012/132011/12


145

(b) Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement element of those assets under statutory provisions. The account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement.

The Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Council.

The Account also contains revaluation gains accumulated on Property, Plant and Equipment before April 2007, the date that the Revaluation Reserve was created to hold such gains.

Note 7 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.


146

£000 £000 £000 £000

(91,099) Balance as 1 April (125,575)

Reversal of items relating to capital expenditure

debited or credited to the Comprehensive Income and

Expenditure Statement

26,661 Charges for depreciation of non-current assets 55,972

40,471

Revaluation losses and impairment on Property,

Plant and Equipment 6,685

1,459 Amortisation of intangible assets 1,567

26,522

Revenue expenditure funded from capital under

statute 13,202

12,924

Amounts of non-current assets written off on

disposal or sale as part of the gain/loss on disposal

to the Comprehensive Income and Expenditure

Statement 125,819

108,036 203,245

(5,990)

Adjusting amounts written out of the Revaluation

Reserve (10,967)

102,046

Net written out amounts of the cost of non-current

assets consumed in the year 192,278

Capital financing applied in the year:

(5,800)

Use of the Capital Receipts reserve to finance new

capital expenditure (3,837)

(173)

Use of the Major Repairs Reserve to finance new

capital expenditure

(68,519)

Capital grants and contributions credited to the


that have been applied to capital financing (26,267)

(12,832)

Application of grants to capital financing from the

Capital Grants Unapplied Account (23,060)

(7,157)

Statutory provision for the financing of capital

investment charged against the General Fund and

HRA balances (6,822)

(12,202) Voluntary MRP (21,826)

(29,277) HRA Self Financing Debt Repayment

(1,599) LSVT Debt set aside (3,984)

(137,559)

Capital expenditure charged against the General

Fund and HRA balances (85,796)

2,351

1,036

Movements in the market value of Investment

Properties debited or credited to the Comprehensive

Income and Expenditure Statement 1,601

-

Movement in the Donated Assets Account Credited to


Statement

- Other adjustments

(125,576) Balance at 31 March (15,141)

2012/132011/12


147

(c) Financial Instrument Adjustment Account The Financial Instrument Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefitting from gains per statutory provisions. The Council uses the Account to manage premiums paid and discounts received on the early redemption of loans. Premiums are debited and discounts are credited to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out of the General Fund Balance to the Account in the Movement in Reserves Statement. Over time, the net expense is posted back to the General Fund balance in accordance with statutory arrangements for spreading the burden on council tax. In the Council’s case this period is the unexpired term that was outstanding on the loans when they were redeemed on the replacement loan. As a result, the balance on the Account at 31 March 2013 will be charged to the General Fund over the next 65 years.

£000 £000 £000 £000

10,768 Balance as 1 April 10,440

Premiums incurred in the year and charged to the


Discounts received in the year and credited to the


(472)

Proportion of premiums incurred in previous financial

years to be charged against the General Fund

Balance in accordance with statutory requirements (472)

144

Proportion of discounts received in previous financial

years to be transferred to the General Fund Balance in

accordance with statutory requirements 144

(328)



are different from finance costs chargeable in the year

in accordance with statutory requirements (328)

10,440 Balance at 31 March 10,112

2012/132011/12

(d) Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pension funds or eventually pays any pension for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.


148

2011/12 2012/13

£000 £000


91,900 Actuarial (gains) and losses on pensions assets and liabilities 53,600

16,900

Reversal of items relating to retirement benefits debited or

credited to the surplus or deficit on the Provision of Services in

the Comprehensive Income and Expenditure Statement 23,200

(20,100)

Employer's pension contributions and direct payments to

pensioners payable in the year (17,500)


(e) Deferred Capital Receipts Reserve The Deferred Capital Receipts Reserve holds the gains recognised on the disposal on non-current assets but for which cash settlement has yet to take place. Under statutory arrangements the Council does not treat these gains as usable for financing new capital expenditure until they are backed by cash receipts. When the deferred cash settlement eventually takes place, amounts are transferred to the Capital Receipts Reserve.

2011/12 2012/13

£000 £000

(235) Balance as 1 April (769)

(769)

Transfer of deferred sales proceeds credited as part of the

gain/loss on disposal to the Comprehensive Income and

Expenditure Statement (734)

235 Transfer to the Capital Receipts Reserve upon receipt of cash 769

(769) Balance at 31 March (734)

(f) Collection Fund Adjustment Account The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.

2011/12 2012/13

£000 £000

(632) Balance as 1 April (555)

77


Comprehensive Income and Expenditure Statement is different

from Council Tax income calculated for the year in accordance

with statutory requirements 382

(555) Balance at 31 March (173)

(g) Short Term Compensated Absences Account The Short Term Compensated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31 March.


149

Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account.

Restated

2011/12 2012/13 2012/13

£000 £000 £000


(7,246)

Settlement or cancellation of the accrual made

at the end of the previous year (6,460) -

6,460 Amounts accrued at the end of the current year 6,050 -

Amount by which officer remuneration charged

to the CIES on an accrual basis is different from

the remuneration chargable in the year in

accordance with statutory requirements (409)



150

27. Cash Flow Statement - Operating Activities

The cash flows for operating activities include the following items: a) Adjust net surplus or deficit on the provision of services for non cash movements

2011/12 2012/13

£000 £000

46,436 Depreciation/Impairment charged to I and E 55,972

1,459 Amortisation of Intangible Assets 1,567

2,686 Impairment Debtors 2,533

(11,992) Increase/(Decrease) in Creditors (4,972)

12,925 (Increase)/Decrease in Debtors 6,626

47 (Increase)/Decrease in Inventories 226

(3,200) Pensions Liability 5,700

3,657 Contributions to/(from) Provisions (1,563)

20,697 Revaluation Losses 6,685

12,924 Carrying value on disposal of Property, Plant and

Equipment, Investment Property and Intangible Assets

125,819

1,036 Investment Properties Losses (Gains) 1,601

353 Other non-cash adjustments -

87,028 200,194 b) Adjust for items included in the net surplus or deficit on the provision of services that

are investing or financing activities

2011/12 2012/13

£000 £000

(80,745) Capital Grants credited to the surplus or deficit on the

provisions of services

(32,486)

(3,932) Proceeds from the sale of non-current assets (2,437)

(84,677) (34,923) c) Interest received, interest paid and dividends received

2011/12 2012/13

£000 £000

1,953 Interest received 2,230

(27,597) Interest paid (20,735)

1,000 Dividends received 1,232

(24,644) (17,273)


151

28. Cash Flow Statements - Investing Activities

2011/12 2012/13

£000 £000

(67,745) Purchase of property, plant and equipment, investment

property and intangible assets

(142,822)

(10,000) Purchase of short-term and long-term investments (25,000)

3,307 Proceeds from the sale of property, plant and equipment,

investment property and intangible assets

2,469

5,047 Proceeds from short-term and long-term investments 10,109

85,158 Capital grants received 35,563

15,767 Net cash flows from investing activities (119,681)


152

29. Cash Flow Statement - Financing Activities

2011/12 2012/13

£000 £000

46,408 Cash receipts of short-term and long-term borrowing 82,438

(5,212) Cash payments for the reduction of the outstanding

liabilities relating to finance leases and on-balance sheet

PFI contracts

(5,326)

(55,307) Repayments of short-term and long-term borrowing (17,511)

(1,566) Billing Authorities - Council Tax and NNDR Adjustments 3,593

(15,677) Net cash flows from financing activities 63,194


153

30. Amounts Reported for Resource Allocation Decisions The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the Service Reporting Code of Practice. However, decisions about resource allocation are taken by the Council’s Cabinet on the basis of budget reports analysed across Directorates. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular: � The cost of retirement benefits is based on cash flows rather than current service

cost of benefits accrued in the year; and � Expenditure on some support services is budgeted for centrally and not recharged to

Directorates. � The Property, Plant and Equipment note has been restated for 2011/12, see note 56

for further details. The income and expenditure of the Council’s principal Directorates recorded in the budget monitroring reports for the year is as follows:

Directorate Income and Expenditure

2012/13

Deputy Chief

Executive

Neighbourhoods

Commissioning

Commercial

Services

Capital, Treasury

and Technical

Accounting

General Fund

Total

Housing

Revenue

Account (HRA)

Total

£000 £000 £000 £000 £000 £000 £000 £000

Fees, charges & other service income 11,306 26,375 19,969 36,479 24,329 118,458 7,000 125,458

Government grants 111,715 7,543 210,131 1,916 2,651 333,956 18,786 352,742

Total Income 123,021 33,918 230,100 38,395 26,980 452,414 25,786 478,200

Employee expenses 11,031 19,874 169,199 21,322 7,327 228,753 395 229,148

Other operating expenses 124,742 66,590 150,552 14,676 (1,644) 354,916 32,705 387,621

Support service recharges 6,714 10,534 17,836 4,327 6,243 45,654 85 45,739

Capital charges 1,693 13,056 15,592 855 17,497 48,693 1,870 50,563

Total Expenditure 144,180 110,054 353,179 41,180 29,423 678,016 35,055 713,071

Net Expenditure 21,159 76,136 123,079 2,785 2,443 225,603 9,269 234,872

Restated Directorate Income and

Expenditure 2011/12

Deputy Chief

Executive

Neighbourhoods

Commissioning

Commercial

Services

Capital, Treasury

and Technical

Accounting

General Fund

Total

Housing

Revenue

Account (HRA)

Total

£000 £000 £000 £000 £000 £000 £000 £000

Fees, charges & other service income 16,067 35,893 42,438 40,518 29,916 164,832 6,641 171,473

Government grants 93,616 1,314 195,925 1,037 - 291,892 13,232 305,124

Total Income 109,683 37,207 238,363 41,555 29,916 456,727 19,873 476,597

Employee expenses 11,267 22,955 185,133 23,629 6,984 249,970 294 250,264

Other operating expenses 112,504 71,684 148,207 16,619 21,427 370,441 19,567 390,008

Support Service Recharges 8,455 15,911 32,570 5,218 6,319 68,473 83 68,556

Total Expenditure 132,226 110,550 365,910 45,467 34,731 688,884 19,944 708,828

Net Expenditure 22,543 73,343 127,547 3,912 4,815 232,160 71 232,231 Reconciliation of Directorate Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement


154

This reconciliation shows how the figures in the analysis of Directorate income and expenditure relate to the amounts included in the Comprehensive Income and Expenditure Statement. 2011/12 2012/13

£000 £000

232,231 234,872

- -

57,700 9,200

(26,586) (27,978)

263,345 216,092

Net Cost of Services in Comprehensive Income and Expenditure

Statement

Cost of Services in Service Analysis

Add services not included in main analysis

Add amounts not reported in service management accounts

Remove amounts reported to management but not included in net cost

of services

Reconciliation to Subjective Analysis This reconciliation shows how the figures in the analysis of Directorate income and expenditure relate to a subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

2012/13

Dir

ecto

rate

An

aly

sis

Serv

ices a

nd

Su

pp

ort

Serv

ices n

ot

in

An

aly

sis

Am

ou

nts

no

t re

po

rted

to m

an

ag

em

en

t fo

r

decis

ion

makin

g

Am

ou

nts

no

t in

clu

ded

in I a

nd

E

Allo

cati

on

of

Rech

arg

es

Net

Co

st

of

Serv

ices

Co

rpo

rate

Am

ou

nts

To

tal

£000 £000 £000 £000 £000 £000 £000 £000

Fees, charges and other service income (124,384) - (23,891) - 46,263 (102,012) - (102,012)

Interest and investment income (1,074) - - 1,074 - - (3,849) (3,849)

Income from Council Tax and non domestic rates - - - - - - (84,937) (84,937)

Government grants and contributions (352,742) - 59,606 - - (293,136) (180,378) (473,514)

Total Income (478,200) - 35,715 1,074 46,263 (395,148) (269,164) (664,312)

- -

Employee expenses 229,149 - (3,841) - - 225,308 - 225,308

Other service expenses 358,568 - (36,859) - - 321,707 - 321,707

Support Service recharges 45,739 - 524 - (46,263) - - -

Depreciation, amortisation and impairment 50,563 - 13,661 - - 64,224 - 64,224

Interest Payments - - 1 - - 1 26,935 26,935

Precepts and Levies 29,052 - - (29,052) - - 29,340 29,340

Payments to Housing Capital Receipts Pool - - - - - - - -

Gain or Loss on Disposal of Non- Current Assets - - - - - - 123,341 123,341

Total operating expenses 713,071 - (26,515) (29,052) (46,263) 611,241 179,616 790,855

Surplus or deficit on the provision of services 234,872 - 9,200 (27,978) - 216,092 (89,547) 126,544


155

Restated 2011/12

Dir

ecto

rate

An

aly

sis

Serv

ices a

nd

Su

pp

ort

Serv

ices n

ot

in

An

aly

sis

Am

ou

nts

no

t re

po

rted

to m

an

ag

em

en

t fo

r

decis

ion

makin

g

Am

ou

nts

no

t in

clu

ded

in I a

nd

E

Allo

cati

on

of

Rech

arg

es

Net

Co

st

of

Serv

ices

Co

rpo

rate

Am

ou

nts

To

tal

£000 £000 £000 £000 £000 £000 £000 £000

Fees, charges and other service income (170,428) - (22,963) - 43,753 (149,637) - (149,637)

Interest and investment income (1,045) - - 1,045 - - (2,783) (2,783)

Income from Council Tax and non domestic rates - - - - - - (207,837) (207,837)

Government grants and contributions (305,124) - 61,247 - - (243,877) (144,951) (388,828)

Total Income (476,597) - 38,285 1,045 43,753 (393,514) (355,571) (749,085)

Employee expenses 250,264 - (12,137) - - 238,127 - 238,127

Other service expenses 362,377 - (12,260) - - 350,117 - 350,117

Support Service recharges 43,868 - (115) - (43,753) - - -

Depreciation, amortisation and impairment 24,688 - 43,906 - - 68,593 - 68,593

Interest Payments - - 22 - - 22 27,331 27,353

Precepts and Levies 27,631 - - (27,631) - - 27,902 27,902

Payments to Housing Capital Receipts Pool - - - - - - - -

Gain or Loss on Disposal of Non- Current Assets - - - - - - 8,058 8,058

Total operating expenses 708,828 - 19,415 (27,631) (43,753) 656,859 63,291 720,150

Surplus or deficit on the provision of services 232,231 - 57,700 (26,586) - 263,345 (292,280) (28,935)


156

31. Acquired and Discontinued Operations The Council has not acquired any operations in the year to 31 March 2013 (no operations were acquired in the year to 31 March 2012). The Council has not discontinued any operations in the year to 31 March 2013 (no operations were discontinued in the year to 31 March 2012.


157

32. Trading Operations The Council has established various trading units where the service manager is required to operate in a commercial environment by generating income from other parts of the Authority, other organisations or the public in order to either match expenditure incurred or, in certain instances, operate within an approved level of subsidy.

The income generation aspects of most of these services are included within the council’s annual fees and charges setting policy guidance report that is approved by cabinet.

The key aim of this report is to ensure that fees and charges are set within a framework of value for public money, whereby financial, performance, access and equality are considered fully and appropriately, and decisions taken represent a transparent and balanced approach.

In setting the annual prices due consideration was given to the current financial climate,

ensuring that prices are on market, that services are not being inappropriately subsidized,

that the Council is maximizing income where it chooses to do so and that income is reviewed

within a developed and developing framework.

In line with the latest Code of Practice on Local Authority Accounting, only those services that are carried out on a commercial basis are included in this note.

Details of those units operating within a commercial environment are listed below.


158

£000 £000 £000 £000 £000 £000

(499) (713) Turnover (708)

490 631 Expenditure 615

(9) (82) (Surplus) / Deficit (93)

(5,431) (5,679) Turnover (6,139)

5,320 5,853 Expenditure 6,094

(111) 174 (Surplus) / Deficit (45)

(2,075) (2,028) Turnover (1,896)

2,322 2,288 Expenditure 2,132

247 260 (Surplus) / Deficit 236

(430) (795) Turnover (1,369)

461 759 Expenditure 1,366

31 (36) (Surplus) / Deficit (3)

(1,213) (1,140) Turnover (1,080)

1,063 1,413 Expenditure 1,255

(150) 273 (Surplus) / Deficit 175

(1,834) (1,712) Turnover (1,743)

1,557 1,383 Expenditure 1,517

(277) (329) (Surplus) / Deficit (226)

(2,331) (2,040) Turnover (1,802)

1,928 2,695 Expenditure 1,777

(403) 655 (Surplus) / Deficit (25)

(3,349) (2,678) Turnover (2,771)

5,154 3,292 Expenditure 4,234

1,805 614 (Surplus) / Deficit 1,463

(602) (500) Turnover (511)

1,068 1,138 Expenditure 1,777

466 638 (Surplus) / Deficit 1,266

(606) (437) Turnover (501)

1,042 844 Expenditure 493

436 407 (Surplus) / Deficit (9)

(1,184) (1,286) Turnover (1,574)

1,871 1,515 Expenditure 1,821

687 229 (Surplus) / Deficit 247

(774) (2,115) Turnover (2,011)

1,093 1,693 Expenditure 1,658

319 (422) (Surplus) / Deficit (353)

3,041 2,381 2,634

2012/13

Highways Maintenance

Cleaning

Fleet Management

Trade Waste

Security Services

TOTAL

Catering

Non-Operational

Markets

Parking

2010/11 2011/12

Public Halls

Building Control

Cemeteries & Crematoria


159

Details of Trading Undertakings General The overall deficit position for 2012/13 is very similar to the previous year. Whilst there are some specific reasons for the movement within individual services, the major factor for the net deficit is the ongoing adverse economic situation in 2012/13.

It is expected that the economic situation in 2013/14 will continue to impact on the overall performance levels for quite a number of the service areas. Many services have undertaken fundamental reviews of their service delivery model in order to mitigate the overall adverse impact to the Council.

Performance should improve as the economic position becomes more favourable.

Highways Highways Maintenance carries out various functions including highway maintenance and structures, land drainage and new street works. They also provide professional highways and engineering services. The competitive element listed in this note relates to all services for clients that have choice of contractor. These clients include schools and private organisations and individuals. Additional income has been realised in the year as result of further improvements in service delivery.

Catering

The catering service employs over 380 staff mainly part-time. The service provides over 12,300 school meals per day, 38 weeks per year. The meals include both lunches and breakfasts (for breakfast clubs). As at the year end the service provided meals to 88 Primary schools and 4 Special schools.

Cleaning

The cleaning service employs approximately 430 staff, mainly part-time. It has responsibility for the provision of building cleaning to over 200 Public and Educational establishments across the borough. The Job Evaluation process has contributed to the net increased costs of the service; this has been offset by a reduction in the overall cleaning hours within the service. The reduction in cleaning hours has meant a fall in the income generated.

Fleet Management This service looks after the Council’s vehicles that operate in a variety of services including Waste Services, Streetscene and Parks. There are approximately 14 full-time equivalent staff employed in the service and it operates one workshop incorporating an MOT bay that is also used to MOT vehicles belonging to the public. All the borough’s taxis and private hire vehicles are MOT tested at this facility. The MOT testing element of the Fleet Management service and all the day to day repairs that are carried out to the Council’s vehicle fleet on behalf of its lease provider, are included in the figures above. The figures also include income and expenditure for sale of fuel and vehicle hires to external customers, where they operate in a competitive environment.


160

Trade Waste The current economic climate has continued to contribute to a year on year reduction in the overall income obtained. Local businesses are still operating in very difficult trading conditions.

As part of the budget setting process for 2012/13 with GMWDA the Council has been able to negotiate a reduction in the processing costs for residual waste associated with Trade Waste until 2014-15. This has helped to improve the overall trading position in the current year.

Markets The market service operates 4 outdoor markets, Tommyfield, Royton, Shaw and the Town Centre Street Markets and twenty market shops. The service employs 11 people and has the capacity for 726 stalls of various types. On average it has 580 traders. The outdoor markets operate between two and four days per week. The indoor markets and market shops open six days per week. The service has seen an increase in expenditure compared to 2011/12 due to extensive repairs and maintenance work carried out on the Market Hall to ensure it remains fit for purpose.

Parking Parking services are managed on behalf of Oldham Council by NSL, which is currently managed as an in-house service; the current contract is agreed to 2019.

There are two elements to the service: on-street parking and car parks. The latter incorporates 13 designated car parks of various types and is the element included in this note as on-street car parking is not subject to competitive forces.

A free parking scheme was applied over the Christmas period in order to encourage activities in the town centre – similar to 2011/12, however, together with the overall economic climate and issues around the expansion of Metrolink in the town centre, this contributed to the overall lower levels of income obtained for the year. A further two hour free parking option was provided from January 2013 to March 2013 which further impacted on the services lower level of income compared to prior years.

Non-Operational Property Oldham Council currently manages directly, or via the Unity Partnership, 766 non-operational assets across the Borough, including a variety of industrial, retail, and commercial properties in addition to garages, gardens and reversionary interests. These assets are subject to a range of occupational agreements, being leased or licensed to various organisations and individuals. Many occupations are subject to service charges for general maintenance and management of the assets although the nature of the contractual arrangement varies, as appropriate, depending on the nature of the asset, its use and market forces. National and regional economic conditions have adversely affected the performance of this property portfolio.

Public Halls The Public Halls include Chadderton Town Hall, the Queen Elizabeth Hall and more recently Failsworth Town Hall. The financial year 2012/13 saw a reduction of income from the halls,


161

mainly due to the wider economy and cuts to various budgets that saw a reduction in their use. A plan to enter into a management partnership to promote the halls was put on hold pending the outcome of the Hotel Futures project.

A number of initiatives aimed at increasing the use of the halls especially for weddings and similar events have been planned, with a wedding package for Chadderton Town Hall proving particularly popular.

Building Control Building Control revenue has been adversely affected by the economic downturn in the last three years however the net 2012/13 position has improved slightly compared to that achieved in 2010/11 and 2011/12. This slight improvement was achieved by joint working with Tameside MBC, the provision of professional support to the Council’s PFI programme and the ongoing BSF work streams. There has been a significant reduction in costs in 2012/13 due to a restructure of the service along with a reduction in other costs which has resulted in the service making a small surplus in 2012/13.

Cemeteries and Crematoria This service manages and maintains seven cemeteries and one crematorium. On average it deals with approximately 500 burials and 1,500 cremations a year and maintains a land area of approximately 126 acres. The service currently employs 17 FTE staff.

Security Services Oldham Council operates an in-house security service to monitor and protect properties including schools, council buildings and leisure facilities. The Council also holds external contracts with organisations such as First Choice Homes Oldham (FCHO) and Positive Steps Oldham. Security Services has a fully committed workforce of 34 FTE that deliver various packages including alarm monitoring, mobile patrols, static guarding, key holding and CCTV monitoring. The non-fee earning (statutory duties) expenditure is separate and not included within this note.

Separation of the statutory function and the restructure has resulted in the traded service delivering a surplus position for the financial year. Trading operations are incorporated into the Comprehensive Income and Expenditure Statement. Some are an integral part of one of the Council’s services to the public (e.g. highways maintenance) whilst others are support services to the Council’s services to the public (e.g. schools catering). The expenditure of these operations is allocated or recharged to headings in the Net Operating Expenditure of Continuing Operations.


162

2011/12 2012/13

£000 £000

2,369 Services to the public included in Expenditure of Continuing

Operations

2,796

12 Support services recharged to Expenditure of Continuing

Operations

(162)

2,381 Net (surplus) / deficit 2,634

Net (surplus) / deficit on trading operations:


163

33. Agency Services The Council carries out work on an agency basis for United Utilities PLC for which it is fully reimbursed. The Council collects water rates from people who live in Council owned houses on behalf of United Utilities PLC. This is an agency agreement with United Utilities PLC and earned the Council a commission of £0.113m in 2012/13 (£0.110m in 2011/12). The Council, as the billing authority, also acts as agent for the Government in collecting National Non-Domestic Rates (NNDR). The Government paid an allowance for the cost of this collection of £0.309m in 2012/13 (£0.307m in 2011/12).

2011/12 2012/13

£000 £000

Services provided for United Utilities

110 Commission received from United Utilities for collection of

water rates

113

307 Government allowance for cost of collection of NNDR 309

417 Total 422


164

34. Road Charging Schemes

The Council has not entered into any road charging schemes in the financial year 2012/13 (in 2011/12 the Council had no road charging schemes in progress).


165

35. Pooled Budgets In 2006, a Joint Loan Equipment Service was formed with Oldham Primary Care Trust (NHS Oldham) and Oldham Council under section 31 of the Health Act 1999 (superseded by section 75 of the National Health Service Act 2006). The partnership was established for the purposes of a pooled budget arrangement. The Joint Loan Equipment Service is available to all residents of Oldham who meet the criteria for service provision, making available loan equipment that will enhance the life of service users, providing an efficient and caring service to it’s users that is responsive to their changing needs. The Service: � Loans community equipment to service users to support as normal and independent

a lifestyle as possible; � Enables disabled people to live at home rather than in institutional care; � Facilitates discharge from hospital, intermediate care or other institutional care; and � Includes the community equipment needs of people meeting the Greater Manchester

criteria (as applied in Oldham) for NHS funded continuing healthcare. Oldham Council’s financial contribution to the partnership is included in Adult Services net cost of services in the Comprehensive Income and Expenditure Statement. The gross financial contribution to the partnership in 2012/13 was £1.018m (£0.510m net). In 2011/12 the contribution was £1.174m (£0.588m net).

£000 £000 £000 £000

Funding provided to the pooled budget:

588 Council 510

586 Oldham PCT 508

1,174 1,018

Expenditure met from the pooled budget:

588 Council 510

586 Oldham PCT 508

1,174 1,018

- Net surplus arising on the pooled budget during the year -

2012/132011/12


166

36. Members’ Allowances The Council paid the following amounts to Members during the year:

2011/12 2012/13

£000 £000

911 Allowances 885

2 Expenses 2

913 Total 887


167

37. Officers’ Remuneration The remuneration of senior employees, also shown in the table of all employees earning over £50,000, is detailed below.

Sala

ry, Fees a

nd

Allow

ances

Expenses

Allow

ances

Com

pensation for

Loss o

f O

ffic

e

Pensio

n

Contr

ibution

Tota

l

Note

£000 £000 £000 £000 £000

2012/13 181 2 9 192 A

2011/12 185 3 31 219

2012/13 137 - 23 160 B

2011/12 138 23 161

2012/13 131 0 22 153 B

2011/12 132 1 22 155

2012/13 129 1 22 151 B

2011/12 130 22 152

2012/13 119 0 20 140 C

2011/12 115 1 19 135

2012/13 99 1 17 117

2011/12 100 17 117

2012/13 92 1 15 108 D

2011/12 94 1 16 111

2012/13 92 1 15 109

2011/12 92 2 15 109

2012/13 89 1 15 105

2011/12 90 15 105

Deputy Chief Executive (formerly Assistant Chief

Executive)

C Parker, Chief Executive, Head of Paid Service

and Clerk to the GMWDA

Executive Director :Neighbourhoods (formerly

Executive Director: Economy, Place and Skills

Executive Director:Commercial Services

(formerly Executive Director: Performance,

Services and Capacity)

Executive Director: Commissioning & Chief

Education Officer and Director of Children's

Social Services

Borough Treasurer and Chief Financial Officer

(Section 151 Officer)

Chief of Staff

Borough Solicitor and Monitoring Officer

Director of Adults' Social Services (Assistant

Executive Director:Commissioning) Senior Officers served for the whole of 2012/13 and 2011/12 unless stated below. Note

A This 2012/13 payment is an alternative remuneration in lieu of employer's pension arrangements, as agreed by The Council's Selection Committee and Council, in the event of Chief Officers opting out of the pensions arrangements.

B The Executive Directors for Neighbourhoods, Commercial Services and Deputy Chief Executive assumed their new roles with effect from the 12th July 2012.

C The Chief Education Officer and Director of Children's Social Services was appointed to the Executive Director for Commissioning on the 1st June 2012.

D The Chief of Staff left on the 17th March 2013.

The Chief Executive provides services for both the Council and the Greater Manchester Waste Disposal Authority (GMWDA), for which an allowance of £12,294 (2011/12 £12,294) was paid. This allowance is included in the figures above.


168

The Council’s other employees receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) were paid the following amounts:

2011/12 2011/12 2012/13 2012/13

Number of

Employees

Excluding

Severance

or Other

Related

Payments

Number of

Employees

Including

Severance

or Other

Related

Payments

Number of

Employees

Excluding

Severance

or Other

Related

Payments

Number of

Employees

Including

Severance

or Other

Related

Payments

70 73 £50,001 - £55,000 54 56

63 68 £55,001 - £60,000 65 68

30 36 £60,001 - £65,000 25 27

12 20 £65,001 - £70,000 17 20

9 12 £70,001 - £75,000 11 10

10 13 £75,001 - £80,000 6 6

9 16 £80,001 - £85,000 10 12

6 10 £85,001 - £90,000 6 6

2 3 £90,001 - £95,000 2 2

1 4 £95,001 - £100,000 2 2

1 3 £100,001 - £105,000 2 4

2 4 £105,001 - £110,000 - -

1 1 £110,001 - £115,000 1 1

1 1 £115,001 - £120,000 1 1

- - £120,001 - £125,000 1 1

- - £125,001 - £130,000 1 1

2 2 £130,001 - £135,000 1 1

1 1 £135,001 - £140,000 1 2

- 1 £140,001 - £145,000 - -

- - £145,001 - £150,000 - -

- - £150,001 - £155,000 - -

- - £155,001 - £160,000 - -

1 1 £160,001 - £165,000 1 1

- - £165,001 - £170,000 - -

- 1 £170,001 - £175,000 - -

221 270 207 221

132 134 Teachers included above 133 133

Remuneration Band

TOTAL

The number of exit packages with total cost per band and total cost of the compulsory and

other redundancies are set out in the table below:

2011/12 2012/13 2011/12 2012/13 2011/12 2012/13 2011/12 2012/13

£ £

£0 - £20,000 20 24 120 119 140 143 1,291,446 1,298,050

£20,001 - £40,000 7 3 47 21 54 24 1,553,768 685,499

£40,001 - £60,000 2 1 19 10 21 11 1,001,180 522,589

£60,001 - £80,000 1 - 8 1 9 1 630,298 61,891

£80,001 - £100,000 - - 3 2 3 2 248,784 173,542

£100,001 - £200,000 - - 3 3 3 3 393,587 333,105

30 28 200 156 230 184 5,119,063 3,074,677

(e)

Exit packagecost

band (including

special payments )

Number of compulsory

redundancies

Number of other

departures agreed

Total number of exit

packages by cost band

[(b) + (c)]

Total cost of exit

packages in each band

Total

(a) (b) (c) (d)


169

38. External Audit Costs The Council has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to non-audit services provided by the Council’s external auditors:

2011/12 2012/13

£000 £000

334 Fees payable to Grant Thornton (Audit Commission

2011/12) with regard to external audit services carried out

by the appointed auditor for the year

191

- Fees payable to the Audit Commission in respect of

statutory inspections

-

72 Fees payable to Grant Thornton (Audit Commission

2011/12) in respect of grant claims and returns for the year

-6

- Fees payable to the Audit Commission in respect of other

services provided during the year

7

406 Total (6)


170

39. Dedicated Schools’ Grant (DSG) The Council’s expenditure on schools is funded primarily by grant monies provided by the Department for Education, the Dedicated Schools Grant (DSG). An element of DSG is recouped by the Department to fund academy schools in the Council’s area. DSG is ringfenced and can only be applied to meet expenditure properly included in the Schools Budget, as defined in the School Finance (England) Regulations 2011. The Schools Budget includes elements for a range of educational services provided on an authority-wide basis and for the individual Schools Budget, which is divided into a budget share for each maintained school. Details of the deployment of the DSG receivable for 2012/13 are as follows:

Central ISB Total

Expenditure

£000 £000 £000

Final DSG for 2012/13 before Academy

Recoupment 206,728

Academy Recoupment Recouped for 2012/13 (40,333)

Final DSG for 2012/13 after Academy

Recoupment 166,395

Brought forward from 2011/12 7,199

Carry forward to 2013/14 agreed in advance (1,920)

Agreed initial budget distribution in 2012/13 25,958 145,716 171,674

In year adjustments - - -

Final budget distribution for 2012/13 25,958 145,716 171,674

Actual central expenditure (25,958) (25,958)

Actual ISB deployed to schools (145,716) (145,716)

Local authority contribution for 2012/13 - - -

Carry forward to 2013/14 - - (1,920)


171

40. Grant Income The Council credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement in 2012/13:

2011/12 2012/13

£000 £000

Credited to Taxation and Non-Specific Grant Income

(85,422) Council Tax Income (84,937)

(122,416) Total Formula Grant (115,145)

Non Ringfenced Government Grants:

(14,464) Early Intervention Grant (EIG) (15,124)

(5,206) Learning Disability and Health Care Reform Grant (5,350)

(2,120) Council Tax Freeze Grant (2,126)

(2,872) Other Non Ringfenced Government Grants (2,941)

Capital Grants and Contributions:

(232) Department for Education - Early Years (556)

(62,042) Department for Education - Schools Capital (23,480)

(6,117) Department for Transport - Retaining Walls -

(335) New Deal for Communities (NDC) (7,236)

(5,635) Private Finance Initiative (PFI) (4,072)

- Regional Housing Board - Housing Improvement

Programme

(4,348)

(4,322) Other Government Grants -

(7,698) Other Grants and Contributions

(33,908) HRA Capital Grant

(352,789) Total (265,313)

Credited to Services

(22,531) Council Tax Benefit Grant (22,469)

(170,476) Dedicated Schools Grant (DSG) (166,395)

(3,261) Department for Education - Early Years (272)

(244) European Regional Development Fund (ERDF) Grant -

(74,607) Housing Benefit Grant (80,702)

506 Housing Market Renewal Fund (HMRF) (154)

578 Housing Revenue Account Subsidy (8)

(4,141) Learning and Skills Council (LSC) - 6th Form (1,741)

(2,953) Learning and Skills Council (LSC) - ACL Income (3,714)

- Learning and Skills Council (LSC) - Vocational -

- New Deal for Communities (NDC) (5,955)

(12,498) PFI Credit (18,799)

(5,603) Standards Fund Grant -

(649) Surestart Grant (2)

(4,059) Other Government Grants (7,209)

(8,489) Other Grants (8,064)

(308,428) Total (315,484)


172

The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver. The balances at the year-end are as follows: Current Liabilities

31 March

2013

£000

Grants Receipts in Advance (Capital Grants)

New Deal for Communities (NDC)

Big Lottery Fund

Other grants

Other contributions (1,916)

Total (1,916)

31 March

2013

£000

Grants Receipts in Advance (Revenue Grants)

Transformation Training and Innovation (108)

Dedicated Schools Grant (80)

Arts Council (120)

Housing Benefit Welfare Reform (34)

Sustainable School Travel Duty (43)

Other Grants (173)

Total (558)

31 March

2012

£000

Grants Receipts in Advance (Capital Grants)

Other contributions (717)

Total (717)


173

31 March

2012

£000

Grants Receipts in Advance (Revenue Grants)

Lifelong Learning (284)

Social Work Improvement Fund (340)

Dedicated Schools Grant (76)

Sport England (70)

Overcrowding pathfinder (62)

OHIP Funding (222)

Homesless Grant (57)

Other Grants (634)

Total (1,745) 41. Related Parties

The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council. In this context, related parties include:

� Central Government � Members � Officers � Other Public Bodies � Entities controlled or significantly influenced by the Council

Central Government Central Government has significant influence over the general operations of the Council. It is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. Council Tax bills, housing benefits). Grants received from Government Departments are set out in the subjective analysis in Note 30 on reporting for resources allocation decisions. Grant receipts outstanding at 31 March 2013 are shown in Note 40.

Members Members of the Council have a direct control over the Council’s financial and operating policies. The total of Members’ Allowances paid in 2012/13 is shown in Note 36. Members have not disclosed any material transactions with related parties. The Register of Members’ Interest is open to public inspection at the Civic Centre during office hours, on application, and is also available on the council’s website. The council is compliant with the Localism Act 2011.


174

Officers Chief Officers have not disclosed any material transactions with related parties. Other Public Bodies (subject to common control by Central Government) The Council has pooled budget arrangements with NHS Oldham in relation to Joint Loan Equipment Stores. Transactions are detailed in Note 35. The Council also pays levies towards the services provided by the GMWDA and the GMCA (previously the Greater Manchester Integrated Transport Authority (GMITA)): � The amount paid to GMWDA in 2012/13 was £12.967m (£12.131m in 2011/12); and � The amount paid to GMCA in 2012/13 was £15.982m (£15.529m to GMITA in

2011/12).

Entities Controlled or Significantly Influenced by the Council The Council has a number of subsidiaries over which it has control and associate companies and a joint venture over which it exerts significant influence. The Council’s subsidiary companies are as follows: Oldham Education Enterprises (OEE) OEE is a company that invests in properties and estates. Up until the 12 March 2013 OEE was the lessor of Henshaw House and Roundthorn Rd and Harmony St sites; however, from this date the leases have transferred to the Council as it is intention of the Directors of the Company to place it into members voluntary liquidation during the forthcoming financial year. Oldham Economic Development Association Limited (OEDA) OEDA is a company without share capital which is 100% owned by the Council, and which was set up to aid economic development and regeneration across the borough. The company has remained inactive in the past year because of the restrictions which apply to companies wholly owned by a Local Authority. Southlink Developments Limited The principal activity of the company is that of a property developer. However the development land now owned by the company is reduced to a few acres located on the Southlink Business Park. The continued inactivity of the company is the result of the restrictions which apply to companies wholly owned by a Local Authority. The Council’s associate companies are as follows: Unity Partnership Ltd (Unity) - Associate


175

Unity came into being on 1 April 2007. It was made up of the Council, Mouchel and HBS (with both companies later merging) and is a private company limited by shares. The Council owns one third of the voting rights of Unity. Unity was formed to deliver services in the following areas:

� Customer services; � Exchequer services; � Information and communication technology; � Highways services; and � Property services.

With effect from 7 February 2011 there was a further transfer of services from the Council to the Unity Partnership involving: � Accounts payable; � Accounts receivable; � Transactional HR and payroll; and � Additional highways management services.

Meridian Development Company Ltd (MDCL) The Council had provided loans and grants to fund the development of the Meridian Business Centre which was developed by Interurban Limited in the 1970s. MDCL was established during 1995/96 as a company involving the Council and a partner for the purchase and development of Lumb Mill, Delph, Saddleworth. As part of these arrangements Interurban Limited then became a 100% subsidiary of MDCL with Interurban Limited retaining its ownership of the Meridian Business Centre. MDCL sold the two business centres it operated at Saddleworth and Hollinwood to Biz Space Ltd in January 2008 and MEDCL sold the Hollinwood Business Centre Phase 2 development to Biz Space Ltd. The Council’s shareholding in MDCL is 27.2% of the voting shares and 59.1% of the non voting shares. Community 1st Oldham (Chadderton) Ltd - Associate Community 1st Oldham (Chadderton) Ltd was incorporated on 29 March 2008 and commenced trading on 30 April 2008. The principal activity of the company is the development and property management of a Multi-Purpose Health and Wellbeing Centre in Chadderton. The Centre opened on 26 October 2009 and is now fully operational. The Council has a 20% shareholding. The Council has one joint venture which is discussed below. Rochdale Canal Trust Limited The Rochdale Canal Trust Limited was incorporated in England and Wales on 4 February 1986 and is a charitable company, limited by guarantee. The Trust has continued to operate


176

as the co-ordinator of Local Authority approval of spending plans for the restoration and maintenance of the Rochdale Canal. The net value of transactions with entities controlled or significantly influenced by the Council during the year are as follows:

2011/12 2012/13

£000 £000

(1,256) Oldham Property Partnerships (OPP) (500)

211 Oldham Educational Enterprises (OEE) 84

20,351 Unity Partnership Limited 18,136

915 Community 1st Oldham (Chadderton) Limited 761

20,221 Total Net Transactions 18,481 The following amounts were due from related parties at 31 March and are included in Debtors (see Note 20):

31 March

2012

31 March

2013

£000 £000

- Unity Partnership Limited 324

3,587 Oldham Educational Enterprises (OEE) -

- Oldham Property Partnerships (OPP) 600

3,587 Total 924

The following amounts were due to related parties at 31 March and are included in Creditors (see Note 23):

31 March

2012

31 March

2013

£000 £000

(1,818) Unity Partnership Limited (1,497)

(36) Other (147)

(1,854) Total (1,644)


177

42. Capital Expenditure and Capital Financing The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases and PFI/PP contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in a decrease in the Capital Financing requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The prior year has been restated in accordance with guidance issued in LAAP Bulletin 96 (March 2013).


178

Restated

Opening

Balance

2011/12

2012/13

£000 £000

427,454 Opening capital financing requirement 400,150

Capital Investment

83,114 Property Plant and Equipment 137,652

111 Investment Assets 18

26,522 REFCUS 13,202

513 Intangible Assets 97

- Heritage Assets 73

- Long Term Debtor 1,000

Sources of Finance

(5,800) Capital Receipts (3,837)

(81,351) Government Grants And Other Contributions (49,327)

(20,958) Sums Set aside from Revenue (32,630)

(173) Major Repairs Reserve -

(29,277) Funding from reserves -

(5) Other 3

400,150 Closing Capital Financing Requirement 466,401

Explanation of movements in year

(7,157) Increase in Need to Borrow Supported by Government Financial

Assistance

(6,822)

(1,281) Increase in Need to Borrow Unsupported by Government Financial

Assistance

5,759

(29,277) HRA Self Financing Debt Repayment -

100 Assets Acquired Under Finance Leases 169

10,311 Assets Acquired Under PFI/ PPP Contracts 67,145

(27,304) Increase / (decrease) in Capital Financing Requirement 66,251

43. Leases

Oldham Council as Lessee Finance Leases Assets acquired under finance leases are carried as Operational Other Land and Buildings and Operational Plant and Equipment in the Balance Sheet at the following net amounts:


179

31 March 2012 31 March 2013

£000 £000

Other Land and Buildings

1,395 Queen Elizabeth Hall -

8,683 Civic Centre -

- -

- -

10,078 -

Vehicles, Plant, Furniture and Equipment

778 Fleet 194

295 Equipment 154

100 Schools 127

1,172 475

11,250 475

The Council is committed to making minimum payments under these leases comprising settlement of the long-term liability for the interest in the property acquired by the Council and finance costs that will be payable by the Council in future years while the liability remains outstanding. The minimum lease payments are made up of the following amounts: 31 March 2012 31 March 2013

£000 £000

Finance lease liabilities (net present value

of minimum lease payments):

1,283 current 577

1,183 non - current 262

335 Finance costs payable in future years 81

2,801 Minimum lease payments 920

The minimum lease payments will be paid over the following periods: Minimum Lease

Payments

Finance Lease

Liabilities

Minimum Lease

Payments

Finance Lease

Liabilities

31 March 2012 31 March 2012 31 March 2013 31 March 2013

£000 £000 £000 £000

1,497 1,283 Not later than one year 633 577

1,299 1,178 Later then one year and not later than five years 288 262

5 5 Later than five years 0 0

2,801 2,466 921 839

Operating Leases During 2012/13 the Council continued to lease land and buildings by means of operating leases. The future minimum lease payments due under non-cancellable leases in future years are:


180

31 March 2012 31 March 2013

£000 £000

751 Not later than one year 623

1,743

Later than one year and not later than five years

1,845

6,094 Later than five years 8,697

8,587 11,165

Of these future minimum lease payments the Council is expected to receive the following from sub-letting.

2011/12 2012/13

£000 £000

8,587 Minimum lease payments 11,165

(95) Sublease payments receivable (63)

8,493 11,102 The expenditure charged to Directorates and included in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was: 31 March 2012 31 March 2013

£000 £000

521 People Communities and Society 418

182 Economy Place and Skills 182

149 Assistant Chief Executive 28

851 Total Minimum Lease Payments 627

(95) Sublease payments receivable (63)

756 564

Oldham Council as Lessor Operating Leases

The Council leases out land and buildings to third parties under operating leases. The future minimum lease payments receivable under non-cancellable leases in future years are:


181

31 March 2012 31 March 2013

£000 £000

2,188 Not later than one year 2,555

7,138

Later than one year and not later than five years

6,256

5,704 Later than five years and not later than ten years 4,646

173,626 Later than ten years 48,997

188,656 62,454

44 PFI and Similar Contracts The Property, Plant and Equipment note has been restated for 2011/12, see note 56 for further details. Oldham Library and Lifelong Learning Centre


182

2012/13 was the eighth year of a 25 year PFI contract for the construction, maintenance and operation of Information Technology (IT) and Financial management (FM) services of the Library and Lifelong Learning Centre in the town centre. The Council has rights under the contract to specify the opening times of the facility. The contract specifies minimum standards for the services to be provided by the contractor, with deductions from the fee payable being made if the facilities are unavailable or performance is below the minimum standards. The contractor was obliged to construct the centres and to maintain them to a minimum acceptable condition, and to procure and maintain the plant and equipment needed to operate the facility. The building, and any plant and equipment installed, will transfer to the Council at the end of the contract for nil consideration. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including the repayment of any of the contactor's outstanding debt attributable to the contract. There have been no changes to the arrangement over the year. Sheltered Housing 2012/13 was the seventh year of a 30 year PFI contract for the demolition and new build (or refurbishment of), and the provision of management and maintenance services to, sheltered and warden supported properties in the Housing Revenue Account. The Council has rights under the contract to specify arrangements around the demolition new build and refurbishment of the dwelling together with the tenancy management services to be supplied. The contract specifies minimum standards for the services to be provided by the contractor, with deductions from the fee payable being made if facilities are unavailable or performance is below the minimum standards. The contractor was obliged to demolish and rebuild/refurbish the dwellings and to maintain them to a minimum acceptable condition over the life of the contract. The dwellings will transfer to the Council at the end of the contact for nil consideration. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including the repayment of any of the contactor's outstanding debt attributable to the contract. There have been no changes to the arrangement over the year. Schools 2012/13 was the fifth year of a 25 year PFI contact for the construction and maintenance of two secondary schools, Radclyffe and Failsworth, along with the provision of FM and IT services over the life of the contract. The Council has rights under the contract to specify the opening times of the schools. The contract specifies minimum standards for the services to be provided by the contractor, with deductions from the fee payable being made if the facilities are unavailable or performance is below the minimum standards. The contractor was obliged to construct the schools and to maintain them to a minimum acceptable condition and to procure and maintain the plant and equipment needed to operate the facility. The schools and any plant and equipment installed in them will transfer to the Council at the end of the contract for nil consideration. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including the repayment of any of the contactor's outstanding debt attributable to the contract. There have been no changes to the arrangement over the year. Chadderton Wellbeing Centre 2012/13 was the fourth year of a 30 year LIFT Lease Plus Agreement to build and maintain the Chadderton Wellbeing centre. The Centre incorporates a library, sports centre, and café and community rooms. The Council has rights under the contract to specify the opening


183

times of the facility. The contract specifies minimum standards for the services to be provided by the contractor, with deductions from the fee payable being made if the facilities are unavailable or performance is below the minimum standards. The contractor was obliged to construct the centres and to maintain them to a minimum acceptable condition and to procure and maintain the plant and equipment needed to operate the facility. The Council has the option to purchase the Wellbeing Centre for less than the asset's market value. The Council has judged itself reasonably certain to exercise the option, and the cost of the eventual purchase has been factored into the Minimum Lease Payments. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including the repayment of any of the contactor's outstanding debt attributable to the contract. There have been no changes to the arrangement over the year. Street Lighting 2012/13 was the second year of a 25 year PFI contract, joint with Rochdale Council, for the replacement of approximately 23,000 street lights in Oldham in the first five years and the ongoing management and maintenance of the street lights over the life of the contract. The Council has rights under the contract to detail the specification of the street lights. The contract specifies minimum standards for the services to be supplied by the contractor, with deductions from the fee being payable if performance is below the minimum standards. The contractor was obliged to replace and maintain the street lights over the life of the contract. The street lights will transfer to the Council at the end of the contract for nil consideration. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred, including the repayment of any of the contractor's outstanding debt attributable to the contract. Gateways to Oldham Housing 2012/13 was the second year of a 25 year PFI contract for the management of 633 HRA dwellings with Inspiral Oldham Limited (Inspiral). Inspiral will be responsible for demolition, new build and refurbishment of the dwellings together with their management and maintenance. The contract also includes minor works to external fabric of 145 leaseholder/owner occupied properties, for which the majority of associated costs will be met by the leaseholders/owner occupiers. The Council has rights under the contract to specify arrangements around the demolition, new build and refurbishment of the dwellings together with the tenancy management services to be supplied. The contract specifies minimum standards for the services to be supplied by the contractor, with capacity for the Council to levy deductions from the fee payable if facilities are unavailable or performance falls below the minimum standards. The contractor has taken on the obligation to demolish and rebuild/refurbish the dwellings and to maintain them to a minimum acceptable condition over the life of the contract. The management of the dwellings within the HRA will transfer back to the Council at the end of the contract for nil consideration unless a separate contract is entered into either with Inspiral or an alternative contractor. The Council has rights to terminate the contract in the event of non performance but will be required to compensate the contractor, potentially including the repayment of any of the contactor's outstanding debt attributable to the contract. Building Schools for the Future 2012/13 was the first year of a 25 year PFI contract for the construction and maintenance of a secondary school, The Blessed John Henry Newman RC Secondary School; along with provision of Facilities Management services over the life of the contract. The council has


184

rights under the contract to specify the opening times of the school. The contract specifies minimum standards for the services to be provided by the contractor, with deductions from the fee being made if the facilities are unavailable or performance is below minimum standards. The contractor was obliged to construct the schools and to maintain them to a minimum acceptable condition, and to procure and maintain the plant and equipment needed to operate the facility. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred including repayment of any of the contractors’ outstanding debt attributable to the contract. Analysis of Payments due to be made under PFI and Similar Contracts The following table shows payments due to be made under PFI and similar Contracts. All the payments under PFI and similar Contracts are linked in full or in part to Retail Price Index inflation and can be reduced if the contractor fails to meet availability and performance standards in any year, but are otherwise fixed. Lifecycle replacement costs have been included in the Service charges element.


185

Library

and

Lifelong

Learning

Centre Schools

Sheltered

Housing

Chadderton

Wellbeing

Centre

Street

Lighting

Gateways

to Oldham

Housing

Building

Schools

for the

Future Total

£000 £000 £000 £000 £000 £000 £000 £000

2013/14 Repayment of Liability 464 1,584 2,720 104 610 1,345 442 7,267

Interest 1,315 3,898 7,735 706 1,220 3,348 3,459 21,682

Service Charges 1,213 2,500 3,692 186 1,289 1,871 1,063 11,814

Total 2,992 7,983 14,147 995 3,119 6,564 4,963 40,762

2014/15 Repayment of Liability 1,954 5,453 10,440 323 2,634 6,926 3,219 30,950

to 2017/18 Interest 4,748 14,234 29,498 2,931 7,984 18,631 12,179 90,204

Service Charges 5,613 13,019 18,448 1,020 5,506 7,726 4,889 56,220

Total 12,314 32,707 58,386 4,274 16,124 33,283 20,287 177,374


to 2022/23 Interest 4,813 14,902 34,066 4,027 8,988 20,304 13,622 100,722

Service Charges 8,640 17,454 29,098 1,322 8,807 13,510 7,858 86,689

Total 16,239 42,782 77,206 5,976 22,111 44,279 26,423 235,016


to 2027/28 Interest 3,278 10,097 29,783 4,205 6,131 16,272 11,394 81,160

Service Charges 9,260 22,394 34,445 2,259 14,933 19,815 9,392 112,497

Total 17,294 45,150 82,180 6,762 23,528 46,760 27,750 249,424


to 2032/33 Interest 1,118 4,217 25,138 4,929 5,599 13,568 7,386 61,955

Service Charges 5,363 23,769 39,984 1,908 13,402 17,920 12,830 115,176

Total 10,317 46,180 87,475 7,650 25,036 49,567 29,251 255,476

2033/34 Repayment of Liability 0 0 25,534 1,262 7,396 19,296 11,217 64,706

to 2037/38 Interest 0 0 12,711 5,447 2,784 6,885 2,798 30,625

Service Charges 0 0 26,349 1,947 6,990 12,179 13,245 60,709

Total 0 0 64,594 8,656 17,171 38,360 27,260 156,040

2038/39 Repayment of Liability 0 0 0 5,356 0 0 0 5,356

to 2042/43 Interest 0 0 0 1,791 0 0 0 1,791

Service Charges 0 0 0 4,857 0 0 0 4,857

Total 0 0 0 12,004 0 0 0 12,004

Repayment of Liability- Total 13,795 48,318 93,041 8,781 23,456 66,784 35,820 289,995

Interest- Total 15,272 47,348 138,930 24,037 32,706 79,008 50,837 388,139

Service Charges- Total 30,089 79,136 152,016 13,499 50,926 73,020 49,276 447,962

Grand total 59,156 174,802 383,987 46,317 107,089 218,812 135,933 1,126,095


186

Analysis of Liabilities as a result of PFI and Similar Contracts The payments to the contractor are described as Unitary payments, however they have been calculated to compensate the contractor for the fair value of the services the contractor provides, the capital expenditure incurred and the interest payable whilst the capital expenditure remains to be reimbursed. The liability to pay the contractors for capital expenditure incurred is as follows:

Scheme Lia

bility 3

1

Marc

h 2

011

Additio

ns

Repaym

ent

s

Oth

er

Movem

ents

Lia

bility 3

1

Marc

h 2

012

Additio

ns

Repaym

ent

s

Lia

bility 3

1

Marc

h 2

013

£000 £000 £000 £000 £000 £000 £000 £000

Library and Lifelong Learning Centre 14,616 (401) 14,215 - (419) 13,795

Schools 50,775 (1,380) 49,395 - (1,077) 48,318

Sheltered Housing 88,167 8,774 (2,098) 516 95,360 - (2,319) 93,040

Chadderton Wellbeing Centre 8,940 (77) 8,863 - (82) 8,781

Street Lighting - 1,537 (212) 1,325 6,136 (789) 6,672

Gateways to Oldham - - 28,890 (4,342) 24,549

Building Schools for the Future - - - - - 35,820 - 35,820

Total 162,498 10,311 (4,167) 516 169,157 70,846 (9,028) 230,975


187

Assets as a result of PFI and Similar Contracts Library

and

Lifelong

Learning

Centre Schools

Sheltered

Housing

Chadderton

Wellbeing

Centre

Street

Lighting

Gateways

to

Oldham

Housing

Building

Schools

for the

Future Total

£000 £000 £000 £000 £000 £000 £000 £000

Cost Or Valuation

As at 31 March 2011

(RESTATED) 18,009 - 52,845 9,065 - 8,268 88,187

Additions 34 8,774 - 1,537 - 10,345

Revaluations recognised in

Revaluation Reserve (17,616) - - (3,254) (20,870)


Surplus/Deficit on Provision

of Services (303) - - (179) (482)

Derecognition-disposals - - - - -

As at 31 March 2012

(RESTATED) 18,043 - 43,701 9,065 1,537 4,835 - 77,180

Accumulated Depreciation &

Impairment

As at 31 March 2011

(RESTATED) (1,486) - (30,298) (291) - (3,296) (35,371)

Depreciation Charge (743) (1,678) (291) - (331) (3,043)

Depreciation Written out to

Revaluation Reserve 341 - - 331 672

Impairment

Losses/(reversals)


Reserve 16,971 - - 2,966 19,937

Impairment

Losses/(reversals)

recognised in the


Provision of Services (7,550) - - - (7,550)

Derecognition -disposals - - - - -

As at 31 March 2012

(RESTATED) (2,229) - (22,214) (582) - (331) - (25,356)

Net Book Value at 31 March

2011 16,523 - 22,547 8,774 - 4,972 - 52,816


2012 15,814 - 21,487 8,483 1,537 4,504 - 51,824

Cost Or Valuation

As at 31 March 2012 18,043 - 43,701 9,065 1,537 4,835 - 77,180

Additions - - 6,136 28,951 35,820 70,907


Revaluation Reserve - (8,175) - - 188 - (7,987)


Surplus/Deficit on Provision

of Services - (385) - - (52) - (436)

Derecognition-disposals - - - - - (35,820) (35,820)

Transfers 80 80

As at 31 March 2013 18,043 - 35,141 9,065 7,673 34,002 - 103,924

Accumulated Depreciation &

Impairment

As at 31 March 2012 (2,229) (22,214) (582) - (331) - (25,356)

Depreciation Charge (744) (1,615) (291) (39) (372) - (3,062)

Depreciation Written out to

Revaluation Reserve - 341 - - 331 - 672

Impairment

Losses/(reversals)


Reserve - 7,550 - - (402) - 7,148

Impairment

Losses/(reversals)

recognised in the


Provision of Services - - - - (24,740) - (24,740)

Derecognition -disposals - - - - - - -

As at 31 March 2013 (2,973) - (15,937) (874) (39) (25,514) - (45,337)


2012 15,814 - 21,487 8,483 1,537 4,504 - 51,824


2013 15,070 - 19,203 8,191 7,633 8,489 - 58,587


188

45. Impairment Losses

During 2012/13, the Council has recognised impairment losses of £34.965m of which £1.992m was offset against previous revaluation gains and the balance of £32.973m was charged to the Surplus/(Deficit) on the provision of Services. This is analysed below:

Impairment

charges to

Surplus /

(Deficit)

Impairment

charges to

Revaluation

Reserve

Total

£000 £000 £000

Council Dwellings 24,740 402 25,142

Other Land and Buildings 8,159 1,590 9,749

Vehicles,Plant and Equipment - - -

Heritage Assets 57 - 57

Infrastructure - - -

Surplus Assets - - -

Community Assets 6 - 6

Property, Plant and Equipment under Construction - - -

Assets held for Sale - - -

Intangible Assets - - -

32,962 1,992 34,953

2012/13

Impairment

charges to

Surplus /

(Deficit)

Impairment

charges to

Revaluation

Reserve

Total

£000 £000 £000

Council Dwellings 7,759 78 7,837

Other Land and Buildings 7,302 7,290 14,592

Vehicles,Plant and Equipment 66 - 66

Heritage Assets - - -

Infrastructure 799 - 799

Surplus Assets 298 - 298

Community Assets 3,516 - 3,516

Property, Plant and Equipment under Construction 1 - 1

Assets held for Sale 4 6 10

Intangible Assets 29 - 29

19,774 7,374 27,148

2011/12 Restated

The impairment of additions due to the Gateway to Oldham PFI Scheme amounted to £25.142m, of which £24.740 was charged to the Surplus/(Deficit) on the Provision of Services and £0.402m was charged to the Revaluation Reserve. There were no other individual assets impaired by more than £4m.


189

46. Capitalisation of Borrowing Costs

The Council has not capitalised any of its borrowing costs during the year.


190

47. Termination Benefits The Council terminated the contracts of 184 employees in 2012/13, incurring liabilities of £3.075m (2011/12 £5.119m) as per Note 37 – Officers’ Remuneration. The payments were made to officers who left the employment of the Council to enable the Council to realise the approved budget savings.


191

48. Pension Schemes Accounted for as Defined Contribution Schemes Teachers employed by the Council are members of the Teachers’ Pension Scheme administered by Department for Education. The Scheme provides teachers with specified benefits upon their retirement and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The Scheme is technically a defined benefit scheme. However, the scheme is unfunded, the Department for Education uses a notional fund as the basis for calculating the employer’s contribution rate paid by local authorities. The Council is not able to identify its share of the underlying financial position and performance of the Scheme with sufficient reliability for accounting purposes. For the purposes of this Statement of Accounts it is therefore accounted for on the same basis as a defined contribution scheme. In 2012/13 the Council paid £8.866m to the Teachers Pensions Agency in respect of teachers’ retirement benefits, representing 13.30% of pensionable pay (2011/12 £9.579m and 13.39%). There were no contributions remaining payable at the year end. The Council is responsible for the costs of any additional benefits awarded upon early retirement outside the terms of the Teachers’ Scheme. These costs are accounted for on a defined benefits basis and detailed in Note 49.


192

49. Defined Benefit Pension Schemes Participation in Pension Schemes As part of the terms and conditions of the employment of its officers, the Council makes contributions towards the cost of post employment benefits. Although these benefits will not actually be payable until the employees retire, the Council has a commitment to make the payments that need to be disclosed at the time the employees earn their future entitlement. The Council participates in the Local Government Pension Scheme which is administered locally by Tameside Metropolitan Borough Council. This is a funded defined benefit final salary scheme, meaning that the Council and employees pay contributions into a fund calculated at a level intended to balance the pension liabilities with investment assets. Transactions Relating to Post-employment Benefits The cost of retirement benefits is recognised in the reported cost of services when they are earned by the employees rather than when they are eventually paid as pensions. However, the charge made against Council Tax is based on the cash payable in the year, so the real cost of post employment/retirement benefits is reversed out of the General Fund through the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance through the Movement in Reserves Statement during the year:

2011/12 2012/13

£000 £000


Cost of Services

15,300 current service cost 15,700

100 past service costs 300

400 settlements and curtailments 1,000

Financing and Investment Income and Expenditure

40,400 interest cost 39,600

(39,300) expected return on scheme assets (33,400)

16,900Total Post Employment Benefit Charged to the Comprehensive Income and

Expenditure Statement23,200

Other Post Employment Benefit Charged to the Comprehensive Income and

Expenditure Statement

91,900 actuarial gains and losses 53,600

108,800Total Post Employment Benefit Charged to the Comprehensive Income and

Expenditure Statement76,800

Movement in Reserves Statement

16,900 reversal of net charges made to the Surplus or Deficit for the Provision of

Services for post employment benefits in accordance with the Code

23,200

2011/12 2012/13

£000 £000

Actual amount charged against the General Fund

Balance for pension in the year

20,100 employers' contributions payable to the scheme 17,500 The cumulative amount of actuarial gains and losses recognised in Other Comprehensive Income and Expenditure in the actuarial gains or losses on pensions assets and liabilities


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line was at 31 March 2013 a loss of £53.600m and at 31 March 2012 was a loss of £91.900m. Assets and Liabilities in Relation to Post-employment Benefits Reconciliation of present value of the scheme liabilities (defined benefit obligation):

2011/12 2012/13

£000 £000

743,400 Opening balance at 1 April 829,700

15,300 Current service cost 15,700

40,400 Interest cost 39,600

6,100 Contributions by scheme participants 5,600

60,900 Actuarial (gains) and losses 106,700

(26,800) Benefits paid (26,100)

100 Past service costs 300

(2,800) Unfunded benefits (2,900)

1,500 Curtailments 1,000

(8,400) Settlements -

829,700 Closing balance 31 March 969,600 Within these figures there is an unfunded element of a total of £46.200m which has increased when compared with the £41.000m at 31 March 2012. The £46.200m is comprised of £26.400m for non-teaching staff and £19.800m relating to teachers discretionary payments as the Council is also responsible for the costs of any additional benefits awarded upon early retirements which are outside the terms of the Teachers’ scheme. Reconciliation of fair value of the scheme (plan) assets:

2011/12 2012/13

£000 £000

602,000 Opening balance at 1 April 599,600

39,300 Expected rate of return 33,400

(31,000) Actuarial (gains) and losses 53,100

20,100 Employer contributions 17,500

6,100 Contributions by scheme participants 5,600

(26,800) Benefits paid (26,100)

- Entity Combinations -

(7,300) Settlements -

(2,800) Unfunded benefits paid (2,900)

599,600 Closing balance 31 March 680,200 The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date.


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Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets. The actual return on scheme assets in the year was £86.600m (2011/12 £8.400m) as a result of very good returns on equity investments. This return on assets is absorbed by the actuarial losses and interest costs generated within scheme liabilities. Scheme History

2008/09 2009/10 2010/11 2011/12 2012/13

£000 £000 £000 £000 £000

Present value of liabilities:

(562,900) (939,800) (743,400) (829,700) Local Government Pension Scheme (969,600)

(562,900) (939,800) (743,400) (829,700) (969,600)

Fair value of assets in the Local Government

Pension Scheme

426,000 581,500 602,000 599,600 Local Government Pension Scheme 680,200

426,000 581,500 602,000 599,600 680,200

(136,900) (358,300) (141,400) (230,100) Surplus/(deficit) in the scheme (289,400) The liabilities show the underlying commitments that the Council has in the long run to pay post employment (retirement) benefits. The total liability of £289.400m has a substantial impact on the net worth of the Council as recorded in the Balance Sheet. However, statutory arrangements for funding the deficit mean that the financial position of the Council remains healthy: � The deficit on the local government scheme will be made good by increased

contributions over the remaining working life of employees (i.e. before payments fall due), as assessed by the scheme actuary; and

� Finance is only required to be raised to cover discretionary benefits when the pensions are actually paid.

The total contributions expected to be made to the Local Government Pension Scheme by the Council in the year to 31 March 2014 are £14.500m Basis for Estimating Assets and Liabilities Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. Both the Local Government Pension Scheme and Discretionary Benefits liabilities have been assessed by Hymans Robertson LLP, an independent firm of actuaries, estimates being based on the latest full valuation of the scheme as at 31 March 2010.


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The principal assumptions used by the actuary have been:

2011/12 2012/13

Long-term expected rate of return on assets in the

scheme:

6.30% equity investment 4.50%

3.90% bonds 4.50%

4.40% property 4.50%

3.50% cash 4.50%

Mortality assumptions:

Longevity at 65 for current pensioners:

20.1 men 20.1

22.9 women 22.9

Longevity at 65 for future pensioners:

22.5 men 22.5

25.0 women 25.0

2.50% Rate of inflation 2.80%

4.30% Rate of increase in salaries 4.60%

2.50% Rate of increase in pensions 2.80%

4.80% Rate for discounting scheme liabilities 4.50% Changes to IAS19 in 2013/14 require the expected rate of return on assets to equal the rate for discounting scheme liabilities. The actuaries have recommended that this change is applied in advance to ensure consistency with future accounting standards. The Council has reviewed this recommendation and have considered the approach to be acceptable, given the long term nature of the asset investments, to ensure consistency with future accounting standards. The rate of increase in salaries is assumed to be 1% until March 2015 reverting to 4.60% thereafter. The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:

31 March

2012

31 March

2013

70% Equity investments 72%

18% Debt instruments 17%

12% Other assets 11% History Experience Gains and Losses The actuarial gains identified as movements on the Pensions Reserve in 2012/13 can be analysed into the following categories, measured as a percentage of assets or liabilities at 31 March of the relevant year as set out in the table below:


196

2008/09 2009/10 2010/11 2011/12 2012/13

£000 £000 £000 £000 £000

Differences between the expected and actual rate of return on

28.9 (7.6) (1.0) (4.8) scheme assets (9.6)

0.2 0.1 9.4 (0.0) Experience gains and losses on liabilities 0.0


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50. Contingent Liabilities A contingent liability is a potential liability which depends on the occurrence or non-occurrence of one or more uncertain future events. The Council has identified the following contingent liabilities as at 31 March 2013. 1) Manchester Airport Group In 2009/10 there was a restructure of various loans used to finance capital expenditure that the airport had agreed to reimburse the Council. As a consequence, the loans to the airport that were previously secured became unsecured but a higher coupon rate became receivable. The loan agreement expires in 2055. Full provision has not been made in the balance sheet to cover the total potential losses to the Council from this agreement. 2) Pension Guarantees The Council has entered into long-term contracts for services that have been outsourced to service providers. These often involve the transfer of Council employees to the new service provider. Employee’s rights are protected under the provision in Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). However, pension rights are not fully covered within TUPE regulations. The Best Value Authorities Staff Transfers (Pension) Direction 2007 made under section 101 of the Local Government Act 2003 means that the Council must secure pension protection for each TUPE transfer which must be the same as, broadly comparable to, or better than, those they had a right to acquire prior to the transfer. This in turn means that the new service providers seek ‘admitted body’ status within the Greater Manchester Pension Fund (GMPF) to comply with the requirement. The legislative framework governing access to the GMPF means that public bodies can only obtain ‘admitted status’ if there is a sponsoring body that is willing to provide a guarantee. For contracts with non-public bodies the ultimate responsibility remains with the sponsoring body. The guarantee means that if an admitted body fails to pay its pension obligations to GMPF then the Council will take on those obligations. The Council has given a full guarantee in respect of: � First Choice Homes Oldham; � Unity Partnership; � Housing 21; � NSL Limited; � Allied Publicity Services (Manchester) Limited; � North Manchester Chamber of Commerce; � Remploy Limited; � The Ace Centre North; � Oldham Disability Alliance; � Oldham Citizen’s Advice Bureau; � Oldham and Rochdale Groundwork Trust; � Church of England Children’s Society; � Taylor Shaw in respect of St. Augustine’s, Bluecoat and Failsworth Schools; � Northgate Managed Solutions; � E-on UK Plc;


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� Great Places Housing Association; � Wates Construction Limited; � SMC Premier Cleaning; and � Kier Facilities Services Limited.

As at the end of March 2013, no guarantees had been exercised. The Council mitigates its risks by allowing only approved staff to enter into GMPF and is developing a system to verify these third parties are paying over their contributions to the Pension Fund. In addition, if the Council assesses that there is a risk of the guarantee being enacted, it can either request the recipient of the guarantee to procure an indemnity bond or, if this is not considered practical, consider the matter during the closure of accounts. 3) Oldham Coliseum Theatre: Overdraft Guarantee In 1997/98, the Council agreed to act as guarantor for up to £0.100m for the overdraft facilities of Oldham Coliseum Theatre. Due to the continued improvement in the theatre there has been no overdraft requirement since 31 March 2005. Any new overdraft facility making use of the guarantee would require approval by the Council. 4) Guarantees and issues on the exit of Council Owned Limited Companies The Council and specific Members are shareholders of several companies limited by guarantee. Rather than paying for issued share capital, members of these companies agree to pay a certain amount in the event of a winding up or dissolution of the company. Usually these are nominal sums, amounting to no more than a few pounds for all such companies in the Council’s ownership and are the maximum of the Council’s obligation. The Council is continuing to look to exit from a number of these companies during 2013/14 and the extent of its potential financial liabilities against its shareholding value will not be clear until they are formally wound up. 5) Abandoned Prosecution In 2009/10, the Council was unsuccessful in its prosecution against a trader which led to the risk that the trader and other individuals may submit a claim against the Council for financial losses incurred as a result of the Council’s action. At present it is uncertain whether a claim will be made or the extent of the claim. 6) Limeside Housing Area As part of the transfer of the Council’s housing stock at Limeside, the Council gave warranties to Portico Housing relating to the environmental conditions of the site. If the whole site were to become uninhabitable due to environmental conditions inherent in the area, but not disclosed, this could amount to a total liability of approximately £6m. It is not considered that there is a significant likelihood that this warranty will be called upon and as such no provision has been made in the accounts. 7) Modesole As a result of the Council receiving a distribution from the proceeds of Modesole’s sale of its shares in the Midland Hotel and Conference Centre, a liability may arise, the extent of which cannot yet be determined, to repay its share of a grant given in 1986 towards the


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refurbishment of the hotel. In addition, as a result of the Council receiving a distribution from the sale of its entire shareholding in Modesole Ltd, an indemnity was given to the buyer against any future liabilities arising in Modesole prior to the date of the sale. This indemnity is limited to the value of the sale proceeds received of £0.661m and will last for a period of 10 years from the date of the sale which was completed on 9 August 2005. 8) Fitton Hill Housing Area As part of the transfer of the Council’s housing stock at Fitton Hill the Council gave warranties to Village Housing Association relating to the environmental conditions of the site. The maximum liability is £20m. It is not considered that there is any significant likelihood that this warranty will be called upon and no provision has been made in the accounts. 9) Metrolink The Association of Greater Manchester Authorities (AGMA), the GMCA and the Department for Transport (DFT) have entered into a partnership funding arrangement for construction of Metrolink Phase 3a. Within the agreement the DFT contribution is capped at £244m in cash and the GMCA and the AGMA Councils are jointly responsible for meeting all costs over and above the amount that sum on the strict understanding that the scope of the scheme, granted full approval is delivered. The scheme is fully funded at present and the above arrangement will only be operative if the amount is exceeded. Strict monitoring arrangements are in place to minimise the risk of that happening. Approval has also been given for Phase 3b of the scheme and there is a capped DFT grant of £121m for the Ashton and Didsbury sections of the programme, the works to Oldham are not covered by the grant and are being funded from within the existing financing agreements and agreed contributions. 10) Oldham and Rochdale Groundwork Trust The Council has agreed jointly with Rochdale MBC, to provide a cash flow facility to assist the trust in maintaining its operations due to the time delay it experiences in being paid grants. The facility is, in effect, unsecured and in theory there is a possibility that full repayment may not occur. Regular reviews of the trust’s reimbursement of debt owed to the Council are undertaken to manage that risk, and there is no reason to consider at 31st March 2013 that any financial loss will be incurred by the Council. 11) Oldham Housing Retirement Partnership The Council is ongoing discussions with both Housing 21 and the Department of Communities and Local Government (DCLG) about the operation of the contract for PFI 2. The Council considers that appropriate deductions have been made to the contract and no grant towards the unitary charge should be reclaimed. 12) Grant Claims The Council submits grant claims for substantial amounts each year. From time to time interpretation of legislation may be a matter of professional and technical judgment. In this


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context it may lead to possible grant qualifications by the external auditors. It is not possible to produce a reliable forecast for the cost of any grant qualifications. The Council also acts as the Accountable Body for a range of grant funding that is paid to third parties. In the role of Accountable Body, the Council has to agree to the repayment of grant should there be a breach of the terms and conditions of the grant. Whilst every effort is taken to administer the grants to minimise any risk of financial loss to the Council, the risk cannot be eliminated. However, it is not possible to make a reliable forecast of any grant clawback arising from Accountable Body status. The level of risk is, however, reducing to reflect the fall in the level of funding received via grant from Central Government and other public sector bodies and also with the switch from ring fenced to general grants. 13) Stock Transfer Warranties The Council agreed to a number of warranties under the stock transfer agreements with FCHO. Such arrangements are common place in such negotiations. The key warranties are as follows: a) Asbestos Indemnity The Council will indemnify FCHO for all costs, claims and lawsuits against FCHO which arise from any person being exposed to asbestos unless there is negligence on the part of FCHO. The indemnity also covers the cost of removal, treatment or encapsulation of asbestos within properties to be paid by the Council provided that FCHO have first spent the £7.782m (inclusive of fees) net cost identified within the Stock Condition Survey and the additional £6m made available by the VAT Sharing agreement. The indemnity stipulates that both parties should work together on an Asbestos Management Policy which will comply with environmental law and endeavor to reduce the risk of asbestos claims. b) Contracts let by FCHO The Council will indemnify FCHO, for six years post the transfer date, against all claims, demands, costs, losses and liabilities incurred in connection with any material breach by FCHO of any contract entered into before the date of transfer, provided that FCHO meet the first £250k of any contract liabilities. 14) Municipal Mutual Insurance The Scheme of Arrangement was enacted in 2012/13. The impact upon the Council as a scheme creditor is not clear and the consequential impact on future funding for unknown claims incurred but not reported between 1974 and 1992. Whilst the council has considered the financial impact in producing its Statement of Final Accounts there is a risk that the Council’s financial liability could increase from this level.


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51. Contingent Assets A contingent asset is an asset that may be received but only if a future event occurs that is not under the control of the Council. The Council has identified the following contingent assets as at 31 March 2013. 1) Housing Market Renewal (HMR) - Equity Share Scheme Under the HMR initiative which ended on 31 March 2011, the Council acquired a number of properties voluntarily for the purpose of site assembly and the delivery of transformational change to the housing markets that is needed in certain neighbourhoods. A major part of this work was to provide sufficient equity release funding (either to renovate existing homes or to enable households to move to newly purchased accommodation). At 31 March 2013, there remains £3.076m of loans outstanding. In addition to the HMR funded equity share scheme, the Council also utilises part of the Regional Housing Capital Pot (RHCP) to renovate existing owner occupied homes on the same equity basis. As at 31 March 2013, there remains £2.041m of loans outstanding. As funding will eventually be repaid to the Council on resale of the properties from both initiatives and as the grants are now un-ringfenced, the receipt will be available to support the Council’s capital programme. 2) Stock Transfer The Stock Transfer has resulted in a number of contingent assets to the Council. a) Right to Buy Sharing Agreement As with other agreed stock transfers, the Council has entered into an agreement with FCHO relating to the future sales under the Prescribed Right to Buy (PRTB) regulations. This relates to any future sales of the transferred stock to existing tenants. The Council will receive capital receipts at the end of each financial year for any properties sold within the year. The value of the receipt is calculated using a formula that takes the net income forgone by FCHO from the total proceeds from the sale of dwellings for that year. b) VAT Shelter Arrangements In normal circumstances, FCHO is not able to reclaim VAT on improvement works to dwellings. The VAT Shelter is an arrangement, used in every transfer since 2002, with HMRC’s agreement, whereby FCHO can reclaim VAT on future improvement works to the transferred housing stock. Of the £229.792m of improvement works to be undertaken, an estimated £45.958m of VAT would be recoverable by FCHO over the 15 years post transfer. The Council has agreed a 50/50 share of the VAT with FCHO, after FCHO has retained its first tranche of recoverable VAT; this is a sum of £14.9m. This first tranche of VAT will be utilised by FCHO within its Business Plan and this is estimated to be within the first 4 years post transfer. FCHO will also retain a second tranche of VAT shelter savings, totalling £6.0m. This second tranche will be used solely for asbestos works that exceed the amount estimated within the Stock Condition Survey of £7.2m, (net of inflation, fees and VAT). This arrangement was agreed to mitigate the Council’s overall risk of a contingent liability through


202

the asbestos warranty. If the total amount of the second tranche is not needed, the remaining balance will be shared under the 50/50 sharing agreement. The estimated value of VAT shelter savings for the Council is £12.529m. Currently the spend profile is an even split across the 15 years post transfer. The Council will not expect to receive any VAT savings until 2016/17. The savings that are received by the Council will be treated as a capital receipt to support the Council’s capital programme. c) Disposals Clawback Agreement As part of the stock transfer agreement with FCHO, the Council negotiated a clawback agreement with FCHO for any future sales of land that had previously transferred. There were some exceptions to this arrangement which include land that is sold for community benefit, highways and to provide utility supplies. The Council will treat any proceeds as capital receipts and use them to support the capital programme. 3) Shareholding in Limited Companies The Council retains an equity shareholding in a number of limited companies and values its shareholding in these at the price it paid for its shareholding. Some of these companies have been operating for a number of years and the value of the Council’s shareholding if it was possible to realise it would be in excess of the value of the shareholding recorded in the statement of final accounts. The ability to realise this value would require the agreement of the individual company shareholders in accordance with the Company Articles. Ultimately any equity funding would be received by the Council in the year when the shareholding is realised. 4) Reclaim for Trade Waste VAT The Council provides trade waste services for which a charge is levied to users of the service. The charge has historically included Value Added Tax. Her Majesty’s Revenues and Customs has now determined that the provision of trade waste services by a Local Authority is non-business activity. The Council is anticipating a net recovery of output tax on the provision of trade waste services of up to £0.470m.


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52. Nature and Extent of Risks Arising from Financial Instruments The Council’s activities expose it to a variety of financial risks: � Credit risk – the possibility that other parties might fail to pay amounts due to the

Council; � Liquidity risk – the possibility that the Council might not have funds available to meet

its commitments to make payments; and � Market risk – the possibility that financial loss might arise for the Council as a result

of changes in such measures as interest rates and stock market movements.

Overall procedures for managing risk The Council’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund services. The procedures for risk management are set out through a legal framework based on the Local Government Act 2003 and associated regulations. These require the Council to comply with the CIPFA Prudential Code, the CIPFA Code of Practice on Treasury Management in the Public Services and investment guidance issued through the Act. Overall, these procedures require the Council to manage risk by: � Formally adopting the requirements of the CIPFA Treasury Management Code of

Practice;

� The adoption of a Treasury Policy Statement and treasury management clauses within its financial regulations/standing orders/constitution;

� Approving annually in advance prudential and treasury indicators for the following three years limiting:

• the Council’s overall borrowing;

• its maximum and minimum exposures to fixed and variable rates;

• its maximum and minimum exposures to the maturity structure of its debt;

• its maximum annual exposures to investments maturing beyond a year; and

� Approving an investment strategy for the forthcoming year setting out its criteria for both investing and selecting investment counterparties in compliance with Government guidance.

These are required to be reported and approved before the start of the year to which they relate. These items are reported with the annual Treasury Management Strategy which outlines the detailed approach to managing risk in relation to the Council’s financial instrument exposure. Actual performance is also reported after each year, as is a mid-year update. The annual Treasury Management Strategy for 2012/13 which incorporates the prudential indicators was approved by Council on 22 February 2012 and is available on the Council website. Amendments to the prudential indicators were approved by Council on 12 December 2012. The key issues within the strategy were: � The Authorised Limit for 2012/13 was initially set at £694.653m but decreased to

£519m due to a change in the capital financing requirement. This is the maximum limit of external borrowings or other long term liabilities;


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� The Operational Boundary was initially set at £684.653m but decreased to £509m also due to a of the change in the capital financing requirement. This is the expected level of debt and other long term liabilities during the year; and

� The maximum amounts of fixed and variable interest rate exposure were set at 100% and 40% based on the Council’s net debt.

These policies are implemented by a central Treasury Team. The Council maintains written principles for overall risk management, as well as written policies (Treasury Management Practices – TMPs) covering specific areas, such as interest rate risk, credit risk, and the investment of surplus cash.

Credit Risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Council’s customers. This risk is minimised through the Annual Investment Strategy, which requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria, in accordance with the Fitch, Moody’s and Standard and Poors Credit Ratings Services. The Annual Investment Strategy also considers maximum amounts and time limits in respect of each financial institution. Deposits are not made unless they meet the minimum requirements of the investment criteria outlined above, and detailed below. Oldham Council uses the creditworthiness service provided by Treasury Management Consultants. This service uses a sophisticated modelling approach with credit ratings from all three rating agencies - Fitch, Moodys and Standard and Poors, forming the core element. However, it does not rely solely on the current credit ratings of counterparties but also uses the following as overlays:

� Credit watches and credit outlooks from credit rating agencies;

� Credit Default Swap (CDS) spreads to give early warning of likely changes in credit ratings; and

� Sovereign ratings to select counterparties from only the most creditworthy countries

Institutions are split into colour bandings. The Council is able to deposit the following:

� Purple: Highest rated - Money Market Funds, Nationalised Banks and Government support – Investment of up to £20m for up to 2 years;

� Blue: Nationalised or semi nationalised UK banks – Initially investment of up to £15m for up to 1 year, but then increased to £20m for up to 1 year;

� Orange and Coop Bank – Initially investment up to £10m for up to 1 year; but then increased to £15m for up to 1 year

� Red £10m for up to 6 months; � Green £5m for up to 3 months; and

� No colour - not to be used.

The full Investment Strategy for 2012/13 was approved by Council on 22 February 2012, with amendments made to prudential indicators on 12 December 2012 and is available on the Council’s website.


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Customers for goods and services are assessed, taking into account their financial position, past experience and other factors, with individual credit limits being set in accordance with internal ratings in accordance with parameters set by the Council. The Council had a total of £65.119m deposited with a number of banks and financial institutions at 31 March 2013, the full amount is potentially exposed to credit risk, there is a specific risk attached to amounts deposited with the individual institutions based on their ability to make interest payments and repay the principal outstanding, it is however more difficult to asses the risk in general terms. Recent experience has shown that it is rare for such entities to be unable to meet their commitments. A risk of irrecoverability applies to all of the Council’s deposits, but there was no evidence at the 31 March 2013 that this was likely to crystallise. The following analysis summarises the Council’s potential maximum exposure to credit risk on other financial assets, based on experience of default and uncollectability over the last three financial years.

Secto

r

Fitc

h

Moody's

Sta

ndard

and

Poors

£000 % % £000

A B C A x B

Deposits with Banks and

Financial Institutions

Bank of Scotland Blue F1 P-1 A-1 15,000 -

Natwest Blue F1 P-2 A-1 15,000 -

Coop Bank F2 P-2 10,319 -

Prime Rate MMF Purple AAA Aaa AAA 14,800 -

Local Authorities Yellow AAA Aaa AAA 10,000 -

Customer Debtors 20,273 0.76% - 154

85,392 - 154

Estimated

maximum

exposure to

default and

uncollectabi

lity at 31

Amount at

31 March

2013

Historical

Experience

of Default

Historical

Experience

adjusted

for market

conditions

at 31 March

No credit limits were exceeded during the reporting period and the Council does not expect any losses from non-performance by any of its counterparties in relation to deposits and bonds. The Council does not generally allow extended credit for customers, but some of the current balance is past its due date for payment. The past due but not impaired amount can be analysed by age as follows:

31

March

2012

31

March

2013

£000 £000

4,177 2,738

113 141

1,114 982

2,664 2,811

8,068 6,672

Less than 3 months

3 - 6 months

6 - 12 months

more than 12 months

Liquidity Risk


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The Council has a comprehensive cash flow management system that ensures that cash is available as needed. The Council has ready access to borrowings from the money markets to cover any day to day cash flow need, and the Public Works Loan Board and money markets for access to longer term funds. There is no significant risk that the Council will be unable to raise finance to meet its commitments under financial instruments. Instead, the risk is that the Council will be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates. The Council sets limits on the proportion of its fixed rate borrowing during specified periods. The strategy is to ensure that not more than 50% of loans are due to mature within 12 months, this is in line with the Treasury Management Strategy, through a combination of careful planning of new loans taken out and (where it is economic to do so) making early repayments. The maturity analysis of financial liabilities is as follows:

31

March

2012

31

March

2013

£000 £000

74,031 37,522

- -

- 241

241 6,841

132,583 140,742

206,855 185,346

Less than 1 year

1 - 2 years

2 - 5 years

5 - 10 years

More than 10 years

The above analysis within more than ten years category includes principal of £75.5m of LOBOs - Lender Option Borrower Option loans that could potentially be called by the lender in the next financial year. The average maturity of LOBOs held within more than ten years is 55 years, these loans all have option dates within the next five years, however it is not anticipated that any of these will be called and require repayment. All trade and other payables are due to be paid in less than one year. Market Risk The Council is exposed to market risk in terms of its exposure that the value of an instrument will fluctuate because of changes in: � Interest rate risk; � Price risk; and � Foreign exchange rate risk.


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Interest Rate Risk The Council is exposed to risk in terms of its exposure to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the Council. For instance, a rise in interest rates would have the following effects: � Borrowings at variable rates – the interest expense charged to the Surplus or Deficit

on the Provision of Services will rise; � Borrowings at fixed rates – the fair value of the liabilities borrowings will fall; � Investments at variable rates – the interest income credited to the Surplus or Deficit

on the Provision of Services will rise; and � Investments at fixed rates – the fair value of the assets will fall.

Borrowings are not carried at fair value, so nominal gains and losses on fixed rate borrowings would not impact on the Surplus of Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in Other Comprehensive Income and Expenditure. The Council has a number of strategies for managing interest rate risk. The usual Council policy is to aim to keep a maximum of 40% of its borrowings in variable rate loans, but this may be varied in specific circumstances. The central Treasury Team monitor market and forecast interest rates within the year to adjust exposures appropriately. For instance during periods of falling interest rates, and where economic circumstances make it favourable, fixed rate investments may be taken for longer periods to secure better long term returns, similarly the drawing of longer term fixed rates borrowing would be postponed. If all interest rates had been 1% higher (with all other variables held constant) the financial effect would have been:

2012/13

£000

44

44

-

651

651

Decrease in fair value of fixed rate borrowings liabilities (no impact on the 1,498

Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure)

Impact on Other Comprehensive Income and Expenditure

Increase in government grant receivable for financing costs

Impact on Surplus or Deficit on the Provision of Services

Share of overall impact debited to the HRA

Decrease in fair value of fixed rate investment assets

The impact of a 1% fall in interest rates would be as above but with the movements being reversed. Price Risk The Council does not generally invest in equity shares but does have shareholdings to the value of £31.6m in a number of joint ventures and in local companies. The Council is consequently exposed to losses arising from movements in the prices of the shares.


208

As the shareholdings have arisen in the acquisition of specific interests, the Council is not in a position to limit its exposure to price movements by diversifying its portfolio. Instead it only acquires shareholdings in return for ‘open book’ arrangements with the company concerned so that the Council can monitor factors that might cause a fall in the value of specific shareholdings. The £31.6m shares are all classified as ‘available for sale’, meaning that all movements in price will impact on gains and losses recognised in Other Comprehensive Income and Expenditure. It is usually anticipated that a general shift of 5% in the general price of shares (positive or negative) may occur, which would have resulted in a £0.625m gain or loss based on prior years valuation being recognised in the Other Comprehensive Income and Expenditure for 2012/13. In 2012/13 the Council’s holding in Manchester Airport, was re-valued resulting in a gain of £19m that was recognised in the Other Comprehensive Income and Expenditure. Foreign Exchange Risk The Council has no financial assets or liabilities denominated in foreign currencies, and thus have no exposure to loss arising from movements in exchange rates.


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53. Heritage Assets: Three Year Summary of Transactions

2010/11 2011/12 2012/13£000 £000 £000

Cost of Acquisitions of Heritage Assets

- - Civic Regalia 73- - Art Collection

- - Total Cost of Purchases 73

Impairment recognised in the period

- - Civic Regalia (57)- - Art Collection

There have been no capitalised items acquired or disposed of in the last 3 years.


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54. Heritage Assets: Further Information on the Museum’s Collections Oldham Free Library, Art Gallery and Museum was established in Union Street in 1883 and its collections included art, social history and natural history items. Gallery Oldham opened in February 2002. It is a new purpose-built building connected via a link bridge to the original Library and Museum, which provides a combined gallery and museum service. The majority of the fine and decorative art collections were moved into Gallery Oldham, with social and natural history collections remaining in the old Museum building and in the Library basement. The collection currently comprises more than 22,000 social and industrial history items, more than 2,500 works of art, about 1,140 items of decorative art, more than 80,000 natural history specimens, over 2,000 geology specimens and over 2,500 archaeology specimens. Natural History Gallery Oldham holds one of the best and most extensive natural history collections in the North West, including a number of collections of national importance. A substantial proportion of the material is of local origin and some dates from the early 19th Century providing a magnificent record of the changing ecology of the area over two centuries. Collections of particular note include the vertebrate collections (700 birds, representing 250 British species), the Taylor Egg collection, (a major collection of almost 5,000 eggs), invertebrate collections of national importance, the Nield Herbarium and a geology collection ‘of rare excellence’. Social History The social history collection consists of around 24,500 items. The collection comprises mainly domestic and household items with an Oldham provenance, along with material representing local industry. There are various large specific collections such as archaeology, costume, ephemera, photographs, dolls and toys, as well as some small specialist collections of numismatics, clocks and watches and militaria. The industrial history collections include machinery and items from the local textile industry including major factories including Bradbury and Ferranti. The archaeology collection comprises local Mesolithic and Neolithic flint tools, a small Egyptian and Greek collection and material excavated at Castleshaw. There is a large costume collection ranging from Victorian costume to 20th century workwear with associated accessories, and more than 50 samplers. There is a collection of more than 20 banners, with religious, political and trade union examples and including a rare womens’ suffrage example. There is an extensive collection of ephemera (over 6,000 items) collected to represent everyday life in the borough, from postcards and local tram tickets to magazines on the Apollo moon landings; this includes some distinct collections of significance, such as printed posters, including unique items such as election material relating to Winston Churchill, who was MP for Oldham from 1900 to 1906.


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Fine and Decorative Art Fine Art The bulk of fine art collection was built up from the opening of the Gallery in 1883 to the late 1930s, with a strong emphasis on British painting. Since the 1930s the collection has benefited from the gift of works from the Contemporary Art Society as well as by numerous purchases and donations. In 2012/13 the Gallery benefited from a donation of works by Helen Bradley as these works have not been deemed to require an increase in the insurance value of the collection they have not been recognised in the Council’s Balance Sheet. The collection consists of over 450 oil paintings, ranging from pre-Raphaelite, British Realism and late Victorian genre to post-war painting including, Pop and Abstract art; approximately 500 watercolour paintings, including early English topographical and Twentieth Century works; around 1,400 prints, mostly covering the emergence of print as an important medium for artists since the 1960. There are also a small number of photographic prints (around 100), drawings, mixed media works and sculptures. In recent years a number of artworks by artists of Bangladeshi and Pakistani origin have been added to the collection, most significantly around 60 works of contemporary art and craft from Bangladesh. Decorative Arts The decorative arts collection consists of over 150 examples of glass miscellaneous ceramics from the 18th to the 20th centuries, various East Asian collections, including Chinese and Japanese pottery and export wares from the Francis Buckley Collection of 1936; the Charles Lees Collection of Oriental Art Metalwork, and the Newton bequest of 1964. There are also a small number of items of silverware and electrotypes including civic items. There are more than 80 items of British Studio Pottery including work by major figures such as Bernard Leach and Michael Cardew. Heritage Assets of Particular Importance The most valuable items in the collection are oil paintings, notably the ten works with their values below:- � J. W. Waterhouse ‘Circe’ - £1.5m; � Stanhope Forbes ‘The Drinking Place’ - £1.5m; � A. J. Munnings ‘A White Slave’ - £1.5m; � William Orpen ‘Behind the Scenes’ - £1.250m; � William Orpen ‘In the Dublin Mountains’ – £1.00m; � Ernest Normand ‘Vashti Deposed’ - £700k ; � L. S. Lowry ‘The Procession’ - £550k; � Walter Langley ‘The Tender Grace of a Day’ - £500k; � H. H L.A Thangue ‘ The Appian Way’ - £500k; and � Annie Swynnerton ‘Cupid + Psyche’ - £500k.

Insurance valuations are available for the oil paintings collection, and this has been valued by an external valuer, Bonhams. The total value was estimated at £18.711m.


212

Preservation and Management Gallery Oldham has a rolling programme of conservation work and each year spends approximately £8,000 on conservation work, directed by immediate need and prioritised by the exhibition programme. In addition, works are sometimes conserved at the expense of borrowers and through grant programmes, including programmes to conserve paintings and frames funded by the Esme Fairbairn Foundation, Heritage Lottery Fund and Woodmansterne Foundation. The Collections are managed by exhibitions and collections co-ordinators: Fine and Decorative Art, Social History and Natural History. The Fine and Decorative Art curator also currently has overall managerial responsibility for collections management. Gallery Oldham is an Accredited Museum and has a Collections Management Plan, according to Accreditation standards. The Collections are documented through the use of the CALM database which includes records for the vast majority of the fine and decorative art collections and some of the social and natural history collections. Additionally there is a complete inventory of the social history and fine and decorative art collections held electronically, and a partial inventory of the natural history collections.


213

55. Trust Funds and Third Party Assets The Council is responsible for the administration of some 100 individual Trust Funds, for all but one of which it is the sole trustee. These funds are not owned by the Council and are used in accordance with the aims of the particular charity or trust.

Income Expenditure Assets

£000 £000 £000

Scholarship Funds 2 - 490

Prize Funds 2 4 193

Social Services Related Funds 0 - 46

Other Funds 340 291 303

Total 344 295 1,032

Income Expenditure Assets

£000 £000 £000

Scholarship Funds 2 - 489

Prize Funds 2 2 195

Social Services Related Funds - - 46

Other Funds 3 1 253

Total 7 3 983

2012/13

2011/12

There are 11 scholarship funds and 63 prize funds which provide grants for educational purposes to qualifying pupils in schools within the borough. The amount of cash held within Oldham Council’s balance sheet under Cash and Cash Equivalents in respect of Trust Funds is £639.021m, with a corresponding creditor provision. The Council holds monies on behalf of residents that cannot administer their own affairs which are held in the Council’s bank account. For the 2012/13 financial year end the balance of residents’ monies held was £3.6m which is reflected within both cash and short term creditor balances. The Council externally invests monies which it has been given in its role as deputy for Court of Protection clients. For the 2012/13 financial year end the balance of clients monies invested was £1.35m.

There are no liabilities associated with these accounts.


214

56. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors Property, Plant & Equipment During a review of the asset register system it came to light that impairment had previously been accounted for incorrectly. There has been no amendment to the net book value of the assets however previously impairment had not been written out on revaluation. This has resulted in Note 12 Property, Plant and Equipment being restated for the following amendments:- � Council Dwellings gross value has been decreased by £85,505k and impairment &

depreciation has been increased by the same amount. � Other Land & Buildings gross value has been decreased by £33,553k and

impairment & depreciation has been increased by the same amount. � Vehicles, Plant & Equipment gross value has been increased by £1,777k and

impairment and depreciation has been decreased by the same amount. � Infrastructure assets gross value has decreased by £322k, and the impairment and

depreciation has been increased by the same amount.

Note 44 – PFI and similar contracts has also been amended to reflect the changes above. � Total Gross Values of assets within the note have reduced by £66,300k � Depreciation and impairment has increased by £66,300k

This restatement has not impacted on the core statements or on the Councils’ financial position. Amounts reported for Resource Allocation Decisions On reviewing working practices and improving reporting information an amendment has been made to Note 30 Amounts reported for Resource Allocation to show depreciation, amortisation and impairment separately and allocate support service recharges. The amendments are as follows:- � Depreciation and Impairment line has been increased by £68,592k � Fees and Charges has been increased by £72,352k � Government Grant income has been reduced by £43,524k � Other Service Expenses has been reduced by £39,765k � HRA other operating expenses has been increased by £19,484k � HRA other support services recharges has been has been reduced by £19,484k

The restatement has no impact on the core statements or on the Councils financial position.


215

Supplementary Financial Statements and Explanatory Notes


216

4.0 Supplementary Financial Statements and Explanatory Notes

4.1 Housing Revenue Account (HRA)

4.1.1 Housing Revenue Account Income and Expenditure Account

2011/12 2012/13

£000 £000 Notes

Expenditure

1,194 Repairs and Maintenance 141

1,801 Supervision and Management 557

7,715 Rent, Rates, Taxes and Other Charges 3,994

15,086 Depreciation and Impairment of Non-Current Assets 27,818

145 Debt Management Costs 145

12 Movement in the allowance for bad debts -

25,953 Total Expenditure 32,655

Income

(4,801) Dwellings Rents (5,322)

(22) Non-dwellings Rents (39)

(1,170) Charges for Services and Facilities (892)

(810) Contributions towards Expenditure (1,014)

(11,920) Housing Revenue Account Subsidy/PFI receivable (18,807) H8

(18,723) Total Income (26,074)

7,230 Net Cost of HRA Services as included in the


6,581

68 HRA Services Share of Corporate and Democratic Core -

7,298 Net Cost of HRA Services 6,581

HRA share of operating income and expenditure

included in the Authority’s Income and Expenditure

Statement

- (Gain) / Loss on sale of HRA Non Current Assets (75)

12,639 Interest Payable and Similar Charges 5,698

(94) HRA Interest and Investment Income (244)

(33,908) Capital Grants and Contributions Receiveable -

(14,065) Surplus / (Deficit) for the year on HRA Services 11,960


217

Reconciliation of Net Cost of HRA Services to Comprehensive Income and Expenditure Statement

2011/12 2012/13

£000 £000

Comprehensive Income and Expenditure Statement –

Net Expenditure:

7,297 Local Authority Housing 6,581

- Exceptional item – HRA-EUV-SH Adjustment

- Exceptional item – HRA-LSVT

7,297 Net (Income)/Cost for HRA Services 6,581 4.1.2 Statement of Movement in the Housing Revenue Account

2011/12 2012/13

£000 £000

11,354 Balance on the HRA at the end of the previous year (10,426)

(14,066) (Surplus) / Deficit for the year on the HRA I & E Account 11,960

14,994 Adjustments between accounting basis and funding basis

under the legislative framework

(20,796)

928 Net (Increase) / Decrease before transfers to or from

reserves

(8,836)

- Transfer (to)/from Reserves -

928 (Increase)/Decrease in year on the HRA (8,836)

(10,426) Balance on the HRA at the end of the current year (19,262)

2011/12 2012/13

£000 £000

Items included in HRA I & E account but excluded

from the movement on HRA balance for the year

(21,271) Difference between any other item of income and

expenditure determined in accordance with Code and with

statutory HRA requirements

(27,868)

2,166 Voluntary MRP 3,031

- Gain or Loss on Sale of HRA Fixed Assets 77

33,926 Transfer to Useable Capital Receipts Reserve - HRA Self

financing

-

- Capital Expenditure funded by HRA 3,812

173 Transfer to Major Repairs Reserve 153

14,994 Net adjustment (20,795)

Adjustment between accounting basis and funding

basis under the legislative framework


218

The HRA Income and Expenditure Statement shows the in-year economic cost of providing housing services in accordance with generally accepted accounting practices, rather than the amount to be funded from rents and government grants. Authorities charge rents to cover expenditure in accordance with the legislative framework; this may be different from the accounting cost. The increase or decrease in the year, on the basis of which rents are raised, is shown in the Movement on the HRA Statement.


219

4.1.3 Index of Explanatory Notes to the Housing Revenue Account

Note Page Note No

Depreciation of Assets 199 H6

Housing Revenue Account – Fixed Asset Valuations 198 H2

Housing Revenue Account Subsidy 199 H8

Housing Stock - Numbers 197 H1

Major Repairs Reserve 198 H4

Rent Arrears 200 H9

Revenue Expenditure Funded from Capital Under Statute 199 H7

Type and Source of Capital Expenditure 2011/12 198 H5

Value of Housing Revenue Account Vacant Possession Dwellings 198 H3


220

4.1.4 Explanatory Notes to the Housing Revenue Account H1. Housing Stock – Numbers At 31 March 2013, the Council had a total housing stock of 1,834 dwellings. The tables below set out the changes to the stock since 1 April 2012.

The round 4 housing PFI reached contract close on 30th November 2011, at which point 316 properties transferred from FCHO to Great Places, leaving 20 properties being managed by FCHO. The number of PFI 4 properties has increased by 68 to 383 at 31 March 2013 due to a programme of new builds.

Oldham Retirement Housing Partnership (ORHP) manages a total of 1,431 dwellings within the Sheltered Housing PFI scheme, this includes 4 properties used as communal and management facilities and therefore not let. The demolition of 6 properties and the repurchase of 2 leasehold accounts for the net reduction of 4 properties during the year. Total housing stock owned by the Council:

Houses and

Bungalows

Flats and

Maisonettes

Hostel Bed

Spaces

Total

Stock at 1 April 2012 930 820 20 1,770

Demolitions - (6) - (6)

Conversions 56 11 - 67

Leaseholder buy-backs - 3 - 3

Stock as at 31 March 2013 986 828 20 1,834 Properties managed by FCHO:

Houses and

Bungalows

Flats and

Maisonettes

Hostel Bed

Spaces

Total

Stock at 1 April 2012 - - 20 20

PFI 4 Transfer -

Demolitions

Conversions

Leaseholder buy-backs

Stock as at 31 March 2013 - - 20 20 Properties managed by ORHP:

Houses and

Bungalows

Flats and

Maisonettes

Hostel Bed

Spaces

Total

Stock at 1 April 2012 817 618 - 1,435

Demolitions (6) (6)

Conversions 1 1

Leaseholder buy-backs 1 1

Stock as at 31 March 2013 818 613 - 1,431


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Properties managed by Great Places:

Houses and

Bungalows

Flats and

Maisonettes

Hostel Bed

Spaces

Total

Stock at 1 April 2012 113 202 - 315

PFI 4 Transfer -

Demolitions

Conversions 55 11 66

Leaseholder buy-backs 2 2

Stock as at 31 March 2013 168 215 - 383

H2. Housing Revenue Account – Fixed Asset Valuations The balance sheet value of HRA assets was as follows:

31 March

2012

31 March

2013

£000 £000

31,136 Dwellings 32,437

2,948 Other Operational Property 2,429

- Non-operational Assets -

34,084 Total 34,866

Other operational property consists of offices and other operational bases. H3. Value of Housing Revenue Account Vacant Possession Dwellings In accordance with Government guidance, valuation of council dwellings have been reduced by a regional adjustment factor in recognition of their status as social housing. This reduced factor was 35% (35% in 2011/12). As a consequence the Council recognises council dwellings at a value of £32.4m (£31.2m at 31 March 2012). At vacant possession the same dwellings would have a value of £122.8m (£103.0m at 31 March 2012) recognising the economic cost to the Government of providing council housing at less than open market rents of £90.3m (£71.8m in 2011/12). H4. Major Repairs Reserve The Major Repairs Reserve is an earmarked fund to which the Council transfers an amount annually to support capital spending on council dwellings.

2011/12 2012/13

£000 £000

- Balance at 1 April -

173 Amount transferred to Major Repairs Reserve in year 153

- Amount for Depreciation on Non Dwellings -

(173) Amount used to Finance Capital Expenditure -

- Amount for Depreciation on Dwellings in Excess of MRA -

- Balance at 31 March 2012 153


222

H5. Type and Source of Capital Expenditure

2012/13 2012/13

£000 £000

Capital Expenditure in year on Dwellings 3,812 Government Grants 3,812

Total 3,812 Total 3,812

Capital Expenditure Financing

H6. Depreciation of Assets

2012/13

Operational

Assets

Non-

Operational

Assets

Total

£000 £000 £000

Balance 1 April 2012 15,020 - 15,020

Depreciation written off during the year (659) - (659)

Depreciation during the year 2,087 - 2,087

Balance 31 March 2013 16,448 - 16,448 H7. Revenue Expenditure Funded from Capital Under Statute

2011/12 2012/13

£000 £000

1,552 Grant Payment to First Choice Homes Oldham -

- Development Contribution to Great Places 50

1,552 50


223

H8. Housing Revenue Account Subsidy The government subsidises the authority’s council housing, and the calculation of how this subsidy figure is arrived at is detailed below:

2011/12 2012/13

£000 £000

Notional Expenditure

3,285 Management and Maintenance -

995 Capital Charges -

182 Adjustment for Previous Years 8

- Caps and Limits -

12,498 PFI Grant 18,799

- Other Allowances -

173 Major Repairs Allowance -

17,133 18,807

Notional Income

(5,201) Notional Dwelling Rent Income -

(9) Interest on Self Financing Settlement -

(3) Interest on Mortgages -

11,920 Deficit (subsidy payable) 18,807

Less :

- PFI Grant used to fund capital element -

- Housing PFI Grant interest element -

11,920 18,807

H9. Rent Arrears Arrears totalled £0.151m at 31 March 2013 (£0.110m at 31 March 2012) and are analysed below:

31 March

2012

31 March

2013

£000 £000

61 Due from Former Tenants 78

49 Due from Current Tenants 73

110 Total Arrears 151 Rent arrears as a percentage of total rent payable during the year were 2.83% (2011/12 2.34%) The provision in respect of bad debts at 31 March 2013 was £0.111m (£0.080m at 31 March 2012).


224

4.2 COLLECTION FUND 4.2.1 Collection Fund Income and Expenditure Account

2011/12 2012/13 Note

£000 £000

INCOME

(77,108) Council Tax Payers (77,584) C2

Transfers from General Fund:

(22,273) - Council Tax Benefits (22,188)

(55,086) Income from Business Ratepayers (51,109) C3

(154,467) (150,881)

EXPENDITURE

Precepts:

85,069 - Oldham Council 85,319

9,094 - Greater Manchester Police Authority 9,119

3,317 - Greater Manchester Fire & Rescue Authority 3,326

Business Rates:

54,779 - Payments to National Pool 50,800 C3

307 - Costs of Collection 309

Bad and Doubtful Debts

266 - Provisions 2,114 C5

1,271 - Write Offs 332

493 Transfer of Collection Fund Surplus - C4

154,596 151,319

129 Deficit / (Surplus) for the year 438

COLLECTION FUND BALANCE

(765) Balance brought forward at 1 April (636)

129 Deficit / (Surplus) for the year (as above) 438

(636) Balance carried forward at 31 March (198)

Allocated to:

(555) - Oldham (173)

(59) - Greater Manchester Police Authority (18)

(22) - Greater Manchester Fire and Rescue Authority (7)

(636) (198)


225

4.2.2 Index of Explanatory Notes to the Collection Fund

Note Page Note No

Contributions to Collection Fund Surpluses and Deficits 219 C4

Council Tax 218 C2

Council Tax Bad Debt Provision – Accounting Policy 220 C5

General 218 C1

Income from Business Ratepayers 219 C3


226

4.2.3 Explanatory Notes to the Collection Fund C1. General The Council has a statutory requirement to operate a distinct Collection Fund as a separate account to the General Fund. The purpose of the Collection Fund is to isolate the income and expenditure relating to Council Tax and National Non-Domestic Business Rates. The administrative costs associated with the collection process are charged to the General Fund. Surpluses declared by the Collection Fund are apportioned to the precepting bodies in the subsequent financial year. Deficits likewise are proportionately charged to the precepting bodies in the following year. For Oldham the precepting bodies are the Police and Crime Commissioner for Greater Manchester (formerly Greater Manchester Police Authority) and the Greater Manchester Fire and Rescue Authority. The national code of practice followed by Local Authorities in England stipulates that a Collection Fund Income and Expenditure account is included in the Council’s accounts. The Collection Fund balance sheet meanwhile is incorporated into the Council’s consolidated balance sheet. C2. Council Tax Council Tax derives from charges raised according to the value of residential properties, which have been classified into 9 valuation bands for this specific purpose. Individual charges are calculated by estimating the amount of income required to be taken from the Collection Fund by the Council for the forthcoming year and dividing this by the Council Tax base (i.e. the equivalent numbers of Band D dwellings). The Council Tax base for 2012/13 was 63,180 (63,006 in 2011/12) calculated as follows:

Chargeable Proportion of Equivalent

Band Dwellings Band D Tax Band D Dwellings

A Reduced 107 5/9 59

A 41,972 6/9 27,981

B 14,523 7/9 11,295

C 13,797 8/9 12,264

D 6,051 1 6,051

E 2,945 11/9 3,599

F 1,375 13/9 1,986

G 790 15/9 1,316

H 41 18/9 82

2.25% -1,454

63,180

Less allowance for non-collection

Tax Base for the Calculation of Council Tax Dwellings for residents entitled to ‘disabled relief reduction’ are reduced to the next lowest band for the calculation of Council Tax. As band ‘A’ is the lowest band, ‘A reduced’ has been introduced to give effect to this reduction for those in band A properties. Income received from Council Tax payers in 2012/13 was £77.6m (£77.1m 2011/12).


227

C3. Income from Business Ratepayers

The Council collects National Non-Domestic Rates (NNDR) for its area based on local rateable values multiplied by a uniform business rate set nationally by Central Government. In 2012/13 the total amount due, less certain allowances, is paid to a central pool (the NNDR pool) administered by Central Government, which, in turn, pays to Local Authorities their share of the pool, such share being based on a standard amount per head of the local adult population. In 2013/14, the NNDR scheme will change following the introduction of a business rates retention scheme where local authorities will retain a proportion of the total amount due. The remainder will be paid to a central pool and redistributed in a similar way to the NNDR scheme currently in operation. The business rates retention scheme aims to give the Council a greater incentive to grow businesses in the Borough but also increases the risk of non-collection of rates. For 2012/13 Oldham collected £51.1m (£55.1m in 2011/12) from business ratepayers and its contribution to the Pool amounted to £50.8m (£54.8m in 2011/12). The total non-domestic rateable value at the year-end is £156.0m (£156.0m in 2011/12). The national multipliers for 2011/12 were 45.0p for qualifying small businesses, and 45.8p for non-qualifying small businesses and all other businesses (42.6p and 43.3p respectively in 2011/12).

C4. Contributions to Collection Fund Surpluses and Deficits The Council has a statutory requirement to prepare an estimate each January of the surplus or deficit expected to arise at the end of the financial year. In January 2012 it was estimated that the Collection Fund would have no surplus or deficit (£493,251 surplus in January 2011) and so nothing was due to or from the preceptors in 2012/13.

2011/12 2012/13

£000 £000

430 Oldham Council -

46 Greater Manchester Police Authority -

17 Greater Manchester Fire & Rescue Authority -

493 Total -


228

C5. Council Tax Bad Debt Provision – Accounting Policy The Collection Fund account provides for bad debts on the Council Tax on the basis of levels recommended by the Audit Commission.

2011/12

£000

2012/13

£000

6,185 Balance at 1 April 6,451

(1,271) Write-offs during year for previous years (332)

1,537 Contributions to provisions during year 2,446

266 Net Increase/(Decrease) in Provision 2,114

6,451 Balance at 31 March 8,565 The Council’s proportion of these write offs and increase in provision are shown below.

2011/12

£000

2012/13

£000

5,397 Balance at 1 April 5,629

(1,110) Write-offs during year for previous years (290)

1,342 Contributions to provisions during year 2,134

232 Net Increase/(Decrease) in Provision 1,845



229

5.0 Other Statements

5.1 Annual Governance Statement 2012/13

SCOPE OF RESPONSIBILITY

Oldham Council is responsible for ensuring that its business is conducted in accordance with

the law and proper standards, and that public money is safeguarded and properly accounted

for, and used economically, efficiently and effectively. Oldham Council also has a duty

under the Local Government Act 1999 to make arrangements to secure continuous

improvement in the way in which its functions are exercised, having regard to a combination

of economy, efficiency and effectiveness.

In discharging this overall responsibility, Oldham Council is responsible for putting in place

proper arrangements for the governance of its affairs including internal control, to facilitate

the effective exercise of its functions, which includes arrangements for the management of

risk.

Oldham Council has approved and adopted a code of corporate governance, which is

consistent with the principles of the CIPFA/SOLACE Framework Delivering Good

Governance in Local Government. A copy of the code is on our website at

www.oldham.gov.uk or can be obtained from Mark Stenson, Head of Corporate Governance

at Oldham Council. This Annual Governance Statement sets out how Oldham has complied

with this Code and also meets the requirement of regulation 4(3) of the Accounts and Audit

(England) Regulations 2011, and accompanies the 2012-13 Final Accounts of the Council.

The Annual Governance Statement will be subject to detailed review by the Audit Committee

when it considers the Statement of Accounts.

The issues identified as a significant governance issue and the progress made by

management throughout the financial year 2013-14 to address these issues will be reported

regularly to the Audit Committee with an assessment of the progress made in reducing the

risk as part of their Governance role within the Council

THE PURPOSE OF THE GOVERNANCE FRAMEWORK

The governance framework comprises the systems and processes, culture and values, by

which the authority is directed and controlled, and the activities through which it accounts to,

engages with and leads the community. It enables the authority to monitor the achievement

of its strategic objectives and to consider whether those objectives have led to the delivery of

appropriate, cost-effective services.

The system of internal control is a significant part of that framework and is designed to

manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve

policies, aims and objectives and can therefore only provide reasonable and not absolute

assurance of effectiveness. The system of internal control is based on an ongoing

process, designed to identify and prioritise the risks to the achievement of Oldham

Council’s policies, aims and objectives, to evaluate the likelihood of those risks being

realised and the impact should they be realised, and to manage them efficiently,

effectively and economically.


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The governance framework has been in place at Oldham Council for the year ended 31st

March 2013 and up to the date of the production of the annual report and statement of

accounts.

THE GOVERNANCE FRAMEWORK

The Council’s control environment encompasses the strategies, policies, plans, procedures,

structures, processes, attitudes, behaviour and actions required to deliver good governance

for the citizens of Oldham. The key elements of good governance arrangements in Oldham

Council are:

Communicating the Authority’s Vision

The Council’s current strategic objectives are set out in the Corporate Plan. These have

been aligned to establish a clear link between Central Government priorities, the priorities for

the Council as identified with its partners, involvement of the local community, and the work

of the Council. The Council’s Corporate Plan was refreshed in 2012-13 with the Corporate

Objectives amended to incorporate the Council’s commitment to become a Co-operative

Council. In order to continue to develop Oldham as a Co-operative Council it has set up a

Co-operative Commission including representation from the council, co-operative

enterprises, trade unions, the voluntary sector and business.

Core Values

The Core Values of the Council are linked into it being a Co-operative Council and are

concentrated with the way it connects with citizens and communities. This include a

Corporate Responsibility Statement which set out the guiding principles. This shows the

Council’s commitment to change and embedding the Co-operative values such as Social

Responsibility. As part of the work to reposition the Council it has agreed an Employee

Volunteering Scheme. Further continuing developments of the Core Values are anticipated

in 2013/14 and future years.

Engagement and Consultation with the Community

The Council is fully committed as a Co-operative local authority to community engagement

and consultation. The authority works closely with other local public bodies, community and

voluntary groups via a partnership approach to ensure effective delivery of its services.

The Council also operates District Partnerships which have a membership of both elected

members and co-opted local representatives. These partnerships are supported by Council

resources which are spent on local priorities by the District Partnership. In the 2012-13

budgets there was an agreed guaranteed investment in neighbourhood working. This

included the continuation of a District Investment Fund to provide funding for capital projects

to meet local needs as identified in district plans.

The agreed District Partnerships are:

Chadderton

East Oldham

Failsworth and Hollinwood

Royton, Shaw and Crompton

Saddleworth and Lees


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West Oldham

Clear Management Accountability

The Council is managed by a Cabinet system as set out in the agreed Council Constitution,

which sets out the scheme of delegation between elected Members and Officers. Members

of the Cabinet are held to account by a system of Scrutiny which is also set out in the

Constitution. Scrutiny of Executive decisions for 2012/13 has been undertaken by the:

� Overview and Scrutiny Management Board

� Overview and Scrutiny Performance and Value for Money Select Committee

There are also two independent committees which undertake important roles in holding both

Members and Officers to account:

� The Standards Committee which reviews the conduct of elected Members

� The Audit Committee which reviews matters of financial administration, internal

control and approving the final audited accounts of the Council.

The localism act has abolished the Standards Board for England and Wales. This will place

greater emphasis on the Council to develop local processes and procedures around

Members and their Code of Conduct.

To implement the agreed policies at officer level the Executive Management Team which

consists of the Chief Executive, Executive Directors, Assistant Chief Executive and Chief of

Staff meets on a weekly basis. The representation of the Borough Treasurer as the Section

151 Officer and the Borough Solicitor as the Monitoring Officer on an as and when required

basis ensures that the key Statutory Officers are represented at the most Senior Level. This

is supported by Directorate Management Teams, which meet on a regular basis to devolve

the agreed policy of the Council at an Operational Level.

Ensuring Development Needs for Members and Senior Officers are met

The Council is committed to developing the skills of both Members and Senior Officers in

order to enable a continuous improvement in the services provided.

All officers are covered by the Corporate Performance Appraisal system, which ensures that

their performance and development needs are reviewed on a regular basis. This will link

directly to the performance objectives for each Senior Officer and Cabinet Member.

A full training programme for both established and newly elected members has been

developed within the Organisational Development Service to ensure they have all the

necessary skills and legislative training to discharge their duties. This continued to be

implemented in 2012-13.

Facilitation of Policy and Decision Making

The Council has agreed a Constitution that sets out how it operates, how decisions are

made, and the procedures that are followed to ensure that these are efficient, proportionate,

transparent and accountable. This Constitution is regularly reviewed and a number of

updates were agreed by Council throughout 2012-13 to ensure it remained up to date. In

2012-13 continual review led by the Borough Solicitor and Head of Corporate Governance

ensure it remains fit for purpose. On an annual basis the Borough Solicitor supported by key

officers will undertake an annual review of the Constitution.


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The Constitution sets out the delegated responsibilities for the Council, Cabinet, Individual

Cabinet Portfolio Holders, Committees and the powers that are delegated to key Officers.

The scheme of delegation clearly sets out the levels at which decisions can be made.

Decisions taken under delegated powers are recorded electronically and are reported on a

regular basis via the Council’s Electronic Decision Making Recording System (EDRS). The

Council updated this system in 2010-11.

All meetings of the Cabinet and key Committees are included in the Council’s Forward Plan,

which is publicised and available to the public. Council meetings can now be viewed live on

the web.

Ensuring Quality Outcomes and Efficient Use of Resources

All Executive Directors and Assistant Executive Directors prepare Directorate and Divisional

Plans that contain the key actions and performance targets necessary to deliver the strategic

objectives of the organisation as outlined in the Corporate Plan.

The Council has a Performance Management Framework for the whole organisation, which

monitors performance against national, local performance indicators and progress against

the priorities set within its Corporate Plans. Information on performance is reported via

quarterly Directorate and Council Performance Reports and where necessary monthly

reports.This information is also reviewed at Senior Management Meetings, Leadership and

Cabinet Sessions and the Overview and Scrutiny Performance and Value for Money Select

Committee. Performance targets and outcomes are reported to stakeholders and bodies that

externally review the Council’s performance; such as the Care Quality Commission, Office

for Standards in Education and external audit.

The Council seeks to obtain value for money via a number of arrangements:

� A co-ordinated approach to Procurement across Directorates to ensure separate

initiatives within Directorates are brought together to ensure economies of scale to

the Council is achieved.

� Developing joint financial and performance reports

� Linking into the various Association of Greater Manchester Authority Initiatives to

look at saving money including closer working with willing partners.

� A robust year on year process for budget challenge when the Council agrees

resources for each financial year

� The appointment of efficiency partners with an agreed programme of work in a

number of operational and back office areas to assist the Council to make

efficiency savings.

� The development of the Co-operative vision to reflect that the environment the

Council is going to operate in will change in the future

The Council has an Approved Risk Management Strategy that enables it to effectively assist

the achievement of its objectives, alongside national and local performance indicators. A

Corporate Risk Register now an integral part of the Corporate Plan supports this. The

Corporate Risk Register is subject to regular review by the Audit Committee.


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The Head of Corporate Governance has consulted with key officers to assess what should

be considered for inclusion in the Annual Governance Statement. It is supported by key risk

registers such as that developed for partnerships and a detailed assessment of the issues

considered for inclusion.

The Council identifies efficiencies and monitors their implementation primarily through its

budget strategy and monitoring processes.

The Council is currently reviewing its Workforce Strategy for relaunch in 2013/14 and clearly

this will underpin the delivery of all current and future policies, strategies and objectives and

impact on the efficient and effective use of resources and quality outcomes.

Ensuring Compliance with Established Policies, Procedures, Laws and Regulations

Executive Directors supported by Assistant Executive Directors are responsible for ensuring

that they establish and maintain effective systems of internal control, complying with

legislation, the Council’s Constitution and key Financial Procedure Rules. This includes

responding to recommendations by Inspectorates.

The respective roles of the Section 151 Officer and the Monitoring Officer ensure legality,

financial prudence, and transparency in transactions.

The Council also places reliance on external assurance providers, such as the Audit

Commission, the Office for Standards in Education, and the Care Quality Commission, and

any recommendations arising are acted upon and monitored through the scrutiny process.

The Council has a public complaints procedure that allows the Local Government

Ombudsman to investigate and report its findings. This ensures that improvements can be

made to processes to prevent occurrences being repeated.

Both the Standards and Audit Committees take a proactive approach to ensuring high levels

of good governance, ethical behaviour and transparency throughout the Council’s processes

for both members and officers. Both of these Committees are chaired by an Independent

Member to ensure its work is non political. To improve the feedback to the Council on its

work the Audit Committee produces an annual report of its work for consideration at a full

Council meeting.

Developing, Communicating and Embedding Codes of Conduct

Members have, in accordance with the Localism Act 2011, adopted the National Code of

Conduct in July 2012. The Council also continues to operate a Standards Committee with

appropriate representation by Independent Members including a Chair who is not an elected

member where allegations into breaches of the Code by Members can be raised. .

Employees are bound by the various Codes of Conduct, which have been agreed with the

Unions setting out acceptable standards of behaviour. The Codes of Conduct are supported

by other further guidance where it is felt to be suitable e.g. on the acceptable private use of

ICT provided by the Council for staff.

There is a Members and Officers relationship protocol, which has been prepared in

accordance with best practice.

Financial Management of the Council

The financial framework of the Council is structured through the Finance and Contract

Procedure Rules plus the Land and Property Protocol, which are set out in the Constitution


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and follow best professional practice as set out in the Chartered Institute of Public Finance

and Accountancy’s guidance. A system of regular management information, administrative

procedures (including division of duties), management supervision, and a system of

delegation and accountability support these. Such procedures seek to ensure that

transactions are authorised and that material errors or irregularities are either prevented or

would be detected within a timely period.

Maintenance of an effective system of both internal and more detailed financial control is the

agreed responsibility of all managers at directorate and corporate level. There are regular

budget monitoring reports presented to Directorate Management Teams, the Executive

Management Team and Cabinet with consultation with the relevant Cabinet Members

between month 3 and 10 of each financial year. In respect of reviewing the effective system

of internal control an independent check is provided by both External and Internal Audit.

A detailed analysis of the significant issues identified from both the work of external and

internal audit in 2012/13 has been prepared to support the production of this governance

statement.

Corporate Governance and the Audit Committee

The Council maintains a Corporate Governance Section, which covers Internal Audit,

Counter Fraud, Risk Management and Insurance. A number of changes to procedures in

previous years have resulted in the Internal Audit Service now operating to the Standards

set out in the Code of Practice for Internal Audit in Local Government in the UK. These

improvements have resulted in the Audit Commission as the external auditor to the Council

being able to place greater reliance of the work done by Internal Audit.

Internal Audit is responsible for monitoring the quality and effectiveness of systems of

internal control and where relevant, making recommendations for improvement. Internal

Audit subsequently checks the implementation of recommendations.

The Head of Corporate Governance has direct access and reporting lines to all senior

management, including the Chief Executive and Chair of the Audit Committee. The Head of

Corporate Governance formally reports on the activities to the Audit Committee and at the

end of each year provides an opinion on the overall adequacy and effectiveness of the

Council’s overall internal control environment.

As part of the regular internal audit review process, Internal Audit undertakes audits as

specified by International Auditing Standards, which cover the main financial systems. It

produces a Audit Needs Assessment and a Fraud and Loss Risk Assessment, which aid the

production of an Audit Plan. A working party of the Audit Committee including the Chair and

Vice Chair also meets on a regular basis to monitor partner and project risk on a pro-active

basis. The Audit Plan is reported to the Audit Committee on an annual basis in advance of

the financial year along with regular reports on the progress made throughout the year.

The Audit Committee has two Independent Members who provide financial expertise to

supplement the skills of elected Members. The Council Constitution sets out that the Chair of

the Audit Committee is an Independent Member. The Council appointed a new independent

chair in 2011/12. The Audit Committee meets on a regular basis, at least quarterly, to

receive the reports of both Internal and External Audit and has the power to hold both the

Cabinet and Executive Directors to account. Reports are submitted on internal control

matters in relation to each Directorate, and at the relevant meeting the Executive Director


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and/or a Senior Representative of this Directorate will respond directly to the Audit

Committee on matters raised.

Procedures for Whistleblowing and for receiving and investigating Complaints

A strong ethical and performance framework is in place to enable officers and Members of

the Council to operate effectively in their respective roles, which allows the pursuit of

excellence in service delivery. The Council has a formalised Counter Fraud Framework,

which includes an Anti-Fraud and Anti-Corruption Strategy, Whistle Blowing Policy and

Fraud and Loss Risk Assessment. The Whistleblowing Policy allows both staff and members

of the public including contractors to raise matters in a confidential manner to the Council.

The Internal Audit and/or Counter Fraud Function investigate all matters of suspected

impropriety in accordance with agreed protocols. Registered electors can also raise matters

with the External Auditor.

In addition a formal complaints policy exists to deal with other matters of public concern

regarding the services provided by the Council.

Partnership and Project Arrangements

The Council currently delivers a wide range of services, which often involve working in

partnership with others, many of which involve considerable levels of funding.

It is a requirement of the Code of Practice on Local Authority Accounting in the United

Kingdom 2010/11 that, “Where an authority is in a group relationship with other entities and

undertakes significant activities through the group, the review of the effectiveness of the

system of internal control should include its group activities.”

The Borough Treasurer commissioned the production of a Partnership Risk Register, which

is updated on a quarterly basis; this was initially reported to the Audit Committee assessing

the risks on significant partnerships to the Council at a point in time using a traffic light rating.

During 2011/12 the Audit Committee agreed to set up a working party to meet on a regular

basis to consider the risks to the Council on partnerships.

Risks on Significant Projects

The Council currently has a number of significant projects, covering a wide range of

services, which can involve working in partnership with others, many of which require

considerable levels of one off and recurrent funding from the Council.

A specific review to the Audit Committee reported in 2010-11 and 2011-12 identified that the

Council did not in all cases have an oversight on its financial commitments on all these

projects. The Borough Treasurer commissioned a Project Risk Register to monitor these

risks and reported back to the Audit Committee who agreed to set up a working party to

consider these risks as well as those on partnerships. This group has met regularly in 2012-

13 to consider risks in this area.

The issues on both partnership risk and project risk have been incorporated into this

governance statement where appropriate


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REVIEW OF EFFECTIVENESS

Oldham Council has responsibility for conducting, at least annually, a review of the

effectiveness of its governance framework including the system of internal control. The

review of effectiveness is informed by the work of the executive managers within the

authority who have responsibility for the development and maintenance of the

governance environment, the Head of Corporate Governance’s annual report, and also by

comments made by the External Auditors and other Review Agencies and Inspectorates.

SIGNIFICANT GOVERNANCE ISSUES

2012/13 Issues Planned Management Action to Reduce

Risk

In disposing of some of its property leased

from third parties as part of its on-going

Asset Rationalisation Programme the

Council has incurred unforeseen,

unbudgeted and in some cases avoidable

costs on its surrendering these leases back

to the original landlord.

An internal audit review is underway within

2012/13 that will look at the Council’s

processes in this area and make

recommendations for improvement. This will

be reported to the Audit Committee at the

appropriate time.

The Borough Treasurer considers the risk as

part of the closure of the 2012-13 accounts.

Internal Audit work as part of the process to

support the closure of the final accounts has

continued to identify internal control issues

around Adult Social Care financial systems

particularly on the quality of client data held

within the systems.

The Borough Treasurer has instigated

dedicated work to develop revised processes

which will significantly strengthen internal

control in this area. Improvements have been

made in 2012-13 particularly around

reconciliations between systems in Adults

and Agresso. Work is continuing and

progress will be reported to the Audit

Committee during its regular reviews of

issues identified in the Annual Governance

Statement.


part of the closure of accounts.

In 2012-13, the Council migrated to a new

fixed asset register purchased from a third

party supplier. During the year, the Finance

Team have engaged regularly with the

supplier in order to resolve issues arising

from the Council’s monthly financial reporting

process. However, this supplier’s system

appears to be challenged by this requirement

and unable to produce monthly Balance

The Borough Treasurer works with a key

supplier of asset register software to develop

a product which can report on a monthly

basis as required by Oldham Council.

The current asset register spreadsheet will

be maintained as a contingency plan to

mitigate the potential risk that the planned

system developments cannot be


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Risk

Sheets. .

Therefore the decision was taken to revert to

the manual spreadsheet, which had been run

in parallel to the new system. Therefore the

Fixed Asset balances in the 2012-13

Statement of Final Accounts have been

prepared using the spreadsheet.

However, the Council is keen to maintain an

electronic asset register which can respond

to its monthly reporting requirements, subject

to a product being developed that can assist

the Council with its aims for continued

improved financial management and earlier

closure of the accounts.

accommodated.

The introduction of the “No Purchase Order,

No Pay” facility within the Accounts Payable

module of Agresso has led to the occasional

production of duplicate orders for the same

invoice. This has increased the volume of

duplicate payments occurring in selected

areas where further training and awareness

is required. Whilst an internal control was

developed to prevent these duplicate

payments once the problem became known

there was a need to review this to ensure it

prevented further duplicate payments.

The control introduced in 2012-13 to detect

duplicate payments will be reviewed

following a detailed internal audit. The

training already developed to support the

introduction of “No Purchase Order, No Pay”

will be supplement to highlight this risk.

In 2013/14, budget monitoring will include

increased focus on re-profiled budgets, and

year to date reviews. There will also be a re-

launch of the procedure manual with

particular emphasis on these matters.

A specific run of the National Fraud Initiative

will be undertaken and reviewed to ensure

there are no unknown duplicate payments.

This will be supported by regular audits

during 2013/14.

The Council may not be able to deliver key

services which are currently provided by

partners due to events outside the direct

control of the Council.

The Borough Treasurer has developed a

service continuity plan which is subject to on-

going review. The methodology for which this

can be applied in all circumstances to

manage risk that a key partner organisation

fails financially.


part of the closure of accounts including the

Housing Revenue Account.

A prosecution with a high level of Council The Council has developed a draft strategy


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Risk

involvement was unsuccessful and has

resulted in a perceived risk that a claim

maybe submitted for financial loss.

to defend the claim should it be received.


part of the closure of accounts over the

period the Council has potential exposure to

any claim.

On-going and future changes to the

Council’s financial framework including

several changes to national funding regimes

will increase the financial pressure the

Council is required to contribute to reduce

the national deficit. These changes arise

from changes to benefit administration, the

need to collect cash from new payers with

the introduction of a localised council tax

reduction scheme, the financing of

Academies, business rates, schools and

continued downward pressure on

government funding of Councils.

The Borough Treasurer has allocated a

Senior Member of his Management Team to

manage the financial impact of these

legislative changes.


part of the closure of accounts including the

Collection Fund.

Information security and compliance with

agreed data protection legislation by all staff

in the Council’s employment has resulted in

the Council making a voluntary declaration to

the Information Commissioner of breaches.

This has led to a consensual audit which

resulted in a number of recommendations

the council needs to implement. Should there

be serious breaches of data protection by the

Council the risk remains that it could be

subjected to fines.

The Information Management Group will

continue to monitor breaches within the

Council and review whether there are any

procedural changes required to reduce the

Council’s future risks. This group will also

review the outcome including the

recommendations of the Information

Commissioner Audit

The Borough Treasurer considers the risks

as part of the closure of accounts.

A review of the Group Accounts of the

Council has identified that there are a

number of Council owned subsidiaries which

have been economically inactive for a

number of financial years. The continued

existence of these companies results in a

recurring cost to the Council.

The Borough Treasurer continues the project

of Corporate Simplification, which began in

2011-12, to wind down companies owned by

the Council which are no longer

economically active or key to the Council’s

strategic objectives.


as part of the closure of accounts.

The Council has a significant number of key

projects planned for the future and a

significant number which are underway.

The Audit Committee has instigated a

system to monitor these risks on a regular

basis and will highlight any concerns to the


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Risk

Should one of these high profile projects not

work out as intended it is likely to result in

reputational damage to the Council or

increase the financial pressure on the council

for the future.

Council.


as part of the closure of accounts

Chief Executive of Oldham Council.

-----------------------------------------------

Leader of Oldham Council

---------------------------------------------


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5.2 Glossary of Terms Accruals Basis The accruals principle is that income is recorded when it is earned rather than when it is received, and expenses are recorded when goods or services are received rather than when the payment is made.

Actuarial Gains & Losses Actuaries assess financial and non-financial information provided by the Council to project levels of future pension fund requirements. Changes in actuarial deficits or surpluses can arise leading to a loss or gain because: � events have not coincided with the actuarial assumptions made for the last valuation � the actuarial assumptions have changed.

Agency Services These are services that are performed by or for another Authority or public body, where the principal (the Authority responsible for the service) reimburses the agent (the Authority carrying out the work) for the costs of the work. Appointed Auditors The Audit Commission appoints external auditors to every Local Authority, from one of the major firms of registered auditors. From 2012/13, an external audit function is no longer directly undertaken by the Audit Commission due to a change in the Audit Commission roles. Associate Companies This is an entity other than a subsidiary or joint venture in which the reporting Authority has a participating interest and over whose operating and financial policies the reporting Authority is able to exercise significant influence. Association of Greater Manchester Authorities (AGMA) AGMA represents the ten local authorities in Greater Manchester and works in partnership with Central Government, regional bodies and other Greater Manchester public sector bodies. Authorised Limit This represents the legislative limit on the Council’s external debt under the Local Government Act 2003.

Balances The balances of the Authority represent the accumulated surplus of income over expenditure on any of the Funds.

Building Schools for the Future (BSF) This is a major Central Government programme of replacing/upgrading schools often via the Private Finance Initiative (PFI)

Business Improvement District (BID) BIDs are provided for under Part 4 of the Local Government Act 2003 (England & Wales) whereby a levy is collected from Business Ratepayers to provide agreed additional services.


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Capital Adjustment Account The Account accumulates (on the debit side) the write-down of the historical cost of fixed assets as they are consumed by depreciation and impairments or written off on disposal. It accumulates (on the credit side) the resources that have been set aside to finance capital expenditure. The same process applies to capital expenditure that is only capital by statutory definition (deferred charges). The balance on the account thus represents timing differences between the amount of the historical cost of fixed assets that has been consumed and the amount that has been financed in accordance with statutory requirements.

Capital Expenditure This is expenditure on the acquisition of a fixed asset, or expenditure, which adds to, and not merely maintains, the value of an existing fixed asset.

Capital Financing Charges This is the annual charge to the revenue account in respect of interest and principal repayments and payments of borrowed money, together with leasing rentals.

Capital Investment Programme Board (CIPB) An internal management Board with a membership of Members and Officers. This oversees the preparation of the Capital Strategy and Capital Programme and makes recommendations to Members on all major capital expenditure projects.

Capital Receipts Income received from the sale of land or other capital assets, a proportion of which may be used to finance new capital expenditure, subject to the provisions contained within the Local Government Act 2003.

Carrying Amount The Balance Sheet value recorded of either an asset or a liability.

Chartered Institute of Public Finance and Accountancy (CIPFA) CIPFA is the leading professional accountancy body for public services.

Collection Fund A fund administered by the Council recording receipts from Council Tax and payments to the General Fund and other public authorities. It also records receipts of non-domestic rates collected on behalf of Central Government.

Community Assets These are Fixed Assets that the Council intends to hold in perpetuity which have no determinable finite useful life and, in addition, may have restrictions on their disposal. Examples include parks and historical buildings not used for operational purposes.

Comprehensive Spending Review (CSR) CSR is the public expenditure planning process introduced by the Government in 1997. The most recent CSR, in October 2010, set the parameters for public spending for the four years from 2011/12 to 2014/15.


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Contingency This is money set aside in the budget to meet the cost of unforeseen items of expenditure, or shortfalls in income, and to provide for inflation where this is not included in individual budgets.

Contingent Liabilities or Assets These are amounts potentially due to or from individuals or organisations which may arise in the future but which at this time cannot be determined accurately, and for which provision has not been made in the Council’s accounts. Co-operative Council This is the ethos of the Council embodied by the desire that citizens, partners and staff work together to improve the borough and create a confident and ambitious place. Council Tax This is the main source of local taxation to Local Authorities. Council Tax is levied on households within its area by the Billing Authority and the proceeds are paid into its Collection Fund for distribution to precepting Authorities and for use by its own General Fund. Council Tax Benefit This is the assistance provided by Billing Authorities to adults on low incomes to help them pay their Council Tax bill. The cost to Authorities of Council Tax benefit is largely met by Government grant in 2012/13.

Council Tax Requirement This is the estimated revenue expenditure on General Fund services that needed to be financed from the Council Tax after deducting income from fees and charges, certain specific grants and any funding from reserves. Creditors Amounts owed by the Council for work done, goods received or services rendered, for which payment has not been made at the date of the balance sheet. Current Service Cost Current Service Cost is the increase in the present value of a defined benefit pension scheme's liabilities expected to arise from employee service in the current period, i.e. the ultimate pension benefits "earned" by employees in the current year's employment. Curtailment Curtailments will show the cost of the early payment of pension benefits if any employee has been made redundant in the previous financial year. Debtors These are sums of money due to the Council that have not been received at the date of the Balance Sheet.

Deferred Capital Receipts These represent capital income still to be received after disposals have taken place and wholly consists of principal outstanding from the sale of council houses.


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Defined Benefit Scheme This is a pension or other retirement benefit scheme other than a defined contribution scheme. Usually, the scheme rules define the benefits independently of the contributions payable and the benefits are not directly related to the investments of the scheme. The scheme may be funded or unfunded (including notionally funded).

Defined Contribution Scheme A Defined Contribution Scheme is a pension or other retirement benefit scheme into which an employer pays regular contributions as an amount or as a percentage of pay and will have no legal or constructive obligation to pay further contributions if the scheme does not have sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Department for Communities and Local Government (DCLG) A Department of Central Government with an overriding responsibility for determining the allocation of general resources to Local Authorities. Depreciation This is the measure of the wearing out, consumption, or other reduction in the useful economic life of a fixed asset. Derecognition Financial assets and liabilities will need to be removed from the Balance Sheet once performance under the contract is complete or the contract is terminated. Discounts Discounts represent the outstanding discount received on the premature repayment of Public Works Loan Board loans. In line with the requirements of the Code, gains arising from the repurchase or early settlement of borrowing have been written back to revenue. However, where the repurchase or borrowing was coupled with a refinancing or restructuring of borrowing with substantially the same overall economic effect when viewed as a whole, gains have been recognised over the life of the replacement loan.

Earmarked Reserves The Council holds a number of reserves earmarked to be used to meet specific, known or predicted future expenditure. Exceptional Items Material items deriving from events or transactions that fall within the ordinary activities of the Authority, but which need to be separately disclosed by virtue of their size and/ or incidence to give a fair presentation of the accounts. External Audit The independent examination of the activities and accounts of Local Authorities to ensure the accounts have been prepared in accordance with legislative requirements and proper practices and to ensure the Authority has made proper arrangements to secure value for money in its use of resources. Expenditure This is amounts paid by the Authority for goods received or services rendered of either a capital or revenue nature. This does not necessarily involve a cash payment since


244

expenditure is deemed to have been incurred once the goods or services have been received even if they have not been paid for.

Fair Value Fair value is the price at which an asset could be exchanged in an arm’s length transaction, less any grants receivable towards the purchase or use of the asset. Finance Lease A finance lease is a lease that transfers substantially all of the risks and rewards of ownership of a fixed asset to the lessee. Financial Instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another. The term 'financial instrument' covers both financial assets and financial liabilities and includes both the most straightforward financial assets and liabilities such as trade receivables and trade payables and the most complex ones such as derivatives and embedded derivatives. Financial Regulations These are the written code of procedures approved by the Council, intended to provide a framework for proper financial management. Financial regulations usually set out rules on accounting, audit, administrative and budgeting procedures. Fixed Assets Assets that yield benefits to the Council and the services it provides for a period of more than one year. Examples include land, buildings and vehicles. General Fund This is the main revenue fund of the Authority and includes the net cost of all services financed by local taxpayers and Government grants. Greater Manchester Combined Authority (GMCA) Created by the Local Government, Economic Development and Construction Act, the Greater Manchester Combined Authority (GMCA) assumed its powers and duties on 1 April 2011. It took over the functions previously the responsibility of the Greater Manchester Integrated Transport Authority (GMITA), which it replaced. It also took over responsibility for transport planning, traffic control and wide loads, assumed responsibility for the transportation resources allocated to the Greater Manchester region and regional economic development functions.

Greater Manchester Waste Disposal Authority (GMWDA) This is a levying Authority that provides waste disposal strategy, policy and services to nine of the AGMA Councils. Group Accounts Group Accounts consolidate the financial results of the Council, any of its subsidiaries and/or associates. The Council is not required to produce this for the 2012/13 Statement of Accounts.


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Heritage Asset A tangible asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture. Housing Benefit This is an allowance to persons on low income (or none) to meet, in whole or part, their rent. Benefit is allowed or paid by Local Authorities but Central Government refunds part of the cost of the benefits and of the running costs of the services to Local Authorities. Benefits paid to the Authority's own tenants are known as rent rebate and that paid to private tenants as rent allowance. Housing Revenue Account (HRA) Local Authorities are required to maintain a separate account - the Housing Revenue Account - which sets out the expenditure and income arising from the provision of Council housing. Other services are charged to the General Fund. HRA Subsidy This is a Government grant paid to some Housing Authorities towards the cost of providing, managing and maintaining dwellings. Impairment A reduction in the value of a fixed asset below its value brought forward in the Balance Sheet. Examples of factors which may cause such a reduction in value include general price decreases, a significant decline in a fixed asset’s market value and evidence of obsolescence or physical damage to the asset. Income These are amounts due to the Council for goods supplied or services rendered of either a capital or a revenue nature. This does not necessarily involve a cash payment. Income is deemed to have been earned once the goods or services have been supplied even if the payment has not been received (in which case the recipient is a debtor to the Council).

Infrastructure Assets Fixed Assets which generally cannot be sold and from which benefit can be obtained only by continued use of the asset created. Examples of such assets are highways, footpaths, bridges and water and drainage facilities. Intangible Fixed Assets These are Fixed Assets that do not have physical substance but are identifiable and controlled by the Council. Examples include software, licenses and patents. International Financial Reporting Standard (IFRS) Defined Accounting Standards that must be applied by all reporting entities to all financial statements in order to provide a true and fair view of the entity’s financial position, and a standardised method of comparison with financial statements of the other entities.


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Inventories Amounts of unused or unconsumed stocks held in expectation of future use. Inventories are comprised of the following categories: � Goods or other assets purchased for resale � Consumable stores � Raw materials and components � Products and services in intermediate stages of completion � Finished goods

Joint Venture This is an entity in which the reporting Authority has an interest on a longer term basis and is jointly controlled by the reporting Authority and one or more other entities under a contractual or other binding arrangement.

Leasing Costs This is where a rental is paid for the use of an asset for a specified period of time. Two forms of lease exist: finance leases and operating leases. Lender Option Borrower Option (LOBO) A LOBO is a type of loan instrument. The borrower borrows a principal sum for the duration of the loan period (typically 20 to 50 years), initially at a fixed interest rate. Periodically (typically every six months to 3 years), the lender has the ability to alter the interest rate. Should the lender make this offer, the borrower then has the option to continue with the instrument at the new rate or alternatively to terminate the agreement and pay back the principal sum with no other penalty. Liabilities These are amounts due to individuals or organisations which will have to be paid at some time in the future. Current liabilities are usually payable within one year of the Balance Sheet date. Local Government Resource Review (LGRR) A Central Government initiated review of the system of financing Local Government. The Government plans to discontinue current funding arrangements at the end of 2012/13 and introduce a new finance system with effect from 1 April 2013 based around the retention of National Non Domestic Rates.

Medium Term Financial Strategy (MTFS) This is a financial planning document that sets out the future years financial forecasts for the Council. It considers local and national policy influences and projects their impact on the general fund revenue budget, capital programme and HRA. In Oldham it usually covers a four year timeframe. Minimum Revenue Provision (MRP) MRP is the minimum amount which must be charged to an Authority’s revenue account each year and set aside as provision for credit liabilities, as required by the Local Government and Housing Act 1989. National Non Domestic Rate (NNDR) (also known as Business Rates) NNDR is the levy on business property, based on a national rate in the pound applied to the ‘rateable value’ of the property. The Government determines a national rate poundage each


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year which is applicable to all Local Authorities. Local Authorities collect the non-domestic rate but the proceeds are pooled and then redistributed by Central Government on the basis of an Authority’s population. Net Book Value (NBV) The amount at which fixed assets are included in the balance sheet, i.e. their historical cost or current value less the cumulative amounts provided for depreciation. Net Debt Net debt is the Council’s borrowings less cash and liquid resources. Net Realisable Value (NRV) NRV is the open market value of the asset in its existing use (or open market value in the case of non operational assets) less the expenses to be incurred in realising the asset. Operational Boundary This reflects the maximum anticipated level of external debt consistent with budgets and forecast cash flows. Operating Lease This is a type of lease, usually of computer equipment, office equipment, furniture, etc. where the balance of risks and rewards of holding the asset remains with the lessor. The asset remains the property of the lessor and the lease costs are revenue expenditure to the Authority.

Precept The amount levied by various Authorities that is collected by the Council on their behalf. The precepting Authorities in Oldham are the Greater Manchester Police Authority and the Greater Manchester Fire and Rescue Authority. Premiums These are discounts that have arisen following the early redemption of long term debt, which are written down over the lifetime of replacement loans where applicable. Prior Period Adjustments These are material adjustments which are applicable to an earlier period arising from changes in accounting policies or for the correction of fundamental errors. Private Finance Initiative (PFI) A Central Government initiative which aims to increase the level of funding available for public services by attracting private sources of finance. The PFI is supported by a number of incentives to encourage Authorities’ participation. Projected Unit Method This is an accrued benefits valuation method in which the scheme liabilities make allowance for projected earnings. An accrued benefits valuation method is a valuation method in which the scheme liabilities at the valuation date relate to: � the benefits for pensioners and deferred pensioners and their dependants, allowing

where appropriate for future increases; and � the accrued benefits for members in service on the valuation date.


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Provisions Amounts set aside to meet liabilities or losses which it is anticipated will be incurred but where the amount and/or the timing of such costs is uncertain. Public Works Loan Board (PWLB) An arm of Central Government which is the major provider of loans to finance long term funding requirements for Local Authorities Related Parties Related parties are Central Government, other Local Authorities, precepting and levying bodies, subsidiary and associated companies, Elected Members, all senior officers from Assistant Director and above and the Pension Fund. For individuals identified as related parties, the following are also presumed to be related parties:- � members of the close family, or the same household; and � partnerships, companies, trusts or other entities in which the individual, or member of

their close family or the same household, has a controlling interest.

Reporting Standards The Code of Practice prescribes the accounting treatment and disclosures for all normal transactions of a Local Authority. It is based on International Financial Reporting Standards (IFRS), International Standards (IAS) and International Financial Reporting Interpretations Committee (IFRIC) plus UK Generally Accepted Accounting Practice (GAAP) and Financial Reporting Standards (FRS). Repositioning Oldham This is the Oldham Council change framework enabling the transformation of the Council into a new service delivery model. Reserves Amounts set aside for general contingencies, to provide working balances or earmarked to specific future expenditure. Revaluation Reserve The Reserve records the accumulated gains on the fixed assets held by the Authority arising from increases in value as a result of inflation or other factors (to the extent that these gains have not been consumed by subsequent downward movements in value). Revenue Expenditure Expenditure incurred on the day-to-day running of the Council. This mainly includes employee costs, general running expenses and capital financing costs. Revenue Expenditure Funded From Capital Under Statute (REFCUS) Expenditure incurred during the year that may be capitalised under statutory provision but that does not result in the creation of a non-current asset that has been charged as expenditure to the CIES.

Service Reporting Code of Practice (SeRCOP) Prepared and published by CIPFA , the Service Reporting Code of Practice (SeRCOP) replaced the previous Best Value Accounting Code of Practice (BVACOP). It is reviewed annually to ensure that it develops in line with the needs of modern Local Government, Transparency, Best Value and public services reform. SeRCOP establishes proper


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practices with regard to consistent financial reporting for services and in England and Wales, it is given legislative backing by regulations which identify the accounting practices it propounds as proper practices under the Local Government Act 2003. Subsidiary This is an entity over which the reporting Authority is able to exercise control over operating and financial policies and is able to gain benefits from the entity or is exposed to the risk of potential losses arising from this control. Total Formula Grant (TFG) This is the main unringfenced grant allocated to Councils by Central Government to support their revenue budgets. As a general grant it can be used for any purpose and an individual Council’s grant share is calculated using a complex formula. Transport for Greater Manchester (TfGM) A Committee of the GMCA delivering strategic transport functions. Treasury Management This is the process by which the Authority controls its cash flow and its borrowing and lending activities.

Treasury Management Strategy (TMS) A strategy prepared with regard to legislative and CIPFA requirements setting out the framework for treasury management activity for the Council. Trust Funds These are funds administered by the Council on behalf of charitable organisations and/or specific organisations. Unsupported (Prudential) Borrowing

This is borrowing for which no financial support is provided by Central Government. The borrowing costs are to be met from current revenue budgets.

Annual Report and Statement of Accounts - Oldham Councilcommittees.oldham.gov.uk/documents/s34174/Statement... · Government body to publish their Statement of Accounts for 2011/12,

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