Please Contact: Emma Denny
Please email: emma.denny@north-norfolk.gov.uk
Please Direct Dial on: 01263 516010
8 September 2014
A meeting of the Audit Committee of North Norfolk District Council will be held in the
Committee Room at the Council Offices, Holt Road, Cromer on Tuesday 16 September
2014 at 2.00 pm
Members of the public who wish to ask a question or speak on an agenda item are
requested to arrive at least 15 minutes before the start of the meeting. It will not always be
possible to accommodate requests after that time. This is to allow time for the Committee
Chair to rearrange the order of items on the agenda for the convenience of members of the
public. Further information on the procedure for public speaking can be obtained from
Democratic Services, Tel: 01263 516047, Email: democraticservices@north-norfolk.gov.uk
Anyone attending this meeting may take photographs, film or audio-record the proceedings
and report on the meeting. Anyone wishing to do so must inform the Chairman. If you are a
member of the public and you wish to speak on an item on the agenda, please be aware that
you may be filmed or photographed.
Sheila Oxtoby
Chief Executive
To: Mr N D Dixon, Mr B Jarvis, Mrs A Moore, Miss B Palmer, Mr R Reynolds and Mr D
Young
All other Members of the Council for information.
Members of the Management Team, appropriate Officers, Press and Public
If you have any special requirements in order to attend this meeting, please let us
know in advance
If you would like any document in large print, audio, Braille, alternative format or in a
different language please contact us
Chief Executive: Sheila Oxtoby
Strategic Directors: Nick Baker and Steve Blatch
Tel 01263 513811 Fax 01263 515042 Minicom 01263 516005
Email districtcouncil@north-norfolk.gov.uk Web site northnorfolk.org
AGENDA
1.
TO RECEIVE APOLOGIES FOR ABSENCE
2.
PUBLIC QUESTIONS
To receive public questions, if any
3.
ITEMS OF URGENT BUSINESS
To determine any items of business which the Chairman decides should be
considered as a matter of urgency pursuant to Section 100B(4)(b) of the Local
Government Act 1972.
4.
DECLARATIONS OF INTEREST
Members are asked at this stage to declare any interests that they may have in any
of the following items on the agenda. The Code of Conduct for Members requires
that declarations include the nature of the interest and whether it is a disclosable
pecuniary interest.
5.
MINUTES
(Page 1)
To approve as a correct record, the minutes of the meeting of the Audit Committee
held on 17 June 2014.
6.
AUDIT UPDATE AND ACTION LIST
(Page 8)
To monitor progress on items requiring action from the meeting of 17 June 2014,
including progress on implementation of audit recommendations.
7.
AUDIT COMMITTEE WORK PROGRAMME
(Page 9)
To review the Audit Committee Work Programme.
8.
PWC 2013/14 ANNUAL GOVERNANCE REPORT (ISA260)
(Page 10)
To consider the Annual Governance Report.
9.
PROTOCOL FOR LIAISON BETWEEN INTERNAL AND EXTERNAL AUDITORS
(Page 40)
To consider the draft Protocol for liaison between internal and external auditors
2014/15 August 2014
10.
ANNUAL REPORT OF THE MONITORING OFFICER 2013/14
To consider the Annual Report of the Monitoring Officer
(Page 67)
11.
ANNUAL GOVERNANCE STATEMENT 2013/14
(Page 74)
(Full Statement, Appendix A – p.76)
Summary:
Conclusions:
Recommendations:
This paper outlines that process for reviewing the
Annual Governance Statement for 2013/14 to provide a
robust statement of the culture and values by which the
Council is directed and controlled. It is built around the
six principles of good governance set out by the
Chartered Institute of Public Finance and Accountancy
(CIPFA) and the Society of Local Authority Chief
Executives (SOLACE).
Adoption of the Annual Governance Statement by the
Council will allow it to move ahead with its corporate
planning process confident that it can address any
issues of governance and risk.
Members are asked to review the Annual Governance
Statement for 2013/14 and approve it for consideration
by Full Council when the annual Statement of Accounts
for 2013/14 are also presented for approval.
Contact Officer, telephone number and email:
Karen Sly, 01263 516243, Karen.sly@north-norfolk.gov.uk
12.
2013/14 STATEMENT OF ACCOUNTS
(Page 92)
(Draft Statement of Accounts attached at p.94)
Summary:
This report presents the Statement of Accounts for
2013/14 for review by the Audit Committee prior to
recommendation to Full Council for approval. The
outturn position was reported to Members in June and
has been used to inform the production of the statutory
annual accounts for 2013/14.
Conclusions:
The Statement of Accounts for 2013/14 has been
produced in accordance with the Code of Practice on
Local authority Accounting. The draft accounts were
produced by 30th June and since then have been
subject to external audit review.
Recommendations:
Members are asked to consider and review the
Statement of Accounts for 2013/14 and recommend
their approval to Full Council.
Reasons for
Recommendations:
To update Members on the Statutory Accounts position
as at 31st March 2014 and their subsequent external
audit review.
Contact Officer, telephone number and email: Malcolm Fry, 01263 516037,
malcolm.fry@north-norfolk.gov.uk
13.
PROGRESS REPORT ON INTERNAL AUDIT ACTIVITY, 01 APRIL TO 05
SEPTEMBER 2014
(Page 205)
(Full report, p 207, Appendix 1- p.212, Appendix 2 – p. 214)
Summary:
This report examines the progress made between 1
April 2014 and 5 September 2014 in relation to delivery
of the Annual Audit Plan for 2014/15, and provides a
current in-year position.
Conclusions:
A total of 5 audit assignments have been processed
during the period covered by this report.
Recommendations:
It is recommended that the Committee notes the
outcome of the audits completed between 01 April
2014 and 5 September 2014 where assurance levels
have been given and the progress made to date
with the annual audit plan.
Contact Officer, telephone number and email:
Emma Hodds, Internal Audit Consortium Manager,01508 533791,
ehodds@s-norfolk.gov.uk
14.
EXCLUSION OF THE PRESS AND PUBLIC
To pass the following resolution, if necessary:
“That under Section 100A(4) of the Local Government Act 1972 the press and public
be excluded from the meeting for the following items of business on the grounds that
they involve the likely disclosure of exempt information as defined in
of Part I
of Schedule 12A (as amended) to the Act.”
Agenda item _5_
AUDIT COMMITTEE
Minutes of a meeting of the Audit Committee held on Tuesday 17th June 2014 in the
Committee Room, Council Offices, Holt Road, Cromer at 2.00 pm.
Members Present:
Mr N Dixon (Chairman)
Mrs A Moore
Mr D Young
Committee:
Officers in
Attendance:
1.
Miss B Palmer
Mr R Reynolds
The Head of Finance, Richard Sayer on behalf of the Internal Audit
Consortium Manager, the Civil Contingencies Manager, the Democratic
Services Officer
APOLOGIES
Mr B Jarvis
2.
PUBLIC QUESTIONS
None received.
3.
ITEMS OF URGENT BUSINESS
None received.
4.
DECLARATIONS OF INTEREST
None
5.
MINUTES
The Minutes of the meeting of the Audit Committee held on 17 March 2014 were
approved as a correct record and signed by the Chairman.
6.
AUDIT UPDATE AND ACTION LIST
The Chairman commented that the Internal Audit Consortium Manager seemed to
have all issues in hand.
7.
AUDIT COMMITTEE WORK PROGRAMME
The Chairman raised a number of issues, including amending a number of dates,
which the Democratic Services Officer agreed to action. The Chairman queried
Audit Committee
1
17 June 2014
1
whether September was the appropriate time for the Business Continuity Update to
come to committee. Following a discussion with the Civil Contingencies Manager, who
was present to give a verbal update, the committee agreed to defer the item to receive
a written report in December.
Mrs A Moore queried why one item was designated ‘Quarterly Summary of Completed
Audits’ when it was only presented half yearly. The Head of Finance explained that this
was due to terminology; the report did come quarterly but was called a ‘half yearly’
report in other months.
8.
BUSINESS CONTINUITY PLAN REVIEW
Minutes note: this item was dealt with following item 61. Work Programme, as the Civil
Contingencies Manager was in attendance to present the item.
The Civil Contingencies Manager introduced this item. He explained that there had
been five incidents since he last report to the committee, including the St Jude’s storm,
district-wide coastal flooding in December, the USAS helicopter crash in January, and
the Fakenham town fire. All of these events had involved emergency and business
continuity plans. He further explained that these events to a certain extent proved that
their business continuity plans were effective. He also noted that Revenue and
Benefits still had to put a business continuity plan in place. With regards to business
continuity he concluded that he was looking to create a ‘bottom up’ approach to the
process, wherein the plans were produced with reducing duplication and acrossservice understanding in mind.
He also discussed business continuity training which was due to take place, allowing
managers to understand the business continuity process in more detail.
With regards to disaster recovery and the work action recovery site, the Civil
Contingencies Manager explained that this work was still in process, but that the
council office at Fakenham would be used in such a situation and would take little
reconfiguration to bring it to standard. He also discussed the business continuity
working group which he planned to restart in order to supplement the production of
business continuity plans.
The Chairman queried when the working group was due to meet, and the Civil
Contingencies Manager replied that it would hopefully take place in August. The
Chairman then invited members to ask questions.
1. Mr R Reynolds queried whether the upstairs area of the Fakenham Connect
building would be utilised in a disaster recovery situation. The Civil Contingencies
Manager replied that the area had viability but that there were cost implications. He
also explained that there was the potential for the area to be a rentable space to
increase usage. Regarding the whole of the Fakenham Connect building, there
was a hope that the building would be utilised more for day-to-day usage.
The Chairman thanked the Civil Contingencies Manager for the information provided
and reminded the committee that the Business Continuity plan was an on-going, ‘live’
document, adapting where and when necessary. He added he looked forward to
receiving the further report in September.
Audit Committee
2
17 June 2014
2
9.
PROGRESS ON INTERNAL AUDIT ACTIVITY
The Acting Internal Audit Consortium Manager introduced this item. He explained it
provided an update on the previous update report, and at this point all revised targets
had been delivered upon. He explained that the vast majority had a positive
assurance, but the item without one regarding a tourist information centre had still had
action taken on it, which showed progress. The Chairman invited members to ask
questions.
1. Mr D Young queried if the issue at the TIC had been resolved by replacing tills.
The Head of Finance replied that there had been software issues which had been
resolved by till replacement or upgrading. Mr D Young further queried if this issue
could be faced elsewhere and suggested spot checks to ensure effectiveness. The
Head of Finance also explained that manual checks had been put in place to
ensure that the issues faced would not arise again. The Acting Internal Audit
Consortium Manager confirmed that spot checks would be carried out.
2. Mr R Reynolds referred to page 23 of the agenda, which suggested that the
incident had been an isolated case. He queried how this had come about. The
Head of Finance replied that whilst she did not know the technical details, it may
have been due to bugs in the existing software. The Chairman commented that he
had a concern that such a basic issue had not been picked up. He also
commented that there had been an audit in 2011/12 and prior to this in 2009/10,
and queried if the software had been in use then. The Head of Finance replied that
issues would have been picked up where there were discrepancies, and the Acting
Internal Audit Consortium Manager commented the auditor raised this as an issue
in 2013. The Chairman commented that he was surprised it wasn’t picked up until
the audit in 2013, and the Head of Finance replied that NNDC had flagged it as an
issue prior to this. The Chairman asked for Head of Finance and the acting Internal
Audit Consortium Manager to follow this up and report back with details on when
the software was introduced and this initially became an issue.
The Chairman commented that the report seemed positive and that the authority had
progressed significantly. The committee agreed to
NOTE
The report
10.
FOLLOW UP ON INTERNAL AUDIT RECOMMENDATIONS 1 NOVEMBER 2013 TO
31 MARCH 2014
The acting Internal Audit Consortium Manager introduced this item. He explained that
there were no outstanding high priority actions, but that there were 19 remaining
medium-low recommendations (45%) which was deterioration in progress. The Head
of Finance provided an update to the outstanding recommendations, commenting that
to date there were now only 14 remaining recommendations (33%), and explained that
of those remaining, some had yet to be implemented and others had been but had not
yet been fully completed. She concluded that they were continuing to chase officers on
remaining recommendations.
The Chairman commented that the good news seemed to be that there were less
recommendations in the first place, which suggested the authority were doing better
overall, however it was important that recommendations were dealt with quickly and
effectively. The acting Internal Audit Consortium Manager commented that in his
experience this seemed to be an on-going issue at a number of authorities, where
Audit Committee
3
17 June 2014
3
there was a fluctuating level of completion of recommendations. He did suggest that
compared to elsewhere, the authority were not performing badly. He also reiterated
that it was particularly good news that there had been no high priority
recommendations. The Chairman agreed and commented that there had been 40
recommendations in total in October 2013 and there were now 27 as of March 2013,
showing that the direction of travel was right. He also raised that as they were smaller
numbers, it made percentages less representative.
Mrs A Moore commented that having being on the Audit committee for the last 6 years,
the authority was certainly going in the right direction and that issues had significantly
improved in this time.
The committee agreed to
NOTE
The report.
11.
INTERNAL AUDIT CONSORTIUM MANAGER’S ANNUAL REPORT AND OPINION
FOR 2013/14 IN RESPECT OF NORTH NORFOLK DISTRICT COUNCIL
The acting Internal Audit Consortium Manager introduced this item. he explained that
this was one of the most important reports at it provided the assurance for the control
environment at the authority, and there was a requirement to produce it annually. He
explained that the Internal Audit Consortium Manager had been able to give an
adequate opinion on the framework of governance at the authority. He further
explained that this meant that there were no significant issues at the authority and that
the audit service was compliant with public sector audit standards. He further
explained that the CIPFA compliance check compares the authority with ‘best practice’
and that whilst there were one or two issues, the authority was working effectively. He
outlined the issues as firstly, the internal audit service and its relation with senior
officers and Head of Finance, explaining that the frequency of meetings may need to
be increased and this was worthy of discussion. He also explained that it may be
useful to call these ‘formal meetings’ in order to reassert them in the audit calendar. He
explained that the second issue was with regards to the audit charter, which did not
show process should there not be sufficient resourcing for internal audit. He explained
this could be added when the charter was reviewed.
Mr D Young queried where this was in the report. The acting Internal Audit Consortium
Manager commented that it could be found at 5.3.3 and 5.3.4. He also commented
that whilst he had never seen an issue arise with regards to insufficient resourcing, it
was important to have it covered in the charter. The Chairman commented that there
had been constraints previously regarding getting work done, so it was important for
this to be covered. The acting Internal Audit Consortium Manager also commented
that it was also important to bear in mind during the audit plan process, particularly
with regards to days allocated; auditors could be under pressure to reduce days
because of financial constraints, so it was important to ensure that there was suitable
provision. The Head of Finance commented that it might be useful for management
team to have a discussion with the Internal Audit Consortium Manager regarding these
issues. She commented that within the authority there was currently no pressure with
regards to reducing days, and they only reduced days where there were good
assurances, not because of financial concerns.
The acting Internal Audit Consortium Manager also commented that 5.1.4 explained
that internal audit would be subject to an external assessment within 5 years, so by
Audit Committee
4
17 June 2014
4
March 2018. He explained that discussions were taking place regarding this and it
would be brought to the committee when there was a recommendation. He explained
the limitation on this was that it couldn’t be done by anyone within the consortium.
The acting Internal Audit Consortium Manager then went on to discuss performance
indicators, as discussed at 5.2. He explained that the year had been an unusual one,
particularly with regards to mitigating circumstances, but that turnaround times were
not currently at target, and incentivising these may be an issue. He also explained that
post audit feedback was requested from managers on completion of an audit but only
5 out of 13 had so far responded. The explained the form for feedback was being
looked at to encourage responses. The Chairman queried who would be filling these
in, and the acting Internal Audit Consortium Manager replied that the managers of the
service being audited were the respondents. Mr D Young commented that a lack of
return of forms may be a good sign as often forms would only be returned where
someone wished to complain. He also commented on the presentation of statistics at
5.2.2 which were not presented in a simplistic manner. The acting Internal Audit
Consortium Manager agreed and commented that he would feed this back to the
Internal Audit Consortium Manager.
The committee agreed to
NOTE
The report.
12.
AUDIT COMMITTEE SELF-ASSESSMENT
The acting Internal Audit Consortium Manager introduced this item. he explained that
the self-assessment was a checklist to compare and confirm activities of the
committee, to establish its effectiveness. He asked members if they had any
comments.
1.
The Chairman commented that they often struggled in the early parts of forming a
committee, reducing the stability of the group which was not an effective check and
balance over audit procedure. He asked that audit be covered more effectively during
the induction procedure so that members firstly understood what the audit committee
was, and secondly were willing to be a committed member. Mr R Reynolds agreed
with this, particularly with regards to overcoming the misunderstanding of the
committee as dealing just with financial information. The Democratic Services Officer
commented the she would ensure this was put on the Member Development work
programme for the upcoming induction process. Mrs A Moore commented that the
committee seemed more stable now, and agreed that effective training would be
useful. The Chairman concluded that it would be useful for audit to have a specific slot
in the induction programme in order to facilitate understanding.
The committee
NOTED
The report.
13.
CORPORATE RISK REGISTER
The Head of Finance introduced this item. She explained that the first item on the risk
register had previously been named ‘central government funding’ but they had
Audit Committee
5
17 June 2014
5
changed this to encapsulate the wider financial risk. She also explained the risk
register would recognise the localised council tax support scheme. Two of the newer
items on the register were ‘loans to registered providers’ and ‘home working’ and risks
surrounding these were explained on the register in more detail.
1. Mr D Young queried why the risk level for central government funding was so high
when there had been knowledge about the reduction in funding for some time. The
Head of Finance replied that there were a number of issues surrounding this,
including the changes to the business rates retention system which had produced
a shift in the risk. It also included risks around changes to the new homes bonus,
which would become a significant issue in the future. The risk tried to encompass
all of these
2. Mr D Young also referred to the downgrading of the co-op and queried why that
was still a high risk. The Head of Finance replied that as the co-op was still the
authority’s bank there was still an on-going risk. She explained it was a high risk,
however it was the lowest possible high risk. Mr D Young queried if this risk was
around the capacity for business continuity should the bank fail, as opposed to
actual financial risk to the authority. The Head of Finance replied that this was
correct; that the authority had to make contingency plans for this situation as they
would struggle to continue day-to-day banking if this happened. She also explained
that the new banking contract was currently out to tender and they hoped to award
the new banking contract in the summer.
3. The Chairman queried if March 2015 was when the new banking contract would
come into effect. The Head of Finance agreed that yes it was, however the cooperative bank had offered them the opportunity to pull out earlier if required.
However this would be dependent on the tender process allowing for such a move.
4. Mr D Young queried why the loans to registered providers were a risk when loans
had not been provided yet. The Head of Finance replied that as it was now
approved by Cabinet and in progress, they were picking the risk up early. Mr D
Young also queried why the risk was higher than the target risk when no action had
taken place as of yet. The Head of Finance replied that this was as the authority
had not provided loans previously, and the programme fell outside of treasury
management mitigation. They would continue to monitor the risk level once the
loans were in place. Mr D Young queried why the target was 10 when it seemed an
impossible goal; the Head of Finance agreed to feed member comments back to
the Performance and Risk Management board to consider a re-evaluation of risk
levels.
5. The Chairman commented that it was interesting that whilst they were improving
housing delivery across the district, one of the authority’s key priorities, this was
simultaneously creating a new risk. He asked if the authority would be lending as
the equivalent of a building society. The Head of Finance replied that the scheme
would charge market rate interest and would form part of the capital programme of
expenditure as it was outside of the treasury management strategy. She explained
that it was a new and different way of thinking for the authority. Mr D Young asked
what the level of security provided for the local investment strategy way. The Head
of Finance replied that as detailed in the Cabinet report, there would be 110%
security on the loan in the form of land assets.
6. Mrs A Moore queried if, as it seemed in the Cabinet papers, the authority within the
Local Investment Strategy would be lending the Broadland Housing Association
who would then lend on to Broadland St Benedicts. The Head of Finance replied
that in actuality, there would be two tranches of the loan, one part that went to
Broadland housing and one part that went to Broadland St. Bendicts. She also
explained that as Broadland St Benedicts were able to produce market housing,
this would shorten the loan time for their tranche, in order to recycle this amount for
Broadland Housing Association.
Audit Committee
6
17 June 2014
6
7. The Chairman referred to page 72 of the report, Shared Services Plans and its
failure to incomplete, and asked what this was in relation to. The Head of Finance
replied that this was primarily in relation to Revenues and Benefits as a shared
service plan with Kings Lynn was now not going ahead. With regards to future
shared services, there had been no decision one way or another and consideration
of this would be an on-going process. The Chairman asked if there currently other
departments in the pipeline for shared service, and the Head of Finance replied
that if there were she was not currently aware of it.
8. The Chairman proposed that it would be useful if within the actions column of the
Shared Service plans, they could look more deeply at shared service proposals
with a consideration of risk mitigation for such proposals. He explained that as a
‘living document’ it should look forward and make considerations for those risks
also.
9. Mrs A Moore queried if the waste contract was a shared service. The Head of
Finance replied that the recycling contract was but via a consortium, and was a
service level as opposed to a corporate risk.
10. The Chairman referred to page 73 of the report, which considered Property Assets
and their risk, and asked if there were any particular issues regarding this at the
moment. The Head of Finance replied that as far as she was aware there was
nothing in particular at risk at the moment, as it would be flagged, but she would
capture any issues for the next meeting as they arose.
The Chairman thanked officers and members for their comments and it was agreed to
NOTE
The report.
The meeting ended at 4.05 pm
______________________
Chairman
Audit Committee
7
17 June 2014
7
Agenda Item
6
AUDIT COMMITTEE 17 JUNE 2014 – ACTIONS ARISING FROM THE MINUTES
1. Audit Work
Programme
Agreed for the Business Continuity report to come to
the December meeting as opposed to September
Richard Cook
2. Progress on
Internal Audit
Activity
To provide clarity on issues regarding ‘bugs’ on till
systems at a north Norfolk TIC by informing the
committee when the software was installed and
when the issue of the ‘bug’ first arose.
Karen Sly
3. Internal Audit
Annual
Report
Head of Finance confirmed that this problem had
now been resolved and that additional checks had
been put in place to ensure that it would not arise in
the future
To feedback to the Internal Audit Consortium
Manager presentation issues regarding tables within
the Annual report.
Richard Sadler
The Internal Audit Consortium Manager confirmed
that the format had now been changed and the
tables would be presented differently from now on.
4. SelfAssessment
To ensure Audit is appropriately covered during the
Member Induction Programme to ensure committee
stability following the election period.
Emma Denny
To provide the Audit committee with a specific slot
on the induction programme to give inductees
sufficient knowledge.
5. Corporate
Risk Register
The Member Development Group had been informed
of this request and agreed to implement it.
Democratic Services will ensure Audit training is
given a specific slot during the Induction process
To return Audit Committee concerns regarding the
risk level of the Local Investment Strategy to the
Performance and Risk Management Board to ensure
appropriate level of risk has been fully considered.
Karen Sly
To consider a further action under ‘Shared Services’
regarding looking more deeply at potential proposals
for shared services in the authority.
The Head of Finance confirmed that the first point
had been actioned and that future consideration
would be given to the risks associated with shared
services
6. Other
To maintain the Audit agenda on white papers for the
foreseeable future
Actioned
8
Democratic
Services
Agenda Item 7
AUDIT COMMITTEE WORK PROGRAMME 2014 – 2015
JUNE 2014
PWC
SEPTEMBER
2014
PWC 2013/14
Annual
Governance
report
(ISA260)
DECEMBER 2014
MARCH 2015
Annual Audit
Letter (PWC)
Audit Plan (PWC)
(with overview)
Annual Grant
Certification
Report
Progress Report
on Internal Audit
Activity
Progress Report
on Internal Audit
Activity
Protocol for
liaison between
internal and
external auditors
Internal Audit
Annual Review
of the
Effectiveness of
Internal Audit
Progress Report
on Internal Audit
Activity
Annual Report
and Opinion
Status of agreed
actions
Undertake selfassessment
NNDC
Corporate Risk
Register/ risk
management
framework
Business
Continuity Plan
Review
Follow Up Report
Strategic and
on Internal Audit
Annual Audit
Recommendations Plans
Internal Audit
training
Statement of
Accounts (+
informal training)
Flood Recovery
Review of
Pensions liability
Business
Continuity
Monitoring
Officer’s Report
RIPA Policy (PreAgenda only)
Local Code of
Corporate
Governance and
Action Plan –
update and
Annual
Governance
Statement
2013/14
Corporate Risk
Register
9
Risk Management
Framework
Agenda Item 8
www.pwc.co.uk
North Norfolk District
Council
Report to those charged with governance
Report to the Audit Committee of the authority on the audit for the
year ended 31 March 2014 (ISA (UK&I)) 260)
Government and
Public Sector
August 2014
DRAFT
10
Contents
Code of Audit Practice and
Statement of Responsibilities
of Auditors and of Audited
Bodies
In April 2010 the Audit Commission
issued a revised version of the
‘Statement of responsibilities of
auditors and of audited bodies’. It is
available from the Chief Executive
of each audited body. The purpose
of the statement is to assist auditors
and audited bodies by explaining
where the responsibilities of
auditors begin and end and what is
to be expected of the audited body in
certain areas. Our reports and
management letters are prepared in
the context of this Statement.
Reports and letters prepared by
appointed auditors and addressed
to members or officers are prepared
for the sole use of the audited body
and no responsibility is taken by
auditors to any Member or officer
in their individual capacity or to
any third party.
Executive summary
2
Audit approach
3
Significant audit and accounting matters
8
Risk of fraud
14
Fees update
16
Appendices
17
Appendix 1: Letter of Representation
18
North Norfolk District Council
PwC  Contents
11
An audit of the Statement of
Accounts is not designed to
identify all matters that may be
relevant to those charged with
governance. Accordingly, the
audit does not ordinarily identify
all such matters. We have issued a
number of reports during the
audit year, detailing the findings
from our work and making
recommendations for
improvement, where appropriate.
Executive summary
Background
This report tells you about the significant findings from our audit. Since we presented our plan to you in March 2014 we
issued an updated plan in June to include a change in engagement leader from Julian Rickett to Harriet Aldridge. In
addition we have subsequently extended our risk assessment to include an elevated risk in relation to Council Tax reform, this
is included in our Audit Approach section below.
Audit Summary


We have completed the majority of our audit work and expect to be able to issue an unqualified audit opinion on the
Statement of Accounts by 30th September 2014.
The key outstanding matters, where our work has commenced but is not yet finalised, are:






final review of the detailed disclosures in the Statement of Accounts;
approval of the Statement of Accounts and letters of representation;
completion of our work on housing benefits income and expenditure; and
completion procedures including subsequent events review.
There are five key judgments which require the Audit Committee/those charged with governance's attention – further
details are set out commencing on page 8.
There are no unadjusted misstatements for review.
Please note that this report will be sent to the Audit Commission in accordance with the requirements of its standing
guidance.
We look forward to discussing our report with you on Tuesday 16th September. Attending the meeting from PwC will be
Harriet Aldridge and Aphrodite Antoniades.
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12
Audit approach
Our audit approach was set in our audit plan which we presented to you in March 2014. We have since included an additional
Elevated risk in relation to Council Tax reform as set out below.
We have summarised below the significant risks we identified in our audit plan, the audit approach we took to address each
risk and the outcome of our work.
Risk
Categorisation
Audit approach
Results of work performed
Risk of Fraud in
Management Override of
Controls
Significant
As part of our assessment of your control
environment we considered those areas where
management could use discretion outside of the
financial controls in place to misstate the
financial statements.
No exceptions were noted.
ISA (UK&I) 240 requires that
we plan our audit work to
consider the risk of fraud,
which is presumed to be a
significant risk in any audit.
This includes consideration of
the risk that management
may override controls in
order to manipulate the
financial statements.
We performed procedures to:
- Review the appropriateness of accounting
policies and estimation bases, focusing on any
changes not driven by amendments to reporting
standards;
- Test the appropriateness of journal entries and
other year-end adjustments, targeting higher
risk items such as those that affect the reported
deficit/surplus;
- Review accounting estimates for bias and
evaluate whether judgment and estimates used
are reasonable (for example pension scheme
assumptions, valuation and impairment
assumptions);
- Evaluate the business rationale underlying
significant transactions outside the normal
course of business; and
- Perform unpredictable procedures targeted on
fraud risks.
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Risk
Categorisation
Audit approach
Results of work performed
Risk of Fraud in Revenue
and Expenditure
Recognition
Significant
We obtained an understanding of revenue and
expenditure controls.
No exceptions were noted in our income testing.
We evaluated and tested the accounting policy
for income and expenditure recognition to
ensure that this is consistent with the
requirements of the Code of Practice on Local
Authority Accounting.
Under ISA (UK&I) 240 there
is a (rebuttable) presumption
that there are risks of fraud in
revenue recognition.
We extend this presumption to
the recognition of expenditure
in local government.
Valuation: Property, plant
and equipment
Property, plant and
equipment (PPE) represents
the largest balance in the
Council’s Balance Sheet. The
Council measures its
properties at fair value
involving a range of
assumptions and the use of
external valuation expertise.
ISAs (UK&I) 500 and 540
require us, respectively, to
undertake certain procedures
on the use of external expert
valuers and processes and
assumptions underlying fair
value estimates.
From our expenditure testing we identified one
transaction relating to FY 14 that had been not
been accrued for and had been incorrectly
included as expenditure in FY 15. This has been
adjusted for correctly. No other exceptions were
noted in expenditure.
We also performed detailed testing of revenue
and expenditure transactions, focussing on the
areas we consider to be of greatest risk.
Elevated
For asset valuations are undertaken in-year we:

agreed the source data used by your
valuer to supporting records.

assessed the work of your valuer through
use of our own internal specialists where
required; and

agreed the outputs to your Fixed Asset
Register and accounts.
For the proposed changes to valuation bases we
worked with you to understand and evaluate the
rationale you are using on a timely basis.
For assets not re-valued in year, we reviewed
your impairment assessment, and evaluated
whether your assets are held at an appropriate
value in your accounts at the year-end.
We reviewed the gross internal areas (GIAs)
used by the internal valuer and traced these
figures back to supporting documentation. For
one asset, the incorrect GIA had been use;
however, this did not result in a material
misstatement therefore no adjustment was
proposed.
We reviewed the revaluations performed and
confirmed whether these were in line with the
CIPFA requirements. It was noted that only a
selection of public conveniences had been
revalued in the year and not the full balance as
required by the Code. We have raised a control
weakness in relation to this below.
No other exceptions were noted.
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Risk
Categorisation
Audit approach
Results of work performed
Savings Requirements
including localisation of
business rates and council
tax benefit
Elevated
We have reviewed your savings plan, understood
how the Council manages the plan, and the
reasons behind any significant variations from
the plan.
We are currently finalising the work on this area
and will update the audit committee on the
results at the audit committee meeting in
September.
The Council continues to need
to achieve significant savings
to meet its medium term
financial plan, following a
reduction in central
government funding.
We have specifically considered:

your record in delivering savings;

the governance structure in place to deliver
the targets (including extent of member
involvement);

the level and extent of accountability;

monitoring and reporting; and

progress on delivering the plan.
We have considered the accounting implications
of your savings plans and the impact of the
efficiency challenge on the recognition of both
income and expenditure.
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Risk
Categorisation
Audit approach
Results of work performed
Council Tax Benefit
reform
Elevated
As a new scheme was introduced this year we
performed additional procedures to understand
the criteria the Council has set and the initial
modelling performed to estimate the cost of the
scheme.
No exceptions were noted.
From 1 April 2013/14, Council
Tax Benefit (CTB) was
replaced by local authorities’
own council tax support and
reduction schemes.
We understood the accounting treatment for the
new support scheme in the year.
Prior to the CTB reforms,
national rules were set by the
Government and therefore
standard calculations and
system parameters would have
applied to the assessment and
processing of all claims.
Following the abolition of
CTB, the Council has
introduced a Council Tax
Support (CTS) scheme having
set their own rules (subject to
a number of restrictions
imposed by the Government).
There is a risk that the new
scheme rules have not been
appropriately implemented
within the Council’s controls
for assessing eligibility, or
have not been effectively
applied within Open
Revenues, which would impact
the accuracy of the CTS
calculation.
We performed detailed testing over the Council
Tax exemptions applied in the year.
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Materiality
In our audit plan presented to you in March 2014 we reported our planned overall materiality which we used in planning the
overall audit strategy and which was based on the Council’s audited expenditure in 2012/13. Our actual materiality was
different to the amount reported in our plan because the Council’s actual expenditure in 2013/14 was lower than in 2012/13;
however this had effect on our testing strategy.
Our revised materiality levels are as follows:
£
Overall materiality
1,045,000
Clearly trivial reporting de minimis
50,000
Overall materiality has been set at 2% of actual expenditure for the year ended 31 March 2014.
ISA (UK&I) 450 (revised) requires that we record all misstatements identified except those which are “clearly trivial” i.e. those
which we do expect not to have a material effect on the financial statements even if accumulated. We agreed the de minimis
threshold with the Audit Committee at its meeting in March 2014.
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Significant audit and accounting matters
Auditing Standards require us to tell you about relevant
matters relating to the audit of the Statement of Accounts
sufficiently promptly to enable you to take appropriate
action.
Accounts
We have completed our audit, subject to the following
outstanding matters:
 final review of the detailed disclosures in the
Statement of Accounts;
 approval of the Statement of Accounts and letters
of representation;
 completion of our work on housing benefits
income and expenditure; and
 completion procedures including subsequent
events review.
Subject to the satisfactory resolution of these matters, the
finalisation of the Statement of Accounts and their approval
of them we expect to issue an unqualified audit opinion.
As part of our work on the Statement of Accounts we have
also examined the Whole of Government Accounts schedules
submitted to the Department for Communities and Local
Government and anticipate issuing an opinion stating in our
view they are consistent with the Statement of Accounts.
Accounting issues
Pensions liability
The most significant estimate in the Statement of Accounts is
in the valuation of net pension liabilities for employees in the
Norfolk County Council pension fund. Your net pension
liability at 31 March 2014 was £31.8 million (2013 - £31.8
million).
The 2013 triennial valuation has been finalised and the effect
on the accounts is£1,432m. This has been agreed back to the
actuaries report without exception.
We reviewed the reasonableness of the assumptions
underlying the pension liability, and we are comfortable that
the assumptions are within an acceptable range. The report
from the Pension Fund actuary was reviewed by the PwC
specialist team and the assumptions used were compared to
the industry averages with no exceptions or major variances
noted.
We validated the data supplied to the actuary on which to
base their calculations.
Changes to IAS 19: Employee Benefits
From 2013/14 there have been changes to the accounting for
defined benefit schemes and termination benefits. These
changes have been reflected in the Authority’s financial
statements with the inclusion of additional disclosures. The
impact on the authority has been immaterial and no prior
year restatement has been required. No exceptions have been
noted with the presentation in the Statement of Accounts.
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Misstatements and significant audit
adjustments
We have to tell you about all uncorrected misstatements we
found during the audit, other than those which are trivial.
None have been noted.
Significant accounting principles and
policies
Significant accounting principles and policies are disclosed in
the notes to the Statement of Accounts. We will ask
management to represent to us that the selection of, or
changes in, significant accounting policies and practices that
have, or could have, a material effect on the Statement of
Accounts have been considered.
Judgments and accounting estimates
The Authority is required to prepare its financial statements
in accordance with the CIPFA Code. Nevertheless, there are
still many areas where management need to apply judgement
to the recognition and measurement of items in the financial
statements. The following significant judgements and
accounting estimates were used in the preparation of the
financial statements:
Property, Plant and Equipment – Depreciation and
Valuation: You charge depreciation based on an estimate of
the Useful Economic Lives of assets for the majority of your
Property, Plant and Equipment (PPE). Your total
depreciation charge in 2013/14 was £2 million (2012/13
£1.74 million). This involves a degree of estimation. You also
value your PPE in accordance with your accounting policies
to ensure that the carrying value is true and fair. This
involves judgement and reliance on your internal valuers
who are charged with revaluing certain classes of assets
annually.
where you know there is a liability to be met which relates to
the current year. This involves a degree of estimation.
Accruals are not disclosed separately within the statement of
accounts.
Pensions: As above, you rely on the work of an actuary in
calculating these balances.
Bad Debt Provision: You provide for all debts that have
been outstanding for more than one year. Further judgement
is used to make additional provisions for riskier debts which
are not deemed to be collectable. The bad debt provision in
2013/14 for the General Fund was £0.79 million (2012/13
£0.72 million).
NNDR Provision for Appeals: With the transfer of the
risks of collection of business rates from central government
to the Council, a new provision has been calculated in year
for appeals to change the business rates paid. You have
calculated the provision amount based on historic data on
the percentage success of claims and the percentage
reduction of these successful claims multiplied by the
rateable value for the year. The value for the current year is
£0.4 million (2012/13 £0).
We have reviewed the judgements and accounting estimates
included in the accounts by management and have concluded
that these are reasonable.
Accruals: You raise accruals for expenditure incurred where
an invoice has not been raised or received at year end, but
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Management representations
The final draft of the representation letter that we ask
management to sign is attached in Appendix 1.
We have asked management in year to confirm the accuracy
of the list of related parties included as an appendix to the
representation letter.
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Related parties
In forming an opinion on the financial statements, we are
required to evaluate:


whether identified related party relationships and
transactions have been appropriately accounted for
and disclosed; and
whether the effects of the related party relationships
and transactions cause the financial statements to be
misleading.
We did not identify any matters during the course of our
work.
Audit independence
We are required to follow both the International Standard on
Auditing (UK and Ireland) 260 (Revised) “Communication
with those charged with governance”, UK Ethical Standard 1
(Revised) “Integrity, objectivity and independence” and UK
Ethical Standard 5 (Revised) “Non-audit services provided to
audited entities” issued by the UK Auditing Practices Board.
Relationships and Investments
We have not identified any potential issues in respect of
personal relationships with the Authority or investments in
the Authority held by individuals.
Employment of PricewaterhouseCoopers staff by the
Authority
We are not aware of any former PwC partners or staff being
employed, or holding discussions in respect of employment,
by the Authority as a director or in a senior management
position covering financial, accounting or control related
areas.
Business relationships
We have not identified any business relationships between
PwC and the Authority.
Together these require that we tell you at least annually
about all relationships between PricewaterhouseCoopers LLP
in the UK and other PricewaterhouseCoopers’ firms and
associated entities (“PwC”) and the Authority that, in our
professional judgement, may reasonably be thought to bear
on our independence and objectivity.
Relationships between PwC and the Authority
We are not aware of any relationships that, in our
professional judgement, may reasonably be thought to bear
on our independence and objectivity and which represent
matters that have occurred during the financial year on
which we are to report or up to the date of this document.
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Services provided to the Authority
The audit of the Statement of Accounts is undertaken in
accordance with the UK Firm’s internal policies. The audit is
also subject to other internal PwC quality control procedures
such as peer reviews by other offices.
Conclusion
We hereby confirm that in our professional judgement, as at
the date of this document:

Fees

The analysis of our audit and non-audit fees for the year
ended 31 March 2014 is included on 16. In relation to the
non-audit services provided, none included contingent fee
arrangements.
we comply with UK regulatory and professional
requirements, including the Ethical Standards issued
by the Auditing Practices Board; and
our objectivity is not compromised.
We would ask the Audit Committee to consider the matters
in this document and to confirm that they agree with our
conclusion on our independence and objectivity.
Services to Directors and Senior Management
PwC does not provide any services e.g. personal tax services,
directly to directors, senior management.
Rotation
It is the Audit Commission's policy that engagement leaders
at an audited body at which a full Code audit is required to be
carried out should act for an initial period of five years. The
Commission’s view is that generally the range of regulatory
safeguards it applies within its audit regime is sufficient to
reduce any threats to independence that may otherwise arise
at the end of this period to an acceptable level. Therefore, to
safeguard audit quality, and in accordance with APB Ethical
Standard 3, it will subsequently approve engagement leaders
for an additional period of up to no more than two years,
provided that there are no considerations that compromise,
or could be perceived to compromise, the auditor’s
independence or objectivity. As noted above, this year the
engagement leader for your audit has changed from Julian
Rickett to Harriet Aldridge helping provide continued
independence and objectivity.
Gifts and hospitality
We have not identified any significant gifts or hospitality
provided to, or received from, a member of Authority’s
Cabinet, senior management or staff.
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Annual Governance Statement
Internal Controls
Local Authorities are required to produce an Annual
Governance Statement (AGS), which is consistent with
guidance issued by CIPFA / SOLACE: “Delivering Good
Governance in Local Government”. The AGS was included in
the Statement of Accounts.
Accounting systems and systems of internal control
Management are responsible for developing and
implementing systems of internal financial control and to put
in place proper arrangements to monitor their adequacy and
effectiveness in practice. As auditors, we review these
arrangements for the purposes of our audit of the Statement
of Accounts and our review of the annual governance
statement.
We reviewed the AGS to consider whether it complied with
the CIPFA / SOLACE “Delivering Good Governance in Local
Government” framework and whether it is misleading or
inconsistent with other information known to us from our
audit work. We found no areas of concern to report in this
context.
Economy, efficiency and effectiveness
Our value for money code responsibility requires us to carry
out sufficient and relevant work in order to conclude on
whether the Authority has put in place proper arrangements
to secure economy, efficiency and effectiveness in the use of
resources.
Reporting requirements
We have to report to you any deficiencies in internal control
that we found during the audit which we believe should be
brought to your attention.
We have not identified any significant matters that we wish
to bring to your attention; a separate report will be produced
for management detailing other matters we have identified.
The Audit Commission guidance includes two criteria:


The organisation has proper arrangements in place for
securing financial resilience; and
The organisation has proper arrangements for
challenging how it secures economy, efficiency and
effectiveness.
We determine a local programme of audit work based on our
audit risk assessment, informed by these criteria and our
statutory responsibilities.
Subject to completion of our work on this area, we anticipate
issuing an unqualified value for money conclusion.
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Risk of fraud
International Standards on Auditing (UK&I) state that we, as
auditors, are responsible for obtaining reasonable assurance
that the financial statements taken as a whole are free from
material misstatement, whether caused by fraud or error.
The respective responsibilities of auditors, management and
those charged with governance are summarised below:
Our objectives are:


to identify and assess the risks of material
misstatement of the financial statements due to fraud;
to obtain sufficient appropriate audit evidence
regarding the assessed risks of material misstatement
due to fraud, through designing and implementing
appropriate responses; and
to respond appropriately to fraud or suspected fraud
identified during the audit.
Management’s responsibility
Management’s responsibilities in relation to fraud are:




to evaluate management’s identification of fraud risk,
implementation of anti-fraud measures and creation of
appropriate “tone at the top”; and
to investigate any alleged or suspected instances of
fraud brought to your attention.
Your views on fraud
Auditors’ responsibility


to design and implement programmes and controls to
prevent, deter and detect fraud;
to ensure that the entity’s culture and environment
promote ethical behaviour; and
to perform a risk assessment that specifically includes
the risk of fraud addressing incentives and pressures,
opportunities, and attitudes and rationalisation.
In our audit plan presented to the Audit Committee in March
2014 we enquired:




Whether you have knowledge of fraud, either actual,
suspected or alleged, including those involving
management?
What fraud detection or prevention measures (e.g.
whistle-blower lines) are in place in the entity?
What role you have in relation to fraud?
What protocols / procedures have been established
between those charged with governance and
management to keep you informed of instances of
fraud, either actual, suspected or alleged?
In presenting this report to you we ask for your confirmation
that there have been no changes to your view of fraud risk
and that no additional matters have arisen that should be
brought to our attention. A specific confirmation from
management in relation to fraud is included in the letter of
representation.
Responsibility of the Audit Committee
Your responsibility as part of your governance role is:
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Conditions under which fraud may occur
Management or other employees have an incentive
or are under pressure
Incentive / pressure
Why
commit
fraud?
Opportunity
Rationalisation/attitude
Circumstances exist that provide opportunity –
ineffective or absent control, or management
ability to override controls
Culture or environment enables management to
rationalise committing fraud – attitude or values
of those involved, or pressure that enables them
to rationalise committing a dishonest act
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Fees update
Fees update for 2013/14
We reported our fee proposals in our plan.
Our fees charged were therefore:
Statement of Accounts (including whole of government
accounts and Value for Money Conclusion)
Fee variation (pending Audit Commission approval)
2013/14
forecast
outturn
2013/14
fee proposal
2012/13
fee actual
71,250
71,250
74,350
3,216
-
--
29,568
33,600*
36,000
-
-
2,700
6,627
104,034
104,850
119,677
Grant Certification fee:
BEN01 Housing and Council Tax Benefit Scheme
LA01 National Non Domestic Return
Fee variation (extended testing following error identification)
TOTAL
*Since our annual audit plan, the Audit Commission has further reduced the Grant certification fee from £33,600 which
was reported to you then, to £29,568.
As we anticipated when we presented our annual audit plan to you, the Audit Commission has reduced the certification
arrangements for Housing and Council Tax Benefit Grant Claim and have also removed the requirement for certification of
the LA01 (National Non Domestic Rates) claim.
These changes have resulted in additional testing required over the Council Tax Benefit expenditure and Business Rates
income in the statement of accounts as we are no longer able to rely on the work done over the certification of these as in
previous years.
We are currently seeking approval from the Audit Commission for a fee variation of £3,216 and will update the Committee
on this once a response is received.
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Appendices
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Appendix 1: Letter of Representation
Savannah house
3 Ocean Way
Ocean Village
Southampton
SO14 3TJ
Dear Sirs
Representation letter – audit of North Norfolk District Council’s (the Council) Statement of Accounts for the
year ended 31 March 2014
Your audit is conducted for the purpose of expressing an opinion as to whether the Statement of Accounts of the Council give a
true and fair view of the affairs of the Council as at 31 March 2014 and of its surplus and cash flows for the year then ended
and have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in
the United Kingdom 2013/14 supported by the Service Reporting Code of Practice 2013/14.
I acknowledge my responsibilities as Chief Financial Officer for preparing the Statement of Accounts as set out in the
Statement of Responsibilities for the Statement of Accounts. I also acknowledge my responsibility for the administration of
the financial affairs of the Council and that I am responsible for making accurate representations to you.
I confirm that the following representations are made on the basis of enquiries of other chief officers and members of the
Council with relevant knowledge and experience and, where appropriate, of inspection of supporting documentation sufficient
to satisfy myself that I can properly make each of the following representations to you.
I confirm, to the best of my knowledge and belief, and having made the appropriate enquiries, the following representations:
Statement of Accounts

I have fulfilled my responsibilities for the preparation of the Statement of Accounts in accordance with the
CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2013/14 supported by the
Service Reporting Code of Practice 2013/14; in particular the Statement of Accounts give a true and fair view in
accordance therewith.
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

All transactions have been recorded in the accounting records and are reflected in the Statement of Accounts.
Significant assumptions used by the Council in making accounting estimates, including those surrounding
measurement at fair value, are reasonable.
All events subsequent to the date of the Statement of Accounts for which the CIPFA/LASAAC Code of Practice on
Local Authority Accounting in the United Kingdom 2013/14 requires adjustment or disclosure have been adjusted or
disclosed.

Information Provided

I have taken all the steps that I ought to have taken in order to make myself aware of any relevant audit information
and to establish that you, the Council's auditors, are aware of that information.
I have provided you with:
 access to all information of which I am aware that is relevant to the preparation of the Statement of Accounts such
as records, documentation and other matters, including minutes of the Council and its committees, and relevant
management meetings;
 additional information that you have requested from us for the purpose of the audit; and
 unrestricted access to persons within the Council from whom you determined it necessary to obtain audit
evidence.
So far as I am aware, there is no relevant audit information of which you are unaware.


Accounting policies
I confirm that I have reviewed the Council’s accounting policies and estimation techniques and, having regard to the possible
alternative policies and techniques, the accounting policies and estimation techniques selected for use in the preparation of
Statement of Accounts are appropriate to give a true and fair view for the Council's particular circumstances.
Fraud and non-compliance with laws and regulations
I acknowledge responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud.
I have disclosed to you:


the results of our assessment of the risk that the Statement of Accounts may be materially misstated as a result of
fraud.
all information in relation to fraud or suspected fraud that we are aware of and that affects the Council and involves:
PwC  19
29
–
–
–
management;
employees who have significant roles in internal control; or
others where the fraud could have a material effect on the Statement of Accounts.

all information in relation to allegations of fraud, or suspected fraud, affecting the Council’s Statement of Accounts
communicated by employees, former employees, analysts, regulators or others.
 all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should
be considered when preparing Statement of Accounts.
I am not aware of any instances of actual or potential breaches of or non-compliance with laws and regulations which provide
a legal framework within which the Council conducts its business and which are central to the Council’s ability to conduct its
business or that could have a material effect on the Statement of Accounts.
I am not aware of any irregularities, or allegations of irregularities including fraud, involving members, management or
employees who have a significant role in the accounting and internal control systems, or that could have a material effect on
the Statement of Accounts.
Related party transactions
I confirm that the attached appendix to this letter is a complete list of the Council’s related parties. All transfer of resources,
services or obligations between the Council and these parties have been disclosed to you, regardless of whether a price is
charged. We are unaware of any other related parties, or transactions between disclosed related parties.
Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the
requirements of Section 3.9 of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom
2013/14.
We confirm that we have identified to you all senior officers, as defined by the Accounts and Audit Regulations 2011, and
included their remuneration in the disclosures of senior officer remuneration.
Employee Benefits
I confirm that we have made you aware of all employee benefit schemes in which employees of the Council participate.
Contractual arrangements/agreements
All contractual arrangements (including side-letters to agreements) entered into by the Council have been properly reflected
in the accounting records or, where material (or potentially material) to the statement of accounts, have been disclosed to you.
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30
The Council has complied with all aspects of contractual agreements that could have a material effect on the Statement of
Accounts in the event of non-compliance. There has been no non-compliance with requirements of regulatory authorities that
could have a material effect on the Statement of Accounts in the event of non-compliance.
I have disclosed all material agreements that have been undertaken by the Council in carrying on its business.
Provisions

Provisions for depreciation and diminution in value including obsolescence have been made against property, plant and
equipment on the bases described in the statement of accounts and at rates calculated to reduce the net book amount of
each asset to its estimated residual value by the end of its probable useful life in the authority’s business. In this respect I
am satisfied that the probable useful lives have been realistically estimated and that the residual values are expressed in
current terms.

Full provision has been made for all liabilities at the balance sheet date including guarantees, commitments and
contingencies where the items are expected to result in significant loss. Other such items, where in my opinion provision
is unnecessary, have been appropriately disclosed in the statement of accounts.
Litigation and claims
I have disclosed to you all known actual or possible litigation and claims whose effects should be considered when preparing
the statement of accounts and such matters have been appropriately accounted for and disclosed in accordance with the
CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2013/14.
Taxation
I have complied with UK taxation requirements and have brought to account all liabilities for taxation due to the relevant tax
authorities whether in respect of any direct tax or any indirect taxes. I am not aware of any non-compliance that would give
rise to additional liabilities by way of penalty or interest and I have made full disclosure regarding any Revenue Authority
queries or investigations that we are aware of or that are ongoing.
In particular:


In connection with any tax accounting requirements, I am satisfied that our systems are capable of identifying all
material tax liabilities and transactions subject to tax and have maintained all documents and records required to be
kept by the relevant tax authorities in accordance with UK law or in accordance with any agreement reached with such
authorities.
I have submitted all returns and made all payments that were required to be made (within the relevant time limits) to
the relevant tax authorities including any return requiring us to disclose any tax planning transactions that have been
undertaken the Council’s benefit or any other party’s benefit.
PwC  21
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
I am not aware of any taxation, penalties or interest that are yet to be assessed relating to either the Council or any
associated company for whose taxation liabilities the Council may be responsible.
Pension fund assets and liabilities
All known assets and liabilities including contingent liabilities, as at the 31 March 2014, have been taken into account or
referred to in the Statement of Accounts.
Details of all financial instruments, including derivatives, entered into during the year have been made available to you. Any
such instruments open at the 31 March 2014 have been properly valued and that valuation incorporated into the Statement of
Accounts.
The pension fund has satisfactory title to all assets and there are no liens or encumbrances on the pension fund's assets.
Pension fund registered status
I confirm that the Local Government Pension Scheme is a Registered Pension Scheme. We are not aware of any reason why
the tax status of the scheme should change.
Bank accounts
I confirm that I have disclosed all bank accounts to you including those that are maintained in respect of the pension fund.
Subsequent events
There have been no circumstances or events subsequent to the period end which require adjustment of or disclosure in the
statement of accounts or in the notes thereto.
Using the work of experts
I agree with the findings of our Internal Valuer, expert in evaluating the value of our non-current assets and have adequately
considered the competence and capabilities of the experts in determining the amounts and disclosures used in the preparation
of the Statement of Accounts and underlying accounting records. The Council did not give or cause any instructions to be
given to experts with respect to the values or amounts derived in an attempt to bias their work, and I am not otherwise aware
of any matters that have had an impact on the objectivity of the experts.
Assets and liabilities
 The Council has no plans or intentions that may materially alter the carrying value and where relevant the fair value
measurements or classification of assets and liabilities reflected in the Statement of Accounts.
PwC  22
32
 In my opinion, on realisation in the ordinary course of the business the current assets in the balance sheet are expected to
produce no less than the net book amounts at which they are stated.
 The Council has no plans or intentions that will result in any excess or obsolete inventory, and no inventory is stated at an
amount in excess of net realisable value.
 The Council has satisfactory title to all assets and there are no liens or encumbrances on the Council's assets, except for
those that are disclosed in the Statement of Accounts.
 I confirm that we have carried out impairment reviews appropriately, including an assessment of when such reviews are
required, where they are not mandatory. I confirm that we have used the appropriate assumptions with those reviews.
 Details of all financial instruments, including derivatives, entered into during the year have been made available to you.
Any such instruments open at the year-end have been properly valued and that valuation incorporated into the statement
of accounts. When appropriate, open positions in off-balance sheet financial instruments have also been properly
disclosed in the Statement of Accounts.
Regarding the revaluation of land and buildings, an accounting estimate that was recognised in the Statement of Accounts:
 We used appropriate measurement processes, including related assumptions and models, in determining the accounting
estimate in the context of the CIPFA Code of Practice on Local Authority Accounting 2013/14. Measurement processes
were consistently applied from year to year.
 The assumptions appropriately reflect our intent and ability to carry out specific courses of action on behalf of the District
Council, where relevant to the accounting estimates and disclosures.
 Disclosures related to accounting estimates are complete and appropriate under the CIPFA Code of Practice on Local
Authority Accounting 2013/14.
 No subsequent event requires adjustment to the accounting estimates and disclosures included in the financial statements.
Financial Instruments

All embedded derivatives have been identified and appropriately accounted for under the CIPFA/LASAAC Code of
Practice on Local Authority Accounting in the United Kingdom 2013/14.

Where hedging relationships have been designated as either firm commitments or highly probable forecast transactions, I
confirm that our plans and intentions are such that these relationships qualify as genuine hedge arrangements.

Where fair values have been assigned to financial instruments, I confirm that the valuation techniques, the inputs to those
techniques and assumptions that have been made are appropriate and reflect market conditions at the balance sheet date,
and are in line with the business environment in which we operate.
PwC  23
33
Retirement benefits
 All retirement benefits that the Council is committed to providing, including any arrangements that are statutory,
contractual or implicit in the Council’s actions, wherever they arise, whether funded or unfunded, approved or
unapproved, have been identified and properly accounted for and/or disclosed.
 All settlements and curtailments in respect of retirement benefit schemes have been identified and properly accounted for.
 The following actuarial assumptions underlying the valuation of retirement benefit scheme liabilities are consistent with
my knowledge of the business and in my view would lead to the best estimate of the future cash flows that will arise under
the scheme liabilities:
Pension Increase Rate
2.8%
Salary Increase Rate
3.6%
Discount Rate
4.3%
Average future life expectancies at age 65
Men
Women
Current Pensioners
22.1 years
24.3 years
Future Pensioners
24.5 years
26.9 years
Items specific to Local Government




I confirm that the Council does not have plans to implement any redundancy/early retirement programmes for which
we should have made provision in the Statement of Accounts.
I confirm that the Council has determined a prudent amount of revenue provision for the year under the Prudential
Framework.
I confirm that the Council has determined a proper application of the statutory provisions for the neutralisation of the
impact of Single Status provisions on the General Fund balance.
I confirm that the Council has determined a proper application of the statutory provisions for the treatment of leases
that have changed status on transition to IFRS.
PwC  24
34

I confirm that the Council has determined a proper application of the statutory provisions for the neutralisation of the
impact of accumulating compensated absences on the General Fund balance.
........................................
Chief Financial Officer
For and on behalf of North Norfolk District Council
Date ……………………
PwC  25
35
Appendix 1 - Related parties and related party transactions
Arts Council
Big Lottery
Cabinet Office
Cromer Hall Estate and Farms
Department for Communities and Local
Government
Department for Environment, Food and Rural
Affairs
Department for Work and Pensions
Department of Energy and Climate Change
Dereham, Watton and Holt Citizens Advice
Bureau
Environment Agency
Food Standards Agency
Forestry Commission
Griffon Area Partnership
HM Revenue and Customs
Kings
Local Authority Mutual Investment Fund
Local Government Pension Scheme
Lynn and West Norfolk Borough Council
Norfolk County Council
Norfolk Police and Crime Commissioner and
Chief Constable
Sport England
Victory Housing Trust
Wells Maltings Trust
Parish Councils:
Alby with Thwaite
Aldborough and Thurgarton
Antingham
Ashmanhaugh
Aylmerton
Baconsthorpe
Bacton
Barsham
Barton Turf
Beckham East/West
Beeston Regis
Binham
Blakeney
Hickling
High Kelling
Hindolveston
Hindringham
Holkham
Holt
Honing
Horning
Horsey
Hoveton
Ingham
Ingworth
Itteringham
Scottow
Sculthorpe
Sea Palling
Sheringham
Sidestrand
Skeyton
Sloley
Smallburgh
Southrepps
Stalham
Stibbard
Stiffkey
Stody
PwC  26
36
Bodham
Brinton
Briston
Catfield
Cley
Colby
Corpusty and Saxthorpe
Cromer
Dilham
East Ruston
Edgefield
Erpingham
Fakenham
Felbrigg
Felmingham
Field Dalling
Fulmodestone
Gimingham
Great Snoring
Gresham
Gunthorpe
Hanworth
Happisburgh
Helhoughton
Hempstead
Hempton
Kelling
Kettlestone
Knapton
Langham
Lessingham
Letheringsett with Glandford
Little Barningham
Little Snoring
Ludham
Matlaske
Melton Constable
Morston
Mundesley
Neatishead
North Walsham
Northrepps
Overstrand
Paston
Plumstead
Potter Heigham
Pudding Norton
Raynham
Roughton
Runton
Ryburgh
Salthouse
Suffield
Sustead
Sutton
Swafield
Swanton Abbott
Swanton Novers
Tattersett
Thornage
Thorpe Market
Thursford
Trimingham
Trunch
Tunstead
Upper Sheringham
Walcott
Walsingham
Warham
Wells-next-the-Sea
Weybourne
Wickmere
Wighton
Witton
Wiveton
Wood Norton
Worstead
PwC  27
37
PwC  28
38
In the event that, pursuant to a request which North Norfolk District Council has received under the Freedom of Information Act 2000, it is required to disclose any information contained in this
report, it will notify PwC promptly and consult with PwC prior to disclosing such report. North Norfolk District Council agrees to pay due regard to any representations which PwC may make in
connection with such disclosure and North Norfolk District Council shall apply any relevant exemptions which may exist under the Act to such report. If, following consultation with PwC, North
Norfolk District Council discloses this report or any part thereof, it shall ensure that any disclaimer which PwC has included or may subsequently wish to include in the information is reproduced
in full in any copies disclosed.
This document has been prepared only for North Norfolk District Council and solely for the purpose and on the terms agreed through our contract with the Audit Commission. We accept no
liability (including for negligence) to anyone else in connection with this document, and it may not be provided to anyone else.
© 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate
legal entity. Please see www.pwc.com/structure for further details.
130610-142627-JA-UK
39
Agenda item 9
North Norfolk District Council
Draft Protocol for liaison between internal and external auditors 2014/15
August 2014
40
Contents
Introduction
1
Background
2
Planning and Liaison
3
Reliance on the work performed by Internal Audit
5
Appendix A: Sample Sizes
8
10
Appendix B: Summary of Key Internal Financial Controls
In March 2010 the Audit Commission issued a revised version of the ‘Statement of responsibilities of auditors and of audited bodies’. It is available from the Chief
Executive of each audited body and on the Audit Commission’s website.
The purpose of the statement is to assist auditors and audited bodies by explaining where the responsibilities of auditors begin and end and what is to be expected
of the audited body in certain areas.
This report is prepared in the context of this Statement.
Reports and letters prepared by appointed auditors (PwC in this instance) and addressed to members or officers are prepared for the sole use of the audited body
and no responsibility is taken by auditors to any Member or officer in their individual capacity or to any third party.
41
Introduction
1
This document sets out the proposed working relationship between the PricewaterhouseCoopers LLP (PwC) audit team and the internal auditors of North
Norfolk District Council, (referred to as ‘Internal Audit’).
2
The purpose of this document is to set out the general approach and principles to be put in place to facilitate the delivery of a managed audit. This will aid
joined-up working, reducing duplication of audit work.
3
This document sets out:
4

Confirmation of the liaison arrangements between Internal and External Audit;

The requirements to be followed in order that PwC can place the desired level of assurance on the work of internal audit;

PwC requirements on sample sizes; and

A detailed summary of controls and suggested testing that PwC consider to be key in proving the internal financial control systems.
These arrangements are subject to regular review by both parties and amendments can be made subject to mutual agreement.
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42
Background
5
North Norfolk District Council (“the Council”) has a responsibility to put in place proper arrangements for the governance and stewardship of its resources.
Internal Audit is an important part of these arrangements. In the course of discharging its responsibilities, Internal Audit is required to deliver a service
which meets the professional standards laid down in the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom 2006 and
CIPFA’s published Statement on the Role of the Head of Internal Audit in Public Service Organisations 2010.
6
Under the Audit Commission Act 1998 and the Code of Audit Practice the external auditor appointed by the Audit Commission is responsible for reviewing
and reporting on the Council’s:

Financial Statements and Annual Governance Statement;

Arrangements for securing economy, efficiency and effectiveness in its Use of Resources: and,

Grant certification (if required).
7
Internal Audit evaluates the effectiveness of the control environment in achieving the organisation’s objectives. In part fulfilment of these responsibilities,
Internal Audit carry out reviews of systems and key controls, including evaluation and testing of those controls.
8
The external auditor does not have a role in directing the work of Internal Audit, nor does it have a direct role in the quality assurance process.
9
Although internal and external auditors carry out their work with different objectives in mind, many of the processes are similar in respect of the review of
the controls in place over the Council’s financial systems. Therefore, it is appropriate that they should work together closely. Every effort is made to ensure
effective co-operation between the two bodies, in order to minimise duplication of effort and maximise the benefits and value achieved from the Council’s
total audit resource. An open and constructive relationship is thus cultivated between the two bodies, audit plans are shared and wherever possible, reliance
is placed upon each other’s work.
10 The Audit Commission emphasises this need for co-operation in a number of its publications:

The Code of Audit Practice 2005 states that external auditors should establish effective co-ordination arrangements between internal and external
audit and seek to place maximum reliance on the work of Internal Audit wherever possible;

‘It Takes Two’ (published in 1996) is a good practice guide to assessing and improving co-operation between internal and external auditors; and

The Managed Audit Good Practice Guide 1995 promotes a more efficient audit by encouraging reliance on the control environment, which includes
Internal Audit.
2
43
Planning and Liaison
11 To facilitate effective planning and liaison between PwC and Internal Audit the following communications will be made:

Quarterly liaison meetings;

Communication of the respective Audit Plans;

Informing the other party of significant changes in the audit approach compared to the Audit Plan, including delays to the scheduled/expected work
plan;

Forwarding of all finalised external audit reports arising as a result of work performed and internal audit reports relating to the Council’s
fundamental financial systems (see appendix B) and any other reports considered to be relevant once finalised;

Communication of the annual reports/letters;

Communication of fraud investigations and alerts initiated on a timely basis; and

Significant concerns regarding the internal controls or financial performance of the Council.
12 Internal Audit will also provide PwC with the following upon request:

Terms of Reference;

The risk analysis on which they have based their programme of work;

Statement of assurance/opinion on the Council’s systems of internal control, as reflected in the Council’s Annual Governance Statement; and

Audit files.
13 All communications will be made on a timely basis.
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44
14 The key points of contact will be as follows:
Name
Position
Email Address
North Norfolk District Council
Sheila Oxtoby
Chief Executive
sheila.oxtoby@north-norfolk.gov.uk
Karen Sly
Head of Finance
karen.sly@north-norfolk.gov.uk
Emma Hodds
Internal Audit Consortium
Manager
ehodds@s-norfolk.gov.uk
Simon Craven
Senior Internal Auditor
scraven@s-norfolk.gov.uk
Internal Audit
PricewaterhouseCoopers LLP
Harriet Aldridge
Engagement Leader
harriet.c.aldridge@uk.pwc.com
Aphrodite
Antoniades
Engagement Manager
Aphrodite.antoniades@uk.pwc.com
Louise Shaw
Engagement Team Leader
Louise.shaw@uk.pwc.com
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45
Reliance on the work performed by Internal Audit
15 In accordance with International Standard on Auditing (ISA) 610, in order to place reliance on the work performed by Internal Audit, it will be necessary for
PwC to review the working papers and reports of Internal Audit and re-perform testing on a sample basis. To facilitate this, PwC will need to satisfy itself
that:

The scope of the work is appropriate;

Audit programmes are adequate;

Working papers adequately document work performed;

Conclusions are appropriate in the circumstances;

Reports are consistent with the results of work performed;

Any exceptions or unusual matters are properly resolved; and

Supervision and review within Internal Audit appears to have been appropriately carried out (e.g. review by senior audit personnel of work
performed).
16 PwC will also need to ensure that the conclusions made by Internal Audit have been reached using testing sample sizes that are equal to, or in excess of, the
sample sizes PwC would have needed to apply to reach the same conclusions. PwC provide further guidance as to the sample sizes required and this is
included in Appendix A.
17 The degree to which PwC can place reliance on the work of Internal Audit is also affected by the timing and/or completion of the audits. In order that PwC
can place reliance on the work of Internal Audit, the timetables detailed below will be adhered to.
18 Under the Audit Commission’s Code of Audit Practice (“the Code”) the key aspect of PwC’s work is relating to the accounts, including a review of the
Statement of Internal Control.
Accounts
19 As detailed in PwC’s Audit Plan, the accounts audit is carried out in accordance with the Accounts Code objective. It requires PwC to comply with the
International Standards on Auditing (ISAs) (UK & Ireland) issued by the Auditing Practices Board (APB). PwC plan and perform their audit so as to be able
to provide reasonable assurance that the financial statements are free from material misstatement and give a true and fair view. PwC use professional
judgement to assess what is material. This includes consideration of the amount and nature of transactions.
20 PwC’s audit approach is based on a thorough understanding of the Council’s business and is risk-driven. It first identifies and then concentrates resources on
5
46
areas of higher risk and issues of concern to the Council. This involves breaking down the accounts into components. PwC assess the risk characteristics of
each component to determine the audit work required.
21 PwC adopts a top-down, controls-based approach to the audit, where a thorough drill down of the management structure and review key business processes
is carried out. From this, PwC focus their work on verifying, evaluating and validating, where possible, the controls management use to ascertain how much
assurance can be drawn from them. The work on the Council’s key controls is supplemented with detailed analytical procedures and additional substantive
tests as necessary.
22 It is the review of key business systems and controls on which PwC will seek to place reliance on the work of Internal Audit wherever possible. To enable this,
Internal Audit will complete this work prior to the commencement of PwC’s initial fieldwork. Estimates are that this will be in Spring 2013. Should the timing
need to be brought forward or changed, this would be discussed and agreed as part of the liaison meetings.
23 The most significant matters on which PwC plan to place reliance on the work of Internal Audit are:

The understanding, evaluating and validating of the controls over the following key financial systems, including:

Purchasing and payables/creditors;

Income receivable/debtors;

Payroll and pensions;

Fixed assets;

Cash/Treasury Management;

Housing and Council Tax Benefits;

Council Tax;

National Non-Domestic Rates;

General ledger maintenance;

Budgetary controls - including budget setting and monitoring; and

Car parks income.

Review of the assurance given by Internal Audit in relation to the Annual Governance Statement; and

Assessment of fraud risk (as required under ISA240). This will primarily relate to the review of any assessment undertaken by internal audit to
inform their programme of work and review/discussion of the results of any internal audit reviews and/or investigations in so far as they relate to the
risk of fraud within the Council.
24 Appendix B details the key controls Internal Audit will test as part of the work on the Council’s key financial systems. If these were not tested for any reason
then PwC would need to perform additional work to gain the audit assurance required for PwC’s opinion on the Council’s financial statements.
6
47
Grant certification
25 At present there are no formal arrangements for joint working in respect of grant certification. However a dialogue will be maintained in order to share
matters of concern so that both parties can consider them when planning work in this area.
Fraud
26 Internal audit will notify PwC promptly of all frauds exceeding £10,000. PwC will, in turn, notify the Audit Commission of such frauds including any cases of
corruption or any fraud cases of particular interest of complexity, via an AF70 for submission to the Audit Commission Counter-Fraud Unit. If appropriate,
PwC will offer support and assistance to Internal Audit in investigating significant frauds.
27 In the event that PwC suspect a fraud, PwC will pass the case over to the control of Internal Audit who will then be expected to oversee the investigation of
the case and keep PwC informed of progress. PwC reserve the right to retain control over a fraud investigation, although this is only likely in exceptional
circumstances.
7
48
Appendix A: Sample Sizes
PwC Sample sizes
In relation to manually performed controls, the following sample size ranges should be used:
Frequency of Control
Annual
Quarterly
Monthly
Weekly
Daily
Multiple times a day
Number of items to test for
low assurance
Number of items to test for
medium assurance
1
2
3-4
10
30
45
2
5
20
25
Number of items to test for high
assurance
5
15
40
60
Frequency of Control
The reference to “items” refers to the number of occurrences for the control. For example, in relation to testing bank reconciliations where the control is
undertaken monthly, PwC would expected either 2, 3, 4 or 5 reconciliations to be tested dependent on the level of assurance required (see below) from
undertaking the test.
Where it is not possible to ascertain the frequency of the control as this is done on an ad-hoc basis, PwC would expect a yearly estimate, based on past
performance, to be calculated to determine the frequency of the control. For example, at the time of the audit review in October, 37 individuals joined the Council
in the period 1 April – 30 September. An expectation of the yearly number of starters would therefore be 37 x 2 = 74. This equates to between a weekly, (control
operates approximately 52 times a year), and a daily, (control operates approximately 260 times a year), control. Therefore, in testing the controls surrounding
starters on the payroll system PwC would expect the frequency of the control to be weekly (nearest approximation to the frequency that the control has/will have
operated during the year).
8
49
Level of Assurance
The level of assurance required from the audit testing and therefore the choice of the number of items to test in relation to a specific control will be based on:

The significance of the risk addressed by the control, (the greater the risk, the greater assurance is required);

The importance of the control to addressing the risk, (the greater the importance, the greater the assurance required);

The degree to which the control is cumulative, (cumulative controls will lower the assurance required);

The relevance and reliability of the audit evidence to be obtained in supporting that the control prevents, or detects and corrects, material
misstatements at the control assertion level. (The assertions are: completeness, accuracy, validity and restricted access). For example third party
evidence used in testing the control will lower the assurance required;

The extent to which audit evidence is obtained from tests of other controls related to the assertion. Therefore, if other controls tested verify the
accuracy of items, it may be considered that a items for a lower level of assurance would be appropriate for testing if the control addresses this same
audit assertion; and

The amount of assurance required from the testing of the control (e.g. for a new control a high level of assurance would be considered appropriate).
Documentation of sample sizes
In all cases, the justification for the sample sizes chosen for testing should be documented.
Choosing a sample
Sample sizes should be chosen from across the whole financial year, up to the date of testing, to ensure that appropriate consideration is given to whether the
control is in place and working effectively over this period.
Identification of Errors
If errors or uncertainties are identified within the controls testing undertaken an extended sample should be chosen for testing to focus further on the specific
area of risk identified.
.
9
50
Appendix B: Summary of Key Internal Financial Controls
The following tables set out the key controls that PwC seek to understand and evaluate on an annual basis to support the external audit work under the Code of
Audit Practice. The tables do not detail a complete list of all controls within the financial system and therefore it may be appropriate to supplement these with
further controls to meet Internal Audit objectives.
The tables cover the following areas:

Purchasing and payables/creditors;

Income receivable/debtors;

Payroll and pensions;

Fixed assets;

Cash/Treasury Management;

Housing and Council Tax Benefits;

Council Tax;

National Non-Domestic Rates;

General ledger maintenance;

Budgetary controls - including budget setting and monitoring; and

Car parks income.
10
51
Purchasing and payables/creditors
Key Control
Type of testing expected
Appropriately authorised orders should be raised for all purchases.
Review of orders to check for appropriate authorisation.
Invoices received should be matched to orders and GRNs (where
applicable) for accuracy and confirmation of receipt of the goods/service.
Review of invoices against orders and GRNs.
Invoices should be appropriately authorised.
Review of invoices to check for appropriate authorisation.
Invoices input into the system for payment should be checked for
accuracy.
Review of information recorded within the payments system back to the
invoice to ensure accuracy of information recorded.
BACS payments should be appropriately authorised.
Review a sample of BACS runs to ensure they have been appropriately
authorised.
Creditor control accounts/purchasing system to general ledger system
interfaces should be reconciled and all reconciling items should be
identified, investigated and resolved on a timely basis. An independent
review of the reconciliation should be performed on a timely basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for ordering and those responsible for payments.
Review of access rights to the purchasing and payables system.
Amendments to standing data (eg new vendors, suppliers’ details) should
be appropriately authorised and accurately input on to the system.
Obtain a list of amendments made to supplier’s details (from the system)
and check against appropriate supporting documentation to confirm
accuracy of change to data and that the change was appropriately
authorised.
Tendering procedures should be followed for all purchases above the
limit set.
Review of procedures and testing to ensure that procedures were
followed.
11
52
Income receivable/debtors
Key Control
Type of testing expected
Invoice requisitions should be appropriately authorised and raised in a
timely manner.
Review of invoice requisitions to check for appropriate authorisation.
Invoices raised should be checked to invoice requisition to ensure
accuracy and completeness of invoices raised.
Check of invoices raised to invoice requisitions to agree value of invoice
raised.
Receipt of income should be reconciled to the amount banked.
Review a sample of income reconciliations to ensure they have been
appropriately completed and reviewed.
Debtor control accounts/receivables system to general ledger system
interfaces should be reconciled and all reconciling items should be
identified, investigated and resolved on a timely basis. An independent
review of the reconciliation should be performed on a timely basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for raising invoices and those responsible for recording
income.
Review of access rights to the receivables system.
Refunds/credit notes should only be issued following the appropriate
authorisation.
Review of credit notes to check for appropriate authorisation.
Appropriate procedures should be in place for monitoring the
recoverability of aged debts.
Document the procedures undertaken to recover aged debts.
Reports used for the purposes of monitoring debts are accurately
produced.
Review of a sample of reports to check for accuracy.
Bad debts should be written off after appropriate authorisation per the
financial regulations.
Testing of write-offs to confirm the appropriate authorisation was
obtained prior to write-off.
Testing of aged debts to ensure that appropriate procedures have been
followed.
12
53
Payroll and Pensions
Key Control
Type of testing expected
New starter forms should be appropriately authorised by management
and completed by the HR department and employee (based on the
employment contract) prior to input into the payroll system. Input of
details into the payroll system should be checked for accuracy.
Testing new starters per the system back to starter forms and employee
contracts to confirm appropriate authorisation, the accuracy of the input
into the system and appropriately completed supporting documentation
exists.
Leaver forms must be appropriately authorised and accurately input into
the payroll system.
Testing leaver forms to ensure that they have been correctly authorised
and input into the payroll system.
Amendments to standing data must be authorised by the employee and
appropriate manager and accurately input into the payroll system
Testing amendments per the system back to amendment forms to
confirm the accuracy of the change on the system and that the
amendments have been appropriately authorised.
Payroll control accounts/payroll system to general ledger system
interfaces should be reconciled and all reconciling items should be
identified, investigated and resolved on a timely basis. An independent
review of the reconciliation should be performed on a timely basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Payroll and pensions are appropriately authorised prior to payment.
Testing monthly payrolls to ensure that they have been correctly
authorised prior to payment.
Managers should be asked to verify the completeness and accuracy of
employee information on the payroll system on at least a quarterly basis.
Review the positive pay returns issued and received, ensuring all have
been received and action taken as appropriate.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for inputting details and those authorising payments.
Review of access rights to the payroll system.
13
54
Fixed assets
Key Control
Type of testing expected
All capital additions should be appropriately authorised in accordance
with procedures.
Testing of capital additions to ensure appropriate authorisation has been
obtained.
All capital disposals should be appropriately authorised in accordance
with procedures.
Testing of capital disposals to ensure appropriate authorisation has been
obtained.
The fixed asset register is reconciled to the general ledger on a regular
basis. The reconciliation should be signed and dated by the preparer as
evidence of completion. An independent review of the reconciliation
should be performed and evidenced by the reviewer (signature and date).
Testing of the reconciliations between the fixed asset register and the
general ledger.
Restricted access to the fixed asset register should be ensured.
Review of access rights to the fixed asset register.
Capital expenditure should be monitored and controlled against budget.
The budget set should be realistic and based upon appropriate
assumptions.
Review the processes in place for setting and agreeing the capital budget.
Review the controls in place to monitor and control performance against
the capital budget.
14
55
Cash and Treasury Management
Key Control
Type of testing expected
Bank reconciliations for all bank accounts should be performed on a
monthly basis and all reconciling items fully identified, investigated and
resolved as necessary. The reconciliation should be signed and dated by
the preparer as evidence of completion. An independent review of the
reconciliation should be performed and evidenced by the reviewer
(signature and date).
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for purchasing and those responsible for payments.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Review of access rights to the cash receipting system.
15
56
Housing and Council Tax Benefits
Key Control
Type of testing expected
Claimant details are input correctly and the appropriate supporting
information obtained.
Test a sample of claimants and ensure their details have been correctly
entered onto the benefits system and appropriate supporting evidence
has been retained.
Review the system in place for sample checking claims processed to
ensure operating effectively.
Backdated claims are supported by a backdating form and are subject to
authorisation by the backdating officer to ensure this is performed in
accordance with the rules.
Test a sample of backdated claims and ensure appropriate evidence has
been retained of the backdating officer’s review and that backdating was
appropriately awarded.
BACS payments should be appropriately authorised.
Review a sample of BACS runs to ensure they have been appropriately
authorised.
Cheques should be appropriately authorised.
Review a sample of cheque runs to ensure they have been appropriately
authorised.
All payments over the Council approved limit should be subject to
independent review to ensure accuracy of the payment.
Test a sample of payments exceeding the approved limit and ensure there
is evidence of review.
Overpayments are checked to ensure they have been accurately classified
and calculated.
Test a sample of overpayments to ensure correctly classified and
calculated.
Overpayments per the benefits system are reconciled to the debtors
system.
Test a sample of reconciliations between the benefits and debtors system
to ensure overpayments have been correctly raised.
The recovery of overpayments is monitored and action taken to collect
debts.
Review the process for monitoring overpayment recovery and ensure
action is taken on a timely basis to collect debts outstanding.
16
57
Key Control
Type of testing expected
The benefits system is reconciled to the Council Tax and General Ledger
systems on at least a monthly basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for inputting details and those authorising payments.
Review of access rights to the benefits system.
17
58
Council Tax
Key Control
Type of testing expected
The Council ensures the record of properties as per the Council Tax (CT)
system reconciles to the list of properties notified to them by the
Valuation Office.
Test a sample of reconciliations between the CT system and the Valuation
Office reports/notifications.
CT exemptions/discounts are reviewed on a weekly basis to identify
exemptions due for review in the next 7 days, exemptions which have no
end date and exemptions passed their review date but which have not
been reviewed.
Test a sample of exemption reports and ensure evidence of review and
appropriate follow-up of exceptions.
There is a sample check of all CT processing.
Review evidence of sample checking and ensure being performed. Reperform a sample of the checking to ensure being performed to the
required standard.
CT precepts per property band are input onto the CT system before the
start of the financial year and reviewed for accuracy by a senior officer.
Obtain evidence that the precepts entered onto the CT system have been
evidenced as reviewed by a senior officer. Agree the precepts to those
approved by the Council and notified by the parish and County Councils
and Police Authority.
A reconciliation of returned Direct Debits’ is performed against the value
of reversals on the CT system.
Test a sample of reconciliations and ensure there is evidence of review
and follow-up and resolution of reconciling items.
There is a daily reconciliation of cash receipts / cash postings / reversals
against movement on outstanding debt.
Test a sample of reconciliations and ensure there is evidence of review
and follow-up and resolution of reconciling items.
Refunds are authorised by a senior billing officer. Refunds over £1,000
must have a payment voucher authorised by the Head of Revenues.
Test a sample of refunds and ensure appropriately authorised.
The Council Tax system is reconciled to the General Ledger and benefits
systems on at least a monthly basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
18
59
Key Control
Type of testing expected
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for inputting details and those processing payments.
Review of access rights to the council tax system.
19
60
National Non-Domestic Rates
Key Control
Type of testing expected
The Council ensures the record of properties and their total rateable
value as per the National Non-Domestic Rates (NNDR) system reconciles
to the list of properties and total rateable value notified to them by the
Valuation Office.
Test a sample of reconciliations between the NNDR system and the
Valuation Office reports/notifications.
NNDR exemptions/discounts are reviewed on a weekly basis to identify
exemptions due for review in the next 7 days, exemptions which have no
end date and exemptions passed their review date but which have not
been reviewed.
Test a sample of exemption reports and ensure evidence of review and
appropriate follow-up of exceptions.
There is a sample check of all NNDR processing.
Review evidence of sample checking and ensure being performed. Reperform a sample of the checking to ensure being performed to the
required standard.
The NNDR rateable value multiplier is put onto the NNDR system
reviewed for accuracy by a senior officer.
Obtain evidence that the multiplier entered onto the NNDR system have
been evidenced as reviewed by a senior officer. Agree the multiplier used
to notification received.
A reconciliation of returned Direct Debits’ is performed against the value
of reversals on the NNDR system.
Test a sample of reconciliations and ensure there is evidence of review
and follow-up and resolution of reconciling items.
There is a daily reconciliation of cash receipts / cash postings / reversals
against movement on outstanding debt.
Test a sample of reconciliations and ensure there is evidence of review
and follow-up and resolution of reconciling items.
Refunds are authorised by a senior billing officer. Refunds over £1,000
must have a payment voucher authorised by the Head of Revenues.
Test a sample of refunds and ensure appropriately authorised.
The NNDR system is reconciled to the General Ledger system on at least
a monthly basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
20
61
Key Control
Type of testing expected
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for inputting details and those processing payments.
Review of access rights to the NNDR system.
21
62
General Ledger Maintenance
Key Control
Type of testing expected
All manual journals raised are appropriately authorised and input into
the system.
Testing of manual journals from the system back to supporting
documentation to confirm accuracy of input.
Testing of manual journals from supporting documentation to the system
to confirm accuracy of input and completeness of processing.
Access rights to the system should be reviewed regularly to ensure that
the appropriate access levels have been given to the appropriate
individuals and to allow segregation of duties.
Review and testing of controls regarding setting of access rights and
monitoring of these rights.
Review of access rights to the general ledger.
22
63
Budgetary Control
Key Control
Type of testing expected
Budgets should be approved prior to the start of the financial year and be
based upon appropriate and reasonable assumptions.
Review of the approval of the budget and the underlying assumptions.
Budgets should be assigned to appropriate personnel and should be
monitored regularly throughout the year.
Review of procedures in place regarding budgetary control. Testing to
ensure procedures are being followed, including discussion of procedures
with budget holders and obtaining evidence to corroborate their
explanations for variances against budget.
Budgetary information should reconcile to the general ledger.
Agreement of budget reports (including those presented to Members)
back to the general ledger.
23
64
Car Parks Income
Key Control
Type of testing expected
Cash collected from car park ticket machines is reconciled to that
expected per the ticket machine records. Any significant differences are
investigated.
Review and testing of the reconciliation process across all of the Council’s
car park ticket machines.
Cash recorded within the bank statement matches that collected from the
car park ticket machines.
Review and testing of the reconciliation process between cash banked
and that per the car park ticket machines.
Car Park income is monitored against budget and between locations and
machines.
Review and testing of the car park income budget monitoring process.
24
65
In the event that, pursuant to a request which North Norfolk District Council has received under the Freedom of Information Act 2000, it is required to disclose any information contained in this
proposal, it will notify PwC promptly and consult with PwC prior to disclosing such information. North Norfolk District Council agrees to pay due regard to any representations which PwC may
make in connection with such disclosure and North Norfolk District Council shall apply any relevant exemptions which may exist under the Act to such information. If, following consultation with
PwC, North Norfolk District Council discloses any such information, it shall ensure that any disclaimer which PwC has included or may subsequently wish to include in the information is reproduced
in full in any copies disclosed.
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66
Agenda item ___10____
Monitoring Officer
Annual Report 2013/14
Section
Numbers
Contents
1
Introduction
2
The Monitoring Officer’s Work April 2013 – March 2014
3
Key Messages
4
Looking Forward
5
Overall opinion on the adequacy and effectiveness of the
Governance framework
67
1.
Introduction
1.1
The Monitoring Officer’s Annual Report summarises the more important
matters arising from the Monitoring Officer’s work for the District Council from
1 April 2013 to 31 March 2014 and comments on other current issues.
1.2
Corporate Governance is the system by which local authorities direct and
control their functions and relate to their communities. It is founded on the
fundamental principles of openness, integrity and accountability together with
the overarching concept of leadership. In this respect, North Norfolk District
Council recognises the need for sound corporate governance arrangements
and over the years has put in place policies, systems and procedures
designed to achieve this.
1.3
The Monitoring Officer is appointed under Section 5 of the Local Government
and Housing Act 1989 and has a number of statutory functions in addition to
those conferred under the Localism Act 2011 and subsequent regulations
governing local investigations into Member conduct. These are outlined in the
next section of the report.
2.
The Monitoring Officer’s Work April 2013 – March 2014
2.1
The Monitoring Officer has undertaken the following work during the year
from April 2013 to March 2014.
Duties
(a) Report on contraventions or likely
contraventions of any enactment or
rule of law.
Work undertaken
None
(b)
Report any findings of
maladministration causing injustice
where the Ombudsman has carried
out an investigation.
There have been no such reportable
incidents.
(c)
Establish and maintain the Register
of Member’s interests and gifts and
hospitality.
The Register of Members’ Interests is
publicised on the Council’s website.
Monitoring Officer Annual Report 2013/14
68
(
Duties
d) Maintain Register of Employees
gifts and hospitality and declaration
of officer’s interests in contract.
Work undertaken
The Registers have been updated
regularly and are open to inspection.
(e)
During the year between April 2013 and
March 2014 a total of 9 complaints have
been received, compared with 10 in
2012 / 13.
Investigate misconduct in respect of
District, Parish and Town
Councillors under the Code of
Conduct.
No cases were referred for investigation
(3 in 2012/13) and none were referred for
other action (none in 2012/13).
Of the 9 complaints received, 0 related to
a District Councillor and 9 related to
Town or Parish Councillors.
Members have regularly sought advice in
order to comply with the Code of
Conduct, particularly in relation to
declaring interests under the Code.
(f)
Investigate breaches of the
Council’s own protocols.
There have been no alleged breaches of
the Council’s own protocols.
(g)
Provide advice to Town and Parish
Councils on the interpretation of the
Code of Conduct.
The Monitoring Officer has provided
advice to Parish Councils on the
Standards and Conduct Arrangements
during 2013/14 face to face, by letter,
telephone and email.
Monitoring Officer Annual Report 2013/14
69
Duties
(h) Promote and support high
standards of conduct through
support to the Standards
Committee.
Work undertaken
The Standards Committee have received
reports on a range of matters during
2013/14 including;




Regular reporting of outstanding
cases.
Reports requested by the
Committee.
Progress of other action.
Events arranged with parish
councils
The Standards Committee has been
programmed to meet on a bi-monthly
basis with reserve dates for alternate
months. During the year to 31 March
2014, the Standards Committee actually
met on 5 occasions.
(i)
Compensation for
maladministration.
None.
(k)
Maintenance and review of the
Constitution.
A revised Constitution was adopted by
the Council at its December 2012
meeting. It has been amended since then
in accordance with resolutions of the
Council implementing recommendations
of Constitution Working party.
(l)
Responsibility for complaints made
under the Council’s Whistleblowing
and Anti-Fraud policies.
The procedures have not been actioned
during the 2013/ 14 period and the
Whistleblowing Panel has not been
convened.
(m) Breaches of the Employee Code of
Conduct.
There have been no formal allegations of
breaches under the Employee Code of
Conduct.
Monitoring Officer Annual Report 2013/14
70
Duties
(n) Advice on vires issues,
maladministration, financial
impropriety, probity and policy
framework.
Work undertaken
The Monitoring Officer has been
consulted on new policy proposals and
on matters which have potentially
significant legal implications.
The Monitoring Officer has attended
Council and other Committees as
necessary.
The Monitoring Officer regularly advises
on the legality and/or appropriateness of
administrative procedures, in conjunction
with the Democratic Services Team.
Ombudsman matters
The Commissioner for local administration (the Ombudsman) has jurisdiction over
cases of “maladministration” - where a local authority has failed in its duties – for
example:










delay
incorrect action or failure to take any action
failure to follow procedures or the law
failure to provide information
inadequate record-keeping
failure to investigate
failure to reply
misleading or inaccurate statements
inadequate liaison
inadequate consultation
broken promises
We received 16 ombudsman complaints during 2013 /14
These are chiefly matters where the ombudsman considered the case outside her
jurisdiction or found no maladministration. The remaining cases were local
settlements – that is to say where the authority voluntarily took steps to remedy any
failing on its part.
3.
Key Messages
3.1
The key messages to note from the year are:
(i)
The systems of internal control administered by the Monitoring Officer
including compliance with the Council’s Constitution were adequate and
effective during the period for the purposes of the latest Regulations.
However, it is important that Members and Officers are regularly reminded
of their obligations and updated on any changes to ensure there is no
complacency.
Monitoring Officer Annual Report 2013/14
71
(ii)
Following the 2012 revision of the Constitution, there remains an ongoing
need to monitor and review how any new aspects of the Constitution are
working and whether and what fine tuning may need to take place.
4.
Looking Forward
4.1
The key issues for 2013/14 are as follows;
4.2
Code of Conduct
4.2.2
In accordance with the resolution of Standards Committee to continue to
engage with parish councils over their promotion and maintenance of high
standards of ethics and conduct.
4.2.3
To consider the role and impact of the Council’s Independent Person and
whether any changes to the role and to the activities required of the
Independent Person.
4.3
Corporate Governance Framework
4.3.1
The Council will keep the Code of Corporate Governance under review,
taking into account any revisions to associated guidance and any
recommendations arising from audit reports.
4.3.2
The Monitoring Officer will continue to provide an assurance in respect of the
Code and the Annual Governance Statement by way of this Annual Report.
4.4
Constitution and Regulations
4.4.1
Following the adoption of a revised Constitution at Council in December 2012,
the Constitution Working Party will have an on-going role and responsibility
for the foreseeable future in monitoring the effectiveness of the Constitution
and identifying further amendments.
4.4.2
It will be appropriate to continue to remind Members and staff of the
importance of compliance with the Council’s regulations, as set out in the
Constitution and other policy framework documents, and the Monitoring
Officer and his staff will give advice accordingly.
5.
Overall opinion on the adequacy and effectiveness of the Governance
framework
5.1
That the systems of internal control administered by the Monitoring Officer
including the Code of Conduct and the Council’s Constitution, were adequate
and effective during the year between April 2013 and March 2014 for the
purposes of the latest regulations (subject to the areas outlined above).
David Johnson
Monitoring Officer
4 September 2014
Monitoring Officer Annual Report 2013/14
72
Monitoring Officer Annual Report 2013/14
73
Audit Committee
16 September 2014
Agenda Item No_____11________
Annual Governance Statement 2013/14
Summary:
This paper outlines that process for reviewing the Annual
Governance Statement for 2013/14 to provide a robust statement
of the culture and values by which the Council is directed and
controlled. It is built around the six principles of good
governance set out by the Chartered Institute of Public Finance
and Accountancy (CIPFA) and the Society of Local Authority
Chief Executives (SOLACE).
Conclusions:
Adoption of the Annual Governance Statement by the Council will
allow it to move ahead with its corporate planning process confident
that it can address any issues of governance and risk.
Recommendations:
Members are asked to review the Annual Governance Statement for
2013/14 and approve it for consideration by Full Council when the
annual Statement of Accounts for 2013/14 are also presented for
approval.
Cabinet member(s):
Ward(s) affected:
All
All
Karen Sly, 01263-516243, Karen.sly@north-norfolk.gov.uk
Contact Officer, telephone number,
and e-mail:
1.
Introduction
1.1. The Annual Governance Statement (AGS) sets out the way in which the Council ensures
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,
effectively and efficiently in the delivery of its services.
1.2. North Norfolk District Council has adopted its own Local Code of Corporate Governance
which supports this AGS. The Local Code is compliant with the recommendations of the
CIPFA/SOLACE “Delivering good governance in Local Government” and the recently
published guidance on the review of governance arrangements.
1.3. The Local Code was reviewed and updated as part of the 2012/13 AGS process, there
have been no significant changes to the code for 2013/14.
2.
Annual Governance Statement
2.1. The Annual Governance Statement for 2013/14 is attached at Appendix A. It has been
prepared in the context of the Local Code of Corporate Governance and has been
informed by the annual assurance statement process that Management Team review and
update annually. The statement takes into account Annual Internal Audit Report and the
outcomes of the internal audit reviews completed in the year.
74
Audit Committee
16 September 2014
2.2. The AGS is reported alongside the annual Statement of Accounts and is signed by the
Leader of the Council and the Chief Executive.
2.3. This committee is asked to examine the draft AGS and make recommendations, if
applicable, prior to its submission to Full Council.
3.
Conclusion
3.1. The draft AGS fully represents the principles and ethics of the Council in support of the
discharge of their legal obligations to their stakeholders and allows it to move forward in
developing its corporate planning processes confident that it can address issues of
governance and risk.
4.
Recommendation
4.1. Members are asked to review the Annual Governance Statement for 2013/14 and approve
it for consideration by Full Council when the annual Statement of Accounts for 2013/14
are presented.
75
Annual Governance Statement 2013/14
1. SCOPE OF RESPONSIBILITY
1.1.
North Norfolk District Council (NNDC) is responsible for ensuring that its business is conducted in accordance with the law and proper
standards, that public money is safeguarded and properly accounted for and used economically, efficiently and effectively. NNDC 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.
1.2.
In discharging this overall responsibility, NNDC is responsible for putting in place proper arrangements for the governance of its affairs,
facilitating the effective exercise of its functions, which includes arrangements for the management of risk.
1.3.
NNDC has approved and adopted a local code of corporate governance, which is consistent with the principles of the CIPFA/SOLACE
Framework “Delivering Good Governance in Local Government” (2007) as well as the update “Guidance note for English Authorities” (2012).
A copy of the Council‟s local code is on our website at www.northnorfolk.org or can be obtained from the Head of Finance at the Council
Offices, Holt Road, Cromer. This statement explains how NNDC has complied with the code and also meets the requirement of regulation 4[3]
of the Accounts and Audit (England) Regulations 2011 in relation to the publication of an annual governance statement, prepared in
accordance with proper practises in relation to internal control and is reviewed annually or more frequently as required.
2. THE PURPOSE OF THE GOVERNANCE FRAMEWORK
2.1.
The governance framework comprises the systems and processes, and culture and values, by which the authority is directed and controlled
and its activities through which it accounts to, engages with and leads the community. It enables the Council to monitor the achievement of
its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost-effective services.
2.2.
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
the Council‟s policies, aims and objectives, to evaluate the likelihood and impact should those risks be realised and to manage those risks
efficiently, effectively and economically.
2.3.
The governance framework has been in place at NNDC for the year ended 31 March 2014 and up to the date of approval of the statement of
accounts.
AGS 2013/14, Page 1 of 16
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Annual Governance Statement 2013/14
3. THE GOVERNANCE FRAMEWORK
3.1.
The Councils governance framework is derived from the following principles:
3.1.1.
focusing on the purpose of the authority and on outcomes for the community and creating and implementing a vision for
the local area;
3.1.2. members and officers working together to achieve a common purpose with clearly defined functions and roles;
3.1.3. promoting values for the authority and demonstrating the values of good governance through upholding high standards of conduct and
behaviour;
3.1.4. taking informed and transparent decisions which are subject to effective scrutiny and managing risk;
3.1.5. developing the capacity and capability of members and officers to be effective; and
3.1.6. engaging with local people and other stakeholders to ensure robust public accountability.
3.2.
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 not fully achieving policies, aims and objectives and therefore provides a reasonable rather than 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
NNDC 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.
3.3.
The following section goes through in detail each of the key principles of the governance framework.
4. THE SIX KEY PRINCIPLES
4.1.
Focusing on the purpose of the authority and on outcomes for the community and creating and implementing a vision for the local area
4.1.1. The Council‟s aims and objectives are set out in the Corporate Plan covering the period 2012 to 2015. This contains a statement of
the Council‟s vision for the area, priorities and business strategy over the same period.
AGS 2013/14, Page 2 of 16
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Annual Governance Statement 2013/14
4.1.2. The Corporate Plan identifies five key strategic priorities for the Council up to 2015 including clear statements of intent under each of
the following priority areas:

To boost employment and create more jobs

To enable the provision of new homes and the infrastructure that goes with them

To protect our coastline and the character of our countryside and built heritage

To empower individuals and local communities to have a greater say in their own futures

To reform the organisation to deliver high quality services that achieve our priorities in an efficient manner that represents good
value for local taxpayers.
4.1.3. The Corporate Plan contains details of what we want to achieve and the methods we will employ in delivering the key priorities and is
accompanied by a detailed annual work programme “Small Government, Big Society” setting out the details which underpin the
Corporate Plan. Additionally the Cabinet receives an annual Medium Term Financial Strategy which draws on other strategies,
including ICT, asset management and human resources covering a rolling four-year period, which is used to set initial parameters for
the annual budget process.
4.1.4. The Council has an effective performance management framework – utilising a dedicated IT system to record and report upon
performance management information. The system is driven by the Corporate Plan which focuses attention on Council priorities. This
is cascaded through departmental service plans, individual employee appraisals and action plans. It is clearly established in the
annual service and financial planning and performance management cycle.
4.1.5. The Annual Report and Performance Plan represents the culmination of the annual planning and reporting process. The report
evidences the compliance of the Council with its Performance Management Framework and is reported in June each year.
4.1.6. The Council‟s Cabinet and the Performance and Risk Management Board monitor and scrutinise progress against targets and
performance in priority areas affecting relevant service areas, and consider and approve corrective action on a regular basis where
necessary. These reports also include a minimum of five budget monitoring reports including the outturn report, covering the revenue
account, capital projects, key prudential code indicators and certain specific budget areas regarded as particularly sensitive. The
reporting process is under constant review in order to develop its maximum potential, and we are conscious that the financial
information needs to be closely linked to the service performance information.
4.1.7. The Council maintains an objective and professional relationship with external auditors and other statutory inspectors, as evidenced
by the Annual Audit Letter.
4.1.8. Through reviews by external agencies, and Internal Audit, the Council constantly seeks ways of ensuring the economic, effective and
efficient use of resources, and for securing continuous improvement in the way in which its functions are exercised.
AGS 2013/14, Page 3 of 16
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Annual Governance Statement 2013/14
4.1.9. During the year the Constitution Working Party met to review and recommend changes as applicable.
4.1.10. All budget headings are allocated to a named budget officer, who is responsible for controlling spend against a budget. This control is
reinforced by regular budget monitoring reports to Cabinet and Overview and Scrutiny Committee culminating in the annual outturn
report.
4.1.11. The Performance and Risk Management Board has defined terms of reference to develop a comprehensive performance framework
for risk management and to embed risk management across the Council. The Performance and Risk Management Board maintains
the risk register, and submits it to the Audit Committee on a regular basis. The Business Continuity Working Group continues to meet
regularly. Business Impact Assessments are now in place for critical areas and Business Continuity Plans have been strengthened
with critical services having complete documentation. Work is on-going with other non-critical services to develop their documentation
so that a comprehensive base is produced to assess staffing and equipment needs during a period of service disruption.
4.2.
Members and Officers working together to achieve a common purpose with clearly defined functions and roles
4.2.1.
The Council aims to ensure that the roles and responsibilities for governance are defined and allocated so that accountability for
decisions made and actions taken are clear.
4.2.2.
The Council has adopted a constitution which sets out how the Council operates, how decisions are made and the procedures which
are followed to ensure these are efficient, transparent and accountable to local people. It does this by electing a Leader and
appointing a Cabinet. The Leader then allocates executive responsibilities to the members of the Cabinet.
4.2.3.
The Council publishes a forward plan which contains details of key decisions to be made by the Cabinet. Each Cabinet member has a
specific portfolio of responsibilities requiring them to work closely with senior officers and other employees so as to achieve the
Council‟s ambitions. The Cabinet operates on the basis of collective responsibility.
4.2.4.
Additionally, the Council appoints a number of committees to discharge the Council's regulatory and scrutiny responsibilities. These
leadership roles, and the delegated responsibilities of officers, are set out in the Constitution, revisions to the constitution were
recommended by the constitution working party during the year.
4.2.5.
All Committees have clear terms of reference and work programmes to set out their roles and responsibilities. An Audit Committee
provides assurance to the Council on the effectiveness of the governance arrangements, risk management framework and internal
control environment.
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4.2.6.
Meetings are open to the public except where personal or confidential matters are being discussed. Public speaking was introduced
to all Committees and Full Council some years ago to improve openness and accountability. In addition, senior officers of the Council
can make decisions under delegated authority, the extent of these delegations is set out in the Constitution.
4.2.7.
The Constitution also includes a Member/Officer protocol which describes and regulates the way in which Members and Officers
should interact to work effectively together.
4.2.8.
The Council's Chief Executive (and Head of Paid Service) leads the Council's officers and chairs the Corporate Leadership Team. All
staff, including senior management, have clear conditions of employment and job descriptions which set out their roles and
responsibilities.
4.2.9.
The Head of Finance has been appointed as the s151 Officer under the Local Government Act 1972, carrying overall responsibility for
the financial administration of the District Council and is member of the Management Team. The Council complies with the
requirements of the CIPFA statement on the Role of the Chief Financial Officer in Local Government. The corporate finance function
headed by s151 Officer, provides support to each service area of the Council in respect of budget preparation, financial monitoring
and advice.
4.2.10. The Monitoring Officer position is provided under contract with NP Law and carries overall responsibility for legal compliance
supported by a legal team. The Council employs two practising solicitors.
4.2.11. The Council‟s Corporate Leadership Team (CLT) is made up of the Chief Executive and two Corporate Directors who meet on a
weekly basis to develop policy issues commensurate with the Council‟s aims, objectives and priorities. CLT also considers other
internal control issues, including risk management, performance management, compliances, value for money and financial
management. CLT also meets with portfolio holders on a regular basis to review progress in achieving the Council‟s ambitions,
priorities for action, performance management and forward planning for major issues.
4.2.12. Below CLT the management structure is well defined in a hierarchical manner, comprising the following teams:
Title
Principal Objectives
Corporate Leadership Team
(CLT)
Weekly meetings that deal with forward workplan and media issues
(Consists of Chief Executive
and Corporate Directors)
•
Provides collective responsibility for:
Providing corporate leadership;
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Title
•
Employee development ;
•
Internal and external communications;
•
Performance management; and
•
Co-ordinating and delivering corporate objectives and priorities for action;
•
Reviews corporate policy implementation;
•
Agrees corporate standards; and
•
Considers key operational matters
Principal Objectives
Management Team (MT)
To work with the Corporate Leadership Team in the leadership of the Council so as to deliver the
Council‟s Corporate Plan and provision of high quality services to the District‟s residents,
(Consists of CLT and Heads of businesses and visitors.
Service)
To work as one team to deliver the Council‟s objectives and vision by
•
Leading by example - promoting the values and principles of the Council
•
Utilising collective skills, knowledge and experience
•
Creating a safe, collaborative and respectful environment where robust challenge and
informed and managed risk taking is acceptable
•
Keeping colleagues informed on matters which may impact on other service areas
•
Collectively updating CLT on matters of strategic or reputational importance
•
Providing consistent and regular communication to staff on key issues and activities
•
Listening to, sharing and reacting to feedback from staff, Councillors and service users
•
Deputising on generic management issues for other Heads of Service as required
•
Providing shared understanding of the changes the Council needs to take in order to gain „buy
in‟ from staff
•
Taking joint responsibility to empower and motivate staff to provide the best possible service
and be proud of their achievements
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Title
Principal Objectives
•
Continually challenging current working practices and identifying flexible and innovative ways
to maximise efficiency and effectiveness
•
Taking responsibility for implementing changes (within budget) to service delivery, including
across services
•
Driving a customer service ethos throughout the organisation
•
Measuring and managing performance against key indicators
Title
Principal Objectives
Extended Managers Group
•
(Consists of all Managers that •
Report to a Head of Service)
•
Quarterly meetings of all Managers that report to a Head of Service
Deliver consistent messages through the organisation
Keeping managers informed on matters which may impact on their teams and services
In addition there are specific groups established to progress issues on a corporate basis, examples include the following:
Group
Principal objectives
Coastal Management Board
•
The Board meets on a quarterly basis, with additional meetings if required;
•
To oversee coastal adaptation and policy and coast defence capital works;
•
Providing strategic steer for the overall management of the coastal issues at NNDC;
•
Provides an officer/member corporate group to ensure an integrated approach is taken to all
coastal issues and inform the development of an Integrated Coastal Management Plan;
•
Make recommendations to Cabinet as appropriate;
•
Reports into the Coastal Forum.
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Group
Performance and Risk
Management Board
Housing and Planning Policy
Board
Big Society Grant Panel
4.3.
Principal objectives
To maintain a performance management framework that is understood and implemented by all;
•
To identify and manage the Council‟s strategic and operational risks and strengthen business
continuity;
•
To ensure that all staff and Members have a shared understanding of the council‟s priorities
and of what is needed to be done to realise those priorities;
•
To ensure that the commitment given to performance and risk management is commensurate
with the importance placed on embedding a successful performance and risk management
culture;
•
To ensure that services deliver the corporate objectives by challenging the measures and
targets put forward by service heads / managers;
•
To ensure that management and Council decisions are based on valid, accurate and timely
information;
•
Report to Audit Committee, Scrutiny or Cabinet.
•
Provide a steer to the work of the Housing and Planning Policy Teams to ensure a strategic
approach to deliver the Council‟s Growth Agenda;
•
Report to Planning Policy and Built heritage Working Party.
•
•
Receive and determine applications for Big Society and Enabling funding;
Make recommendations to Cabinet on large grant applications.
Promoting values for the community and demonstrating the values of good governance through upholding high standards of conduct and
behaviour.
4.3.1.




The Council has adopted a number of codes and protocols that govern both Member and Officer activities. These are:
Members Code of Conduct;
Officers Code of Conduct;
Planning Protocol;
Members‟ declarations of interest;
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

4.3.2.



4.4.
Member/Officer relations; and
Gifts and hospitality
The Council takes fraud, corruption and maladministration very seriously and has the following policies in place which aim to prevent
or deal with such occurrences:
Anti-Fraud and Corruption Policy;
Whistle Blowing Policy; and
HR policies regarding the implications for staff involved in such incidents.
4.3.3.
It is part of the function of the Monitoring Officer to ensure compliance with established policies, procedures, laws and regulations.
After consulting the Chief Executive and Head of Finance, the Monitoring Officer can report to the Full Council if any proposal,
decision or omission would give rise to unlawfulness or maladministration. Such a report will have the effect of stopping the proposal
or decision being implemented until the report has been considered.
4.3.4.
The financial management of the Council is conducted in accordance with the financial rules set out in the Constitution and with
Financial Regulations. The Council has designated the Head of Finance as its Chief Finance Officer in accordance with Section 151
of the Local Government Act 1972. The Council has in place a four-year Financial Strategy, updated annually, to support the mediumterm aims of the Corporate Plan.
4.3.5.
The Council maintains an externalised Internal Audit function, which operates to the Public Sector Internal Audit standards. This is the
fifth year of the arrangement with South Norfolk District Council to provide internal audit services to a consortium of client authorities
under a contract with Mazars Public Sector Internal Audit Ltd.
4.3.6.
Individual services have produced Service Plans. These Service Plans are updated each year so as to translate the Corporate Plan
requirements into service activities and to take into account available funding. In this way services identify and plan to achieve the
Council‟s priorities and ambitions. These plans also identify any governance impact.
4.3.7.
At employee level the Council has established an Employee Development Scheme so as to jointly agree employee objectives and
identify training and development needs. The Scheme provides for an annual appraisal for each member of staff at which past
performance is reviewed, work objectives are planned and also provides for regular monitoring of performance during the year.
Taking informed and transparent decisions which are subject to effective scrutiny and managing risk.
4.4.1.
The Council‟s Constitution sets out how the Council operates and the process for policy and decision making.
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4.4.2.
Full Council sets the policy and budget framework. Within this framework, all key decisions are made by the Cabinet. Cabinet
meetings are open to the public (except where items are exempt under the Access to Information Act).
4.4.3.
The Leader‟s Forward Plan of key decisions to be taken over the next three months is published on the Council‟s website.
4.4.4.
All decisions made by Cabinet are made on the basis of reports, including assessments of the legal and financial implications, policy
and equalities assessments, and consideration of the risks involved and how these will be managed. The financial and legal
assessments are provided by named finance and legal officers as part of the report production stage.
4.4.5.
The decision-making process is scrutinised by a scrutiny function which has the power to call in decisions made, but which also
undertakes some pre-decision scrutiny and some policy development work.
4.4.6.
Other decisions are made by officers under delegated powers. Authority to make day to day operational decisions is detailed in a
departmental Scheme of Delegation.
4.4.7.
Policies and procedures governing the Council's operations include Financial Regulations, Contract Procedure Rules and a Risk
Management Policy. Ensuring the policies are up to date and complied with is the responsibility of managers across the Council. The
Internal Audit, Finance and Legal Services also check that policies are complied with. Where incidents of non-compliance are
identified, appropriate action is taken.
4.4.8.
The Council‟s Risk Management framework requires that consideration of risk is embedded in all key management processes
undertaken. These include policy and decision making, service delivery planning, project and change management, revenue and
capital budget management and partnership working. In addition, a Corporate Risk Register is maintained and the Performance and
Risk Management Board meets regularly to review the extent to which the risks included are being effectively managed. The Audit
Committee oversees the effectiveness of risk management arrangements and provides assurance to the Council in this respect.
Financial Management processes and procedures are set out in the Council‟s Financial Regulations and include:

Comprehensive budgeting systems on a medium term basis;

Clearly defined capital and revenue expenditure guidelines;

Regular reviews and reporting of financial performance against the plans for revenue and capital expenditure and
income;

Overall budgets and a clear Scheme of Delegation defining financial management responsibilities;

Regular capital monitoring reports which compare actual expenditure plus commitments to budgets;

Key financial risks are highlighted in the budgeting process and are monitored through the year by service and
corporately;
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

4.4.9.
Robust core financial systems; and
Documented procedures are in place for business critical financial systems, and these are also checked on a regular
basis by Internal Audit.
Containing spending within budget is given a high priority in performance management for individual managers. Monitoring reports
are submitted to the Cabinet on a quarterly basis linking finance and service delivery performance.
4.4.10. The Council has several committees which carry out regulatory or scrutiny functions. These are:

Development Control Committee to determine planning applications and related matters;

Standards Committee which promotes, monitors and enforces probity and high ethical standards amongst the Council‟s
Members, and this extends to having the same responsibility for all town and parish councils within the District;

Audit Committee to obtain assurance about the adequacy of internal controls, financial accounting and reporting
arrangements, and that effective risk management is in place. The committees work is intended to enhance public trust
in the corporate and financial governance of the council;

A Licensing Committee is responsible for policy issues regarding licensing and will consider licensing applications;

Overview and Scrutiny Committee, which review and/or scrutinise decisions made or actions taken in connection with
the discharge of any of the Council‟s functions.
4.5.
Developing the capacity and capability of Members and Officers to be effective
4.5.1.
The Council aims to ensure that Members and managers of the Council have the skills, knowledge and capacity they need to
discharge their responsibilities and recognises the value of well trained and competent people in effective service delivery. All new
Members and Officers undertake an induction to familiarise them with protocols, procedures, values and aims of the Council.
4.5.2.
All Council services are delivered by trained and experienced people. All posts have a detailed post profile and person specification.
Training needs are identified through the Employee Development Scheme and addressed via the Human Resources service and/or
individual services as appropriate.
4.5.3.
The Council was re-assessed in July 2013 for the Investors in People Standard and was re-accredited at Bronze level.
4.5.4.
In respect of Members, the Council has established a Member Training, Development and Support Group which has continued to
meet to support the Member induction programme. As part of the arrangements for developing and supporting elected Members the
Council has committed itself to achieving the Members Charter which will provide a structured approach to building elected Member
capacity.
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4.6.
4.5.5.
Members who have not undertaken relevant training are not permitted to sit on the regulatory committees. This, along with the
Scrutiny role provides important developmental opportunities for Members.
4.5.6.
The Council is concentrating on delivering improved service for its customers through an information management strategy designed
to enhance the value and usefulness of the corporate resource that information, data and knowledge represents.
Engaging with local people and other stakeholders to ensure robust public accountability
4.6.1.
The Council has an approved Communication Strategy which covers the period 2011 to 2015, this is due to be reviewed in 2014/15.
The Communication Strategy ensures that the work of the Council is and will continue to be open, honest and transparent and will
enhance inclusion by building on our understanding of all residents‟ needs and perceptions, through improved customer service and
community engagement. An annual action plan is agreed and implemented in conjunction with the strategy.
4.6.2.
In line with the implications and opportunities arising from the Localism Act 2011, the Council is currently developing a Customer
Services Strategy and a separate Consultation Strategy is also being developed.
4.6.3.
The Communication Strategy sets the framework for both conveying messages and seeking residents‟ views, and supports the need
for further improvement with clear aims and a set of specific actions.
4.6.4.
The Council has continued to engage with local people and stakeholders on a range of issues, the means of engagement include the
following;

Surveys;

Consultation workshops;

Interviews;

Public meetings;

Road shows;

Attendance at parish and Town Council meetings.
4.6.5.
The results of this engagement continue to be used to shape and inform the Council‟s policies and strategies.
4.6.6.
The Council has tried to engage “harder to reach” groups through varying the way in which it conducts consultation so that the views
of a broad spectrum of the community can be well represented.
4.6.7.
The Council has recognised the opportunities provided by the Localism Act 2011 to engage with local communities. The Corporate
Plan (Small Government – Big Society), and its associated action plan, sets out how the Council proposes to embrace the Localism
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agenda. In addition the Council has continued to provide support and funding (from the Big Society Fund) for community oriented
projects, building on the successful approach operated in 2012/13.
5. REVIEW OF EFFECTIVENESS
5.1.
NNDC annually reviews the effectiveness of its governance framework including the system of internal control. The review of effectiveness is
informed by managers within the Council who have responsibility for the development and maintenance of the governance environment, the
work of the internal auditors and from comments made by the external auditors and other inspection agencies.
5.2.
Both during the year and at year end, reviews have taken place. In year review mechanisms include:
5.2.1.
The Cabinet is responsible for considering overall financial and performance management and receives comprehensive reports on a
quarterly basis. It is also responsible for key decisions and for initiating corrective action in relation to risk and internal control issues.
5.2.2.
The Monitoring Officer has a duty to monitor and review the operation of the Constitution to ensure its aims and principles are given
full effect. In addition the Constitution Working Party is in place to review the constitution and make recommendations to Full Council
as appropriate.
5.2.3.
The Council has a Scrutiny Committee which can establish „task and finish‟ groups, to look at particular issues in depth, taking
evidence from internal and external sources, before making recommendations to the Cabinet. Scrutiny can “call-in” a decisions of the
Cabinet which are yet to be implemented, to enable it to consider whether the decision is appropriate. In addition the Scrutiny
Committee can exercise its scrutiny role in respect of any Cabinet function, regardless of service area or functional responsibility, and
will conduct regular performance monitoring of all services, with particular attention to areas identified as under-performing.
5.2.4.
The Local Government and Public Involvement in Health Act 2007 include powers to enable Councillors to formally champion local
issues where problems have arisen in their ward. North Norfolk has embedded the “Councillor Call for Action”. This allows Councillors
to ask for discussion at Overview and Scrutiny Committee on issues where other methods of resolution by the District member have
been exhausted.
5.2.5.
The development of the procurement function across the public sector has led to the establishment of a number of framework
agreements for purchasing where the detailed work on price and quantity with suppliers has already been carried out. Contracts for
supply are only established when goods works or services are called off under the agreement.
5.2.6.
The Equality Framework builds on the work already undertaken in this area. It is based on three levels of “developing, achieving and
excellent”.
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5.2.7.
The Standards and Conduct provisions of the Localism Act 2011 came into force on 1st July 2012. The authority has appointed an
Independent Person pursuant to the Act and has decided to have a Standards Committee (which is now not mandatory). This
committee met five times during the year to consider complaints and issues around the conduct of Members. The Committee has
received a number of items during the year including, reports detailing complaints received by the Monitoring Officer and the status of
such complaints. It has held two full hearings in relation to Members and parish complaints.
5.2.8.
The Audit Committee met four times during the year to provide independent assurance to the Council in relation to the effectiveness
of the risk management framework and internal control environment. The Committee received regular reports on, internal control and
governance matters in accordance with its agreed work programme. During the year 14 internal audit assignments were completed
delivered over 186 days, the level of assurance achieved was adequate overall. Two reviews were not completed during the year as
originally planned due to the timing of the reviews and changes within the internal management, these were carried forward to the
following year.
5.2.9.
Internal Audit is an independent and objective assurance service to the management of the District Council. It completes a
programme of reviews throughout the year (14 reviews completed during 2013/14) to provide an opinion on the internal control, risk
management and governance arrangements. In addition, Internal Audit undertakes fraud investigation and proactive fraud detection
work which includes reviewing the control environment in areas where fraud or irregularity has occurred. All significant weaknesses in
the control environment identified by Internal Audit are reported to senior management and the Audit Committee. It should be noted
that there was only one high risk recommendation raised in the years and this was in relation to the Tourist Information Centres. This
recommendation had been implemented by the time that the report was issued and therefore no high priority recommendations are
outstanding. Internal Audit also carry out bi-annual reviews of the status of implementation of Internal Audit recommendations. During
the year there has been a reduction in the percentage of completed recommendations (medium and low priority). Whilst it is pleasing
to see that the overall numbers of recommendations have reduced, at March 2014 there were still 19 (out of 42 recommendations)
outstanding, compared to 13 (out of a total of 59) for the period up to 31 October 2013.
5.2.10. The External Auditor‟s Annual Audit Letter is considered by the Audit Committee and the Performance and Risk Management Board.
5.2.11. The Performance and Risk Management Board monitor Performance Indicators on a quarterly basis and recommend improvements
to the Cabinet. They also continually review corporate risks and ensure that actions are being taken to effectively manage the
Council's highest risks.
5.2.12. The Council continues to review its treasury management arrangements in line with best practice and in response to regular updates
and advice from the Council‟s Treasury advisors, Arlingclose.
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5.2.13. Management Team (Heads of Service and CLT) complete an annual Self-Assessment Assurance Statement which identifies noncompliance in a number of areas including procedures, risk and control, financial management and procurement. Any significant
areas of non-compliance will either be taken account of in service plans or if corporate including in the AGS action plan.
5.3.
The year-end review of the governance and the control environment arrangements by the Performance and Risk Management Board
included:
5.3.1.
Obtaining assurances from Directors and Heads of Service that key elements of the control framework were in place during the year
in their departments.
5.3.2.
The statement itself was considered by CLT and is supported by them as an accurate reflection of the governance arrangements in
place for the year.
5.3.3.
Obtaining assurances from other senior management, including the Monitoring Officer that internal control and corporate governance
arrangements in these essential areas were in place throughout the year.
5.3.4.
Reviewing any high level audit recommendations that remained outstanding at the year end and taking appropriate action if
necessary.
5.3.5.
Reviewing external inspection reports received by the Council during the year, the opinion of the Head of Internal Audit in her annual
report to management and an evaluation of management information in key areas to identify any indications that the control
environment may not be sound.
5.4.
The Audit Committee received assurances from the Head of Internal Audit that standards of internal control, corporate governance
arrangements and systems of risk management were all operating to an adequate standard.
5.5.
The Audit Committee review the effectiveness of the governance framework as part of an annual review of the Local Code of Corporate
Governance, and an improvement plan to address weaknesses and ensure continuous improvement of the system is in place.
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6. SIGNIFICANT GOVERNANCE ISSUES
6.1.
No significant issues requiring action were made within the 2012/13 Annual Governance process and therefore there is no status position
included on these.
6.2.
Following from the review of the Annual Governance Statement for 2013/14 and the Self-Assessment Assurance Statements the following
actions have been identified:
Action
Officer
Target Date
Timely completion of all agreed internal audit
recommendations
Management Team (All Heads of
Service and CLT)
31 October 2014
Recording of all delegated Executive decisions
Chief Executive
30 September 2014
7. CERTIFICATION
7.1.
To the best of our knowledge, the governance arrangements, as defined above, have been effectively operating during the year with the
exception of those areas identified above. We propose over the coming year to take steps to address the above matters to further enhance
our governance arrangement. We are satisfied that these steps will address the need for improvements that were identified during the review
of effectiveness and will monitor their implementation and operation as part of our next annual review.
Leader of the Council:
Tom FitzPatrick
Chief Executive:
Date:
Sheila Oxtoby
Date:
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Audit Committee
16 September 2014
Agenda Item No_____12_______
2013/14 STATEMENT OF ACCOUNTS
Summary:
This report presents the Statement of Accounts for
2013/14 for review by the Audit Committee prior to
recommendation to Full Council for approval. The
outturn position was reported to Members in June and
has been used to inform the production of the statutory
annual accounts for 2013/14.
Options considered:
Not applicable
Conclusions:
The Statement of Accounts for 2013/14 has been
produced in accordance with the Code of Practice on
Local authority Accounting. The draft accounts were
produced by 30th June and since then have been
subject to external audit review.
Recommendations:
Members are asked to consider and review the
Statement of Accounts for 2013/14 and recommend
their approval to Full Council.
Reasons for
Recommendations:
To update Members on the Statutory Accounts position
as at 31st March 2014 and their subsequent external
audit review.
2013/14 Statement of Accounts
1
Introduction
1.1
The Council’s statement of accounts must be produced and audited by 30 September
each year.
1.2
The Outturn report for 2013/14 was presented to Cabinet and Overview and Scrutiny in
June 2014. That report provided details of the variances on the revenue account in
expenditure and income compared with the updated budget and allowed for a number of
underspends to be rolled forward within earmarked reserves to fund ongoing and
identified commitments. The report also detailed the year end position in respect of the
capital programme and the updated capital programme for 2014/15 onwards.
1.3
The Code of Practice on Local Authority Accounting in the United Kingdom 2013/14 (the
Code) prescribes the form of the statutory accounts to be presented and published.
Consequently the format is very prescriptive and areas of non compliance are reported
by the External Auditors as part of their audit of the accounts (ISA 260 report also
included on this agenda). Whereas the outturn report to Cabinet and Overview and
Scrutiny provides information on the actual expenditure and income compared to
budget, the statement of accounts shows the financial position of the Council and
transactions in the year compared to the previous financial year.
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Audit Committee
16 September 2014
1.4
There have been minimal changes to the reporting requirements within the accounts
compared to the previous year in terms of reporting requirements, changes are detailed
within section 3 of the explanatory foreword.
1.5
Since the production of the draft accounts by 30 June 2014 they have been subject to
external audit review for which the auditors report (ISA 260) is included as a separate
item on this agenda.
2
Statement of Accounts
2.1
A copy of the financial statements has been provided to members as an appendix to this
agenda (Appendix B). It is an audited version and has been updated for
recommendations made by the auditors. The final external audit review process is yet to
be finalised and whilst there are not expected to be any significant changes to the
accounts now presented, any changes will be reported verbally at the meeting.
2.2.
The main focus of Members should be on the financial statements i.e. :
i)
The Movement in Reserves Statement
ii)
Comprehensive Income and Expenditure Account
iii)
Balance Sheet
iv)
Cash Flow Statement
v)
Collection Fund.
2.3.
Each of the statements are supported by a number of notes to the accounts. Other key
areas to consider at the end of the financial year are the level of reserves, both
earmarked and general balances. All balances will be reviewed as part of the update to
the revised Medium Term Financial Plan.
3
Conclusion
3.1
The Final version of the Statement of Accounts for 2013/14 is presented to the Audit
Committee for review prior to recommendation to Full Council for approval. The
statements have been produced based on the information contained in the outturn report
for 2013/14 as reported in June 2014 and in accordance with statutory guidance.
4
Sustainability – None as a direct consequence from this report.
5
Equality and Diversity – None as a direct consequence from this report.
6
Section 17 Crime and Disorder considerations – None as a direct consequence from
this report.
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North Norfolk District Council
DRAFT
STATEMENT OF ACCOUNTS
2013/14
Draft Statement of Accounts 2013/14
North Norfolk District Council
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Draft Statement of Accounts 2013/14
North Norfolk District Council
95
CONTENTS
Explanatory Foreword
Statement of Responsibilities
Financial Statements:
Movement in Reserves Statement
Comprehensive Income and Expenditure
Statement
Balance Sheet
Page
Page
No.
No.
1 - 7 11: Unusable reserves
44 - 49
12: Cash Flow Statement - Operating
8
50
activities
13: Cash Flow Statement - Investing
51
activities
14: Cash Flow Statement - Financing
9
51
activities
15: Cash Flow Statement - Cash and cash
10
51
equivalents
16: Amounts reported for resource allocation
11 - 12
52 - 57
decisions
17: Trading operations
13
58
18: External Audit Costs
59
14 - 30 19: Members Allowances
59
Cash Flow Statement
Notes to the Accounts:
1: Accounting Policies
2: Accounting standards issued; Not
30 - 31 20: Officers' Remuneration
adopted
3: Critical judgements in applying Accounting
31
21: Exit Packages
Policies
4: Assumptions made about the future and
other major sources of estimation
32
22: Defined Benefit Pension schemes
uncertainty
5: Movement in Reserves Statement Adjustments between accounting basis and 33 - 37 23: Events after the Balance Sheet Date
funding basis under regulations
6: Movement in Reserves Statement 38 - 41 24: Related parties
Transfers to/from Earmarked Reserves
7: Other operating expenditure
42
25: Leases
8: Financing and investment income and
42
26: Investment properties
expenditure
9: Taxation and non-specific grant income
42
27: Intangible assets
9a: Material items of Income and Expense
28: Impairment losses
43
10: Usable reserves
28a - Tidal Surge
44
Draft Statement of Accounts 2013/14
29: Property, plant and equipment
30: Capital expenditure and capital financing
62 - 67
67
80
31: Assets held for sale
81
32: Inventories
81
33: Receivables
82
34: Payables
83
35: Provisions
36: Contingent Liabilities
37: Contingent Assets
60 - 61 38: Grant income
61
Page
No.
74 - 79
83
83 - 85
85
86 - 87
39: Financial Instruments
88 - 89
40: Nature and extent of risks arising from
financial instruments
90 - 93
94
Collection Fund
67 - 68 Notes to the Collection Fund
68 - 70 Independent Auditors' Report
70 - 71 Glossary of Terms
95 - 97
98
99 - 102
71 - 72 Glossary of Acronyms
72 - 73
73
103
North Norfolk District Council
96
CONTENTS
This page is intentionally blank
Draft Statement of Accounts 2013/14
North Norfolk District Council
97
EXPLANATORY FOREWORD
1.
Introduction
The explanatory foreword has been written to provide a brief guide to the content of the Statement of the Accounts. North Norfolk District Council‟s
(“the Authority”) financial statements for the year ended 31 March 2014 are set out on pages 9 to 13 followed by supporting notes on pages 14 to 92.
These accounts have been prepared to provide information about the financial position of the Authority and its performance and cash flows to meet
the common needs of most users. The accounts also demonstrate the results of the Members and management‟s stewardship and accountability for
the resources entrusted to them. A glossary of terms and acronyms used within the accounts is provided at the end of the document. While the
financial position of the Authority is regularly monitored and reviewed throughout the year, this Statement of Accounts brings together the financial
results of all the Authority‟s operations and the financial position as at 31 March 2014. The 2013/14 accounts have been prepared in accordance
with the Code of Practice on Local Authority Accounting in the United Kingdom 2013/14 (“the Code”). The following outlines the main statements
with a brief outline of their purpose:
 Statement of Responsibilities – this sets out the responsibilities of the Authority and the Chief Financial Officer for the accounts.
 Movement in Reserves Statement – this statement shows the movement in the year on the different reserves held by the Authority analysed
between „usable reserves‟ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves which are maintained
for accounting purposes.
 Comprehensive Income and Expenditure Statement – this statement shows the accounting cost of providing services in the year in
accordance with generally accepted accounting practices, rather than the amount to be funded from local taxation.
 Balance Sheet – this statement shows the value as at the balance sheet date of the assets and liabilities recognised by the Authority. It sets out
the financial position of the Authority at the year-end, showing its balances, resources and long-term indebtedness, the net current assets
employed in its operations, together with summarised information on the fixed assets held. The Balance Sheet is fundamental to the
understanding of the Authority‟s year-end financial position.
 Cash Flow Statement - summarises all inflows and outflows of cash arising from transactions with third parties for revenue and capital
purposes.
 Collection Fund - this statement shows the collection and disbursement of the Council Tax and non-domestic rates. Before 1st April 2013 cash
collected from NNDR payers by billing authorities (net of cost of collection) was owed to central Government and the amount not paid to
Government at balance sheet date was included as a creditor or if cash paid to government exceeded the cash collected (net of cost of
collection) from NNDR payers, the excess was included in balance sheet as a debtor.
From 1st April 2013 the Business Rates Retention Scheme (BRRS) was introduced. Under this scheme cash collected by the authority (as a
billing authority) from NNDR debtors belongs to Government, the authority and Norfolk County Council (NCC) in proportionate shares. There will
be a debtor or creditor position between the billing authority (NNDC), the Government and the major preceptor (NCC) to be recognised at the
end of each year. This is because the net cash paid to the government and the major preceptor during the year will not exactly match its share
of the cash collected from NNDR payers.
Draft Statement of Accounts 2013/14
1
North Norfolk District Council
98
EXPLANATORY FOREWORD
As this is a change in legislation there is no requirement for the restatement of prior year figures.
The Financial Statements are supported by various notes to the accounts which provide additional information to that contained in the core
statements themselves.
The remainder of the explanatory foreword gives a brief explanation of the financial aspects of the Authority‟s activities and draws attention to the
main characteristics of the Authority‟s financial position. In particular, it compares the outturn results with the revised budget and explains
substantive changes to the accounts in 2013/14.
The Authority incurs both revenue and capital expenditure during the year. Revenue spending is generally considered to be on items which are
consumed within a year (salaries, energy costs) and is financed by Government Grants, Council Tax and other income streams. Capital expenditure
is incurred on items that have a life beyond one year and is financed from grants, capital receipts or revenue contributions.
2.
Activity in the Year
The following table compares the outturn to the budget for the year. This is the main revenue account that represents the day to day expenditure
incurred and income received from government grants, Council Tax, fees and charges in provision of local services.
(a)
Revenue Activity
The following table shows how the Authority‟s General Fund expenditure compares with the updated budget for 2013/14. This position excludes
notional charges but includes precepts by parish councils and levies by other bodies.
Net Expenditure on Services
Net Cost of Services
Parish Precepts
Net Interest Receivable/Payable
Revenue Contributions to Capital
Capital Financing from Reserves
Net Contributions to/(from) Earmarked Reserves
Council Tax (including Parish Precepts)
External Support (Government Grant)
Net (Surplus)/Deficit for year
Balance Brought Forward
Balance Carried Forward
Draft Statement of Accounts 2013/14
Original
Budget
£000
12,206
12,206
Updated
Budget
£000
12,517
12,517
1,457
(392)
400
(9)
497
(6,540)
(7,907)
(288)
1,457
(383)
823
(583)
704
(6,540)
(7,984)
11
1,457
(354)
600
(182)
2,277
(6,540)
(8,504)
(179)
0
29
(223)
401
1,573
0
(520)
(190)
(288)
11
(179)
(190)
2
Actual
Variance to
Updated Budget
£000
£000
11,067
(1,450)
11,067
(1,450)
North Norfolk District Council
99
EXPLANATORY FOREWORD
The actual net spend on services was £1,449,554 less than the Updated budget for 2013/14; this is before movements on earmarked reserves. The
remaining surplus is transferred to earmarked reserves to cover future spend. The reasons for the more significant variances are shown below: Car Parks £58,022 underspend – The level of car park income has exceeded the budget, the most significant being additional car park fee
income of £40,618 and penalty charge notice income of £12,757.
 Administration Buildings £65,196 overspend – Of the overspend £27,718 relates to the demolition costs of Upper Sheringham Depot. Other
overspends shown in the service relate to the re-laying out of the office and associated office moves.
 Foreshore £37,071 underspend – Within the service there have been storm related repair costs, some of which were in relation to emergency
works which have been included in the Bellwin claim. There is still an overall underspend within the service of which £33,622 are in relation to
grounds maintenance works.
 Investment Properties £35,445 overspend – The under recovery of budgeted income due to vacant premises. Costs in relation to the storm
damage and associated repairs that have been completed by the end of March 2014 totalling £37,986. Some of these have been mitigated by
insurance claims which have been accrued for in the accounts.
 Coast Protection £176,228 underspend – The underspend is due to the suspension of revenue works following the tidal surge. Storm repairs of
£50,766 have been incurred under this service heading. The under spend on the planned revenue works has been carried forward to 2014/15.
 Pathfinder £57,431 underspend – The budget included £60,000 in relation to the Integrated Coastal Management fund which had not been spent
by the year-end and has been carried forward within the Pathfinder earmarked reserve.
 Housing Strategy £75,997 underspend – The underspend is due to VAT shelter receipts received in the year above the level budgeted for, these
have been transferred to the Capital Projects earmarked reserve.
 Community and Localism £301,459 underspend – This service heading includes the income that the County Council return to the districts from
their discretionary element of the second homes council tax charge. The variance shown at the year-end is partly in relation to the Big Society
Fund projects not yet allocated or drawn down and also other external grants received that have not yet been fully matched by expenditure in the
year. These have been carried forward to the next financial year.
 Coastal Management £41,919 underspend – relates to a post that was vacant in the year
 Customer Services Corporate £58,552 underspend – Of the underspend £34,976 relates to employee costs due to turnover and vacant posts
within the year. This has been rolled forward pending the appointment of the Customer Services Manager and utilisation as part of the Business
Transformation project. There is also an under spend of £15,655 in relation to stationery and other purchases not made in the year.
 Development Management £47,609 under spend - The annual income budget has been exceeded due to a number of large planning
applications.
 Building Control and Access £45,687 underspend – Of the variance £20,972 is in relation to exceeding the budgeted level of income, with the
balance of the under spend being due to a vacant post.
Draft Statement of Accounts 2013/14
3
North Norfolk District Council
100
EXPLANATORY FOREWORD
 Benefits £97,127 underspend – Of the underspend £65,483 relates to staff turnover savings above the budgeted level including a vacant post and
also transport costs not incurred in the year. An element of this has been carried forward to 2014/15 to support the implementation of further
modules of the revenues and benefits system.
 Discretionary Payments £89,168 – The funding for these is now accounted for within the Business Rates Retention Scheme, a compensating
transfer to reserves has been made to offset this.
The Updated budget assumed that a net contribution to earmarked reserves of £121,101 would be made in the year. At the year-end £2,095,214
was actually transferred to funds. Further analysis on the movements on the reserves in the year is provided within note 6 to the accounts on pages
38 to 41.
(b)
Capital Activity
Capital expenditure in 2013/14 amounted to £4,801,577 (£4,545,815 2012/13) and was incurred against the following areas:
Jobs and the Local Economy
Housing and Infrastructure
Coast, Countryside and Built Heritage
Localism
Delivering the Vision
Original
Budget
£000
350,802
1,344,641
4,256,823
379,370
579,874
6,911,510
Revised
Budget
£000
324,079
1,344,641
5,018,546
379,370
579,874
7,646,510
Actual
£000
283,903
979,476
2,930,399
121,191
486,607
4,801,577
Variance to
Revised Budget
£000
(40,176)
(365,165)
(2,088,147)
(258,179)
(93,267)
(2,844,933)
These figures include £1,216,266 (£2,582,808 2012/13) Revenue Expenditure Funded from Capital under Statute (REFCUS), of which £571,563
has been funded by grant and external contributions.
The main areas of capital expenditure in the year included the following:Jobs and the Local Economy

Payment of grant to Wells Maltings Trust - £100,000;

Works in relation to Car Parking Resurfacing and Refurbishment - £178,353;
Housing and Infrastructure

Payment of Disabled Facilities Grants - £534,316;

Payments to Housing Associations - £397,100;
Coast, Countryside and Built Heritage
Draft Statement of Accounts 2013/14
4
North Norfolk District Council
101
EXPLANATORY FOREWORD

Structural works undertaken in relation to the Cromer Pier - £588,712;

Works on the Cromer Coastal Protection Scheme - £1,349,91;

Reactive coastal works following the tidal surge in December 2013 - £698,382;

Rebuilding of Chalets following the tidal surge - £58,200;

Cromer Pier tidal surge works - £88,676;
Localism

Capital grants awarded under the Big Society Fund scheme - £112,000;
Delivering the Vision



Completion of works in relation to the new Cromer Office Reception - £154,544
Other improvement works at the Cromer Office Site – £117,306
Purchase of replacement personal computers and mobile technology - £64,324
In the year £1,982,438 (£3,336,271 2012/13) of the Authority‟s own resources, including capital receipts, reserves and revenue contributions have
been used to finance the capital programme. The balance relates to external sources of finance for example other contributions and grants.
The variances in the year related in the main to either slippage of schemes to 2014/15 due to schemes not progressing as originally anticipated, or
as a result of the significant works which arose due to the storm surge which occurred in December 2013
3.
Significant Changes introduced in the 2013/14 Accounts
There have been no significant accounting changes introduced by the 2013/14 code that are applicable to the Authority.
4.
Reserves
The Authority has a policy to maintain General Fund balances above a minimum of £1.75 million. As at 31 March 2014 the General Fund balance
exceeded this at £1.923 million. Earmarked reserves are also held to fund future one-off projects and where there is a need to hold a contingency to
meet future liabilities. The Authority‟s reserves are detailed on pages 38 to 41.
5.
Retirement Benefits Disclosure
International Accounting Standard “Employee Benefits” (IAS 19) has been fully incorporated into the Chartered Institute Public Finance and
Draft Statement of Accounts 2013/14
5
North Norfolk District Council
102
EXPLANATORY FOREWORD
Accountancy (CIPFA) Local Authority Accounting Statement of Recommended Practice. The disclosures required for the financial year ending 31
March 2014 are on pages 61 to 66 and show a Net Pension Liability of £31,716,000 as at 31 March 2014 (£31,840,000 at 31 March 2013).
The liabilities show the underlying commitments that the Authority has in the long run to pay retirement benefits. However, statutory arrangements
for funding the deficit mean that the financial position of the Authority remains healthy. At present the deficit on the scheme would be made good by
increased contributions over the remaining working life of employees, as assessed by the scheme actuary.
6.
Borrowing Facilities
The Authority remained free of long term debt at 31 March 2014. There are no current plans to undertake any new long-term borrowing,
requirements for cash flow purposes will be met by borrowing on the London Money Market.
7.
Prudential Code
The Prudential Code allows local authorities to finance capital expenditure from borrowing which does not receive financial support from central
government. The objectives of the code are to ensure that local authority investment plans are affordable, prudent and sustainable. In 2013/14 the
Authority did not undertake any prudential borrowing to finance capital expenditure.
8.
Impact of the Current Economic Climate
The current economic climate along with the associated reductions in central government funding continues to have a direct impact on the finances
of the authority.
The 2013/14 budget was approved in February 2013 and included savings and additional income of just under £400k across a number of corporate
and service areas including structural reviews and efficiency savings. The progress of achieving these has been regularly monitored during the year
and where necessary amendments have been made to the budget to reflect where they were not achieved as planned or in fact exceeded.
The repair and recovery programme of works following the damage to NNDC properties caused by the tidal surge that occurred in December 2013
required some reallocation of resources both financial and non-financial within very short timescales. The repair programme is on-going in 2014/15;
however costs totalling £1.027million have been incurred in the last quarter of 2013/14 and have been reflected in the accounts. Whilst some
external funding has been secured, any uninsured or unfunded costs will be funded from the general reserve. It is for this reason that the year-end
surplus was transferred to the general reserve to mitigate the costs in 2014/15.
The 2013/14 financial year was the first year of some significant changes to the funding of Local Government, namely Localised Council Tax
Support and Business Rates Retention Scheme. The introduction of Council Tax Support replaced the previous Council Tax Benefit system in
response to the reduced government funding for support. The new system meant that all those of working age who had previously been on 100%
Draft Statement of Accounts 2013/14
6
North Norfolk District Council
103
EXPLANATORY FOREWORD
benefit had to pay a minimum council tax charge of 8.5%. The other significant change was the introduction of business rates retention whereby an
element of the rates collected are retained locally as opposed to the previous system which saw all rates collected paid over to the Governments
central pool for reallocation through a formulae based system. Under the new system an element of growth in business rates above the
Governments pre-set baseline is retained locally.
A balanced budget has been set for the 2014/15 financial year and takes account of continuing savings from 2013/14 along with new savings and
income plans of approximately £581,000. Future funding gaps have been forecast for the following three years of £239,000 in 2015/16 increasing to
just over £2million by 2017/18. The Authority has already started planning for this which includes business transformation projects which are
expected to deliver additional on-going savings from 2016 onwards.
Income from investments has increased compared to previous years. For 2013/14 income from investments totalled some £353,827. The overall
level of interest received has increased because of the investment made at the end of 2012/13 in a pooled property fund (the Local Authority Mutual
Investment Trust‟s property fund). The aim of this fund is to provide over the long term a principal and income return, by investing in commercial and
industrial property in the UK, exclusively for local authorities. Income from other investments have fallen, as longer term investments mature these
are replaced with investments at a lower of return. In addition the total balance for investment will reduce as spending is incurred on the capital
programme which is financed by retained capital receipts. The key treasury management principles for investment continue to be ensuring security,
liquidity and yield of principal.
9.
Further Information
For further information about these accounts please contact the Head of Finance, North Norfolk District Council, Council Offices, Holt Road, Cromer,
NR27 9EN or email accountancy@north-norfolk.gov.uk.
Draft Statement of Accounts 2013/14
7
North Norfolk District Council
104
STATEMENT OF RESPONSIBILITIES
The Authority's Responsibilities
The Authority is required to:

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 this authority, that officer is the Chief Finance Officer.

Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets.

Approve the Statement of Accounts.
The Chief Finance Officers Responsibilities
The Chief Finance Officer is responsible for the preparation of the Authority‟s Statement of Accounts in accordance with proper practices as set out
in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Code of Practice).
In preparing this Statement of Accounts, the Chief Finance Officer has:

Selected suitable accounting policies and then applied them consistently.

Made judgements and estimates that were reasonable and prudent.

Complied with the local authority code.
The Chief Finance Officer has also:

Kept proper accounting records which were up to date.

Taken reasonable steps for the prevention and detection of fraud and other irregularities.
Certificate by the Chief Finance Officer
I certify that this Statement of Accounts has been prepared in accordance with proper accounting practices and presents a true and fair view of the
financial position of the Authority at the reporting date and of its expenditure and income for the year ended 31 March 2014.
Dated:
30 June 2014
Draft Statement of Accounts 2013/14
K Sly BA Hons CPFA
8
North Norfolk District Council
105
DRAFT FINANCIAL STATEMENTS 2013/14
Movement in Reserves Statement
This statement shows the movement in the year on the different reserves held by the Authority, 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 Authority‟s services, more details of which are shown in the Comprehensive Income and Expenditure Statement.
These are different from the statutory amounts required to be charged to the general fund balance for council tax setting purposes. The Net
Increase/Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or
from earmarked reserves undertaken by the Authority.
General
Fund
Balance
Balance at 1 April 2012
Movement in Reserves during 2012/13
Surplus or (Deficit) on provision of services
Other Comprehensive Income and Expenditure
Total Comprehensive Income and Expenditure
Adjustments between accounting basis & funding basis
under regulations (5)
Net Increase/(Decrease) before Transfers to
Earmarked Reserves
Transfers (to)/from Earmarked Reserves (6)
Increase/(Decrease) in Year
Balance at 31 March 2013 Carried Forward
Movement in Reserves during 2013/14
Surplus on provision of services
Other Comprehensive Income and Expenditure
Total Comprehensive Income and Expenditure
Adjustments between accounting basis & funding basis
under regulations (5)
Net Increase/(Decrease) before Transfers to
Earmarked Reserves
Transfers (to)/from Earmarked Reserves (6)
Increase/(Decrease) in Year
Balance at 31 March 2014 Carried Forward
Draft Statement of Accounts 2013/14
£000
2,051
Earmarked
General
Fund
Reserves
£000
6,494
(3,036)
0
(3,036)
Capital
Receipts
Reserve
£000
9,063
Capital
Grants
Unapplied
Account
£000
101
0
0
0
0
0
0
3,011
0
(25)
Total
Usable
Reserves
Unusable
Reserves
Total
Authority
Reserves
£000
17,709
£000
14,855
£000
32,564
0
0
0
(3,036)
0
(3,036)
0
(3,741)
(3,741)
(3,036)
(3,741)
(6,777)
(2,166)
(101)
744
(744)
0
0
(2,166)
(101)
(2,292)
(4,485)
(6,777)
(280)
(305)
1,745
280
280
6,774
0
(2,166)
6,897
0
(101)
0
0
(2,292)
15,416
0
(4,485)
10,371
0
(6,777)
25,787
2,611
0
2,611
0
0
0
0
0
0
0
0
0
2,611
0
2,611
0
3,255
3,255
2,611
3,255
5,866
(339)
0
(627)
0
(966)
966
(0)
2,272
0
(627)
0
1,645
4,221
5,866
(2,095)
177
1,922
2,095
2,095
8,869
0
(627)
6,270
0
0
0
0
1,645
17,061
0
4,221
14,591
0
5,866
31,652
9
North Norfolk District Council
106
DRAFT FINANCIAL STATEMENTS 2013/14
Comprehensive Income and Expenditure Statement
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; this may be different from the
accounting cost. The taxation position is shown in the Movement in Reserves Statement.
Gross
Expenditure
£000
11,379
3,559
9,425
3,711
967
31,256
1,760
95
62,152
1,074
2012/13
Gross
Net
Income
Expenditure
£000
£000
(9,513)
1,866 Central Services to the public
(591)
2,968 Cultural and Related Services
(3,279)
6,146 Environmental and Regulatory Services
(1,883)
1,828 Planning Services
(2,237)
(1,270) Highways and Transport Services
(28,542)
2,714 Other Housing Services
0
1,760 Corporate and Democratic Core
0
95 Non Distributed Costs
(46,045)
16,107 Cost of Services
1,153 Other Operating Expenditure
(207)
867 Financing and Investment Income and Expenditure
(15,091) Taxation and Non-Specific Grant Income
3,036 (Surplus) or Deficit on Provision of Services
(Surplus) or Deficit on revaluation of Plant, Property and
(1,107)
Equipment Assets
(Surplus) or Deficit on revaluation of Available for Sale Financial
25 Assets
4,823 Actuarial (gains)/losses on pension assets/liabilities
3,741 Other Comprehensive Income and Expenditure
6,777 Total Comprehensive Income and Expenditure
Draft Statement of Accounts 2013/14
10
Note
7
8
9
16
Gross
Expenditure
£000
3,212
3,385
8,998
3,518
885
30,492
1,782
23
52,295
1,563
2013/14
Gross
Net
Income
Expenditure
£000
£000
(1,617)
1,595
(622)
2,763
(3,306)
5,692
(2,419)
1,099
(2,311)
(1,426)
(29,292)
1,200
(2)
1,780
0
23
(39,569)
12,726
831
(358)
1,205
(17,373)
(2,611)
(1,400)
(439)
(1,416)
(3,255)
(5,866)
North Norfolk District Council
107
DRAFT FINANCIAL STATEMENTS 2013/14
Balance Sheet
The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Authority. The net assets of the
Authority (assets less liabilities) are matched by the reserves held by the Authority. Reserves are reported in two categories. The first category are
usable reserves, i.e. those reserves that the Authority 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 may only be used to fund capital expenditure or repay debt). The
second category of reserves is those that the Authority 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'.
31 March 2013
£000
43,639
270
398
4,976
7
49,290
14,046
67
4,183
170
0
18,466
0
(3,500)
(4,221)
(776)
(8,497)
0
(33,472)
(33,472)
Note
29
26
27
39
39
Property, Plant and Equipment
Investment Property
Intangible Assets
Long Term Investments
Long Term Debtors
Long Term Assets
Short Term Investments
Inventories
Short Term Debtors
Cash and Cash Equivalents
Assets held for sale (<1yr)
Current Assets
Bank Overdraft
Short Term Borrowing
Short Term Creditors
Capital Grants Receipts in Advance
Current Liabilities
Long Term Creditors
Other Long Term Liabilities
Long term Liabilities
39
32
33
15
31
15
39
34
38
22/39
25,787 Net Assets
Draft Statement of Accounts 2013/14
31 March 2014
£000
47,246
260
294
5,412
23
53,235
6,106
26
4,177
10,059
0
20,368
(462)
0
(7,834)
(611)
(8,907)
0
(33,044)
(33,044)
31,652
11
North Norfolk District Council
108
DRAFT FINANCIAL STATEMENTS 2013/14
31 March 2013
£000
1,745
6,774
6,897
0
15,416
14,473
(28)
27,917
(31,840)
36
(187)
10,371
25,787
Note
Usable Reserves:
General Fund Balance
Earmarked Reserves
Capital Receipts Reserve
Capital Grants Unapplied Account
Total Usable Reserves
Unusable Reserves:
Revaluation Reserve
Available for Sale Financial Instruments Reserve
Capital Adjustment Account
Pensions Reserve
Collection Fund Adjustment Account
Accumulated Compensated Absences Adjustment Account
Total Unusable Reserves
Total Reserves
6
11
11(a)
11(b)
11(c)
11(d)
11(e)
11(f)
31 March 2014
£000
1,922
8,869
6,270
0
17,061
15,742
411
30,228
(31,716)
133
(207)
14,591
31,652
The Statement of Accounts presents a true and fair view of the financial position of the Authority at the accounting date and its income and
expenditure for the year ended 31 March 2014. The notes on pages 14 to 92 and 94 to 97
form part of the financial statements.
Dated: 30 June 2014
Draft Statement of Accounts 2013/14
K Sly BA Hons CPFA
12
North Norfolk District Council
109
DRAFT FINANCIAL STATEMENTS 2013/14
Cash Flow Statement
The Cash Flow Statement shows the changes in cash and cash equivalents of the Authority during the reporting period. The statement shows how
the Authority 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 Authority are funded by way of taxation
and grant income or from the recipients of services provided by the Authority.
Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Authority'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 Authority.
31 March 2013
£000
(3,036) Net Surplus/(Deficit) on the provision of services
3,190 Adjust Net Surplus/(Deficit) on the provision of services for non cash movements
Adjust for items included in the Net Surplus/(Deficit) on the provision of services that are
(990) investing and financing activities
(836) Net Cash Flows from Operating Activities
(1,038) Investing Activities
533 Financing Activities
(1,341) Net Increase or (Decrease) in Cash and Cash Equivalents
1,511 Cash and Cash Equivalents at the beginning of the reporting period
170 Cash and Cash Equivalents at the end of the reporting period
Draft Statement of Accounts 2013/14
13
Note
16
12
12
13
14
15
15
31 March 2014
£000
2,611
6,839
(1,965)
7,485
6,380
(4,438)
9,427
170
9,597
North Norfolk District Council
110
NOTES TO THE ACCOUNTS
1.
Accounting Policies
A
General Principles
The Statement of Accounts summarises the Authority's transactions for the 2013/14 financial year and its position at the year-end of 31 March 2014.
The Authority is required to prepare an annual Statement of Accounts by the Accounts and Audit (England) Regulations 2011. These practices
primarily comprise the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Local Authority Accounting in the United
Kingdom 2013/14 and the Service Reporting Code of Practice 2013/14 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 noncurrent assets and financial instruments. The accounting policies detailed below have been consistently applied within the financial statements.
B
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 Authority 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 Authority
Revenue from the provision of services is recognised when the Authority 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 Authority.
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 those services provided by employees) are recorded as expenditure when the services
are received, rather than when payments are made.
Interest payable on borrowings and receivable on investments is accounted for 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 receivable or payable for the relevant
amount is recorded in the Balance Sheet. Where there is evidence that debts are unlikely to be settled, the balance of receivables is written
down and a charge made to revenue for the income that might not be collected.
Where the Authority is acting as an agent for another party (e.g., in the collection of NNDR and council tax), income and expenditure are recognised
only to the extent that commission is receivable by the Authority for the agency services rendered or the Authority incurs expenses directly on its
own behalf in rendering the services.
Draft Statement of Accounts 2013/14
14
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NOTES TO THE ACCOUNTS
C
Cash and Cash Equivalents
Cash is represented by cash in hand and deposits with financial institutions repayable on demand. Cash equivalents are highly liquid investments
that are readily convertible to known amounts of cash on the Balance Sheet date, and which are subject to an insignificant risk of change in value.
Cash and cash equivalents are shown net of bank overdrafts as they are repayable on demand and form an integral part of the Authority‟s day to
day cash management activity.
D
Changes in Accounting Policies and Estimates and Errors
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 Authority's financial position or financial performance. Where a
change is made, it is applied retrospectively by adjusting opening balances and comparative amounts for the prior period as if the new policy had
always been applied. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change.
Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior
period.
E
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 assets attributable to the service.
The Authority is not required to raise council tax to cover depreciation, revaluation and impairment losses or amortisations.
F
Employee Benefits
Benefits Payable during Employment
Short-term employee benefits (those that fall due wholly within 12 months of the year-end), such as wages and salaries, paid annual leave and paid
sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees, are recognised as an expense in the year in which employees
render services to the Authority. An accrual is made against services in the Surplus or Deficit on the Provision of Services for the cost of holiday
Draft Statement of Accounts 2013/14
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112
NOTES TO THE ACCOUNTS
entitlements and other forms of leave earned by employees but not taken before the year-end and which employees can carry forward into the next
financial year. The accrual is made at the remuneration rates applicable in the following financial year. Any accrual made is required under statute to
be reversed out of the General Fund Balance by a credit to the Accumulating Compensated Absences Adjustment Account in the Movement in
Reserves Statement.
Termination Benefits
Termination benefits are amounts payable as a result of a decision by the Authority to terminate an officer's employment before the normal
retirement date or an officer's decision to accept voluntary redundancy and are charged on an accruals basis to the Non Distributed Costs line in the
Comprehensive Income and Expenditure Statement when the Authority is demonstrably committed to either terminating 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 Authority 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 termination benefits related to pensions enhancements 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 Authority are members of the Local Government Pensions Scheme (LGPS), administered by Norfolk County Council. The scheme
provides defined benefits to members (retirement lump sums and pensions), earned as employees worked for the Authority.
The Local Government Scheme is accounted for as a defined benefits scheme in accordance with the Local Government Pension Scheme
(Benefits, Membership and Contributions) Regulations 2007, the Local Government Pension Scheme (Administration) Regulations 2008 and the
Local Go
Government Pension Scheme (Transitional Provisions) Regulations 2008. It is contracted out of the State Second Pension:

The liabilities of the Norfolk pension fund attributable to the Authority 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 projected earnings for current
employees.
Draft Statement of Accounts 2013/14
16
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113
NOTES TO THE ACCOUNTS

Liabilities are discounted to their value at current prices, using a discount rate of 4.3% (4.5% in 2012/13). This rate is based on a corporate
yield curve based on the constituents of the iBoxx Sterling Corporates AA index and using the UBS delta curve fitting methodology. In line
with the adoption of IAS 19 – Employee Benefits, an individual discount rate is calculated for each employer, based on their own weighted
average duration category. The weighted average duration is used to identify the appropriate category for each employer as shown in the
table below:Weighted Average Duration
Less than 17 years
Between 17 and 23 years
More than 23 years

Discount Rate Category
Short
Medium
Long
The change in the net pensions liability is analysed into seven components:
o Current service cost - The increase in the present value of the defined benefit obligation resulting from employee service in the
current period
o Past service cost – The increase in the present value of the defined benefit obligation for employee service in prior periods, resulting
in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. Past
service cost may either be positive (where benefits are introduced or improved) or negative (where existing benefits are reduced).
o Interest cost – The increase during a period in the present value of a defined benefit obligation which arises because the benefits are
one period closer to payment.
o Expected return on assets -The expected increase during a period in the value of assets, based on values and long term expected
returns as at the start of the period.
o Gains/losses on settlements and curtailments -the result of actions to relieve the Authority of liabilities or events that reduce the
expected future service or accrual of benefits of employees - debited/credited to the Surplus/Deficit on the Provision of Services in the
Comprehensive Income and Expenditure Statement as part of Non Distributed Costs;
o 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. These are
recognised under „other comprehensive income‟;
o Contributions paid to the Norfolk 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 Authority 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 on 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.
Draft Statement of Accounts 2013/14
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114
NOTES TO THE ACCOUNTS
Discretionary Benefits
The Authority 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 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.
G
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:


Those that provide evidence of conditions that existed at the end of the reporting period - the Statement of Accounts is adjusted to reflect
such events;
Those that are indicative of conditions that arose after the reporting period - the Statement of Accounts are not adjusted to reflect such
events, but where a category of events would have a material effect, disclosure is made in the notes to the accounts of the nature of the
events and their estimated financial effect.
Any events taking place after the accounts are finally signed off are not reflected in the Statement of Accounts.
H
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 Authority‟s
financial performance.
Financial Instruments
I
Financial Liabilities
Financial liabilities are recognised on the Balance Sheet when the Authority becomes a party to the contractual provisions of a financial instrument.
For the short term borrowing that the Authority has, the amount presented in the Balance Sheet is the outstanding principal payable (plus accrued
interest). Interest charged to the Comprehensive Income and Expenditure statement is the amount payable for the year. Other financial liabilities
are trade payables. These are carried on the Balance Sheet at their fair value which is taken to be the invoiced amount and no instruments are held
at amortised cost
Draft Statement of Accounts 2013/14
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115
NOTES TO THE ACCOUNTS
J
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 Authority becomes a party to the contractual provisions of a financial
instrument and are initially measured at fair value. If it is appropriate, they are then measured at their amortised cost (if, for example, the Authority
incurred significant transaction costs which need to be written-off or an investment was bought for other than its par value). 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. 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 under the terms of the loan.
Where loans are advanced at below market rates, they are classed as „Soft Loans‟ and specific accounting requirements apply to them. The
Authority has a very small number of car loans to employees and other loans to voluntary organisations to encourage leisure activities and economic
development. The impact of accounting fully for the losses on these loans is considered to be immaterial and the special accounting requirements
have not been applied.
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 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.
Available for Sale Assets
Available-for-sale assets are recognised on the Balance Sheet when the Authority 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.
Draft Statement of Accounts 2013/14
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116
NOTES TO THE ACCOUNTS
Assets are maintained in the Balance Sheet at fair value based on the quoted market price. Changes in fair value are balanced by an entry in the
Available-for-Sale Reserve and the gain/loss is recognised in the Surplus/Deficit on Revaluation of Available-for-Sale Financial Assets line in the
Comprehensive Income and Expenditure Statement.
It is the Authority‟s policy to hold these assets until maturity at which time the fair value of the asset will be equal to the nominal value. If the asset
were to be sold prior to maturity, any gain or loss would be recognised in the Financing and Investment Income and Expenditure line in the
Comprehensive Income and Expenditure Statement.
K
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
Authority when there is reasonable assurance that:


the Authority will comply with the conditions attached to the payments; and
the grants or contributions will be received.
Amounts recognised as due to the Authority are not credited to the Comprehensive Income and Expenditure Account until conditions attached to the
grant or contributions have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in
the asset received in the form of 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 payables. When
conditions are satisfied, the grant or contribution is credited to the relevant service line (for attributable revenue grants and contributions) or Taxation
and Non-Specific Grant Income (non-ring-fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement.
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 Account. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Account
are transferred to the Capital Adjustment Account once they have been applied.
Where general (non-ring fenced) revenue grants are allocated to the Authority by Central Government these are credited to Taxation and NonSpecific Grant Income in the Comprehensive Income and Expenditure Statement.
Draft Statement of Accounts 2013/14
20
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117
NOTES TO THE ACCOUNTS
L
Intangible Assets
Expenditure on non-monetary assets that do not have physical substance but are controlled by the Authority 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 Authority for
more than one financial year.
Intangible assets are initially measured at cost. Amounts are only revalued where the fair value of the assets held by the Authority can be
determined by reference to an active market. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service
lines 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 lines 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 with proceeds greater than £10,000
the Capital Receipts Reserve.
M
Inventories and Work in Progress
Inventories including coast protection materials and stationery are included in the Balance Sheet at the lower of cost and net realisable value. Cost
is determined using the first-in, first-out (FIFO) method.
N
Investment Properties
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 yearend. 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 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
Draft Statement of Accounts 2013/14
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118
NOTES TO THE ACCOUNTS
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.
O
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 return for payment are accounted for under this policy
where fulfilment of the arrangement is dependent on the use of specific assets.
The Authority as Lessee
Finance Leases
Property, plant and equipment held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its 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 Authority 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 years 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)
Property Plant and Equipment recognised under finance leases is 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.
The Authority is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a
prudent annual provision is made from revenue towards the deemed capital investment in accordance with statutory requirements. Depreciation and
revaluation and impairment losses are therefore replaced by revenue provision 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.
Draft Statement of Accounts 2013/14
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119
NOTES TO THE ACCOUNTS
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 Authority as Lessor
Finance Leases
Where the Authority 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 Authority'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 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 liability (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 will be 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 paid, the element for the charge for the acquisition of the interest in the property is
used to write down the lease asset. 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 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.
Draft Statement of Accounts 2013/14
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NOTES TO THE ACCOUNTS
Operating Leases
Where the Authority 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.
P
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 2013/14 (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 Authority's status as a multifunctional, democratic organisation;
Non Distributed Costs - the cost of discretionary benefits awarded to employees retiring early and any depreciation and impairment losses
chargeable on surplus assets in Property, Plant and Equipment.
These two cost categories are defined in SeRCOP and accounted for as separate headings in the Comprehensive Income and Expenditure
Statement, as part of Net Expenditure on Continuing Services.
Q
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 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 Authority 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.
A de-minimus level of £10,000 is applied to expenditure on assets.
Draft Statement of Accounts 2013/14
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121
NOTES TO THE ACCOUNTS
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 cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition will not increase the cash flows of the
Authority. In the latter case, the cost of the acquisition is the carrying amount of the asset given up by the Authority.
Assets are then carried in the Balance Sheet using the following measurement bases:


Infrastructure, community assets and assets under construction - depreciated historical cost
All other assets - fair value, determined, 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 is used as an
estimate of fair value.
Assets included in the Balance Sheet at fair value are re-valued 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. Valuations are carried out either by an internal or external qualified valuer.
Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to
the Comprehensive Income and Expenditure Statement where they arise from the reversal of a revaluation or impairment loss previously charged to
a service.
Where decreases in value are identified, the revaluation loss is 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 insufficient balance, the carrying amount of the asset is written down against the
relevant service line(s) in the Comprehensive Income and Expenditure Statement.
Draft Statement of Accounts 2013/14
25
North Norfolk District Council
122
NOTES TO THE ACCOUNTS
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 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.
Disposals
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. The asset is re-valued 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 previously recognised losses. Depreciation is not charged on Assets Held for Sale.
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 Properly, 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.
Draft Statement of Accounts 2013/14
26
North Norfolk District Council
123
NOTES TO THE ACCOUNTS
Amounts received for a disposal in excess of £10,000 are generally categorised as capital receipts. The balance of receipts is required to be
credited to the Capital Receipts Reserve, and can then only be used for new capital investment. Receipts are appropriated to the 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.
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 bases:




Buildings - straight-line allocation over the useful life of the property as estimated by the valuer (typically 30 to 100 years);
Vehicles, plant and equipment - a percentage of the value of each class of assets in the Balance Sheet, as advised by a suitably qualified
officer. The maximum useful life is 10 years and the minimum 4 years typically most assets have a useful life of 5 years;
Infrastructure – straight line allocation over 20 years.
Community and Surplus assets – The land element of these is not depreciated, any property is depreciated over its useful life.
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.
Componentisation
Where an item of Property, Plant and Equipment asset has major components whose cost is significant (i.e. more than 30%) in relation to the total
cost of the item, the components are depreciated separately.
Componentisation is considered for all new valuations, enhancement expenditure and acquisition expenditure carried out on or after 1 April 2011.
Where a component is replaced or restored (i.e. enhancement expenditure) the carrying amount of the old component shall be de-recognised before
reflecting the enhancement.
Draft Statement of Accounts 2013/14
27
North Norfolk District Council
124
NOTES TO THE ACCOUNTS
The Authority recognises the following levels of components:




Substructure
Superstructure
Internal services
External works
Componentisation is not applicable to land as land is non-depreciable and is considered to have an infinite life.
R
Provisions, Contingent Liabilities and Contingent Assets
Provisions
Provisions are made where an event has taken place that gives the Authority 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 but where there is uncertainty
around the timing.
Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the
Authority becomes aware of the obligation, and 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. Where the obligation is expected to be settled within 12 months of the Balance Sheet
date the provision is recognised as a Current Liability in the Balance Sheet. Other provisions are recognised as Long Term Liabilities.
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 and 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), this is only recognised as income for the relevant service if
it is virtually certain that reimbursement will be received if the Authority settles the obligation.
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), this is
only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Authority settles the obligation.
Draft Statement of Accounts 2013/14
28
North Norfolk District Council
125
NOTES TO THE ACCOUNTS
Provisions for bad and doubtful debts are maintained in respect of possible losses from non-collection of amounts owing to the Authority. This
includes Council Tax, Business Rates and other income. The provisions are recalculated each year based on age and category of outstanding debt
at the end of the financial year, reflecting historical collection patterns, and are included in the Balance Sheet as an adjustment to receivables.
Contingent Liabilities
A contingent liability arises where an event has taken place that gives the Authority 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 Authority. 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 Authority 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 Authority. 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.
S
Reserves
The Authority 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 and included against the Surplus/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 and retirement benefits and that do not
represent usable resources for the Authority - these Unusable Reserves are explained elsewhere within the Accounting Statements.
T
Revenue Expenditure Funded from Capital under Statute
Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of a non-current asset has
been charged as expenditure to the relevant service in the Comprehensive Income and Expenditure Statement in the year. Where the Authority has
determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement
Draft Statement of Accounts 2013/14
29
North Norfolk District Council
126
NOTES TO THE ACCOUNTS
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.
U
VAT
VAT 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.
V
Council Tax and Non-domestic Rate Income
Billing authorities in England are required by statute to maintain a separate fund for the collection and distribution of amounts due in respect of
Council Tax and Non-Domestic Rates (NDR). In its capacity as a billing authority, the Council acts as an agent collecting and distributing Council
Tax and NDR income on behalf of the major preceptors and itself.
From 1 April 2009, the Council has been required to show Council Tax income in the Comprehensive Income and Expenditure Account as accrued
income.
From 1 April 2013, the Council has been required to show Non-Domestic Rate income in the Comprehensive Income and Expenditure Account as
accrued income.
The Council‟s share of Collection Fund income and expenditure is recognised in the Comprehensive Income and Expenditure Statement in the
Taxation and Non-Specific Grant Income and Expenditure section.
2.
Accounting Standards That Have Been Issued but Have Not Yet Been Adopted
The Code of Practice on Local Authority Accounting in the UK 2014-15 has introduced the following changes in accounting policy, which will need to
be adopted fully by the Authority in the 2014-15 financial statements from 1 April 2014.
IFRS 10 – Consolidated Financial Statements. The new standard identifies a single definition of control for the basis of consolidation. This does not
affect these financial statements although it may in future years
IFRS 11 – Joint Arrangements. The new standard introduces a pre-requisite that there must be joint control based on the share of rights and
obligations rather than legal structure and specifies the resulting accounting treatment. This does not affect these financial statements although it
may in future years
Draft Statement of Accounts 2013/14
30
North Norfolk District Council
127
NOTES TO THE ACCOUNTS
IFRS 12 - Disclosure of interests in other entities. The new standard introduces the need to disclose greater detail of material interests in other
entities to aid users in their evaluation of the financial statements. This does not affect these financial statements although it may in future years
IFRS 13 – Fair Value Measurement. In accordance with the requirements of the 2013-14 Code (this has deferred adoption of IFRS 13 to the 201516 Code) the Statement of Accounts do not include the measurement and disclosure requirements of this standard.
Other changes to the following standards are not expected to materially impact on the Council:



3.
IAS 27 Separate Financial Statements (as amended 2011).
IAS 28 Investments in Associates and Joint Ventures (as amended 2011)
IAS 32 Financial Instruments. Presentation
Critical Judgements in Applying Accounting Policies
In applying the accounting policies set out in Note 1, the Authority has had to make certain judgements about complex transactions or those
involving uncertainty about future events. The critical judgements made in the Statement of Accounts are:



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.
Asset Categorisation - The Code classifies assets according to certain criteria. For example investment properties are classified as those
assets that are held primarily to generate rental income or for capital appreciation, surplus assets are those assets that are surplus to service
needs and do not meet the criteria for investment property or assets held for sale. Assets held for sale is usually restricted to property that is
expected to be sold in 12 months. For the Authority, industrial rental units have been treated as other land and buildings based on the
judgement that they are held for a service objective of Economic Development and regeneration.
NNDR appeals- are estimates made for the expected loss of income as a result of successful appeals based on currently outstanding
appeals
Draft Statement of Accounts 2013/14
31
North Norfolk District Council
128
NOTES TO THE ACCOUNTS
4.
Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty
The Statement of Accounts contains estimated figures that are based on assumptions made by the Authority about the future or that are otherwise
uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances
cannot be determined with certainty, actual results could be materially different from the assumptions and estimates.
The items in the Authority's Balance Sheet at 31 March 2014 for which there is a significant risk of material adjustment in the forthcoming financial
year are as follows:
Item
Property
Plant and
Equipment
Pensions
Liability
Uncertainties
Asset valuation in the current economic climate is subject to
significant stress. Impairment reviews by the Authority of its
asset base have been undertaken in a robust way to reflect the
changes in its asset values. Depreciation charges are related
to the useful life of the assets and dependant on the level of
repairs and maintenance that will be incurred in relation to
individual assets.
Estimation of the net liability to pay pensions depends on a
number of complex judgements relating to the discount rate
used, the rate at which salaries are projected to increase,
changes in retirement ages, mortality rates and expected
returns on pension fund assets. Actuaries are employed by
the pension schemes administrators to provide expert advice
about the assumptions to be applied.
Effect if actual results differ from assumptions
It is important that the asset values in the Balance Sheet are kept under
review. If the useful lives of the assets are reduced depreciation
increases and the carrying value of the assets falls. Whilst there is a risk
in any valuation exercise changes to useful lives and depreciation do not
impact the Authority‟s useable reserves as depreciation charges do not
fall on the Council Tax payer.
The effects on the net pension‟s liability of changes in individual
assumptions can be measured, for example a 0.5% decrease in the real
discount rate assumption would result in an increase of 9% in the
pension liability which is approximately £7.646m.
(i)
(ii)
(iii)
Draft Statement of Accounts 2013/14
32
A one year increase in member life expectancy would result
in an increase of 3% in the pension liability which is
approximately £2.589m.
If salaries were to increase by 0.5% more than anticipated,
the pension liability would increase by 2%, approximating to
£2.108m.
If pensions payable were to increase by 0.5% more than
anticipated, the pension liability would increase by 6%,
approximating to £5.483m.
North Norfolk District Council
129
NOTES TO THE ACCOUNTS
5.
Movement in Reserves Statement - Adjustments between Accounting Basis and Funding Basis Under Regulations
This details the adjustments that are made to the total comprehensive income and expenditure recognised by the Authority in the year in accordance
with proper accounting practice to the resources that are specified by statutory provisions as being available to the Authority to meet future capital
and revenue expenditure.
Draft Statement of Accounts 2013/14
33
North Norfolk District Council
130
NOTES TO THE ACCOUNTS
2013/14
Adjustments 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
Revaluation losses on Property, Plant and Equipment
Movements in the market value of Investment Properties
Amortisation of intangible assets
Capital Grants and Contributions that have been applied to
capital financing
Revenue Expenditure Funded from Capital Under Statute
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
Insertion of items not debited or credited to the Comprehensive
Income and Expenditure Statement:
Statutory provision for the financing of capital investment
Capital expenditure charged against the General Fund
Adjustments involving the Capital Grants Unapplied Account
Application of grants to capital financing
Draft Statement of Accounts 2013/14
General
Fund
Balance
Capital
Receipts
Reserve
£000
£000
Capital
Grants
Unapplied
Account
£000
Movement in
Unusable
Reserves
£000
883
441
10
150
0
0
0
0
0
0
0
0
(883)
(441)
(10)
(150)
(2,247)
645
0
0
0
0
2,247
(645)
(555)
0
0
555
(281)
(600)
0
0
0
0
281
600
0
0
0
0
34
North Norfolk District Council
131
NOTES TO THE ACCOUNTS
2013/14
General
Fund
Balance
Capital
Receipts
Reserve
£000
£000
Adjustments involving the Capital Receipts Reserve
Transfers of sale proceeds credited as part of the gain/loss on
disposal to the Comprehensive Income and Expenditure
Use of the Capital Receipts Reserve to finance new capital
expenditure
Adjustments involving the Pensions Reserve
Reversal of items relating to post employment benefits debited
or credited to the surplus or deficit on the provision of services in
the Comprehensive Income and Expenditure Statement
Employer's pensions contributions and direct payments to
pensioners payable in the year
Adjustments involving the Collection Fund Adjustment
Account
Amount by which Council Tax income credited to the
Comprehensive Income and Expenditure Statement is different
from the Council Tax income calculated for the year in
accordance with statutory requirements
Adjustments involving the Accumulating Compensated
Absences Adjustment Account
Amount by which officer remuneration charged to the
Comprehensive Income and Expenditure Statement on an
accruals basis is different from remuneration chargeable in the
year in accordance with statutory requirements
Movement in
Unusable
Reserves
£000
0
755
0
(755)
0
(1,382)
0
1,382
2,976
0
0
(2,976)
(1,684)
0
0
1,684
0
(97)
0
0
97
0
Total Adjustments
Draft Statement of Accounts 2013/14
Capital
Grants
Unapplied
Account
£000
35
20
0
0
(20)
(339)
(627)
0
966
North Norfolk District Council
132
NOTES TO THE ACCOUNTS
2012/13
General
Fund
Balance
Capital
Receipts
Reserve
£000
£000
Adjustments 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
Revaluation losses on Property, Plant and Equipment
Movements in the market value of Investment Properties
Amortisation of intangible assets
Capital Grants and Contributions that have been applied to
capital financing
Revenue Expenditure Funded from Capital Under Statute
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
Insertion of items not debited or credited to the Comprehensive
Income and Expenditure Statement:
Statutory provision for the financing of capital investment
Capital expenditure charged against the General Fund
Adjustments involving the Capital Grants Unapplied Account
Application of grants to capital financing
Draft Statement of Accounts 2013/14
36
Capital
Grants
Unapplied
Account
£000
Movement in
Unusable
Reserves
£000
1,743
390
20
153
0
0
0
0
0
0
0
0
(1,743)
(390)
(20)
(153)
(443)
1,917
0
0
0
0
443
(1,917)
(780)
0
0
780
(257)
(386)
0
0
0
0
257
386
0
0
(101)
101
North Norfolk District Council
133
NOTES TO THE ACCOUNTS
2012/13
General
Fund
Balance
Capital
Receipts
Reserve
£000
£000
Adjustments involving the Capital Receipts Reserve
Transfers of sale proceeds credited as part of the gain/loss on
disposal to the Comprehensive Income and Expenditure
Use of the Capital Receipts Reserve to finance new capital
expenditure
Adjustments involving the Pensions Reserve
Reversal of items relating to post employment benefits debited
or credited to the surplus or deficit on the provision of services in
the Comprehensive Income and Expenditure Statement
Employer's pensions contributions and direct payments to
pensioners payable in the year
Adjustments involving the Collection Fund Adjustment
Account
Amount by which Council Tax income credited to the
Comprehensive Income and Expenditure Statement is different
from the Council Tax income calculated for the year in
accordance with statutory requirements
Adjustments involving the Accumulating Compensated
Absences Adjustment Account
Amount by which officer remuneration charged to the
Comprehensive Income and Expenditure Statement on an
accruals basis is different from remuneration chargeable in the
year in accordance with statutory requirements
Movement in
Unusable
Reserves
£000
0
782
0
(782)
0
(2,950)
0
2,950
2,238
0
0
(2,238)
(1,615)
0
0
1,615
18
0
0
(18)
13
0
0
(13)
3,011
(2,166)
(101)
(744)
Total Adjustments
Draft Statement of Accounts 2013/14
Capital
Grants
Unapplied
Account
£000
37
North Norfolk District Council
134
NOTES TO THE ACCOUNTS
General Fund Balance
The General Fund is the statutory fund into which all the receipts of an authority are required to be paid and out of which all liabilities of
the authority are to be met, except to the extent that statutory rules might provide otherwise.
Capital Receipts Reserve – The Capital Receipt Reserve holds the proceeds from the disposal of land or other assets, which are
restricted by statute from being used other than to fund new capital expenditure or to be set aside to finance historical capital
expenditure. The balance on the reserve shows the resources that have yet to be applied for these purposes.
Capital Grants Unapplied – The capital Grants Unapplied Account holds grants and contributions received towards capital projects
from which the Council has met the conditions that would otherwise require repayment of the monies but which have yet to be applied to
meet expenditure. The balance is restricted by grant terms as to the capital expenditure against which it can be applied and/or the
financial year in which this can take place.
Draft Statement of Accounts 2013/14
38
North Norfolk District Council
135
NOTES TO THE ACCOUNTS
6.
Movement in Reserves Statement – Transfers to/from Earmarked Reserves
This sets out the amounts set aside from the General Fund balances in earmarked reserves to provide financing for future expenditure plans and the
amounts posted back from earmarked reserves to meet General Fund expenditure in 2013/14.
Asset Management
Benefits
Big Society Fund
Building Control
Business Rate Retention
Capital Projects Reserve
Carbon Management
Coast Protection
Common Training
Cromer Pier
Economic Development & Tourism
Election Reserve
Enforcement Board
Environmental Health
Environmental Policy
Grants
Grassed Area Deposits
Housing
Land Charges
Legal
Local Development Framework
Local Strategic Partnership
LSVT Reserve
New Homes Bonus
Draft Statement of Accounts 2013/14
Balance at
1 April
2012
£000
27
640
0
0
0
1,820
21
208
32
15
54
2
0
0
20
0
349
242
50
47
0
672
435
0
Transfers
Transfers
Out
In
2012/13
2012/13
£000
£000
(10)
48
(182)
214
(610)
1,152
0
0
0
0
(356)
599
0
0
(208)
60
(5)
9
0
0
(48)
25
(2)
30
0
0
0
33
(20)
0
0
48
0
0
0
0
0
0
(33)
34
0
0
(615)
26
0
0
0
612
39
Balance at
31 March
2013
£000
65
672
542
0
0
2,063
21
60
36
15
31
30
0
33
0
48
349
242
50
48
0
83
435
612
Transfers
Out
2013/14
£000
(53)
0
(184)
0
0
(994)
(21)
(60)
(9)
(15)
(25)
0
(53)
(20)
0
(48)
0
(142)
(30)
(43)
0
(31)
0
0
Transfers
In
2013/14
£000
36
50
611
46
327
812
0
243
50
0
6
45
200
53
0
238
0
0
20
44
0
0
0
675
Balance at
31 March
2014
£000
48
722
969
46
327
1,881
(0)
243
77
0
13
75
147
66
0
238
349
100
40
49
0
52
435
1,287
North Norfolk District Council
136
NOTES TO THE ACCOUNTS
Organisational Development
Partnership Budgets
Pathfinder
Planning - Revenue
Regeneration Projects
Restructuring and Invest to Save
Sports Hall Equipment/Sports Facilities
Treasury (Property) Reserve
Whistle Blowing
Total
Balance at
1 April
2012
£000
494
196
404
111
38
468
23
116
10
6,494
Transfers Transfers
Out
In
2012/13
2012/13
£000
£000
(494)
70
(196)
35
(198)
60
(56)
80
0
0
(87)
313
(8)
10
(50)
0
0
0
(3,178)
3,458
Total transfers out during 2013/14
Total transfers in during 2013/14
Net Movement in Earmarked Reserves
in 2013/14
Balance at
31 March
2013
£000
70
35
266
135
38
694
25
66
10
6,774
Transfers
Out
2013/14
£000
(70)
(35)
(128)
(124)
0
(205)
(13)
0
(10)
(2,313)
Transfers
In
2013/14
£000
108
0
102
289
0
435
18
0
0
4,408
Balance at
31 March
2014
£000
108
0
240
300
38
924
30
66
0
8,869
(2,313)
4,408
2,095
The purpose of each earmarked reserves is explained below:
Asset Management - To support improvements to our existing assets as identified through the Asset Management Plan.
Benefits - To mitigate any claw back by the Department of Works and Pensions following final audited subsidy determination.
Big Society Fund – Earmarked from the return of the second homes funding from Norfolk County Council.
Building Control – Ring-fenced to cover any future deficits
Business Rates Retention – To be used to mitigate the impact of final claims and appeals in relation to Business Rates Retention scheme.
Capital Projects Reserve - To provide funding for capital projects. This includes the VAT shelter income that is received in the year and not yet
spent on projects.
Carbon Management - To fund revenue invest to save initiatives as part of the Authority's Carbon Management Plan.
Draft Statement of Accounts 2013/14
40
North Norfolk District Council
137
NOTES TO THE ACCOUNTS
Coast Protection - To support the on-going coast protection maintenance programme.
Common Training - To deliver the corporate training and development programme.
Cromer Pier - To fund future repair costs for the pier.
Economic Development and Tourism: Service underspends rolled forward that relate to one off projects or expenditure not budgeted for in future
years.
Election Reserve - Established to meet costs associated with district council elections, to smooth the impact between financial years.
Environmental Health - Earmarking of underspends for one off projects not budgeted for in future years.
Environmental Policy - To fund a range of environmental policy initiatives.
Grants – Earmarking of grants to be used to fund future expenditure.
Grassed Area Deposits - To finance ongoing commitments in relation to grounds maintenance contracts.
Housing – Includes homelessness grant funding received in previous years that had been earmarked for related projects.
Land Charges – To mitigate the impact of potential income reductions for the service.
Legal – Includes funding for Compulsory Purchase Order (CPO) work and other one-off work.
Local Strategic Partnership – Ring fenced from the former Local Strategic Partnership, earmarked for ongoing liabilities.
LSVT Reserve – To meet the cost of successful warranty claims not covered by bonds and insurance following the housing stock transfer.
New Homes Bonus – Established for supporting communities with future growth and development.
Organisational Development - To provide funding for organisation development to create capacity within the organisation and address anomalies
within the pay structure.
Draft Statement of Accounts 2013/14
41
North Norfolk District Council
138
NOTES TO THE ACCOUNTS
Partnership Budgets - This reflects the balance of Funding as at 31/03/12 on the Revenues and Benefits Partnership project. This will be utilised in
2013/14.
Pathfinder - To help Coastal Communities adapt to coastal changes. The balance represents grant funding that has been received that has been
fully allocated to projects to deliver the Pathfinder objectives but has not yet been spent.
Planning (Revenue and Capital) - Balance of Housing and Planning Delivery grant received in previous years earmarked for funding related
revenue and capital projects.
Regeneration Projects - Earmarked for various regeneration projects.
Restructuring and Invest to Save - To be used for restructuring costs including one-off redundancy and pension strain costs and invest to save
projects that will deliver efficiency savings.
Sports Hall Equipment and Sports Facilities - To support renewals for sports hall equipment. Transfers in the year represents over or under
achievement of income target.
Treasury (Property) – To smooth the impact of fluctuations in returns from property investment.
Whistle Blowing - Commissioning investigation activity as required.
Draft Statement of Accounts 2013/14
42
North Norfolk District Council
139
NOTES TO THE ACCOUNTS
7.
Comprehensive Income and Expenditure Statement – Other Operating Expenditure
2012/13
£000
1,539
394
(780)
1,153
8.
2013/14
£000
1,457
(71)
(555)
831
Parish Council Precepts
(Gains)/Losses on Trading Operations (Note 17)
Gains/losses on the disposal of non current assets
Total
Comprehensive Income and Expenditure Statement – Financing and Investment Income and Expenditure
2012/13
£000
164 Interest payable and similar charges
2013/14
£000
140
930
1,429
Pensions interest cost and expected return on pensions assets
(207) Interest receivable and similar income
(20) Changes in the fair value of investment property
867 Total
9.
(354)
(10)
1,205
Comprehensive Income and Expenditure Statement – Taxation and Non Specific Grant Income
2012/13
£000
(7,328)
(6,247)
(121)
(952)
(443)
(15,091)
2013/14
£000
(6,540)
(3,271)
(4,235)
(1,080)
(2,247)
(17,373)
Council Tax Income
Non Domestic Rates
Revenue Support Grant
Other Non ringfenced government grants
Capital grants and contributions
Total
Draft Statement of Accounts 2013/14
43
North Norfolk District Council
140
NOTES TO THE ACCOUNTS
9a. Material Items of Income and Expense
Material items of income and expenditure which are not disclosed separately on the face of the Comprehensive Income and Expenditure Statement
are as follows:
Tidal Surge of 5th and 6th December 2013. This event had a significant impact upon properties both residential and commercial throughout the
coastal areas of the district. The Comprehensive Income and Expenditure Statement reflects the repair costs that had been incurred as at the 31st
March 2014 and the associated sources of funding. These are set out in the table below.
Expenditure:
NNDC Property Assets
57,914
Coastal Assets
71,668
Other Infrastructure
Emergency Response
Sub Total
8,142
44,373
182,097
External Funding:
Insurance Claims
(33,697)
Bellwin Claim*
(45,758)
Severe Weather Recovery Scheme **
(102,642)
Net Impact 2013/14
(182,097)
0
Details of capital expenditure incurred as a result of the Tidal Surge can be found in note 28a
* A Government scheme designed to recompense authorities for the costs of emergency measures
taken during exceptional circumstances.
** A fund launched by Government in February 2014 to help local authorities affected by flooding. A total of £143,616
was received of which £102,642 has been utilised in the year. The balance of £40,974 will be used to offset costs that
will be incurred in the year to 31st March 2015.
Draft Statement of Accounts 2013/14
44
North Norfolk District Council
141
NOTES TO THE ACCOUNTS
Balance Sheet – Usable Reserves
10.
Movements in the Authority‟s usable reserves are detailed in the Movement in Reserves Statement and notes 5 and 6.
Balance Sheet – Unusable Reserves
11.
The following provides a summary of the details of the Authority‟s unusable reserves. Further details on each of the reserves are provided below.
2012/13
£000
14,473
(28)
27,917
0
(31,840)
36
(187)
10,371
2013/14
£000
15,742
411
30,228
0
(31,716)
133
(207)
14,591
Revaluation Reserve
Available for Sale Financial Instruments Reserve
Capital Adjustment Account
Financial Instruments Adjustment Account
Pensions Reserve
Collection Fund Adjustment Account
Accumulated Compensated Absences Adjustment Account
Total Unusable Reserves
11(a) Revaluation Reserve
The Revaluation Reserve contains the gains made by the Authority arising from increases in the value of its Property, Plant and Equipment (and
Intangible Assets). 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.
Draft Statement of Accounts 2013/14
45
North Norfolk District Council
142
NOTES TO THE ACCOUNTS
2012/13
£000
13,498 Balance at 1 April
1,721 Upward revaluation of assets
Downward revaluation of assets and impairment losses not
(614)
charged to the surplus/deficit on the provision of services
Surplus/Deficit on revaluation of non-current assets posted to
0
the Comprehensive Income and Expenditure Statement
Difference between fair value depreciation and historical cost
(132)
depreciation
0 Accumulated gains on assets sold or scrapped
0 Amount to be written off to the capital adjustment account
14,473 Balance at 31 March
2013/14
£000
14,473
2,767
(1,367)
0
(132)
0
0
15,742
11(b) Available for Sale Financial Instruments Reserve
The Available for Sale Financial Instruments Reserve contains the gains made by the Authority arising from increases in the value of its investments
that have quoted market prices or otherwise do not have fixed or determinable payments. The balance is reduced when investments with
accumulated gains are:


revalued downwards or impaired and the gains are lost
disposed of and the gains are realised
2012/12
£000
2013/14
£000
(28)
0
(3) Balance at 1 April
0 Upward revaluation of investments
(Downward)/upward revaluation of investments not charged to
(25)
the surplus/deficit on the provision of services
Accumulated gains/losses on assets sold and maturing assets
0 written out to the Comprehensive Income and Expenditure
Statement as part of other investment income
(28) Balance at 31 March
Draft Statement of Accounts 2013/14
439
0
411
46
North Norfolk District Council
143
NOTES TO THE ACCOUNTS
11(c) Capital Adjustment Account
The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of noncurrent assets and for financing the acquisition, construction or enhancement 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 Authority 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 Authority.
The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation
Reserve was created to hold such gains.
Note 5 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.
Draft Statement of Accounts 2013/14
47
North Norfolk District Council
144
NOTES TO THE ACCOUNTS
2012/13
£000
27,874
(1,743)
(390)
(153)
(1,917)
(3)
23,667
132
23,800
2,950
443
101
257
386
27,937
(20)
27,917
Balance at 1 April
Reversal of items relating to capital expenditure debited or credited to
the Comprehensive Income and Expenditure Statement:
Charges for depreciation and impairment on non-current assets
Revaluation losses on Property, Plant and Equipment
Amortisation of tangible assets
Revenue expenditure funded from capital under statute
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
(883)
(441)
(150)
(645)
(203)
25,594
132
Adjusting amounts written out of the revaluation reserve
Net written out amount of the cost of non current assets consumed in
the year
Capital financing applied in the year:
Use of capital receipts reserve to finance new capital expenditure
Capital grants and contributions credited to the Comprehensive
Income and Expenditure Statements that have been applied to capital
financing
Application of grants to capital financing from the capital grants
unapplied account
Statutory provision for the financing of capital investment charged
against the general fund balance
Capital expenditure charged against the general fund balance
Movements in the market value of investment properties debited or
credited to the Comprehensive Income and Expenditure Statement
25,728
1,382
2,247
0
281
600
30,238
(10)
30,228
Balance at 31 March
Draft Statement of Accounts 2013/14
2013/14
£000
27,917
48
North Norfolk District Council
145
NOTES TO THE ACCOUNTS
11(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 Authority 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 Authority makes employer's contributions to pension funds or eventually pays any pensions for which it is directly
responsible. The deficit on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and
the resources the Authority 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.
2012/13
£000
(26,394) Balance at 1 April
(4,823) Actuarial gains/(losses) on pensions assets and liabilities
Reversal of items relating to retirement benefits debited or
(2,238) credited to the surplus or deficit on the provision of services in
the Comprehensive Income and Expenditure Statement
Employer's pension contributions and direct payments to
1,615
pensioners payable in the year
(31,840) Balance at 31 March
2013/14
£000
(31,840)
1,416
(2,976)
1,684
(31,716)
11(e) 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.
2012/13
£000
2013/14
£000
54 Balance at 1 April
Amount by which council tax income credited to the
Comprehensive Income and Expenditure Statement is different
(18)
from council tax income calculated for the year in accordance
with statutory requirements
36 Balance at 31 March
Draft Statement of Accounts 2013/14
49
36
97
133
North Norfolk District Council
146
NOTES TO THE ACCOUNTS
11(f) Accumulating Compensated Absences Adjustment Account
The Accumulating Compensated Absences Adjustment 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. Statutory arrangements require that the impact on the General Fund
Balance is neutralised by transfers to or from the Account.
2012/13
£000
(174) Balance at 1 April
Settlement or cancellation of an accrual made at the end of the
174
preceding year
(216) Amounts accrued at the end of the current year
Amount by which officer remuneration charged to the
Comprehensive Income and Expenditure Statement on an
29
accruals basis is different from remuneration chargeable in the
year in accordance with statutory requirements
(187) Balance at 31 March
Draft Statement of Accounts 2013/14
2013/14
£000
(187)
187
(213)
6
(207)
50
North Norfolk District Council
147
NOTES TO THE ACCOUNTS
12.
Cash Flow Statement – Arising from Operating Activities
The cash flows for operating activities include the following items
2012/13
£000
234 Interest Received
(164) Interest Paid
70 Net cash flows from operating activities
2012/13
£000
1,743
409
153
0
722
28
(490)
0
622
3
2013/14
£000
296
(140)
156
The surplus or deficit on the provision of services has been adjusted for the following non-cash movements
2013/14
£000
Depreciation
Impairment and downward valuations
Amortisation
Adjustments movements in fair value of investments classified as Fair Value through Profit & Loss a/c
Increase/(Decrease) in Creditors
Increase/(Decrease) in Interest and Dividend Debtors
Increase/(Decrease) in Debtors
Increase/(Decrease) in Inventories
Movement in Pension Liability
Carrying amount of non-current assets and non-current assets held for sale, sold or derecognised
3,190
2012/13
£000
883
451
150
2
2,931
(58)
944
41
1,292
203
6,839
Adjust for items included in the net surplus or deficit on the provision of services that are investing or financing
2013/14
activities
£000
(208) Capital Grants credited to surplus or deficit on the provision of services
0 Net adjustment from the sale of short and long term investments
(782) Proceeds from the sale of property plant and equipment, investment property and intangible assets
(990)
Draft Statement of Accounts 2013/14
(213)
(997)
(755)
(1,965)
51
North Norfolk District Council
148
NOTES TO THE ACCOUNTS
13.
Cash Flow Statement – Investing Activities
2012/13
£000
(196)
(14,615)
782
12,615
376
(1,038)
14.
Purchase of property, plant and equipment, investment property
and intangible assets
Purchase of short-term and long-term investments
Proceeds from the sale of property, plant and equipment,
investment property and intangible assets
Proceeds from short-term and long-term investments
Other receipts from investing activities
Net cash flows from investing activities
(2,074)
(41,315)
755
50,310
(1,296)
6,380
Cash Flow Statement – Financing Activities
2012/13
£000
2,703 Other receipts from financing activities
Cash payments for the reduction of the outstanding liabilities
(2,170)
relating to finance leases.
533 Net cash flows from financing activities
15.
2013/14
£000
2013/14
£000
(2,525)
(1,913)
(4,438)
Cash Flow Statement – Cash and Cash Equivalents
The balance of cash and cash equivalents is made up of the following elements:
2012/13
£000
2013/14
£000
4 Cash held by officers
44 Bank current accounts
Call Accounts with Banks and investments in Money Market
122
Funds
170 Total cash and cash equivalents
Draft Statement of Accounts 2013/14
4
10,055
(462)
9,597
52
North Norfolk District Council
149
NOTES TO THE ACCOUNTS
16.
Amounts Reported for Resource Allocation Decisions
The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Account is that specified by the Best
Value Accounting Code of Practice. However, decisions about resource allocation are taken by the Authority's Cabinet on the basis of budget
reports analysed across Service Areas. These reports are prepared on a different basis from the accounting policies used in the financial
statements
The income and expenditure of the Authority's principal Service Areas recorded in the budget reports for the year is as follows:
Service Area Income and Expenditure - 2013/14
Fees, charges and other services income
Government Grants
Total Income
Assets &
Leisure
£000
(4,766)
0
(4,766)
CLT /
Corporate
Customer
Services
Community,
Economic
Development
& Coastal
Organisational
development
(1,116)
0
(1,116)
(2,711)
0
(2,711)
(2,056)
(463)
(2,519)
(859)
0
(859)
Employee Expenses
Pension Fund Accounting Entries (Included in reporting to
management)
Other service expenses
Depreciation, amortisation and impairment (Included in reporting to
management)
Support service expenses
Total Expenditure
1,074
775
1,322
914
628
18
14
20
16
10
3,858
122
815
575
612
27
0
265
1,795
0
1,369
6,346
206
1,117
1,057
3,479
1,030
4,330
491
1,741
Net Expenditure
1,580
1
768
1,811
882
Draft Statement of Accounts 2013/14
53
North Norfolk District Council
150
NOTES TO THE ACCOUNTS
Service Area Income and Expenditure - 2013/14 Cont'd
Fees, charges and other services income
Government Grants
Total Income
Environmental
Health
£000
(3,473)
0
(3,473)
Development
Finance
Management
£000
£000
(2,146)
(2,763)
(28,850)
0
(30,996)
(2,763)
Total
£000
(19,890)
(29,313)
(49,203)
Employee Expenses
Pension Fund Accounting Entries (Included in reporting to
management)
Other service expenses
Depreciation, amortisation and impairment (Included in reporting to
management)
Support service expenses
Total Expenditure
1,158
2,199
1,544
9,614
22
(264)
27
(137)
5,080
29,259
412
40,733
252
36
41
2,416
786
7,298
2,448
33,678
1,121
3,145
8,508
61,134
Net Expenditure
3,825
2,682
382
11,931
Draft Statement of Accounts 2013/14
54
North Norfolk District Council
151
NOTES TO THE ACCOUNTS
Service Area Income and Expenditure - 2012/13
Fees, charges and other services income
Government Grants
Total Income
Assets &
Leisure
£000
(4,480)
0
(4,480)
CLT /
Corporate
Customer
Services
Community,
Economic
Development
& Coastal
Organisational
development
(1,173)
0
(1,173)
(2,869)
(120)
(2,989)
(1,508)
(609)
(2,117)
(870)
0
(870)
Employee Expenses
Pension Fund Accounting Entries (Included in reporting to
management)
Other service expenses
Depreciation, amortisation and impairment (Included in reporting to
management)
Support service expenses
Total Expenditure
1,059
871
1,547
952
621
(13)
3,670
(10)
131
(18)
864
(11)
996
(7)
614
1,099
0
163
2,651
0
1,286
7,101
181
1,173
911
3,467
1,331
5,919
425
1,653
Net Expenditure
Service Area Income and Expenditure - 2012/13 Cont'd
2,621
0
478
3,802
783
Development
Finance
Management
£000
£000
(2,274)
(2,395)
(36,290)
0
(38,564)
(2,395)
Total
£000
(19,137)
(37,019)
(56,156)
Fees, charges and other services income
Government Grants
Total Income
Environmental
Health
£000
(3,568)
0
(3,568)
Employee Expenses
Pension Fund Accounting Entries (Included in reporting to
management)
Other service expenses
Depreciation, amortisation and impairment (Included in reporting to
management)
Support service expenses
Total Expenditure
1,249
2,373
1,644
10,316
(12)
5,176
(210)
36,849
(26)
323
(307)
48,623
267
34
41
886
7,566
2,804
41,850
1,065
3,047
4,255
8,889
71,776
Net Expenditure
3,998
3,286
652
15,620
Draft Statement of Accounts 2013/14
55
North Norfolk District Council
152
NOTES TO THE ACCOUNTS
Reconciliation of Service Area Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement
This reconciliation shows how the figures in the analysis of Service Area income and expenditure relate to the amounts included in the
Comprehensive Income and Expenditure Statement.
2012/13
£000
15,620 Net expenditure in the Service Area analysis
Amounts included in the analysis not included in the Comprehensive Income and
487
Expenditure Statement
16,107 Cost of services in Comprehensive Income and Expenditure Statement
Draft Statement of Accounts 2013/14
56
2013/14
£000
11,931
795
12,726
North Norfolk District Council
153
NOTES TO THE ACCOUNTS
Reconciliation to Subjective Analysis
This reconciliation shows how the figures in the analysis of Service Area 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.
2013/14
Fees, charges and other services
income
Interest and investment income
Income from council tax
Government grants and contributions
Total Income
Employee Expenses
Pension Fund Accounting Entries
Other service expenses
Support service recharges
Depreciation, amortisation and
impairment
Interest Payments
Precepts and levies
Gain or loss on disposal of fixed
assets
Total Expenditure
Surplus or deficit on the provision
of services
Draft Statement of Accounts 2013/14
Service
Area
Analysis
Services
and Support
Services not
in Analysis
£000
Amounts not
reported to
management
Amounts not
included in
I&E
Allocation
of recharges
Cost of
Services
(sub total)
Corporate
Amounts
Total
£000
£000
£000
£000
£000
£000
(19,890)
0
0
0
(183)
(20,073)
(190)
(20,263)
0
0
(29,313)
(49,203)
0
0
0
0
0
0
0
0
0
0
729
729
0
0
0
(183)
0
0
(28,584)
(48,657)
(358)
(6,540)
(10,833)
(17,921)
(358)
(6,540)
(39,417)
(66,578)
9,614
(137)
40,733
8,508
0
0
0
0
0
0
0
0
0
0
66
0
4,403
0
4,288
(8,508)
14,017
(137)
45,087
0
10
1,429
109
0
14,027
1,292
45,196
0
2,416
0
0
0
0
2,416
(10)
2,406
0
0
0
0
0
0
0
0
0
0
0
0
144
1,457
144
1,457
0
0
0
0
0
0
(555)
(555)
61,134
0
0
66
183
61,383
2,584
63,967
11,931
0
0
795
0
12,726
(15,337)
(2,611)
£000
57
North Norfolk District Council
154
NOTES TO THE ACCOUNTS
2012/13 (Comparative Figures)
Fees, charges and other services
income
Interest and investment income
Income from council tax
Government grants and contributions
Total Income
Employee Expenses
Pension Fund Accounting Entries
Other service expenses
Support service recharges
Depreciation, amortisation and
impairment
Interest Payments
Precepts and levies
Gain or loss on disposal of fixed
assets
Total Expenditure
Surplus or deficit on the provision
of services
Draft Statement of Accounts 2013/14
Service
Area
Analysis
Services
and Support
Services not
in Analysis
£000
Amounts not
reported to
management
Amounts not
included in
I&E
Allocation
of recharges
Cost of
Services
(sub total)
Corporate
Amounts
Total
£000
£000
£000
£000
£000
£000
(19,137)
0
0
0
(169)
(19,306)
(176)
(19,482)
0
0
(37,019)
(56,156)
0
0
0
0
0
0
0
0
0
0
808
808
0
0
0
(169)
0
0
(36,211)
(55,517)
(207)
(7,328)
(7,763)
(15,474)
(207)
(7,328)
(43,974)
(70,991)
10,316
(307)
48,623
8,889
0
0
0
0
0
0
0
0
0
0
(321)
0
4,710
0
4,348
(8,889)
15,026
(307)
52,650
0
930
570
0
15,026
623
53,220
0
4,255
0
0
0
0
4,255
(20)
4,235
0
0
0
0
0
0
0
0
0
0
0
0
164
1,539
164
1,539
0
0
0
0
0
0
(780)
(780)
71,776
0
0
(321)
169
71,624
2,403
74,027
15,620
0
0
487
0
16,107
(13,071)
3,036
£000
58
North Norfolk District Council
155
NOTES TO THE ACCOUNTS
17.
Trading Operations
The Authority runs two service areas as trading services. Details of those services are as follows:
The Council currently operates four general produce markets on three car park
sites in Sheringham, Cromer and Stalham. They are provided to meet local
demands and to promote tourism. The trading objective is to minimise the deficit
relating to the service.
Turnover
Expenditure
Deficit
The Council lets a total of 17 industrial units over three sites in Fakenham, North
Walsham and Catfield. The Catfield and Fakenham sites include starter units
which were developed jointly with EEDA, to provide opportunities for local
business start ups and developments. The trading objective is to minimise the
deficit relating to the service.
Turnover
Expenditure
Deficit /
(Surplus)
2012/13
£000
£000
(77)
2013/14
£000
£000
(78)
143
144
66
(99)
465
Net deficit on trading operations:
66
(112)
12
366
(101)
432
(35)
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. refuse collection), whilst others are support services to the Council's services to the public. The
expenditure of these operations is allocated or recharged to headings in the net operating expenditure of continuing operations. Only a residual
amount of the net surplus on trading operations is charged as other operating expenditure (see Note 7):
The reduction in expenditure between the years reflects the fact that there were no further impairments charged in 2013/14, and there was a
full revaluation of the industrial units during the year.
2012/13
2013/14
£000
£000
432
(35)
(38)
(36)
0
0
394
(71)
Net deficit on trading operations
Services to the public included in expenditure of continuing operations
Support services recharged to expenditure of continuing operations
Net deficit / (surplus) debited / (credited) to other operating expenditure
Draft Statement of Accounts 2013/14
59
North Norfolk District Council
156
NOTES TO THE ACCOUNTS
18.
External Audit Costs
The Authority 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 Authority's external auditors:
2012/13
PWC
2012/13
Audit
Commission
£000
£000
Fees payable with regard to external audit services carried out
by the appointed auditor for the year
Fees payable for the certification of grant claims and returns for
the year
Total
19.
2012/13
Total
2013/14
PWC
£000
£000
2013/14
Audit
Commission
£000
2013/14
Total
£000
74
(5)
69
74
(8)
66
55
0
55
39
0
39
129
(5)
124
113
(8)
105
Members Allowances
The Authority paid the following amounts to members of Council during the year. Full details can be obtained by writing to North Norfolk District
Council, Information Services, Holt Road, Cromer, Norfolk, NR27 9EN.
2012/13
£
249,080 Allowances
29,803 Expenses
278,883
Draft Statement of Accounts 2013/14
2013/14
£
258,160
29,823
287,983
60
North Norfolk District Council
157
NOTES TO THE ACCOUNTS
20.
Officers’ Remuneration
The following table sets out the remuneration paid to the Authority‟s senior officers. A senior officer is defined as being a statutory chief officer as
defined in the LGHA 1989 section 2(6); a non-statutory Chief officer as defined in the LGHA 1989 section 2(7); or someone with responsibility for the
management of the Authority, being able to direct or control its major activities, whether solely or collectively.
Salary, Fees
and
Allowance
£
Job Title
Bonuses
Expenses
Allowances
£
£
Compensation
for Loss of
Office
£
Sub-total
Pension
Contribution
Total
£
£
1st April 2013 to 31st March 2014
Chief Executive
2013/14
Corporate Director
2013/14
Corporate Director
2013/14
Section 151 Officer
2013/14
99,771
77,307
77,307
57,270
0
0
0
0
0
0
1,747
0
0
0
0
0
99,771
77,307
79,054
57,270
14,467
11,210
11,210
8,304
114,238
88,517
90,264
65,574
1st April 2012 to 31st March 2013
Chief Executive
2012/13
99,074
0
8,073
0
107,147
14,366
121,513
82,688
82,688
41,627
0
0
0
8,073
7,192
4,130
0
0
0
90,761
89,880
45,757
11,990
11,990
6,036
102,751
101,870
51,793
(Includes S.151 officer responsibility until 15th July 2012)
Corporate Director
Corporate Director
Section 151 Officer
(Effective from 16th July 2012)
2012/13
2012/13
2012/13
Draft Statement of Accounts 2013/14
61
North Norfolk District Council
158
NOTES TO THE ACCOUNTS
The number of employees not falling into the category of senior officers shown above whose remuneration, excluding pension contributions was
£50,000 or more in bands of £5,000 were:
2012/13
Number of Employees
3
2
0
0
0
1
21.
Remuneration Band
£50,000 - £54,999
£55,000 - £59,999
£60,000 - £64,999
£65,000 - £69,999
£70,000 - £74,999
£75,000 - £79,999
2013/14
Number of Employees
2
0
0
0
0
0
Exit Packages
The number of exit packages agreed with the total cost per band and total cost of the compulsory and other are set out in the table below.
Compulsory
Redundancies
2012/13
Other
Departures
Compulsory
Redundancies
Number of
Employees
Number of
Employees
£0 to £20,000
0
1
1
£20,001 to £40,000
1
0
£40,001 to £60,000
0
£60,001 to £80,000
Bandings
Number of
Employees
Number of
Employees
16,364
3
5
8
88,251
1
29,391
1
1
2
61,402
0
0
0
0
0
0
0
1
0
1
62,494
0
0
0
0
2
1
3
108,249
4
6
10
149,653
Draft Statement of Accounts 2013/14
Total Number
Total
of Employees Amount £
2013/14
Other
Departures
62
Total Number
Total
of Employees Amount £
North Norfolk District Council
159
NOTES TO THE ACCOUNTS
22.
Defined Benefit Pension Schemes
Participation in pension schemes
As part of the terms and conditions of employment of its officers, the Authority makes contributions towards the cost of post-employment benefits.
Although these benefits will not actually be payable until employees retire, the Authority has a commitment to make the payments and this needs to
be disclosed at the time that employees earn their future entitlement.
The Authority participates in two post- employment schemes:

The Local Government Pension Scheme, administered locally by Norfolk County Council - this is a funded defined benefit final salary
scheme, meaning that the Authority and employees pay contributions into a fund, calculated at a level intended to balance the pensions
liabilities with investment assets.

Arrangements for the award of discretionary post-retirement benefits upon early retirement - this is an unfunded defined benefit final
arrangement; under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet the
pension‟s liabilities, and cash has to be generated to meet actual pension payments as they eventually fall due.
Transactions relating to post-employment benefits
The Authority recognises the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the
benefits are eventually paid as pensions. However, the charge we are required to make 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 via the Movement in Reserves Statement. The following
transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in
Reserves Statement during the year:
Draft Statement of Accounts 2013/14
63
North Norfolk District Council
160
NOTES TO THE ACCOUNTS
Comprehensive Income and Expenditure Statement
Cost of Services:
Current service cost
Past Service Costs loss
Curtailments loss
Local Government
Pension Scheme
2012/13
£000
Financing and Investment Income and Expenditure:
Interest cost
Expected return on scheme assets
Total post-employment benefit charged to the
surplus/deficit on the provision of services
Other post-employment benefit charged to the Comprehensive
Income and Expenditure Statement:
Actuarial gains and (losses)
Total post-employment benefit charged to the
Comprehensive Income and Expenditure Statement
Movement in Reserves Statement:
Reversal of net charges made to the surplus/deficit for the
provision of services for post-employment benefits in
accordance with the code
Actual amount charged against the general fund balance for
pensions in the year:
Employers' contributions payable to scheme
Local Government
Pension Scheme
2013/14
£000
1,213
95
0
1,524
23
0
3,517
(2,258)
3,779
(2,350)
2,567
2,976
(4,823)
1,416
2,256
(4,392)
(2,238)
(2,976)
1,615
1,684
The cumulative amount of actuarial gains and losses recognised in the comprehensive income and expenditure statement to the 31 March 2014 is a
loss of £24,377m (£25,793m at 31 March 2013).
Draft Statement of Accounts 2013/14
64
North Norfolk District Council
161
NOTES TO THE ACCOUNTS
Assets and liabilities in relation to post-employment benefits
Reconciliation of present value of the scheme liabilities (defined benefit obligation):
Funded Liabilities
Local Government
Opening Balance at 1 April
Current service cost
Interest cost
Contributions by scheme participants
Curtailments
Actuarial gains and losses
Benefits paid
Unfunded Benefits paid
Past service costs
Closing Balance at 31 March
Pension Scheme
2012/13
2013/14
£000
£000
73,930
84,647
1,213
1,524
3,517
3,779
441
432
0
8,523
(886)
(2,809)
(2,958)
(263)
(264)
95
23
84,647
86,297
Reconciliation of fair value of the scheme (plan) assets:
Opening balance at 1 April
Expected rate of return
Actuarial gains
Employers contributions
Contributions by scheme participants
Contributions in respect of Unfunded Benefits
Benefits paid
Unfunded Benefits paid
Closing balance at 31 March
Draft Statement of Accounts 2013/14
Local Government Local Government
Pension Scheme
Pension Scheme
2012/13
2013/14
£000
£000
47,536
52,807
2,258
2,350
4,019
546
1,362
1,404
441
432
263
264
(2,809)
(2,958)
(263)
(264)
52,807
54,581
65
North Norfolk District Council
162
NOTES TO THE ACCOUNTS
Fair Value of Employer Assets
31/03/13
31/03/14
Quoted
Quoted
Total £(000)
Prices in Prices not in
active
active
markets
markets
£(000)
£(000)
Percentage
of Total
Assets
Quoted
Prices in
active
markets
£(000)
Quoted
Total £(000)
Prices not in
active
markets
£(000)
Percentage
of Total
Assets
ASSET CATEGORY
Equity Securities:
Consumer
Manufacturing
Energy & Utilities
Financial Institutions
Health & Care
Information
Technology
Other
Debt Securities:
Corporate Bonds
(Investment Grade)
Corporate Bonds (NonInvestment Grade)
Other
3,207.6
2,534.7
1,867.5
3,269.5
1,391.7
1,005.1
0.0
0.0
0.0
0.0
0.0
0.0
3,207.6
2,534.7
1,867.5
3,269.5
1,391.7
1,005.1
6%
5%
4%
6%
3%
2%
3,316.0
3,041.1
1,696.6
3,399.6
1,551.1
976.2
0.0
0.0
0.0
0.0
0.0
0.0
3,316.0
3,041.1
1,696.6
3,399.6
1,551.1
976.2
6%
6%
3%
6%
3%
2%
2,556.2
0.0
2,556.2
5%
2,423.5
0.0
2,423.5
4%
2,329.3
0.0
2,329.3
4%
2,202.7
0.0
2,202.7
4%
43.0
0.0
43.0
0%
78.3
0.0
78.3
0%
159.6
0.0
159.6
0%
192.6
0.0
192.6
0%
0.0
3,862.0
3,862.0
7%
0.0
3,754.9
3,754.9
7%
Private Equity:
All
Draft Statement of Accounts 2013/14
66
North Norfolk District Council
163
NOTES TO THE ACCOUNTS
Fair Value of Employer Assets (cont'd)
31/03/13
31/03/14
Quoted
Quoted
Total £(000)
Prices in Prices not in
active
active
markets
markets
£(000)
£(000)
Real Estate:
UK Property
Overseas Property
Percentage
of Total
Assets
Quoted
Prices in
active
markets
£(000)
Quoted
Total £(000)
Prices not in
active
markets
£(000)
Percentage
of Total
Assets
0.0
0.0
5,021.5
860.4
5,021.5
860.4
10%
2%
0.0
0.0
5,438.9
809.4
5,438.9
809.4
10%
2%
Investment Funds & Unit Trusts:
Equities
15,879.7
Bonds
7,714.0
0.0
0.0
15,879.7
7,714.0
29%
15%
15,786.2
8,490.0
0.0
0.0
15,786.2
8,490.0
30%
16%
Derivatives:
Other
(34.9)
0.0
(34.9)
0%
23.7
0.0
23.7
0%
0.0
1,140.3
1,140.3
2%
0.0
1,399.7
1,399.7
3%
41,923
10,884
52,807
100%
43,178
11,403
54,581
100%
Cash & Cash Equivalents
All
TOTALS
Draft Statement of Accounts 2013/14
67
North Norfolk District Council
164
NOTES TO THE ACCOUNTS
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. Expected returns on
equity investments reflect long-term real rates of return experienced in the respective markets.
2014
£000
Present Value of Liabilities:
Local Government Pension Scheme
Unfunded obligations
Fair value of assets in the LGPS
Surplus/(Deficit) in the scheme:
Local Government Pension Scheme
Discretionary Benefits
Total
2013
£000
2012
£000
2011
£000
2010
£000
(81,765)
(4,532)
54,581
(80,213)
(4,434)
52,807
(69,675)
(4,255)
47,536
(63,553)
(4,003)
48,035
(80,015)
(4,744)
46,694
(31,716)
0
(31,716)
(31,840)
0
(31,840)
(26,394)
0
(26,394)
(19,521)
0
(19,521)
(38,065)
0
(38,065)
The liabilities show the underlying commitments that the Authority has in the long run to pay post-employment (retirement) benefits. The total liability
of £31.72m has a substantial impact on the net worth of the Authority as recorded in the Balance Sheet. However, statutory arrangements for
funding the deficit mean that the financial position of the Authority 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.

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 Authority in the year to 31 March 2015 is £1.4m.
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 for the County Council Fund being based on
the latest full valuation of the scheme as at 1 April 2013.
Draft Statement of Accounts 2013/14
68
North Norfolk District Council
165
NOTES TO THE ACCOUNTS
In relation to the Commutation Adjustment, an allowance is included for future retirements to elect to take 50% of the maximum additional tax-free
cash up to HMRC limits for pre-April 2008 service and 75% of the maximum tax-free cash for post-April 2008 service.
The principal assumptions used by the actuary have been:
Local Government
Pension Scheme
2012/13
Long-term expected rate of return on assets in the scheme:
Equity investments
Bonds
Property
Cash
Mortality assumptions:
Longevity at 65 for current pensioners:
Men
Women
Longevity at 65 for future pensioners:
Men
Women
Pension Increase Rate (CPI)
Rate of increase in salaries
Expected Return on Assets
Rate of discounting scheme liabilities
Local Government
Pension Scheme
2013/14
4.5%
4.5%
4.5%
4.5%
4.3%
4.3%
4.3%
4.3%
21.2
23.4
22.1
24.3
23.6
25.8
24.5
26.9
2.8%
5.1%
4.5%
4.5%
2.8%
3.6%
4.3%
4.3%
The Discretionary Benefits arrangements have no assets to cover its liabilities. The Local Government Pension Scheme's assets consist of the
following categories, by proportion of the total assets held:
Equities
Bonds
Property
Cash
31 March 2013
%
68
19
11
2
100
Draft Statement of Accounts 2013/14
31 March 2014
%
66
20
11
3
100
69
North Norfolk District Council
166
NOTES TO THE ACCOUNTS
History of experience gains and losses
The actuarial losses identified as movements on the Pensions Reserve in 2013/14 can be analysed into the following categories, measured as a
percentage of assets or liabilities at 31 March 2014;
Difference between the expected and actual return on assets
Experience gains and losses on liabilities
23.
2014
%
1.0
0.6
2013
%
7.0
(0.0)
2012
%
(5.7)
1.5
2011
%
(2.8)
(12.4)
2010
%
18.9
0.4
Events after the Balance Sheet Date
Events taking place after the accounts are finally signed off are not reflected in the financial statements or notes. Where events taking place before
this date provided information about conditions existing at 31 March 2014, the figures in the financial statements and notes have been adjusted in all
material respects to reflect the impact of this information.
24.
Related Parties
The Authority is required to disclose material transactions with related parties - bodies or individuals that have the potential to control or influence the
Authority or to be controlled or influenced by the Authority. Disclosure of these transactions allows readers to assess the extent to which the
Authority 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 Authority.
Central Government
Central government has effective control over the general operations of the Authority - it is responsible for providing the statutory framework, within
which the Authority operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the
Authority 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 16 on amounts reported to decision makers. Grant receipts outstanding at 31 March 2014 are shown in note 38.
Members
Members of the Authority have direct control over the Authority's financial and operating policies. The total of members' allowances paid in 2013/14
is shown in note 19. During 2013/14, works and services to the value of £43,786 were commissioned from companies in which three members had
an interest. Contracts were entered into in full compliance with the Authority's standing orders. In addition, the Authority paid grants totalling
Draft Statement of Accounts 2013/14
70
North Norfolk District Council
167
NOTES TO THE ACCOUNTS
£118,053 to voluntary organisations in which two members had declared an interest. In all instances, the grants were made with proper
consideration of declarations of interest. The relevant members did not take part in any discussion or decision relating to the grants. Details of all
these transactions are recorded in the Register of Members' Interest, open to public inspection at the Council Offices during office hours.
25.
Leases
Authority as Lessee
Finance Leases
The Authority has determined that the contracts with Kier Services - Environmental for waste collection and related services, and with the Borough
Council of King‟s Lynn and West Norfolk for car parks management, contain embedded finance leases in respect of the vehicles and equipment
used on the contracts. A deferred liability has been set up for the estimated lease rental charges included in the contract payments made to the
contractors, and the assets are recognised on the balance sheet at net book value.
The vehicles subject to the lease are carried as property, plant and equipment in the balance sheet at the following net amounts:
Property, Plant and Equipment
31 March 2013
£000
1,777
1,777
31 March 2014
£000
1,462
1,462
The Authority is committed to making minimum payments under these leases comprising settlement of the long-term liability for the acquisition of the
vehicles and finance costs which will be payable in future years while the liability remains outstanding. The minimum lease payments are made up of
the following amounts:
31 March 2013
£000
31 March 2014
£000
282
1,634
477
2,393
305
1,328
338
1,971
Finance Lease Liabilities (Net present value of minimum lease
payments):
- Current
- Non current
Finance costs payable in future years
Minimum Lease Payments
Draft Statement of Accounts 2013/14
71
North Norfolk District Council
168
NOTES TO THE ACCOUNTS
The minimum lease payments will be payable over the following periods:
Not later than one year
Later than one year and not later than five years
Later than five years
Minimum Lease Payments
31 March 2013 31 March 2014
£000
£000
421
421
1,595
1,550
377
0
2,393
1,971
Finance Lease Liabilities
31 March 2013 31 March 2014
£000
£000
282
306
1,279
1,328
355
0
1,916
1,634
Operating Leases
The Authority leases property, land, vehicles and items of equipment, including printing and telephony equipment, as part of a number of operating
leases. The future minimum lease payments due under non-cancellable leases in future years are:
Not later than one year
Later than one year and not later than five years
Later than five years
31 March 2013
£000
88
143
100
331
31 March 2014
£000
58
210
101
369
The expenditure charged to the Comprehensive Income and Expenditure Statement during the year in relation to these Leases was:
Minimum Lease Payments
Contingent Rents
Draft Statement of Accounts 2013/14
31 March 2013
£000
144
26
170
72
31 March 2014
£000
122
29
150
North Norfolk District Council
169
NOTES TO THE ACCOUNTS
Authority as Lessor
Operating Leases
The Authority leases out properties under operating leases for the following purposes:
 for the provision of community services, such as sports facilities, tourism services and community centres
 for economic development purposes to provide suitable affordable accommodation for local businesses
The future minimum lease payments receivable under non-cancellable leases in future years are:
Not later than one year
Later than one year and not later than five years
Later than five years
31 March 2013 31 March 2014
£000
£000
(101)
(71)
(153)
(144)
(44)
(51)
(298)
(266)
The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as
adjustments following rent reviews.
26.
Investment Properties
The following items of income and expense have been accounted for in the Comprehensive Income and Expenditure Statement:
2012/13
£000
Rental income from investment property
Direct operating expenses arising from investment property
Net gain/(loss)
2013/14
£000
29
(3)
26
8
(21)
(13)
There are no restrictions on the Authority's ability to realise the value inherent in its investment property or on the Authority's right to the remittance
of income and the proceeds of disposal. The Authority has no contractual obligations to purchase, construct or develop investment property or
repairs, maintenance or enhancement.
Draft Statement of Accounts 2013/14
73
North Norfolk District Council
170
NOTES TO THE ACCOUNTS
The following table summarises the movement in the fair value of investment properties over the year:
2012/13
£000
2013/14
£000
Opening Balance
Additions:
290
270
Net gains/losses from fair value adjustments
(20)
(10)
Transfers:
Closing Balance
270
260
There have been no additions in the year and the net loss is due to a fair value adjustment.
27.
Intangible Assets
The Authority 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. Intangible assets would include both purchased licenses and 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 Authority. The useful
lives assigned to software currently used by the Authority are identified below, with the two most significant being shown separately:
5 years
Internally Generated Assets
None
Other Assets
Probass, Choice Based Letting, Other Software
The carrying amount of intangible assets is amortised on a straight-line basis. The amortisation of £150,584 charged to revenue in 2013/14
(£152,990 in 2012/13) was charged to the following lines within the income statement; Central Services to the Public (£86,310), Environmental
Services (£6,317), Planning Services (£37,827) and Housing Services (£20,130).
The movement on intangible asset balances during the year is as follows:
Draft Statement of Accounts 2013/14
74
North Norfolk District Council
171
NOTES TO THE ACCOUNTS
Internally
Generated
Assets
£000
Opening Balance:
Gross carrying amounts
Accumulated amortisation
Net carrying amount at start of year
Additions:
- Purchases
Amortisation for the period
Closing Balance
2012/13
Other
Assets
Total
£000
£000
Internally
Generated
Assets
£000
2013/14
Other
Assets
Total
£000
£000
0
0
0
1,135
(619)
516
1,135
(619)
516
0
0
0
1,170
(772)
398
1,170
(772)
398
0
0
0
35
(153)
398
35
(153)
398
0
0
0
46
(150)
294
46
(150)
294
There are two items of capitalised software that are individually material to the financial statements.
Probass - Planning Back-office System
Housing Choice Based Lettings System
Carrying Amount
31 March 2013 31 March 2014
£000
£000
70
38
41
20
Remaining
Amortisation
Period
2 years
2 years
During 2013/14 the Authority entered into two new contracts for the purchase of software. The first of these was an extension of the Choice based
Letting System for an additional £33,150, which was completed within the year. The second was for the purchase of a Committee Management
Information System, which has progressed during the year, with the final elements of implementation to be completed in 2014/15.
28.
Impairment Losses
During 2013/14 the Authority has recognised total impairment losses of £188,167 directly in relation to the impact of the tidal surge in December
2013. 2012/13 £Nil.
An impairment loss of £68,000 has been recognised in relation to the loss of and damage to chalet buildings in Cromer. The impairment loss has
been reversed out of the Revaluation Reserve which existed in relation to these buildings, and did not have any impact on the Comprehensive
Income and Expenditure Statement. This reserve reflects gains in value in relation to the Authority‟s assets which will have occurred in previous
years.
Draft Statement of Accounts 2013/14
75
North Norfolk District Council
172
NOTES TO THE ACCOUNTS
Two public conveniences have also been impaired as a result of the tidal surge; Westcliffe Public Convenience and Mundesley Public Convenience.
The former has been impaired by £78,000, with Mundesley being impaired by a total of £16,250. In both instances the impairment loss has been
included within the Environmental Services line within the Comprehensive Income and Expenditure Statement.
In addition to these, there have also been two further impairments in relation to cafes situated along the coastline. The Westcliffe Café building has
been impaired by a total of £9,967 which was taken to the Comprehensive Income and Expenditure Account through the Cultural and Related
Services line. The second building to be affected was the West Prom Café in Cromer which has been impaired by a total of £15,950. Of this sum
£2,606 has been reversed out to the Revaluation Reserve which existed in relation to this building, and the balance of £13,344 was written out
through the Cultural and Related Services line of the Comprehensive Income and Expenditure Account,
28a. Tidal Surge
Tidal Surge of 5th and 6th December 2013. This event had a significant impact upon the Council‟s property and Coastal Assets. The table below
shows the levels of expenditure on these assets and the associated funding within the year.
Capital
Expenditure:
NNDC Property Assets
Coastal Assets
Sub Total
External Funding:
Environment Agency
Insurance Claims
Net Impact 2013/14
Draft Statement of Accounts 2013/14
146,876
698,382
845,258
(698,382)
(146,876)
(845,258)
0
76
North Norfolk District Council
173
NOTES TO THE ACCOUNTS
29.
Property, Plant and Equipment
Movement on Balances
Movement in 2013/14:
Cost or Valuation:
At 1 April 2013
Additions
Donations
Revaluation increases/(decreases) recognised in
the revaluation reserve
Revaluation increases/(decreases) recognised in
the surplus/(deficit) on the provision of services
Derecognition - disposals
Derecognition - other
Assets reclassified (to)/from held for sale
Other movements in cost or valuation
At 31 March 2014
Draft Statement of Accounts 2013/14
Other
Land and
Buildings
Vehicles,
Plant and
Equipment
Infrastructure
Assets
Community
Assets
Surplus
Assets
Assets
Under
Construction
£000
£000
£000
£000
£000
£000
Total
Property
Plant and
Equipment
£000
44,920
377
0
11,086
161
0
10,182
1,372
0
468
0
0
3,402
12
0
1,800
1,811
0
71,858
3,733
0
1,457
0
0
44
5
0
1,506
(2,477)
0
0
(157)
(1,361)
0
(3,995)
(309)
0
0
262
44,230
(56)
0
0
32
11,223
0
0
0
0
11,554
(5)
0
0
0
350
0
0
0
0
2,058
0
0
0
(294)
3,317
(370)
0
0
0
72,732
77
North Norfolk District Council
174
NOTES TO THE ACCOUNTS
Accumulated Depreciation and Impairment:
At 1 April 2013
Depreciation charge
Depreciation written out to the revaluation reserve
Depreciation written out to the surplus/deficit on the
provision of services
Impairment losses/(reversals) recognised in the
revaluation reserve
Impairment losses/(reversals) recognised in the
surplus/deficit on the provision of services
Derecognition - disposal
Derecognition - other
Eliminated on reclassification to assets held for
sale
Other movements in depreciation and impairment
At 31 March 2014
Net Book Value
At 31 March 2014
At 31 March 2013
Draft Statement of Accounts 2013/14
Other
Land and
Buildings
Vehicles,
Plant and
Equipment
Infrastructure
Assets
Community
Assets
Surplus
Assets
Assets
Under
Construction
£000
£000
£000
£000
£000
£000
Total
Property
Plant and
Equipment
£000
11,118
750
6,690
768
7,995
481
18
3
2,398
0
0
0
28,219
2,002
0
0
0
0
0
0
0
(1,119)
0
0
0
(1,303)
0
(2,422)
71
0
0
0
0
0
71
(2,216)
0
0
0
0
0
(2,216)
(134)
0
(34)
0
0
0
0
0
0
0
0
0
(168)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8,470
7,424
8,476
21
1,095
0
25,486
35,705
33,802
3,799
4,397
3,078
2,187
329
450
963
1,004
3,372
1,800
47,246
43,639
78
North Norfolk District Council
175
NOTES TO THE ACCOUNTS
Comparative Movements in 2012/13:
Cost or Valuation:
At 1 April 2012
Additions
Donations
Revaluation increases/(decreases) recognised in
the revaluation reserve
Revaluation increases/(decreases) recognised in
the surplus/(deficit) on the provision of services
Derecognition - disposals
Derecognition - other
Assets reclassified (to)/from held for sale
Other movements in cost or valuation
At 31 March 2013
Draft Statement of Accounts 2013/14
Other
Land and
Buildings
Vehicles,
Plant and
Equipment
Infrastructure
Assets
Community
Assets
Surplus
Assets
Assets
Under
Construction
£000
£000
£000
£000
£000
£000
Total
Property
Plant and
Equipment
£000
41,970
593
0
10,985
119
0
9,988
194
0
468
0
0
3,452
61
0
1,364
961
0
68,227
1,928
0
1,721
0
0
0
0
0
1,721
0
0
0
0
0
0
0
0
0
0
636
44,920
(18)
0
0
0
11,086
0
0
0
0
10,182
0
0
0
0
468
0
0
0
(111)
3,402
0
0
0
(525)
1,800
(18)
0
0
0
71,858
79
North Norfolk District Council
176
NOTES TO THE ACCOUNTS
Accumulated Depreciation and Impairment:
At 1 April 2012
Depreciation charge
Depreciation written out to the revaluation reserve
Depreciation written out to the surplus/deficit on the
provision of services
Impairment losses/(reversals) recognised in the
revaluation reserve
Impairment losses/(reversals) recognised in the
surplus/deficit on the provision of services
Derecognition - disposal
Derecognition - other
Eliminated on reclassification to assets held for
sale
Other
Land and
Buildings
Vehicles,
Plant and
Equipment
Infrastructure
Assets
Community
Assets
Surplus
Assets
Assets
Under
Construction
£000
£000
£000
£000
£000
£000
Total
Property
Plant and
Equipment
£000
9,505
517
5,922
767
7,540
455
15
3
2,505
1
0
0
25,487
1,743
0
0
0
0
0
0
0
0
0
0
0
0
0
0
614
0
0
0
0
0
614
374
16
0
0
0
0
390
0
0
(15)
0
0
0
0
0
0
0
0
0
(15)
0
0
0
0
0
0
0
0
Other movements in depreciation and impairment
At 31 March 2013
108
0
0
0
(108)
0
0
11,118
6,690
7,995
18
2,398
0
28,219
Net Book Value
At 31 March 2013
At 31 March 2012
33,802
32,465
4,397
5,063
2,187
2,448
450
453
1,004
905
1,800
1,406
43,639
42,740
Draft Statement of Accounts 2013/14
80
North Norfolk District Council
177
NOTES TO THE ACCOUNTS
Capital Commitments
As at 31 March 2014, the Authority has entered into several contracts for the construction or enhancement of Property, Plant and Equipment in
2013/14 and future years, budgeted to cost £6,082,495. The major commitments relate to the following Schemes:
2012/13
Cromer Pier Major Refurbishment Works
Cromer 982 Coastal Protection Scheme
Tidal Surge Emergency Works
2013/14
1,216,196
249,550
1,465,746
41,706
2,730,326
400,623
3,172,655
Revaluations
The Authority carries out a rolling programme that ensures that all Property, Plant and Equipment required to be measured at fair value is revalued
at least every five years. During the intervening years reviews are conducted to ensure the carrying value of assets are not materially different from
their fair values. Impairment reviews are also undertaken on the portfolio on an annual basis to ensure that the carrying value of assets is not
overstated. For the 2013/14 accounts the valuations have been carried out by the Authority‟s own internal valuer and externally appointed valuers.
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 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. Further details regarding the valuations are provided within the
Statement of Accounting Policies which starts on page 14.
Draft Statement of Accounts 2013/14
81
North Norfolk District Council
178
NOTES TO THE ACCOUNTS
Other
Land and
Buildings
Vehicles,
Plant and
Equipment
£000
Carried at historical cost
Valued at fair value as at:
31 March 2014
31 March 2013
31 March 2012
31 March 2011
31 March 2010
Total Cost or Valuation
Draft Statement of Accounts 2013/14
Infrastructure
Assets
0
£000
11,223
£000
11,554
31,013
2,435
7,493
1,570
1,719
44,230
0
0
0
0
0
11,223
0
0
0
0
0
11,554
82
Community
Assets
Surplus
Assets
£000
£000
Assets
Under
Construction
350
0
£000
3,317
Total
Property
Plant and
Equipment
£000
26,444
0
0
0
0
0
350
957
(1,352)
543
2,427
(517)
2,058
0
0
0
0
0
3,317
31,970
1,083
8,036
3,997
1,202
72,732
North Norfolk District Council
179
NOTES TO THE ACCOUNTS
30.
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 Authority, the expenditure results in an increase in the Capital Financing Requirement (CFR), a
measure of the capital expenditure incurred historically by the Authority that has yet to be financed. The CFR is analysed in the second part of this
note.
Opening Capital Financing Requirement
Capital Investment:
Property, plant and equipment
Property, Plant and Equipment - embedded finance leases
Investment properties
Intangible assets
Revenue expenditure funded from capital under statute
Sources of finance:
Capital receipts
Government grants and other contributions
Sums set aside from revenue:
- direct revenue contributions
- MRP
Closing Capital Financing Requirement
2012/13
£000
2,173
2013/14
£000
1,959
1,928
0
0
35
1,917
3,540
0
0
46
645
(2,950)
(501)
(1,382)
(2,247)
(386)
(257)
1,959
(600)
(282)
1,677
0
0
0
0
(215)
(215)
(282)
(282)
Explanations of movements in year
Increase in underlying need to borrow (supported by
government financial assistance)
Increase in underlying need to borrow (unsupported by
government financial assistance)
Assets acquired under finance leases
(Decrease) in Capital Financing Requirement
Draft Statement of Accounts 2013/14
83
North Norfolk District Council
180
NOTES TO THE ACCOUNTS
31.
Assets Held for Sale
There are no assets classified as Held for Sale (2012/13 £Nil)
32.
Inventories
Balance outstanding at start of year
Purchases
Recognised as expenses in the year
Written off balances
Balance outstanding at year-end
Consumable Stores
2012/13
2013/14
£000
£000
39
39
123
40
(123)
(68)
0
0
39
11
Draft Statement of Accounts 2013/14
84
Maintenance Materials
2012/13
2013/14
£000
£000
28
28
0
9
0
(22)
0
0
28
15
Total
2012/13
£000
67
123
(123)
0
67
2013/14
£000
67
49
(90)
0
26
North Norfolk District Council
181
NOTES TO THE ACCOUNTS
33.
Receivables
Receivables represents the amounts owed to the Authority at 31 March 2014 and are analysed below. The Authority makes an allowance for
outstanding amounts for which recovery of receivables is not anticipated (bad debt provision). Receivables are shown net of the bad debt provision
within the Balance Sheet. The movement on Central Government bodies relates to the balance of Department of Works and Pensions (DWP)
Benefits Subsidy due to/(from) the authority as a result of the final subsidy claim and a number of capital contributions from the Environment
Agency.
Central government bodies
Other local authorities
NHS Bodies
Other entities and individuals
Sub Total
Less: Bad Debt Provision
General Fund
Collection Fund
Sub Total
Total
Draft Statement of Accounts 2013/14
31 March 2013 31 March 2014
£000
£000
2,757
1,752
293
357
0
0
1,945
3,034
4,995
5,143
(724)
(88)
(812)
4,183
(792)
(173)
(965)
4,177
85
North Norfolk District Council
182
NOTES TO THE ACCOUNTS
34.
Payables
Payables represent the amounts owed by the Authority at 31 March 2014.
Central government bodies
Other local authorities
Public corporations and trading funds
Other entities and individuals
Sub Total
Less: Receipts in Advance
Central government bodies
Other Local Authorities
Public Corporations and Trading Funds
Other entities and individuals
Sub Total
Total
35.
31 March 2013 31 March 2014
£000
£000
(1,449)
(3,701)
(456)
(1,064)
(3)
(3)
(3,089)
(3,677)
(4,997)
(8,445)
678
28
4
66
776
(4,221)
607
0
4
0
611
(7,834)
Provisions
The Authority has no outstanding legal cases in progress or other potential liabilities that require provisions to be made.
36.
Contingent Liabilities
At 31 March 2014, the Authority had the following material contingent liabilities:
(a)
Housing Stock Transfer - As part of the legal agreements associated with the transfer of the housing stock to the Victory Housing Trust in
2006/07, the Authority provided a number of environmental and non-environmental warranties, guarantees and indemnities to the Trust, its
Lenders and the Norfolk Pension Fund.
The risks associated with these warranties and indemnities have been assessed following professional advice and where felt appropriate the
Authority has, or is making, arrangements to transfer some of the potential risks. Specifically, insurance has been arranged in respect of the
environmental warranties and the Trust has provided a bond with an initial sum of £1.2 million in favour of the Authority with regard to any
Draft Statement of Accounts 2013/14
86
North Norfolk District Council
183
NOTES TO THE ACCOUNTS
liabilities to the Norfolk Pension Fund in the event of the insolvency, winding up and liquidation of the Trust. In May 2014 the actuary‟s total
value of the indemnity required to meet the deficit with a certainty of 80% to 85% was estimated at £620,000 (£2,032,000 for 2012/13). A
bond of £2,533,000 (£4,751,000 for 2012/13), would be required to be 98% certain of meeting any deficit arising.
To the extent that claims have to be met some time in the future beyond those covered by the environmental warranty insurance and the
pension bond, the Authority discloses a contingent liability. An earmarked reserve of £435,000 is held to mitigate such claims.
(b)
NNDR Appeals – Note 8 to the Collection Fund details the provision made for appeals. It is not possible to quantify the number and value of
appeals that have not yet been lodged with the Valuation Office with any certainty, so there is a risk to the Council that national and local
appeals may have a future impact on the accounts.
(c)
Tidal Surge – Expenditure on recovering from this event will continue into 2014/15. There is a risk that not all insurance claims will be paid
in full. The estimate of all insurance claims is £841,259. Any shortfall in recovering costs will have to be met from reserves.
(d)
Benefits - There is a risk of potential claw back from the Department of Works and Pensions following the final audit and sign off the year
end subsidy claim. To mitigate the impact of any claw back there is an earmarked reserve for which the balance stood at £721,792 at 31
March 2014.
(e)
Land Charges - Local authorities nationally have been subject to a legal challenge by personal search companies in respect of an element
of land charges fee income paid to authorities going back to 2001. The personal search companies‟ claim is based on the position that they
could access for free certain information for which to date they have been charged, by means of the Environmental Information Regulations.
Local authorities are awaiting clarification on this point. The Council has carried out no formal calculations in respect of this potential liability
to date.
(f)
Municipal Mutual Insurance (MMI) - In September 1992, Municipal Mutual Insurers (MMI), the Council‟s insurers at the time, stopped
accepting new business and with its policy holders set up a Scheme of Arrangement for the orderly rundown of its affairs. It was agreed that
MMI would continue to settle all claims in full as they were received. Should the company become insolvent in the future then a claw back
clause would be triggered which would make the Council liable to repay to MMI all claims received since the start of the Scheme of
Arrangement.
The Scheme of Arrangement was triggered by the directors of MMI in November 2012 and control was passed to the Scheme Administrator,
Ernst & Young LLP. They wrote to the Council in May 2013 indicating that a Levy notice would be issued later in 2013, the rate of Levy to be
set at 15% of claims payments made.
Draft Statement of Accounts 2013/14
87
North Norfolk District Council
184
NOTES TO THE ACCOUNTS
On 14th January 2014 a levy notice was issued and payment made for £10,786 being 15% of claims payments previously made of £121,909
less £50,000 exemption, £71,909.
As at 31st March 2014 the value of outstanding claims was estimated to be £15,000. If these claims are eventually paid, they will be received
net of the 15% levy of £2,250.
(g)
North Walsham Pool
The Authority has an agreement with the service provider for the North Walsham Sports facility to enable them to build an extension to the
pool. The agreement runs until March 2019. Any amount remaining un-depreciated at the end of the management contract period will be a
liability to the Authority. This is estimated to be £148,000.
37.
Contingent Assets
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets the Authority recognises the following contingent assets:
(a)
VAT Sharing Agreement - As part of the transfer of the housing stock in 2006, the Authority entered a VAT sharing agreement with Victory
Housing Trust. Under this agreement the Authority receives a 50% share of £8,748,520. During the year £490,862 was received (£416,073
in 2012/13). The balance remaining at 31 March 2014 to be received is £174,794 (£665,656 at 31 March 2013).
.
Draft Statement of Accounts 2013/14
88
North Norfolk District Council
185
NOTES TO THE ACCOUNTS
38. Grant Income
The Authority credited the following grants, contributions and donations to the Comprehensive Income and Expenditure accounts in 2013/14.
Credited to Taxation and Non Specific Grant Income
Revenue Support Grant
Business Rates from National Pool
Business Rates
Local Services Support Grant (LSSG)
New Homes Bonus
Community Right to Challenge/ Community Right to Bid
Council Tax Freeze Funding
Local Council Tax Support Transitional Funding
Efficiency Support Sparse Area
Capital Grants and Contributions
Council Tax Support New Burdens
Severe Weather Recovery
Other
Total
Credited to Services
DWP
Rent Allowances
Council Tax Benefits
Admin Subsidy
Dept for Communities and Local Govt (DCLG)
Dept for Environment, Food & Rural Affairs (DEFRA)
Cabinet Office
Arts Council England
Big Lottery
Norfolk County Council
S106 Contributions
Other Grants & Contributions
Total
Total Revenue Grants Received
2012/13
£000
121
6,247
0
120
612
23
144
0
0
443
49
0
4
7,763
2013/14
£000
4,235
0
3,271
0
729
16
58
23
44
2,247
58
144
7
10,832
27,366
8,205
719
36,290
650
15
1
17
75
702
0
63
37,813
45,576
28,187
0
663
28,850
555
12
22
20
0
1,208
51
135
30,853
41,685
The Authority 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:
Draft Statement of Accounts 2013/14
89
North Norfolk District Council
186
NOTES TO THE ACCOUNTS
31 March 2013
£000
31 March 2014
£000
Capital Grant Receipts in Advance
Pathfinder
Travellers Site
Coastal Erosion Grant
Developer Contributions
Other
Total
312
306
60
54
44
776
299
260
48
3
0
611
Draft Statement of Accounts 2013/14
90
North Norfolk District Council
187
NOTES TO THE ACCOUNTS
39.
Financial Instruments
Categories of Financial Instruments
The following categories of financial instruments are carried in the Balance Sheet:
Long Term
Current
Long Term
Current
31 March 2013 31 March 2013 31 March 2014 31 March 2014
£000
£000
£000
£000
Investments
Loans and receivables
Available-for-sale financial assets
Total Investments
0
4,976
4,976
13,171
998
14,169
0
5,412
5,412
16,087
0
16,087
Debtors
Loans and receivables
Financial assets carried at contract amount
Total Debtors
7
0
7
1
1,130
1,131
23
0
23
0
2,591
2,591
Borrowing
0
3,500
0
0
1,632
1,632
282
282
1,328
1,328
306
306
0
0
2,874
2,874
0
0
2,810
2,810
6,615
21,956
6,763
21,794
Other Long-term Liabilities
Finance lease liabilities
Total Other Long-term Liabilities
Creditors
Financial liabilities carried at contract amount
Total Creditors
Total Financial Instruments
The loans and receivables shown under investments above, of £16,087,116 are classified on the balance sheet as short term-investments of
£6,106,280 and cash and cash equivalents of £10,058,424. Investments which can be repaid on the balance sheet date – i.e. money market funds
and call accounts, are classified as cash and cash equivalents. The current financial liabilities (£2,809,886) together with the finance lease liabilities
(£305,876) total £3,155,405. Note 34 shows total payables of £8,250,298. The difference between these two figures represents liabilities which are
non-contractual or statutory in nature and therefore not financial instruments.
Draft Statement of Accounts 2013/14
91
North Norfolk District Council
188
NOTES TO THE ACCOUNTS
Reclassifications
There has been no reclassification of financial assets during 2013/14.
Income, Expense, Gains and Losses
2012/13
Financial
Liabilities
Finance
Interest income/expense included in
surplus/deficit on the provision of
services
Losses on revaluation
Net gain/(loss) for the year
2012/13
Financial
Assets
2013/14
Financial
Liabilities
2013/14
Financial
Assets
Available
for
-Sale Assets
£000
Total
Finance
Leases
£000
Loans
and
Receivables
£000
Loans
Available
and
for
Receivables -Sale Assets
£000
£000
Total
£000
Leases
£000
164
198
8
206
139
92
263
355
0
164
0
198
(25)
(17)
(25)
181
0
139
0
92
439
702
439
794
£000
Fair values of Assets and Liabilities
Financial liabilities and financial assets represented by loans and receivables and long-term receivables and payables are carried in the balance
sheet at amortised cost. Their carrying values are all equal to their fair value. The fair value is defined as the amount for which an asset could be
exchanged or a liability settled between knowledgeable willing parties in an arm‟s length transaction.
The Authority‟s loans and receivables consist of term deposits with banks and building societies, and investments in money market funds. Where
the maturity dates of these investments are within 12 months of the balance sheet date, the carrying amount is assumed to approximate to fair
value. The contract terms under which a term deposit is made do not permit premature repayment.
The Available-for-sale financial assets are units in a pooled property Fund. Their fair value has been determined by reference to quoted market
prices at 31 March 2014 for the purchase price of the units for the pooled fund.
None of the investments were impaired (i.e. at risk of default).
The fair value of trade receivables and payables is taken to be the invoiced amount.
Draft Statement of Accounts 2013/14
92
North Norfolk District Council
189
NOTES TO THE ACCOUNTS
40.
Nature and Extent of Risks arising from Financial Instruments
The Authority‟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 Authority

liquidity risk - the possibility that the Authority might not have funds available to meet its commitments to make payments

market risk - the possibility that financial loss might arise for the Authority as a result of changes in such measures as interest rates, market
process etc.
The Authority has adopted CIPFA’s Code of Practice on Treasury Management and complies with The Prudential Code for Capital Finance in Local
Authorities.
To comply with the Treasury Management Code, the Authority approves a Treasury Management Strategy before the commencement of each
financial year which sets out the parameters for the management of risks associated with Financial Instruments. The Authority also produces
Treasury Management Practices specifying the practical arrangements to be followed to manage those risks.
The Treasury Management Strategy includes an Annual Investment Strategy in compliance with Central Government‟s Investment Guidance to
Local Authorities. The guidance defines a prudent investment policy as having the two objectives of security (protecting the capital sum from loss)
and then liquidity (keeping adequate funds readily available for expenditure when needed). Once proper levels of security and liquidity have been
achieved, consideration is given to seeking the highest rate of return consistent with those priorities.
Credit Risk
The Authority manages this risk by ensuring that investments are placed with counterparties which have a high credit rating and for the maximum
periods and amounts set out in the Treasury Management Strategy, Practices and Schedules.
The security and liquidity of the funds invested are the primary objective of the Authority‟s treasury management activities. The Authority selects
countries and the institutions within them as suitable counterparties for investment after analysis and careful monitoring of the credit ratings of all
three rating agencies and a range of economic indicators and financial information are taken into account.
Draft Statement of Accounts 2013/14
93
North Norfolk District Council
190
NOTES TO THE ACCOUNTS
The table below shows the credit criteria and counterparty limits for investments in place at the end of the financial year.
Category
Deposits with banks and
building societies
Local Authorities
Debt Management Office
Money Market Funds
Pooled Funds
Criteria
Minimum long-term rating of A- as
issued by Fitch, Moody's or Standard
& Poors rating agencies
All UK Local Authorities
AAA Constant & Variable Net Asset
Value
Independent Investment Advice
Maximum sum to be
Invested
Amount Invested
31 March 2014
£m
£3m (per counterparty)
9.04
£3m (per counterparty)
No Limit
10% of investments (per
counterparty)
£15m (in total)
Nil
Nil
7.05
5.41
The Authority has no historical experience of counterparty default and the Authority does not anticipate any losses from default in relation to any of
its current deposits and bonds. No credit limits were exceeded in the financial year.
None of the above were identified as past due or impaired during the year.
In addition to treasury investments, the Authority is exposed to credit risk from its customers. However the Authority has put in place appropriate
debt recovery procedures to manage this risk and minimise any loss.
The age analysis of trade receivables which are past due date but are not impaired is shown below.
Less than three months
Three months to one year
More than one year
31 March
2013
£000
16
15
7
38
31 March
2014
£000
15
47
2
64
A bad debt provision of £24k has been made against debts which are more than one year old. The factors the Authority consider in determining if a
trade debt is impaired include the age of the debt; the default history of the debtor; the proportion of the original debt which is still outstanding and
Draft Statement of Accounts 2013/14
94
North Norfolk District Council
191
NOTES TO THE ACCOUNTS
the recovery stage of the debt. The Authority‟s maximum exposure to trade debts is £312,927. Of the debts which are passed their due date (and
not impaired) £15,293 is less than three months old, £46,965 is between three months and one year and £1,719 is more than one year, as per the
table above. The aged debt note relates to trade receivables only and it is not possible to determine the credit quality of the debtor.
Liquidity risk
The Authority has a comprehensive cash flow management system that seeks to ensure that cash is available as needed. If unexpected movements
happen, the Authority has ready access to short-term borrowing should this be required, and there is no significant risk that it will be unable to raise
funds to meet its commitments. The Authority does not have any long-term debt and therefore does not have any maturing liabilities for which funds
would be required.
Market risk
Interest rate risk
The Authority is exposed to risks arising from the movements in interest rates. If interest rates had been lower, there would be a reduction in the
amount of interest credited to the Comprehensive Income and Expenditure Statement. The impact of a reduction in interest rates would be delayed
as term deposits are fixed for a period of time, and it is not until the investment matures that the lower rate would impact on the Authority‟s
investment return. If the overall rate of return on investments had been 0.25% lower than the rate actually achieved in 2013/14, there would have
been a reduction of £43,200 in investment income, based on the average balance available for investment during the year.
The sensitivity to interest rate movements is assessed as part of the budget setting process, and interest rates movements and the resulting impact
is monitored throughout the year as part of routine budget monitoring, and this assumes that all other terms of the investments remain unchanged.
The figure of 0.25% reduction has been used because interest rates are historically low and anticipated to remain low and unlikely to change by
more than this figure.
Price risk
The investment in the pooled property fund exposes the Authority to the risk of changes in the price of the fund units. As they are classified as
available-for-sale financial assets, all gains and losses will be recognised in the Comprehensive Income and Expenditure Statement. For example,
if the price of the units held by the Authority at the year-end reduced by 1%, there would be a loss in fair value of £54,125.
Foreign Exchange Risk
The Authority has no financial assets or liabilities denominated in foreign currencies and therefore there is no exposure to loss arising from
movements in exchange rates.
Draft Statement of Accounts 2013/14
95
North Norfolk District Council
192
COLLECTION FUND
2012/13
Collection Fund
Notes
£000
(55,120)
(8,119)
(22,263)
INCOME
Council Tax Payers
Council Tax Benefit
Income from Business Ratepayers
(5 & 6)
(2)
(3)
(85,502)
7,283
47,367
8,146
22,033
230
162
56
45
294
49
(469)
163
(306)
(56,791)
(56,791)
EXPENDITURE
Precepts:
- North Norfolk District Council (including Parish Councils)
- Norfolk County Council
- Office of the Police & Crime Commissioner for Norfolk
Business Rate Shares:
- Central Government
- North Norfolk District Council (including Renewable Energy Scheme)
- Norfolk County Council
Charges to the Collection Fund:
- Payments to the National Pool
- Cost of Collection
- Increase / (Decrease) in Provision for Bad & Doubtful Debts
- Write Offs of Uncollectable Amounts
- Increase / (Decrease) in Provision for Appeals
Apportionment of Previous Year Deficit / (Surplus)
- North Norfolk District Council
- Norfolk County Council
- Office of the Police & Crime Commissioner for Norfolk
(4)
(3)
(8)
(8)
(4)
85,665
163
2013/14
Council Tax Business Rates
£000
£000
Deficit / (Surplus) for the year
(7)
COLLECTION FUND BALANCE
Balance brought forward at 1 April
Deficit / (Surplus) for the year (as above)
Balance carried forward at 31 March
Draft Statement of Accounts 2013/14
96
(24,185)
(56,791)
(24,185)
(24,185)
(80,976)
6,513
41,693
7,311
25
186
Total
£000
6,513
41,693
7,311
11,738
9,410
2,348
11,738
9,410
2,348
230
(77)
87
450
230
(52)
273
450
26
171
29
26
171
29
55,954
24,186
80,140
(837)
1
(836)
(306)
(837)
(1,143)
1
1
(306)
(836)
(1,142)
North Norfolk District Council
193
COLLECTION FUND
1. General
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 of Council Tax and National NonDomestic Rates (NNDR) and its distribution to local government bodies and central government. The Collection Fund is consolidated with the
other accounts of the billing authority for Balance Sheet purposes.
2. Council Tax Benefit
In 2013/14 Council Tax Benefit was replaced by a Local Council Tax Support Scheme. In 2012/13 an amount of £8,119,617 was transferred
from the General Fund in respect of Council Tax benefit expenditure for which a subsidy was received from the Department for Works and
Pensions. This was the last year the transfer was required. In 2013/14 support was provided to tax payers by granting a discount, and this is
reflected in the reduction in the Council‟s tax base shown in note 5.
3. Income from Business Ratepayers
The Council collects NNDR from ratepayers based on local rateable values provided by the Valuation Office Agency, multiplied by a uniform
business rate in the £ set nationally by Central Government. The total rateable value for the District was £65,488,294 on 31 March 2014
(£63,761,974 on 31 March 2013). The national multipliers for 2013/14 were 46.2p for qualifying Small Businesses (45.0p in 2012/13), and the
standard multiplier was set at 47.1p for all other businesses (45.8p in 2012/13).
In 2013/14 the Business Rate Retention Scheme was introduced which aimed to give Councils a greater incentive to grow businesses in their
area. Rather than paying the rates collected into a central pool administered by Central Government, and then receiving a share based on an
amount per head of population, local authorities retain a proportion of the rates collectable in their area. North Norfolk District Council retains a
40% share, Norfolk County Council retains 10% and the remainder is paid to Central Government.
The total income from business rate payers was £24,184,512 (£22,263,084 in 2012/13) and this sum includes £273,975 of transitional protection
payments from Central Government. The transitional relief scheme provides protection to ratepayers from large changes in their bills following
revaluations of their business, by phasing in changes gradually. This could mean that a billing authority may collect more or less rates than
would otherwise be the case, and Government Regulations make provision for adjusting payments to be made to or from billing authorities.
Draft Statement of Accounts 2013/14
97
North Norfolk District Council
194
COLLECTION FUND
4. Precepts and Demands
The authorities that made a precept or demand on the Collection Fund are:
Net
Payment
2012/13
£000
7,328
47,661
8,195
63,184
Precept /
Demand
Collection
Fund
Surplus
£000
£000
North Norfolk District Council (including Parish Precepts)
Norfolk County Council
Office of the Police & Crime Commissioner for Norfolk
Total
6,513
41,693
7,311
55,517
26
171
29
226
Net
Payment
2013/14
£000
6,539
41,864
7,340
55,743
5. The Council Tax Base for 2013/14 is as follows:
Therefore each £1 of Council Tax set was calculated to produce income of £36,411 (£41,366 in 2012/13).
Valuation
Band
A
B
C
D
E
F
G
H
Total Tax Base
Number of Chargeable
Dwellings adjusted for
Discounts
2012/13
2013/14
9,021
6,685
12,543
9,999
10,002
9,094
7,752
7,359
4,194
4,106
1,955
1,947
898
903
70
72
46,435
40,165
Draft Statement of Accounts 2013/14
Equivalent
Number of Band D
Dwellings
2012/13
2013/14
6,012
4,454
9,755
7,777
8,890
8,083
7,752
7,358
5,127
5,019
2,823
2,813
1,497
1,506
140
144
41,996
37,154
98
Adjusted Equivalent
Number of Band D
Dwellings
2012/13
2013/14
5,922
4,365
9,608
7,621
8,756
7,921
7,636
7,210
5,050
4,919
2,781
2,757
1,475
1,476
138
142
41,366
36,411
North Norfolk District Council
195
COLLECTION FUND
6. Band D Tax Rate
This Authority set a Council Tax of £1,488.69 for a band D dwelling, (£1,484.73 in 2012/13), which consisted of £1,145.07 (£1,145.07 in
2012/13) for Norfolk County Council, £204.75 (£200.79 in 2012/13) for the Office of the Police & Crime Commissioner for Norfolk and £138.87
(£138.87 in 2012/13) for the District's requirements. Sums ranging from nil to £89.45 (nil to £88.97 in 2012/13) were charged in addition for
parish and town council requirements.
The calculation of the District‟s Council Tax is made by dividing its demand on the Collection Fund by the equivalent number of Band D
dwellings in the area (the Tax Base). An adjustment is made to the Tax Base to take into account the anticipated non-collection of amounts due.
Discounts are given for empty and other properties, in respect of students, disabled people, single occupiers and those in receipt of support
under the Local Council Tax Support Scheme. Since 2004/05 the Authority has implemented the provisions of the Local Government Act 2003
and exercised its discretionary powers to reduce or eliminate discounts on certain empty properties and second homes.
7. Balances
The balance on the Collection Fund largely represents a surplus from the Council Tax transactions. The surplus is shared with the Norfolk
County Council and the Office of the Police & Crime Commissioner for Norfolk in proportion to the respective demands and precepts. There is
small deficit on the Business Rate transactions resulting from minor changes for the year against initial estimates. The total balance is attributed
as follows:
31 March 2013
Total
£
(35,508)
(230,922)
(39,712)
(306,142)
Share of Balance
North Norfolk District Council
Norfolk County Council
Office of the Police & Crime Commissioner for Norfolk
Central Government
Total
Draft Statement of Accounts 2013/14
31 March 2014
Council Tax
Business Rates
£
£
331
(134,120)
(858,511)
82
(150,541)
412
(1,143,172)
99
Total
£
(133,789)
(858,429)
(150,541)
412
825 (1,142,347)
North Norfolk District Council
196
GLOSSARY OF TERMS
8. Bad Debt Provision and Appeals Accounting Policy
The Collection Fund account provides for bad debts on arrears based on historical experience of non-payment and the age of debt.
Authorities are expected to finance the cost of appeals made against rateable values and are required to make provision for these amounts. A
provision of £450,104 has been charged to the Collection Fund for 2013/14 in respect of appeals not settled as at 31 March 2014. This is the
first year of this provision and is based on the historical experience of the percentage of appeals which are successful, and the resulting
reduction in rateable value achieved.
Draft Statement of Accounts 2013/14
100
North Norfolk District Council
197
GLOSSARY OF TERMS
Independent auditors’ report to the Members of North Norfolk District Council
Draft Statement of Accounts 2013/14
101
North Norfolk District Council
198
GLOSSARY OF TERMS
Accruals - The accounting treatment that requires expenditure and income to be recognised in the period it is incurred or earned, not when the
money is actually paid or received.
Amortisation - The process of spreading a cost to revenue over a number of years. For example Intangible Assets are amortised to revenue over
their useful life.
Area Based Grant (ABG) - The ABG is paid directly to the Authority that benefits from the grant without any constraint on how the monies are to be
used.
Bad Debts - Amounts owed to the Authority which are considered unlikely to be recovered. An allowance is made in the accounts for this possibility.
Balance Sheet - The Authority's financial position at the year end. It summarises what the respective assets and liabilities are.
Business Rates - Business or National Non-Domestic Rates are collected from occupiers of business properties based upon a rateable value and a
nationally set rate. They are collected by each authority and nationally determined proportionate shares are paid to the Government and Norfolk
County Council with a share retained by the authority.
Capital Adjustment Account - An account which reflects the difference between the cost of fixed assets consumed and the capital financing set
aside to pay for them. The balance represents the balance of capital resources set aside to finance capital expenditure (e.g. capital receipts,
revenue contributions) awaiting consumption of resources e.g. from depreciation and impairment.
Capital Expenditure - Spending on the purchase or enhancement of significant assets which have an expected life of over a year - for example
major improvements to Council housing or construction of a car park.
Capital Financing Requirement - The Capital Financing Requirement represents the Authority‟s underlying need to borrow for capital purposes.
Capital Receipts - Money received from the sale of assets. This can be used to finance capital expenditure or repay debt.
Collection Fund - The account which contains all the transactions relating to Community Charge, Council Tax and Business Rates together with the
payments to this Authority, Norfolk County Council and Norfolk Police Authority to meet their requirements.
Contingent Assets - A Contingent Assets is a possible asset that arises from past events and whose existence will only be confirmed by the
occurrence of one or more uncertain future events not wholly within the Authority‟s control.
Corporate and Democratic Core - Costs relating to the Authority‟s status as a multi-functional, democratic organisation.
Draft Statement of Accounts 2013/14
102
North Norfolk District Council
199
GLOSSARY OF TERMS
Contingent Liabilities - A Contingent Liability is a possible obligation that arises from past events and whose existence will be confirmed only by
the occurrence of one or more uncertain future events not wholly within the Authority‟s control.
Deferred Capital Receipts - Representing the amounts that are not available as cash. They arise from Council house sales on mortgage to the
Authority, and where repayments of principal sums due are received over a number of years.
Depreciation - A measure of the financial effect of wearing out, consumption or other reduction in the useful life of a fixed asset.
Earmarked Reserve - Amounts set aside for a specific purpose to meet future commitments or potential liabilities, for which it is not appropriate to
establish provisions.
Financial Instruments - Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another. The
term covers both financial assets and financial liabilities. Examples of financial assets include bank deposits, equity instrument of another entity, e.g.
shares, contractual right to receive cash or another financial asset from another entity, such as a trade receivable. Financial liabilities include for
example, contractual obligations to deliver cash or another financial asset.
Fixed Assets - Representing, as fixed assets, the value of what the Authority owns in terms of property, land etc. and what is owed to the Authority
in respect of debt.
General Fund - The account which summarises the revenue costs of providing services, which are met by the Authority‟s demand on the Collection
Fund.
Impairment - Reduction in the value of a fixed asset below its amount included in the Balance Sheet.
Infrastructure - A classification of fixed assets which have no market value and which exist primarily to facilitate transportation and communication
requirements (e.g. roads, street lighting).
Intangible Assets - Intangible Assets are non-financial fixed assets that do not have a physical substance and include for example software
licences.
International Accounting Standard 19 (IAS 19) - The requirement for Local Authority‟s to include the forecast cost of future pensions in the
accounts on a notional basis.
International Financial Reporting Standards (IFRS) – A set of international accounting standards stating how particular types of transactions and
other events should be reported in Financial Statements. IFRS are issued by the International Accounting Standards Board.
Draft Statement of Accounts 2013/14
103
North Norfolk District Council
200
GLOSSARY OF TERMS
Large Scale Voluntary Transfer (LSVT) - The process of transferring Council House stock from a local Authority to a Registered Social Landlord.
North Norfolk District Council transferred its housing stock to North Norfolk Housing Trust in February 2006.
Leasing - A method of acquiring items such as vehicles and computer equipment by payment of a lease charge over a period of years. There are
two types of lease.
 A finance lease is where the Authority effectively pays for the cost of an asset (it counts as capital expenditure for control purposes and is
included on our Balance Sheet). A primary lease period is that period for which the lease is originally taken out and a secondary period
relates to any extension.
 An operating lease (a long-term hire) is subject to strict criteria and the cost can be charged as a running expense. The item leased must be
worth at least 10% of its original value at the end of the lease and does not appear on the Balance Sheet.
Liabilities - This shows what the Authority owes for borrowing, payables etc. at the Balance Sheet date.
Minimum Revenue Provision - The minimum amount which must be charged to the revenue account each year and set aside as a provision to
meet the rest of credit liabilities for example borrowing
National Non-Domestic Rate (NNDR) - National Non-Domestic Rate (NNDR) is set by the Government and collected by each authority and
nationally determined proportionate shares are paid to the Government and Norfolk County Council with a share retained by the authority.
Non Distributed Costs - The cost of discretionary benefits awarded to employees retiring early and any depreciation and impairment losses
chargeable on non-operational properties.
Payables - Amounts which the Authority owes to others for goods and services received before the year end of 31 March but which were not paid
until after 1 April.
Precepts - The amount which the Norfolk County Council and Norfolk Police Authority require us to collect, as part of the Council Tax, to pay for
their services is called a precept. Town and Parish Councils also precept on the District Council to pay for their expenses.
Provisions - An amount set aside for potential liabilities which may arise or will be incurred, where there is uncertainty as to the amounts concerned
or the dates on which these liabilities may arise.
Prudential Code - Professional code of practice developed by CIPFA which came into effect from the 1 April 2004 to ensure Local Authorities
Capital investment plans are affordable, prudent and sustainable. „The code allows authorities to undertake borrowing to finance capital expenditure
as long as they can demonstrate affordability. „
Draft Statement of Accounts 2013/14
104
North Norfolk District Council
201
GLOSSARY OF TERMS
Receivables - Sums which at 31 March are owing to the Authority.
Reserves - Accumulated balances built up from excess of income over expenditure or sums that have been specifically identified for a particular
purpose which are known as earmarked reserves.
Revaluation Reserve - Net unrealised gains from the revaluation of fixed assets recognised in the balance sheet. Introduced in the 2007 SORP
from 1 April 2007.
Revenue Contribution to Capital (or Direct Revenue Financing) - Use of revenue resources to finance capital expenditure.
Revenue Expenditure - The day to day running expenses on the services provided.
Revenue Expenditure Funded from Capital Under Statute - Expenditure incurred during the year that may be capitalised under statutory
provisions but does not result in the creation of a fixed asset has been charged as expenditure to the relevant service revenue account in the year.
Revenue Income - Amounts receivable for such items as rents and charges for services and facilities.
Revenue Support Grant (RSG) - Grant paid by central government to aid local authority services in general as opposed to specific grants which
may only be used for a specific purpose.
Soft Loans - Loans which are made at less than market rates or interest free. An authority will sometimes make soft loans to achieve a policy or
service objective. For example an interest free loan to a voluntary organisation to provide upfront funding or car loans to employees.
Support Services - Activities of a professional, technical and administrative nature which are not local authority services in their own right, but
support main front-line services.
Temporary Loans - Money borrowed on a short-term basis as part of the overall borrowing strategy.
VAT Shelter - A procedure agreed by the DCLG and HM Revenues and Customs to ensure that following a housing stock transfer there is no
impact on taxation. Had the Authority retained the housing stock and carried out the necessary works on the properties the VAT would have been
reclaimed by the Authority, however the Housing Trust are unable to recover the VAT and the VAT shelter arrangement allows the VAT to be
recovered and shared between the Authority and Victory Housing Trust.
Draft Statement of Accounts 2013/14
105
North Norfolk District Council
202
GLOSSARY OF ACRONYMS
CFR
Capital Financing Requirement
NNDC
North Norfolk District Council
CIPFA
Chartered Institute of Public Finance and Accountancy
REFCUS
Revenue Expenditure Funded from Capital Under Statute
IAS
International Accounting Standards
RSG
Revenue Support Grant
ICT
Information Communication Technology
SERCOP
Service Reporting Code of Practice
IFRS
International Financial Reporting Standard
SORP
Statement of Recommended Practice
LSVT
Large Scale Voluntary Transfer
TIC
Tourist Information Centre
MRP
Minimum Revenue Provision
UK GAAP
United Kingdom - Generally Accepted Accounting Principles
Draft Statement of Accounts 2013/14
106
North Norfolk District Council
203
Draft Statement of Accounts 2012/13
North Norfolk District Council
204
Audit Committee
16 September 2014
Agenda Item No______13_______
Progress Report on Internal Audit Activity – 01 April to 5 September 2014
Summary:
This report examines the progress made between 1 April 2014
and 5 September 2014 in relation to delivery of the Annual Audit
Plan for 2014/15, and provides a current in-year position.
Conclusions:
A total of 5 audit assignments have been processed during the
period covered by this report.
Recommendations:
It is recommended that the Committee notes the outcome of the
audits completed between 01 April 2014 and 5 September 2014
where assurance levels have been given and the progress made
to date with the annual audit plan.
Cabinet member(s):
Ward(s) affected:
All
All
Emma Hodds, Internal Audit Consortium Manager
01508 533791, ehodds@s-norfolk.gov.uk
Contact Officer, telephone
number, and e-mail:
1.
Background
1.1.
This Activity Report reflects progress made with regard to assignments featuring
in the approved Annual Internal Audit Plan for 2014/15, which was endorsed by
the Audit Committee on 19 March 2014.
2.
Overall Position
2.1.
The overall position in relation to the progress made against the Internal Audit
Plan is within the attached report.
3.
Conclusion
3.1
Expected progress has been made with the delivery of the Audit Plan; positive
assurances have been awarded in four areas and a limited in the other.
4.
Recommendation
4.1
It is recommended that members note the outcomes of the completed audits and
the progress made to date.
205
Audit Committee
16 September 2014
Appendices attached to this report:
Progress Report on Internal Audit Activity
206
NORFOLK INTERNAL AUDIT CONSORTIUM
NORTH NORFOLK DISTRICT COUNCIL
PROGRESS REPORT ON INTERNAL AUDIT ACTIVITY 2014/15
PERIOD COVERED: - 01/04/2014 TO 05/09/2014
RESPONSIBLE OFFICER
EMMA HODDS – INTERNAL AUDIT CONSORTIUM MANAGER (IACM)
CONTENTS
1. INTRODUCTION ............................................................................................................. 2
2. SIGNIFICANT CHANGES TO THE APPROVED AUDIT PLAN ...................................... 2
3. PROGRESS MADE IN DELIVERING THE AGREED AUDIT WORK ............................. 2
4. THE OUTCOMES ARISING FROM OUR WORK ........................................................... 2
5. PERFORMANCE INDICATOR OUTCOMES .................................................................. 4
APPENDIX 1 – PROGRESS IN COMPLETING THE AGREED AUDIT WORK .................. 6
APPENDIX 2 – AUDIT REPORT EXECUTIVE SUMMARIES ............................................. 8
Page 1 of 19
207
1.
INTRODUCTION
1.1
This report is issued to assist the Authority in discharging its responsibilities in relation to the
internal audit activity.
1.2
The Public Sector Internal Audit Standards also require the Chief Audit Executive (known in
this context as the Internal Audit Consortium Manager) to report to the Audit Committee on
the performance of internal audit relative to its plan, including any significant risk exposures
and control issues. The frequency of reporting and the specific content are for the Authority
to determine.
1.3
To comply with the above this report includes:



Any significant changes to the approved Audit Plan;
Progress made in delivering the agreed audits for the year;
Any significant outcomes arising from those audits; and
Performance Indicator outcomes to date.
2.
SIGNIFICANT CHANGES TO THE APPROVED AUDIT PLAN
2.1
At the meeting on 19 March 2014, the Annual Audit Plan for the year was approved,
identifying the specific audits to be delivered. Since then, there have been no significant
changes to that plan.
3.
PROGRESS MADE IN DELIVERING THE AGREED AUDIT WORK
3.1
The current position in completing audits to date within the financial year is shown in
Appendix 1 and progress to date is in line with expectations. Details of any specific audit
report can be provided on request.
3.2
In summary, 66 days of programmed work has been completed, equating to 30% of the
Audit Plan for 2014/15.
4.
THE OUTCOMES ARISING FROM OUR WORK
4.1
On completion of each individual audit an assurance level is awarded using the definitions
shown in the table below.
Good
There is a sound system of internal control designed to achieve the
client’s objectives.
The control processes tested are being consistently applied.
Adequate
While there is a basically sound system of internal control, there are
weaknesses, which put some of the client’s objectives at risk.
There is evidence that the level of non-compliance with some of the
control processes may put some of the client’s objectives at risk.
Limited
Weaknesses in the system of internal controls are such as to put the
client’s objectives at risk.
The level of non-compliance puts the client’s objectives at risk
Unsatisfactory
Control processes are generally weak leaving the processes/systems
open to significant error or abuse.
Significant non-compliance with basic control processes leaves the
processes/systems open to error or abuse
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4.2
4.3
Recommendations made on completion of audit work are prioritised using the definitions
shown in the table below.
High
A fundamental weakness in the system that puts the Council at risk. To be
addressed as a matter of urgency, within a 3 month time frame wherever possible,
or, to put in place compensating controls to mitigate the risk identified until such time
as full implementation of the recommendation can be achieved.
Medium
A weakness within the system that leaves the system open to risk. To be resolved
within a 4 – 6 month timescale.
Low
Desirable improvement to the system. To be introduced within a 7 – 9 month period.
During the period covered by the report Internal Audit Services have issued 5 final reports
and the Executive Summary of these reports are attached at Appendix 2. In summary the
final reports issued conclude the following:

Coastal Protection (NN/15/01)
The audit covered the effectiveness and efficiency of controls operating around
Strategy and Governance, Financial Management and Contract Monitoring (Including
the Medium Term Contract with RenoSteel). The systems and processes of internal
control were deemed Adequate in managing the risks associated with Coastal
Protection. The medium priority recommendation relates to the need to undertake
sample check inspections of the contractor’s worksheets to confirm compliance and
accuracy for time spent on works completed.
The contract with RenoSteel provides for monthly liaison meetings with the Council.
However, in practice these are less frequent on the basis that the contract is working
well and there are currently no issues worthy of meeting more regularly. This is
deemed acceptable provided more frequent meetings take place should the need
arise.

Development Management (NN/15/03)
The audit scope included; progress with the Planning Peer Challenge Action Plan,
Planning Applications, Planning Enforcement, Building Control and Section 106
Planning Agreements. On conclusion of the review an Adequate assurance opinion
was awarded with 2 medium and 2 low priority recommendations being agreed with
management. The medium priority recommendations relate to the need to ensure
monthly reconciliations to the general ledger are completed and that priority ratings
are attached to enforcement sites, with sites visits being completed within that
timeframe and sample checks undertaken.
The audit also sought to confirm that progress with the key actions as agreed on
conclusion of the Planning Peer Challenge report is being achieved and reported
upon. The report included the need for the Council to undertake a review of its end to
end processing of planning applications and planning enforcement activities, both of
which are underway. A recommendation was made for the Council to develop a
Planning Obligations Policy and Operating Procedures in October 2013, the Section
106 Obligations Operating Procedures had been developed, however the Planning
Obligations Policy had yet to be introduced, changes will be ongoing throughout the
2015/16 financial year. Finally, there is a previous Internal Audit recommendation
which still remains outstanding in respect of monitoring Section 106 Planning
Agreements. Weaknesses with the monitoring and oversight of Section 106 Planning
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Agreements have also been raised in the Planning Peer Challenge Action Plan,
which continues to be monitored by the Overview and Scrutiny Committee.

Performance Management, Corporate Policy and Business Planning (NN/15/04)
The audit concluded that the systems and processes of internal control are, overall,
deemed Good in managing the risks associated with Performance Management,
Corporate Policy and Business Planning, including Annual Action Plans. Only one
low priority recommendation was raised relating to the need to review the Data
Quality Policy to help confirm it reflects current processes and allows for accurate
data verification. The level of assurance has improved since the previous audit
undertaken for this area, hence the direction of travel indicator has moved forward.
Areas where sound controls are in place and operating consistently were also
recognised as part of the review:

Network Infrastructure (NN/15/14)
The audit covered operating system security. The system of internal control was
deemed Limited in managing the risks associated with the Network Infrastructure.
Whilst it was noted that there had been good work to improve the security of the
domain, based on previous recommendations, none of the four Domain Controllers
had any Anti-Virus controls and Domain Controllers did not have the latest Service
Pack installed nor have up to date security patches. Two high and five medium
priority level recommendations were raised, and seven low priority recommendations
to provide enhancements to the current system were also raised.

Network Security (NN/15/15)
The audit covered Network administration, Network support, Network monitoring,
Network topology and resilience, Routers and Virus detection/prevention. The system
of internal control was deemed Adequate in managing the risks associated with
Network Security. One medium and two low priority recommendations were raised.
The medium priority recommendation was made on the basis that a large number of
computers are either not managed by the Sophos Anti-Virus solution or have had
their on-demand scanning capability disabled.
4.4
On conclusion of the above work, 2 high priority recommendations were made during the
period covered by this report, the details of which are at Appendix 2.
5.
PERFORMANCE INDICATOR OUTCOMES
5.1
The Internal Audit Service is benchmarked against a number of Performance Indicators as
part of the Internal Audit Contract with Mazars. Actual performance to date against these
targets is outlined below.
5.2
To date five final reports have been issued and management have accepted all
recommendations that have been made by the Contractor.
5.3
Audit briefs should be issued to key clients at least 10 days before the fieldwork is due to
start to ensure that they are well informed of the requirements of the audit. Seven audit
briefs have been issued to date and performance in this area reflects that the number of
days has varied between 5 and 62, with the average time for issue being eight days.
Performance has slightly increased in this area and it is expected that this will continue to
improve over the course of the financial year.
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210
5.4
Once audits are underway it can be seen that performance in this area is good with four
being completed on time, and one only slightly overrunning, the reasons for which were
notified to the Audit Management Team.
5.5
Draft reports should be issued to key officers within 10 working days of completion of the
audit fieldwork. Five draft reports have been issued to date, three on time and two were
slightly delayed due to internal review points. However, performance in this area has
improved since financial year end 2013/14.
5.6
Final reports should then be issued to key officers within 15 working days of issue of the final
report. Five final reports have been issued to date, as reported above. Four of these were
issued on time and one was slightly delayed due to a delay in management response.
5.7
On conclusion of all audits a feedback survey is issued to the key client. The survey asks for
responses in relation to; audit staff, audit planning, delivery of the audit and audit reporting.
On completion an overall score of poor (1) through to excellent (6) is reported. To date two
surveys have been completed and an average score of good (5) achieved.
5.7
In conclusion performance is improving across the board; however the Contractor still needs
to ensure that audit briefs are issued to key clients in a timely manner.
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APPENDIX 1 – PROGRESS IN COMPLETING THE AGREED AUDIT WORK
Audit No.
Frequency of
Audit
Coverage
Original Days
Planned
Revised
Days
Planned
Days
Delivered
Scheduling
PLANNED SYSTEMS AUDIT WORK
NN/1501
Coastal Protection
3-yearly
10
10
10
June
Final Report issued 20 August
2014
NN/1502
NN/1503
3-yearly
3-yearly
10
22
10
22
8
22
July
July
Draft report imminent
Final Report issued 4
September 2014
2-yearly
10
10
10
July
Final Report issued 4
September 2014
2-yearly
10
10
3-yearly
12
12
2-yearly
20
20
November
2-yearly
19
19
November
2-yearly
Annual
20
8
20
8
December
January
2-yearly
13
13
January
NN/1512
Procurement
Development Management,
including applications,
enforcement, s106, Community
Infrastructure Levy & Land
Charges
Performance Management,
Corporate Policy and Business
Planning, including annual action
plans
Localism & Communities,
including focus on Big Society
Fund Grant Scheme
Sports halls/leisure centres &
Sports Development
Local C Tax Support, Housing
benefits
Payroll & HR, officers'/members'
expenses
Council Tax and NNDR
Corporate Governance and Risk
Management
Creditors - Ordering, payments,
insurance
Elections & Electoral Registration
3-yearly
12
12
January
NN/1513
Work to Support the AGS
Annual
10
10
February
Annual
8
184
8
184
NN/1504
NN/1505
NN/1506
NN/1507
NN/1508
NN/1509
NN/1510
NN/1511
Description of Audit
Systems Audit Follow Up
TOTAL PLANNED SYSTEMS AUDIT WORK
Status
October
1
October
Fieldwork due to start 8
September 2014
2 x 6-monthly validation
51
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28%
Assurance
Level
applicable
Summary Report
Details presented
to Members
Adequate
Audit Committee,
16 September
2014
Adequate
Audit Committee,
16 September
2014
Good
Audit Committee,
16 September
2014
PLANNED COMPUTER AUDIT WORK
NN/15/14 Network Infrastructure
2-yearly
7
7
7
April
Final Report issued 28 May
2014
NN/15/15
Network security
2-yearly
8
8
8
June
Final Report issued 13 August
2014
NN/15/16
NN/15/17
Virus protection/Software
Firewalls
3-yearly
4-yearly
8
7
8
7
Annual
4
34
4
34
15
44%
218
218
66
30%
0
0
0
218
218
66
Computer Audit Follow Up
TOTAL PLANNED COMPUTER AUDIT WORK
TOTAL PLANNED WORK
November
December
2 x 6-monthly validation
EXTRA WORK REQUESTED
TOTAL OF EXTRA WORK UNDERTAKEN
GRAND WORK TOTAL
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30%
Limited
Adequate
Audit Committee,
16 September
2014
Audit Committee,
16 September
2014
APPENDIX 2 – AUDIT REPORT EXECUTIVE SUMMARIES
Appendix 2(1)
Report No. NN/15/01 – Final Report issued 20 August 2014
Audit Report on Coastal Protection
Audit Scope
The scope of the audit covered the effectiveness and efficiency of controls operating around:
 Strategy and Governance;
 Financial Management; and
 Contract Monitoring (Including the MTC with RenoSteel).
Assurance Opinion
Unsatisfactory
Assurance
Limited Assurance
Adequate
Assurance
Good Assurance
Rationale supporting the award of the opinion
The systems and processes of internal control are, overall, deemed adequate in managing the risks
associated with Coastal Protection. This opinion is based on having raised one medium and one low priority
recommendation. The specific scope area has not been subject to review previously by Deloitte / Mazars;
hence no direction of travel can be given.
The medium priority recommendation relates to the need to undertake sample check inspections of the
contractor’s worksheets to confirm compliance and accuracy for time spent on works completed.
The contract with RenoSteel provides for monthly liaison meetings with the Council. However, in practice
these are less frequent; there were five meetings during 2013 and three up to and including the end of June
2014, on the basis that the contract is working well and no issues worthy of meeting more regularly. This is
deemed acceptable provided more frequent meetings take place should the need arise.
The annual revenue projects were put on hold during 2013/14 due to the tidal surge emergency. These are
planned to re-commence in September 2014.
The contract with RenoSteel, covered in this audit, including the exemptions to Contract Standing Orders for
other coastal works, will now be excluded from the NN/15/02 Procurement audit in quarter two.
Positive Findings
We found that the Council has demonstrated the following areas where sound controls are in place and
operating consistently:





Coastal protection projects are aligned with the Council’s Corporate Priorities as outlined in the
Corporate Plan 2012-2015;
Contract decisions and orders raised with RenoSteel are made in line with the delegated levels of
authority and are supported by a sound business case;
Decisions made on coastal protection projects are formally documented and retained on a shared
drive with access for key Members;
Progress on coastal protection projects is monitored by Senior Management;
The requisite number of quotations is obtained for minor works in line with the Council’s Contract
Standing Orders;
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

Exemptions for costs incurred as a consequence of the tidal surge emergency in December 2013,
had been subject to the requisite levels of authorisation in accordance with the Council’s Financial
procedures; and
The contract with RenoSteel is monitored with outcomes formally documented and reported to senior
management.
Control weaknesses to be addressed
During our work we have identified the following areas where processes in Coastal Protection would benefit
from being strengthened, and as a result, one medium priority recommendation has been made:

Management should undertake spot checks on timesheets submitted by the contractor, RenoSteel,
prior to payment of invoices. This could be achieved through a process of random sample checking.
In addition, a clause should be added within the Contract to indicate that the Council reserves the
right to inspect the contractor's daily worksheets. Where inspections on timesheets are not
undertaken there is an increased risk of the contractor claiming for more time over and above actual
time spent which is not identified, resulting in excessive and potentially fraudulent costs being levied
on the Council.
During our work we have identified one area where we believe that further enhancements could be made. In
particular, the local monitoring spreadsheet should be regularly maintained and kept up to date to reflect all
orders raised with the contractor, RenoSteel.
Summary of the adequacy and effectiveness of controls
Area of Scope
Adequacy and
Effectiveness
Assessments
Strategy
and
Governance
Financial
Management
Contract
Monitoring/Perfor
mance
Total
Adequacy of
Controls
Effectiveness of
Controls
Recommendations Raised
High
Medium
Low
Green
Green
-
-
-
Green
Green
-
-
-
Green
Amber
-
1
1
0
1
1
High Priority Recommendations
No high priority recommendations have been raised as a result of this audit
Management Responses
Management have accepted the recommendations raised.
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Appendix 2(2)
Report No. NN/15/03 – Final Report issued 4 September 2014
Audit Report on Development Management
Audit Scope
The scope of the audit covered the following areas of Development Management to help confirm that the
control environment is operating effectively and efficiently in relation to:





Progress with the Planning Peer Challenge Action Plan;
Planning Applications;
Planning Enforcement;
Building Control; and,
Section 106 Planning Agreements.
Assurance Opinion
Unsatisfactory
Assurance
Limited Assurance
Adequate
Assurance
Good Assurance
Rationale supporting the award of the opinion
The system of internal control is, overall, deemed Adequate in managing the risks associated with
Development Management that fall within the scope of this audit. The direction of travel has indicated that the
overall level of control has remained the same since arrangements were previously audited in 2010/11
(NN/11/12).
The assurance opinion has been derived as a result of two medium and two low priority recommendations
being raised upon conclusion of our work.
The medium priority recommendations relate to the need to complete monthly income reconciliations for
planning applications to the general ledger, and to provide evidence of independent review with these
reconciliations and those for accounting for building control income. There is also a need to manage
processing times more effectively for building control notices.
The assurance opinion is also influenced through recommendations made in the Planning Peer Challenge
Action Plan where they link to the scope of our review and where we have not made further
recommendations, in our report. This included the need for the Council to undertake a review of its end to end
processing of planning applications and planning enforcement activities.
There is also a previous recommendation which remains outstanding in respect of monitoring Section 106
Planning Agreements. Weaknesses over the monitoring and oversight of Section 106 Planning Agreements
have also been raised in the Planning Peer Challenge Action Plan and therefore no further recommendations
are raised in this report. However, we will continue to monitor progress with our previous recommendation
through our cyclical follow up checks on the progress of outstanding recommendations.
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Positive Findings
It is acknowledged there are areas where sound controls are in place and operating consistently, in particular:

Regular updates are provided to senior management and to the Overview and Scrutiny Committee
with respect of the Peer Review Action Plan and subsequent service improvement plan;

The initial receipt of a planning application and supporting items are assessed by the Technical
Officer as part of the validation process and all in line with the Building Regulations 2010; and

Planning enforcement is discussed at the quarterly Development Control Committee meetings, and
provides information on outstanding cases more than three months old.
Control weaknesses to be addressed
During our work we have identified the following areas where we believe that the processes in Development
Control would benefit from being strengthened, and as a result of these findings, two medium priority
recommendations have been raised:
Planning Applications

Monthly reconciliations for planning (and building control) income to the general ledger should be
completed. Reconciliations should be signed and dated by the preparer and the reviewing officer.
Where income reconciliations to the general ledger are not completed or independently reviewed,
there is a risk that income received is not correctly accounted for in the Council’s accounts.
Planning Enforcement

Priority ratings should be assigned to each enforcement action with site visits being completed in
accordance with these timeframes. The Development Manager should undertake sample checks of
applications processed to determine whether target dates have been met and are accurate through
supporting documentary evidence. If reviews of either applications received and/or approval notices
issued do not take place in a timely manner, there is a risk of non-compliance with the agreed
timescales which may go unnoticed. This could also result in reputational damage to the Council for
poor service delivery.
During our work we have identified two areas where we believe that further enhancements could be made, in
particular, to complete the requisite checklists for processing planning applications and including details of
version control when updating building control procedural guidance.
Planning Peer Challenge Action Plan
The following observations were noted during the course of our review. (No recommendations have been
raised in this report as they have already been identified as issues in the Planning Peer Challenge Action
Plan. This approach was agreed with the Head of Planning during the scoping of this audit to avoid
duplication and given that progress with the implementation of Planning Peer Challenge Action Plan is being
monitored by the Overview and Scrutiny Committee).
Planning Applications

A recommendation was made for the Council to ‘undertake an end to end process review of the
handling of planning applications from receipt and validation, allocation, Committee decision and
issuing of Decision Notices – so as to improve customer experience and increased efficiency,
particularly through the increased receipt of applications through the planning portal and in the
scanning of paper applications so as to move towards paperless processes and increased public
accessibility to planning files on-line.’ Following this review, the procedure documentation should
detail the date of the last review, the due date for the next review and who reviewed the procedure.
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Planning Enforcement

A recommendation was made for the Council to update its end to end processes for Planning
Enforcement activity. This is being achieved through a redrafting of the Local Enforcement Plan.
Section 106 Planning Agreements

A recommendation was made for the Council to develop a Planning Obligations Policy and Operating
Procedures in October 2013. However, it was identified that while the Section 106 Obligations
Operating Procedures had been developed, the Planning Obligations Policy had yet to be introduced.
The Head of Planning advised that the delay was due to the requirements of the Community
Instruction for a more robust policy framework for Section 106 Planning Agreements. A Housing and
Policy Board meeting took place on 24th July where the infrastructure review was discussed. This set
out the process and timetable for the local plan review and changes will be ongoing throughout the
2015/16 financial year.

There is also a previous recommendation which still remains outstanding in respect of monitoring
Section 106 Planning Agreements. Weaknesses with the monitoring and oversight of Section 106
Planning Agreements have also been raised in the Planning Peer Challenge Action Plan, which
continues to be monitored by the Overview and Scrutiny Committee. Therefore no further
recommendations are raised in this report. However, we will continue to monitor progress with our
previous recommendation, (included within NN/11/12 issued in May 2011) through our cyclical follow
up checks on the progress of outstanding recommendations.
Summary of the adequacy and effectiveness of controls
Area of
Scope
Adequacy and
Effectiveness
Assessments
Peer Review
Action Plan
Planning
Applications
Planning
Enforcement
Building
Control
Section 106
Planning
Agreements
Adequacy
of
Controls
Effectiveness
of Controls
Recommendations
Raised
High
Medium
Low
Green
Green
0
0
0
Amber
*Amber
0
**1
1
Amber
*Amber
0
1
0
Green
Amber
0
0
1
Green
*Red
0
0
0
0
2
2
Total
High Priority Recommendations
No high priority recommendations have been raised as a result of this audit
Management Responses
Management have accepted the recommendation raised.
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Appendix 2(3)
Report No. NN/15/04 – Final Report issued 4 September 2014
Audit Report on Performance Management, Corporate Policy and Business Planning including Annual
Action Plans
Audit Scope
The scope of the audit covered the effectiveness and efficiency of controls operating around:

Performance Management, Corporate Policy and Business Planning, including Annual Action
Plans.
Assurance Opinion
Unsatisfactory
Assurance
Limited Assurance
Adequate
Assurance
Good Assurance
Rationale supporting the award of the opinion
The systems and processes of internal control are, overall, deemed Good in managing the risks associated
with Performance Management, Corporate Policy and Business Planning, including Annual Action Plans. This
opinion is based on having raised one low priority recommendation relating to the need to review the Data
Quality Policy to help confirm it reflects current processes and allows for accurate data verification. The level
of assurance has improved since the previous audit undertaken for this area, hence the direction of travel
indicator has moved forward.
Positive Findings
We found that the Council has demonstrated the following areas where sound controls are in place and
operating consistently:







A performance management framework is in place which demonstrates how the Council’s strategic
and operational objectives will be implemented, with roles and responsibilities defined;
A Corporate Plan for 2012-2015 is in place, with Annual Action Plans which help to ensure delivery of
the corporate plan;
Quarterly performance reports and monthly data reports are established to ensure continuous
monitoring of performance management indicators;
Each action is assigned to a responsible officer within the respective service areas and is included in
the respective service plans;
Performance management is considered as part of the budget setting arrangements and approved by
Cabinet to ensure that the necessary resources are in place;
Performance indicators and their progress are monitored and reported monthly to senior
management, and to both the Performance and Risk Management Board and Cabinet quarterly; and
Quarterly and monthly performance indicator reports are produced at both service and strategic levels
to support senior management and members in decision making.
Control weaknesses to be addressed
During our work we have identified the following area where we believe that further enhancements could be
made, in particular; management should undertake a formal review of the Council’s Data Quality Policy to
confirm it reflects current working practices and provides audit trail of regular review thereafter.
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Summary of the adequacy and effectiveness of controls
Area of Scope
Adequacy and
Effectiveness
Assessments
Performance
Management,
Corporate
Policy
and
Business
Planning, including
Annual
Action
Plans
Total
Adequacy of
Controls
Effectiveness of
Controls
Green
Amber
High Priority Recommendations
No high priority recommendations have been raised as a result of this audit
Management Responses
Management have accepted the recommendation raised.
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Recommendations
Raised
High
Medium
Low
-
-
1
0
0
1
Appendix 2(4)
Report No. NN/15/14 – Final Report issued 28 May 2014
Audit Report on Network Infrastructure
Audit Scope
The audit covered the following areas:

Operating system security; including
o
o
o
o
o
o
o
o
o
o
o
o
Domain accounts policies;
Audit policy settings;
User privileges;
Trusted and trusting hosts;
User accounts and passwords;
Services and drivers;
Home directories, logon scripts;
Security Option settings;
Logical drives;
Default login accounts;
Discretionary access controls (DACLs); and
Remote Access Servers and Security.
Assurance Opinion
Unsatisfactory
Assurance
Limited Assurance
Adequate
Assurance
Good Assurance
Rationale supporting the award of the opinion
The system of internal control is, overall, deemed Limited in managing the risks associated with the Network
Infrastructure that fall within the scope of this audit. Whilst it has been noted that there has been good work to
improve the security of the domain, based on previous recommendations, it was found that all four of the
Domain Controllers had no Anti-Virus controls in place and the Domain Controllers do not have the latest
Service Pack installed nor do they have up to date security patches applied. The assurance opinion has also
been derived as a result of two high and five medium priority recommendations being raised upon the
conclusion of our work.
Positive Findings
We found that there are areas where sound controls are in place and operating consistently:

There have been improvements to the configuration of the Domain Accounts Policy, although
further improvements have been recommended;

There are procedures in place to manage user home directories, Logon scripts and profiles
effectively;

Logical drives continue to be formatted as NTFS partitions; and

Remote Access Services are being managed effectively.
Control weaknesses to be addressed
During our work we have identified the following key area(s) where we believe that the processes /
arrangements within Network Infrastructure would benefit from being strengthened, and as a result of these
findings two high priority recommendations have been made:

All of the Domain Controllers should have appropriate Anti-Virus/Malware software/scanners
installed, which will help to ensure protection against such rogue software and help ensure
compliance with PSN requirements; and
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
The service packs on the Domain Controllers should be updated to Service pack 2 as currently no
service packs are installed. In addition, security updates and patches have not been applied since
June 2013. Improving the processes in these areas will help to ensure the security of the network
by resolving known weaknesses.
During our work we have identified the following area(s) where we believe that the processes / arrangement
within Network Infrastructure would benefit from being strengthened, and as a result of these findings, five
medium priority recommendations have been made:

Processes to monitor Windows logs require review, including the procurement of appropriate log
management tools to replace the RSA Envision tool;

There are a small number of accounts with Administrator privilege that have been assigned rights
that should not be granted to users and which should be removed, where possible. This will help
to ensure improved security of the network;

There are a small number of active accounts that have not undergone a recent password change
(since December 31 2013). A review of these accounts should be conducted to understand the
reasons for this and to disable any accounts that are no longer required or are assigned to
temporary/seasonal staff;

There are accounts that have been configured to allow a zero length password to be applied. This
ability should be removed, wherever possible. This does not necessarily mean that there are
accounts with blank passwords as the Domain Accounts Policy will always prompt users to change
their passwords, which sample evidence suggests is being done. Making this change will help to
ensure improved security of the network; and

Accounts with passwords that never expire should be reviewed with a view to enforcing password
changes in compliance with the Domain Accounts Policy. Such accounts include those for
Members. This will help to ensure improved security of the network by making passwords more
private.
During our audit we have also raised seven low priority recommendations which will provide enhancements to
the current system in relation to the management of the Network Infrastructure
Summary of the adequacy and effectiveness of controls
Area of Scope
Adequacy
and
Effectiveness
Assessments
Domain
Accounts
Policy
Audit Policy Settings
User Privileges
Analysis of trusted &
trusting domains
User
accounts
&
passwords
Analysis of services &
drivers
Home
Directories,
Logon scripts, and
workstation restrictions
Security options
Analysis
of
logical
drives
Default login accounts
Analysis of DACLs
Remote access servers
and security
Adequacy
of Controls
Effectiveness
of Controls
Recommendations
Raised
High
Medium
Low
Amber
Amber
0
0
1
Amber
Amber
Amber
Amber
0
0
1
1
1
1
Green
Green
0
0
0
Amber
Amber
0
3
1
Red
Red
2
0
1
Green
Green
0
0
0
Amber
Amber
0
0
1
Green
Green
0
0
0
Green
Amber
Green
Amber
0
0
0
0
0
1
Green
Green
0
0
0
2
5
7
Total
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High Priority Recommendations
Two high priority recommendations have been raised as a result of this audit
Management Responses
Management have accepted the recommendation raised.
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Appendix 2(5)
Report No. NN/15/15 – Final Report issued 13 August 2014
Audit Report on Network Security
Audit Scope
The audit covered;
 Network administration;
 Network support;
 Network monitoring;
 Network topology and resilience;
 Routers; and
 Virus detection/prevention.
Assurance Opinion
Unsatisfactory
Assurance
Limited Assurance
Adequate
Assurance
Good Assurance
Rationale supporting the award of the opinion
The system of internal control is, overall, deemed Adequate in managing the risks associated with Network
Security that fall within the scope of this audit. The assurance opinion has primarily been derived as a result
of one medium priority recommendation and two low priority recommendations being raised upon the
conclusion of our work.
Positive Findings
We found that the Council has demonstrated the following points of good practice as identified in this review:









There are adequate network monitoring tools in place that also send email alerts for key events;
Change control processes were noted as being updated to leverage the capabilities of the newlyinstalled Service Desk application;
There are support contracts in place covering the firewall appliances;
The newly installed Service Desk application is being actively used to log Service Desk calls with
ongoing work to enhance these processes by automating calls where possible;
There are processes in place to identify staff training needs via the appraisal system;
The network is designed to prevent access from unauthorised devices;
There is resilience in place for the firewalls and there is work underway to upgrade the entire
network;
There are PSN-related penetration tests being undertaken with action plans in place to address
the issues raised; and
The Council’s IT Security policy makes frequent mention of the dangers of virus infection and the
processes in place to help prevent them.
Control weaknesses to be addressed
During our work we have identified the following key area(s) where we believe that the
processes/arrangements for Network Security would benefit from being strengthened, and as a result of these
findings a medium priority recommendation has been made:

There are a large number of computers that are either not managed by the Sophos Anti-Virus
solution or have had their on-demand scanning capability disabled. Inadequate Anti-Virus
management increases the risk of security vulnerabilities caused by malicious software being
introduced to the network that go undetected.
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During our audit we have also raised two low priority recommendations which will provide enhancements to
the current system in relation to Network Security.
Summary of the adequacy and effectiveness of controls
Area of Scope
Adequacy and
Effectiveness
Assessments
Network
Administration
Network
Support
Network
Monitoring
Network
Topology
&
Resilience
Routers
Virus Detection
Adequacy
of
Controls
Effectiveness
of Controls
Recommendations
Raised
High
Medium
Low
Green
Green
0
0
0
Amber
Amber
0
0
1
Amber
Amber
0
0
0*
Amber
Amber
0
0
1
Green
Amber
Green
Amber
0
0
0
1
0
0
0
1
2
Total
High Priority Recommendations
No high priority recommendations have been raised as a result of this audit
Management Responses
Management have accepted the recommendations raised.
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