Statement of Accounts 
 
 
Year ended 31st March 2008 
 
 
 
 
 

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CONTENTS 
 
 
 
PAGE 
Foreword 1 
Introductory Statements 
 
Statement of Responsibilities for the Statement of Accounts 
9 
Annual Governance Statement 
11 
Independent Auditors’s Report to the Members of              
19 
Leicester City Council 
Guide to the Core Financial Statements 
23 
Statement of Accounting Policies 
25 
 
 
Core Financial Statements 
 
Income and Expenditure Account &  
37 
Statement on the Movement on the General Fund Balance 
Statement of Total Recognised Gains and Losses 
38 
Balance Sheet 
39 
Cash Flow Statement 
40 
Explanatory Notes to the Core Financial Statements 
42 
 
 
Supplementary Financial Statements & Explanatory Notes 
 
Housing Revenue Account 
81 
Notes to the Housing Revenue Account 
82 
Collection Fund Income and Expenditure Account 
87 
Notes to the Collection Fund Income and Expenditure Account 
88 
Glossary 
91 
 

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FOREWORD 
 
 
1. Introduction 
 
This document sets out the published statement of accounts of the Authority for the 
year ending 31st March 2008.  The accounts have been prepared in accordance with 
the regulations and requirements contained in the Code of Practice on Local 
Authority Accounting in the UK 2007, published by the Chartered Institute of Public 
Finance and Accountancy (CIPFA).    
 
This foreword gives a brief summary of the overall financial position of the Authority 
as it stood at 31 March 2008 and its financial activity for the year ending at that date.  
It also explains the purpose of the financial statements that are contained within the 
accounts, highlighting the most significant matters. 
 
This year has been a transitional one for the authority, with a new administration 
elected in May.  2007/08 was the final year of the then existing corporate plan, and 
the year saw the development of the “One Leicester” vision for the city over the next 
25 years.  Key financial developments have been the signing of contracts for the first 
four secondary schools in the Building Schools for the Future programme; near 
completion of the Curve Performing Arts Centre; development of the pay and grading 
scheme for most of the Council’s non-teaching staff; and settlement of a substantial 
number of equal pay claims. 
 
 
2. Revenue Expenditure 
 
Revenue expenditure represents expenditure on the day-to-day running expenses of 
the Authority. The diagram below provides an analysis of the total gross cost (£846m) 
of the various services provided by the Authority.  This is presented in the format of 
the Best Value Accounting Code of Practice (BVACOP) and shows expenditure 
largely as it is depicted in the Income and Expenditure Account.  This is one of the 
main statements within the accounts and can be found on page 37 of this document. 
 
Analysis of Gross Cost of Services
Housing 
Housing Benefits 
Highways, Roads 
13%
Payments
& Transport
14%
4%
Adult Social Care
12%
Children's & 
Education 
Services
Other Services
42%
3%
Cultural, 
Environmental & 
Planning
12%
 
 
 
 
 
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This expenditure is funded from the following main sources of income: 
 Sources of Revenue Finance
Business 
Revenue 
Rates
Support Grant
16%
Council Tax
3%
10%
Other Income 
13%
Other Service 
Dedicated 
Specific Grant 
Schools Grant
Income
Housing 
21%
24%
Benefit Grant
13%
 
 
Despite pressures experienced by many departments during the year due to financial 
constraints, service departments underspent by £1m (0.5%) against a net budget of 
£219m.  The Council has a track record of effective budgetary control, and the early 
identification of budget pressures has enabled corporate directors to take appropriate 
action to contain such pressures resulting in the delivery of an outturn close to budget. 
 
A significant saving materialised on corporate budgets, and in particular capital 
financing, which was predicted early in the year. This was primarily due to large cash 
inflows into the authority leading to higher levels of interest being received, and also 
due to some timely borrowing decisions, when low interest rates were exploited and 
borrowing was undertaken in advance.  This money was invested pending need, and 
has benefited from the increasing interest rates.  In addition to this saving, the 
authority has also received £0.5m of Local Authority Business Growth Incentive 
grant (LABGI) from the Government relating to 2006/07, together with a provisional 
allocation of £1.3m for 2007/08 (including retrospective adjustments from previous 
years).   These savings contributed to budget decisions for 2008/09. 
 
The following table shows the total budget and funding of the General Fund: 
Net 
(under) / 
Original 
Revised 
Expenditure/ 
Over 
Budget
Budget
(Income)
spend
£m
£m
£m
£m
Service departments budgets
214.6
218.9
217.9
(1.0)
Housing Benefits Payments
0.5
0.5
1.3
0.8
Corporate Budgets
25.0
21.0
17.7
(3.3)
Total Budget/Expenditure
240.1
240.4
236.9
(3.5)
Financing of Budget
Revenue Support Grant
(22.6)
(22.6)
(22.6)
0.0
Business Rates
(134.7)
(134.7)
(134.7)
0.0
Council Tax
(82.8)
(82.8)
(82.8)
0.0
Business Growth Incentives
0.0
0.0
(1.8)
(1.8)
Reserves
0.0
(0.3)
(0.3)
0.0
Net Underspend
0.0
0.0
(5.3)
(5.3)  
 
Schools have delegated budgets which are funded from the ring-fenced Dedicated 
Schools Grant (DSG) from the Government.  This grant, amounting to £181m in 
2007/08, not only funds the delegated budgets of schools but also certain items of 
related central expenditure.  During the year, schools underspent on their delegated 
budget by £3.8m (2.5%). A substantial part of this underspending related to planned 
savings prior to the start of the Building Schools for the Future programme of capital 
investment.  Further information on the DSG is provided at note 7 to the core 
financial statements. 
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3. Core Financial Statements 
 
In accordance with the Code of Practice on Local Authority Accounting in the UK, 
the core financial statements are:-    
 
The  Income and Expenditure Account on page 37  of this document shows the 
Council’s actual financial performance for the year, measured in terms of the 
resources consumed and generated over the financial period.  This account shows a 
deficit in 2007/08 of £8.60m.  However, the authority is required by law to set its 
budget and raise council tax on a different accounting basis.  There are a number of 
statutory adjustments made to this figure, as shown and explained in more detail in 
note 2 to the accounts, in order to determine the movement on the general fund 
balance.  In 2007/08 these adjustments amounted to £8.48m, resulting in a small 
reduction on the general reserve of £0.12m.    This figure consists of the £5.3m net 
underspend shown in the above table, less approved transfers for decisions made 
during the year.  
 
The Statement of Total Recognised Gains and Losses (STRGL) shows net recognised 
gains of £207m.  This mainly arises from unrealised gains, including the revaluation 
of fixed assets during 2007/08 totalling £173m, together with a £42m actuarial gain 
on the accumulated investment assets and estimated pensions liabilities.      
 
Balance Sheet 
The Council holds a significant level of reserves. These include the general reserve, 
which represents a minimum working balance in order to be able to deal with the 
unexpected; and earmarked reserves, which are held separately for specific purposes. 
The Council’s general reserve stands at £7.4m at 31 March 2008 (excluding 
departmental carry forward sums). Earmarked reserves include significant ring-
fenced monies such as schools balances, the insurance fund, government grant 
towards Building Schools for the Future, and amounts set-aside to finance capital 
expenditure. These reserves have increased by £8m in 2007/08 to £63.7m. Further 
information on earmarked reserves is shown on page 70 of the accounts. 
 
In common with many other local authorities, Leicester City Council shows a 
significant deficit (£99m) on its pension commitments. The figure is based on a 
financial assessment carried out by a firm of professional actuaries following the 
requirements of the Financial Reporting Standard 17. This projected deficit has no 
direct impact on the revenue budget of the authority or on the level of council tax. 
However, the pension fund is subject to a triennial actuarial review which determines 
the level of future employer contributions required to ensure the scheme is fully 
funded in the long term. The most recent triennial review valued the fund as at March 
2007 and states that assets held at the valuation date were sufficient to cover 93% of 
accrued liabilities assessed at that date.  This has resulted in a change in the level of 
employer contributions for 2008/09, which must be funded from the Council’s 
revenue budget. 
 
 
 
 
 
 
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4. Other Issues 
 
Job Evaluation 
The Council has carried out a review of its grading structure in order to meet the 
expectations of the national single status pay agreement reached in 1997.  Whilst the 
scheme has not yet been implemented, pay increases associated with the new 
agreement are due to be backdated to July 2007 under present negotiated proposals.  
Accordingly, the estimated cost of these increases (£5.5m) has been included within 
the net cost of services section of the Income and Expenditure Account, with a 
provision held within the Balance Sheet.  
 
Equal Pay 
Many local authorities have received claims that predominantly female groups of 
staff have been underpaid in comparison with other, predominantly male, groups of 
employees and a potential breach of equal pay legislation.  During 2007/08 the 
Council has made a significant number of payments of compensation at a cost of 
£11.3m, which has been financed from reserves.  There are a small number of 
potential claims remaining, for which a provision has been made within the accounts.  
Regulations introduced during 2007 enable the authority to defer charging this sum to 
the general fund balance until payments are made.  Accordingly, this amount has 
been transferred to an Unequal Pay – Back Pay Account, as shown in the bottom 
section of the Balance Sheet on page 39. 
 
HomeCome Limited 
The Council set up this company in 2004 as part of its strategy to create new 
affordable housing.  The Council uses its well being powers to provide affordable rent 
grants which enables the company to purchase properties (up to a maximum of 75% 
of the value of the property).  Because the Company is limited by guarantee and the 
Council retains an equity share in the properties for which affordable rent grant has 
been provided, the Council’s exposure to financial risk is low.  It has been determined 
that at present the scale of HomeCome’s activities is not sufficiently material to 
warrant the production of group accounts.  However, details of HomeCome Limited’s 
financial position as at 31st August 2007 are provided at note 40 to the core financial 
statements. 
 
 
5. Supplementary Financial Statements 
 
The Housing Revenue Account (HRA), shown on page 81, is a statutory ring-fenced 
account relating to the provision of rented social housing.  The HRA Income and 
Expenditure account shows a deficit of £1.3m: however, after adjustments to reflect 
statutory requirements, the account incurred a year end surplus of £1.7m against a 
planned deficit of £0.5m.  The HRA balance at 31st March 2008 stands at £4.6m, 
which is not only required as a contingency to meet any unforeseen expenditure or a 
shortfall in income, but also to support the HRA capital programme to meet the 
Government’s Decent Homes Standard by 2010. 
 
The Collection Fund records all income and expenditure in relation to the council tax 
and non-domestic (business) rates.  This account shows a year end deficit of £0.9m, 
which was largely anticipated when the budget was set.  
 
 
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6. Capital Expenditure 
 
In 2007/08, £115m was incurred on capital expenditure.  The main areas of spending 
are detailed below: 
 
£m
Childrens Services
22.8
Housing
31.1
Adults
1.6
Regeneration & Transport
52.6
Corporate & other
6.9
Total Capital Expenditure in 2007/08
115.0  
 
The chart below illustrates the sources of funding for this expenditure: 
 
Sources of Capital Finance in 2007/08
Borrowing
Grants and 
29%
Contributions
45%
Capital 
Major Repairs 
Receipts
Revenue
Reserve
14%
2%
10%
 
 
Major Schemes carried out during 2007/08 are detailed below: 
 
Scheme
£m
CURVE Theatre
18.2
Council Dwellings - Kitchen and Bathroom Improvements
7.3
Building Schools for the Future
7.1
Upperton Road Viaduct
6.9
City Centre Improvements
6.6
Digital Media Centre
2.9  
 
 
7. Future Issues 
 
The authority faces continuing change in both its medium term financial planning 
and financial reporting.  Each year, the authority has to respond to the requirements 
of continuous service improvement, and specific initiatives, within well managed 
arrangements for its finances.   Some of the issues facing the authority are:- 
 
 
 
 
 
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Building Schools for the Future (BSF) 
This is a substantial programme of investment in secondary schools, partly funded by 
conventional finance and partly through the Private Finance Initiative.     
 
Service Transformation Programme 
The authority is in the process of establishing a major programme of service 
transformation.  It is anticipated that this programme will impact on many services, 
including a customer transformation strategy to transform the way customers engage 
with the Council.  
 
Transforming Leicester’s Learning 
This is a comprehensive strategy designed to improve educational attainment levels 
across the city.  The programme is a key priority for the Children and Young 
People’s Department and will require significant levels of resources in 2008/09 and 
2009/10. 
 
Local Area Agreement (LAA) & Area Based Grant 
From April 2006, the Council became a partner to and the accountable body for the 
Local Area Agreement (LAA).  This is a formal agreement between many partner 
organisations to work together towards achieving a wide range of objectives.  These 
objectives were grouped into four main themes; Children and Young People; Safer 
and Stronger Communities; Healthier Communities and Older People; Economic 
Development and Enterprise.  The delivery of each of these themes is overseen by the 
Leicester Partnership, a group of key stakeholders in the city.  The LAA is still a 
relatively new approach which aims to bring together resources to achieve shared 
objectives.  There are a number of funding streams “pooled” within the LAA which 
in 2007/08 increased to £20.1m.  
 
In 2008/09 the grant, renamed Area Based Grant, is due to increase to £26m, rising 
again to £41m by 2010/11.  In the longer term, Area Based Grant provides a valuable 
mechanism for partnership working to achieve shared priorities.  Work is on-going to 
produce a city-wide financial strategy, and a joint commissioning strategy will 
consider how best to use this grant to achieve shared objectives as effectively as 
possible. However in the short term, it is likely that the grant will be spent on much 
the same purposes as the grants which it has replaced.  Reshaping priorities, and 
spending plans, is likely to be a time consuming exercise.  
   
Code of Practice on Local Authority Accounting – The SORP 
This sets out the requirements by which the authority prepares its financial 
statements.  There are only a small number of changes which will affect the financial 
statements in 2008/09.  The main change is to accommodate the introduction of the 
Area Based Grant.  This is a non-ringfenced general grant which will be presented in 
the Income and Expenditure Account after net operating expenditure. 
 
Looking further ahead to 2009/10 and beyond, the introduction of International 
Financial Reporting Standards (IFRS) for local authorities is due to take place in 
2010/11, with comparative figures relating to 2009/10 restated.  However, data 
submitted to the government for the production of the Whole of Government 
Accounts will need to be produced on an IFRS basis in 2009/10.   
 
 
 
 
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8. Accounting Policies & Other Significant Changes 
 
In 2007/08 the Council has adopted a number of significant new accounting policies 
in accordance with the Statement of Recommended Practice 2007. These are:  
 
• 
The introduction of a Revaluation Reserve, which has replaced the Fixed Asset 
Restatement Account (FARA).  The balance on the FARA has been written off 
to the Capital Financing Account to form a new Capital Adjustment Account.  
The Revaluation Reserve has been included in the balance sheet with a zero 
opening balance; 
 
• 
The methodology for calculating deprecation charges on council dwellings has 
been revised.  It is now based on the value of the properties divided by their life 
expectancies.  Previously the Major Repairs Allowance had been used as a 
proxy for depreciation; 
 
• 
Repurchase of Borrowing – changes to the way Premia and Discounts are 
treated mean that the deferred premia and discounts lines on the Balance Sheet 
have been abolished.  Section 16 of the Statement of Accounting Policies 
outlines this in more detail; 
 
• 
Accrued interest – Interest on borrowings is now shown as part of the carrying 
value of the loan, where previously it had been shown within the current 
liabilities section of the Balance Sheet. 
 
Other significant changes are as follows: 
 
• 
Non-operational investment properties  (£155m as at 31st March 2007) have 
been reclassified, resulting in most of the assets transferring to operational land 
and buildings and surplus assets.  This is because it has been determined that 
these properties are not solely held for income generation (investment) but are 
to some extent held to meet service based objectives; 
 
• 
The Council has been a constituent member of the Eastern Shires Purchasing 
Organisation (ESPO) for a number of years.  A review of our accounting 
arrangements for this relationship has been undertaken during 2007/08.  This 
has resulted in ESPO being classified (under the SORP) as a Joint Authority 
Not an Entity (JANE).  This requires the Council to account for its share of 
income, expenditure, assets and liabilities.  As such the Council’s estimated 
share of ESPO’s assets and liabilities have been incorporated into the Balance 
Sheet, with a new line in the bottom half of the Balance Sheet for our estimated 
share of ESPO’s reserves. It should be noted that these are notional sums which 
would only be realised if ESPO’s operations were to discontinue;    
 
• 
Net Cost of Services – the format of this section of the Income and Expenditure 
Account is set out in accordance with the Best Value Accounting Code of 
Practice.  This ensures the figures are presented in a consistent format when 
compared with other local authorities.  For 2007/08 the Children’s Social Care 
function has transferred to the Education line to create a new line named 
Education and Children’s Services.  The former Social Services line has been 
renamed Adult Social Care. 
 
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As a result of these changes, the comparative figures relating to 2006/07 have been 
amended from those previously published to ensure a like for like comparison.  
These prior period adjustments are summarised at note 3 to the core financial 
statements. 
 
The Statement of Accounting Policies, shown on pages 25 to 35, is closely aligned 
with the CIPFA Statement of Recommended Practice and includes a brief 
commentary on all the key accounting issues of relevance to an understanding of the 
financial statements themselves. 
 
 
9. Contents of the Statement of Accounts 
 
A guide to the main financial statements is provided on page 23 of this document.   
 
 
Mark Noble CPFA 
Chief Finance Officer 
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LEICESTER CITY COUNCIL 
ANNUAL GOVERNANCE STATEMENT 2007-08 
 
 
1. Scope of Responsibility 
 
Leicester City Council is responsible for ensuring that its business is conducted in 
accordance with the law and proper standards and that public money is safeguarded 
and properly accounted for and used economically, efficiently and effectively. It also 
has a duty under the Local Government Act 1999 to make arrangements to secure 
continuous improvement in the way in which its functions are exercised, having 
regard to a combination of economy, efficiency and effectiveness. 
 
In discharging this overall responsibility, Leicester City Council is responsible for 
putting in place proper arrangements for the governance of its affairs, facilitating the 
effective exercise of its functions, and which includes arrangements for the 
management of risk. 
 
Leicester City Council has approved and adopted a code of corporate governance, 
which is consistent with the principles of the CIPFA/SOLACE Framework 
Delivering Good Governance in Local Government. 
A copy of the code is on our website at http://www.leicester.gov.uk/your-council--
services/council-and-democracy/key-documents or can be obtained from Customer 
Services.  
 
This statement explains how Leicester City Council meets the requirements of 
regulation 4(2) of the Accounts and Audit Regulations 2003 as amended by the 
Accounts and Audit (Amendment) (England) Regulations 2006 in relation to the 
publication of a statement on internal control. 
 
 
2. The Purpose of the Governance Framework 
 
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 authority 
to monitor the achievement of its strategic objectives and to consider whether those 
objectives have led to the delivery of appropriate, cost effective services. 
 
The system of internal control is a significant part of that framework and is designed 
to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve 
policies, aims and objectives and can therefore only provide reasonable and not 
absolute assurance of effectiveness. The system of internal control is based on an 
ongoing process designed to identify and prioritise the risks to the achievement of 
Leicester City Council’s policies, aims and objectives, to evaluate the likelihood of 
those risks being realised and the impact should they be realised, and to manage them 
efficiently, effectively and economically. 
 
The Governance Framework has been in place at Leicester City Council for the year 
ended 31 March 2008, and up to the date of approval of the accounts. 
 
 
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3. The Governance Framework 
 
The Council has adopted a framework that includes arrangements for:  
  Identifying and communicating the Authority’s vision of its purpose and 
intended outcomes for citizens and service users 
o 
The Council’s vision has been defined through the development of its 
One Leicester document. This identifies the vision for the next twenty-
five years and has been produced in collaboration with the Leicester 
Partnership. 
 
  Reviewing the authority’s vision and its implications for the authority’s 
governance arrangements 
o 
One Leicester includes arrangements for continuing review of the vision 
and its associated governance arrangements. 
 
  Measuring the quality of services for users, for ensuring they are delivered in 
accordance with the authority’s objectives and for ensuring that they represent 
the best use of resources 
o 
The Council has introduced a performance framework which links key 
corporate objectives with clear outcome measures which are subject to 
regular review by the executive and Cabinet. 
 
  Defining and documenting the roles and responsibilities of the executive, non 
executive, scrutiny and officer functions, with clear delegation arrangements 
and protocols for effective communication 
o 
Respective roles and responsibilities are defined within the Council’s 
Constitution, together with delegation arrangements and protocols for 
effective communication. 
 
  Developing, communicating and embedding codes of conduct, defining the 
standards of behaviour for members and staff 
o 
The Council has established a Standards Committee with a remit to 
oversee adherence to relevant codes of conduct for both members and 
officers, and an Audit Committee with overall responsibility for 
reviewing the effectiveness of governance arrangements including those 
related to adherence to standards of conduct. 
 
  Reviewing and updating standing orders, standing financial instructions, a 
scheme of delegation and supporting procedure notes and manuals, which 
clearly define how decisions are taken and the processes and controls required 
to manage risks 
o 
The Constitution is subject to regular review to ensure that it continues 
to meet the needs of the Council in relation to schemes of delegation, 
procedures and decision-making. 
 
  Undertaking the core functions of an audit committee, as identified in CIPFA’s 
Audit Committees – Practical Guidance for Local Authorities  
 
 
 
 
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o 
The Council has established an Audit Committee with terms of reference 
that comply with CIPFA’s guide. The latest review of the Effectiveness 
of the System of Internal Audit, required under the Account and Audit 
Regulations shows that this committee is effective and is contributing 
toward improving the internal control environment of the Council. 
 
  Ensuring compliance with relevant laws and regulations, internal policies and 
procedures, and that expenditure is lawful 
o 
The system of internal control is based on a coherent accounting and 
budgeting framework including contract, finance and procurement 
procedure rules. 
o 
A rolling three-year Financial Strategy, last reviewed in February 2008, 
provides a backbone for ensuring both revenue and capital expenditure 
plans reflect and support delivery of the Council’s core objectives. 
o 
Internal Audit supports the Audit Committee by reviewing elements of 
the Council’s system of internal control and reporting regularly thereon, 
thus helping the Council to satisfy itself that compliance with regulation 
and best practice is happening. 
 
  Whistle-blowing and for receiving and investigating complaints from the public 
o 
The Council has adopted a Whistle Blowing Policy and during 2007-8 
approved a new Anti-Fraud and Corruption Policy which makes a clear 
commitment to maintaining a zero tolerance of fraud and financial 
irregularity. 
 
  Identifying the development needs of members and senior officers in relation to 
their strategic roles, supported by appropriate training 
o 
The Council is undergoing a radical review of its structure and service 
delivery infrastructure as part of its commitment to One Leicester. In 
turn it has committed itself to providing additional corporate resource to 
support the management of change to improve performance and 
efficiency. 
 
  Establishing clear channels of communication with all sections of the 
community and other stakeholders, ensuring accountability and encouraging 
open consultation 
o 
This is being done through the Council’s commitment to One Leicester, 
which itself was developed with the benefit of open consultation with 
stakeholders and our strategic partners. 
 
  Incorporating good governance arrangements in respect of partnerships and 
other group working as identified by the Audit Commission’s report on the 
governance of partnerships “ Governing Partnerships” and reflecting these in 
overall governance arrangements 
o 
For major partnerships the Partnership Guidelines including a financial 
framework has been revised and the database of such major projects 
updated (as required on an annual basis) in March 2008. 
o 
The Council's major partnership is the Leicester Partnership. This body 
is charged with overseeing the arrangements for spending the Area 
Based Grant and for delivering the outcomes set out in the Local Area 
Agreements. In turn this is set out within a comprehensive financial 
framework, to which the LP is signed up. 
 
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4. Review of Effectiveness 
 
The Council is committed to the maintenance of a system of Internal Control which: 
• 
Demonstrates openness, accountability and integrity 
• 
Monitors and reviews compliance with established policies, procedures, laws 
and regulations and effectiveness against agreed standards and targets 
• 
Monitors and reviews the effectiveness of the operation of controls that have 
been put in place 
• 
Identifies, profiles, controls and monitors all significant strategic and 
operational risks 
• 
Ensures that the risk management and control process is monitored for 
compliance. 
 
The framework through which the Council satisfies itself as to the effectiveness of its 
system of internal control takes, as its starting point, the Council’s principal statutory 
and organisational objectives as set out in its Corporate Plan. From this are identified 
the key risks to the achievement of its (the Council’s) objectives set out therein which 
in turn are recorded within risk registers at both Corporate and Departmental levels. 
 
This Assurance Framework was approved by the Audit Committee on 2nd April 2008. 
 
The risks identified are subject to regular review and monitoring and appropriate 
controls identified to manage them.  
 
The results of that review together with  
1. 
An independent review of the effectiveness of internal control carried out by the 
Council’s Internal Audit section  
2. 
A review of the Effectiveness of the System of Internal Audit 
3. 
The External Auditor’s Annual Audit Letter and Annual Governance Report 
which includes findings from the work of other inspection regimes 
 
provide the core information for the preparation of the Annual Governance Statement. 
Leicester City Council has responsibility for conducting, at least annually, a review of 
the effectiveness of its governance framework including the system of internal 
control. The review of effectiveness is informed by the work of the executive 
managers within the authority who have responsibility for the development and 
maintenance of the governance environment, the Head of Audit and Governance’s 
annual report, and also by comments made by the external auditors and other review 
agencies and inspectorates. 
 
A review of the effectiveness of the system of internal control and corporate 
governance as a contribution towards the Council’s Annual Governance Statement, 
has been completed by the Audit Committee in accordance with an agreed assurance 
framework. 
 
An annual corporate governance review has been completed for 2007/8 via Corporate 
Directors' Board on 17th June, Audit Committee on 25th June, Standards Committee 
on 9th July and Cabinet on 14th July and our well established corporate governance 
code, adopted in May 2002, has been updated in 2008 to comply with 
CIPFA/SOLACE's 2007 guidance "Delivering Good Governance in Local 
Government” by including an annual self assessment of compliance with the six core 
principles of good governance. The outcome was  the approval of an action plan, by 
the Cabinet on 14th July 2008. The report can be viewed at  
http://cabinet.council.leicester.gov.uk/Published/C00000078/M00002433/AI00018786/$Corp
orateGovernance.doc.pdf 
 
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5. Significant Governance Issues 
 
The control framework described above facilitates the identification of any areas of 
the Council’s activities where there are significant weaknesses in the financial 
controls, governance arrangements or the management of risk. Overall, it can 
concluded that controls are operationally sound. 
The areas where weaknesses have been identified are listed below, together with a 
brief summary of the action being taken to make the necessary improvements. 
 
Area of concern 
Comment 
Action planned 
 
The documentation, 
This was identified as a weakness in 
A programme of training for 
promulgation and adherence 
the Statement on Internal Control for 
certifying officers is now 
to of Corporate policies, 
2006-7.  
being delivered by the 
procedures and 
There is evidence that in some 
Corporate Counter Fraud 
requirements is variable.  
locations staff remain unaware of 
Team in addition to fraud 
expectations placed upon them. 
awareness training.  
 
A major overhaul of 
 
induction programmes is 
 
currently in progress with 
the outcomes expected 
during  autumn 2008. 
The use of web based 
learning tools to support 
Freedom of Information and 
Data Protection Act training 
for staff is being actively 
progressed. 
The work programme of the Audit 
Internal Audit incorporate 
Committee includes identifying 
this issue as part of planned 
control issues, and establishing firm 
and commissioned audit 
expectations. 
work to promote the spread 
Whilst the problem is greatest at 
and use of best practice at all 
outlying locations, evidence of similar 
locations. 
issues at centrally based locations is 
Recommendations made by 
available. 
Internal Audit are regularly 
This matter was also referred to in the 
followed up and their 
CPA report in relation to the need for 
implementation monitored 
mandatory training 
by the Audit Committee. 
 
 
 
Effective maintenance of  Internal Audit has reviewed the 
Future Internal Audit 
inventories is patchy. 
maintenance and veracity of 
reviews will maintain this 
inventories at various Council 
check as part of the 
establishments as part of its audit 
programme of review. 
programmes during 2007-8.  
Some improvement has been 
identified although concerns relating 
to inventories of ICT hardware and 
software remain.  
 
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Area of concern 
Comment 
Action planned 
 
 
 
Management and letting 
A Public Interest Report issued by the 
A corporate inter-
of Contracts 
Audit Commission found weaknesses 
departmental group of 
in our procurement and management 
officers has been established 
of a number of Housing contracts. 
to address the issues raised 
in the Public Interest Report. 
The group has reported 
regularly both to the Audit 
Committee and the Cabinet 
on progress. Internal Audit 
and the Audit Commission 
are to carry out a joint 
follow up review during 
autumn 2008  
 
 
 
Communications Strategy  
A new strategy is being 
prepared based on the One 
Leicester work. 
Implementation will follow 
publication of the vision 
document. 
 
 
 
Transparency and 
The Corporate Assessment identified 
Being addressed as part of 
accountability of decision-
that the Councils application of the 
the action plan arising from 
making should be 
ethical governance framework and 
the CPA Corporate 
strengthened. 
standards is unsatisfactory. 
Assessment 
 
 
 
Consideration of whether 
The Council has a significant number  A training needs assessment 
some training such as on 
of new councillors who have been  for individual members is 
the Council's Code of 
offered standards training and drop-
currently being compiled 
Conduct should be 
in ‘surgeries’. However code of  and appropriate training and 
mandatory.  
conduct training is not compulsory  support will follow 
and few councillors have attended.  reflecting the results of 
The Standards Committee and assessments. 
monitoring officer provide some 
training, advice and assistance to 
councillors on the ethical framework 
but this is not a proactive approach. 
 
 
 
The role of the Standards 
The Corporate Assessment identified 
Being addressed as part of 
Committee, Monitoring 
that The role of the Standards 
the action plan arising from 
Officer and Leader in 
Committee, Monitoring Officer and 
the CPA Corporate 
setting and maintaining 
Leader in setting and maintaining the 
Assessment 
ethical governance 
highest standards of ethical 
standards should be 
governance should be clarified and a 
clarified  
more proactive approach taken to 
training and developing councillors 
and staff in modern corporate 
governance. 
 
 
 
Practices in relation to 
The Corporate Assessment stated that  At the Council meeting on 
membership of Committees 
some practices such as Cabinet 
15th May 2008, no Cabinet 
require review 
members also being members of 
members were appointed to 
regulatory committees should be 
Regulatory Committee 
discontinued immediately. Such 
membership. 
measures will help to reinforce the 
Consideration is being given 
Council's standing in the community 
to constitutional changes to 
and demonstrate effective and 
support this decision. 
confident community leadership. 
 
 
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INDEPENDENT AUDITOR’S REPORT TO THE 
MEMBERS OF LEICESTER CITY COUNCIL 
___________________________________________ 
 
Opinion on the financial statements 
I have audited the Authority accounting statements and related notes of Leicester City 
Council for the year ended 31 March 2008 under the Audit Commission Act 1998. The 
Authority accounting statements comprise the Authority Income and Expenditure 
Account, the Authority Statement of the Movement on the General Fund Balance, the 
Authority Balance Sheet, the Authority Statement of Total Recognised Gains and Losses, 
the Authority Cash Flow Statement, the Housing Revenue Account, the Collection Fund 
and the related notes. These accounting statements have been prepared under the 
accounting policies set out in the Statement of Accounting Policies. 
 
This report is made solely to the members of Leicester City Council in accordance with 
Part II of the Audit Commission Act 1998 and for no other purpose, as set out in 
paragraph 36 of the Statement of Responsibilities of Auditors and of Audited Bodies 
prepared by the Audit Commission. 
 
Respective responsibilities of the Chief Finance Officer and auditor 
The Chief Finance Officer's responsibilities for preparing the financial statements in 
accordance with relevant legal and regulatory requirements and the 'Statement of 
Recommended Practice on Local Authority Accounting in the United Kingdom 2007' are 
set out in the Statement of Responsibilities for the Statement of Accounts.  
 
My responsibility is to audit the financial statements in accordance with relevant legal 
and regulatory requirements and International Standards on Auditing (UK and Ireland). 
 
I report to you my opinion as to whether the Authority accounting statements present 
fairly, in accordance with relevant legal and regulatory requirements and the Statement of 
Recommended Practice on Local Authority Accounting in the United Kingdom 2007, the 
financial position of the Authority and its income and expenditure for the year. 
 
I review whether the governance statement reflects compliance with ‘Delivering Good 
Governance in Local Government: A Framework’ published by CIPFA/SOLACE in June 
2007. I report if it does not comply with proper practices specified by CIPFA/SOLACE 
or if the statement is misleading or inconsistent with other information I am aware of 
from my audit of the financial statements. I am not required to consider, nor have I 
considered, whether the governance statement covers all risks and controls. Neither am I 
required to form an opinion on the effectiveness of the Authority’s corporate governance 
procedures or its risk and control procedures.  
 
I read other information published with the Authority accounting statements, and 
consider whether it is consistent with the audited Authority accounting statements. This 
other information comprises the Explanatory Foreword. I am not required to consider, nor 
have I considered, any information regarding future projections included within the 
statement of accounts. I consider the implications for my report if I become aware of any 
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apparent misstatements or material inconsistencies with the Authority accounting 
statements. My responsibilities do not extend to any other information. 
 
Basis of audit opinion 
I conducted my audit in accordance with the Audit Commission Act 1998, the Code of 
Audit Practice issued by the Audit Commission and International Standards on Auditing 
(UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, 
on a test basis, of evidence relevant to the amounts and disclosures in the Authority 
accounting statements and related notes. It also includes an assessment of the significant 
estimates and judgments made by the Authority in the preparation of the Authority 
accounting statements and related notes, and of whether the accounting policies are 
appropriate to the Authority’s circumstances, consistently applied and adequately 
disclosed. 
 
I planned and performed my audit so as to obtain all the information and explanations 
which I considered necessary in order to provide me with sufficient evidence to give 
reasonable assurance that the Authority accounting statements and related notes are free 
from material misstatement, whether caused by fraud or other irregularity or error. In 
forming my opinion I also evaluated the overall adequacy of the presentation of 
information in the Authority accounting statements and related notes. 
 
Opinion 
In my opinion the Authority financial statements present fairly, in accordance with 
relevant legal and regulatory requirements and the Statement of Recommended Practice 
on Local Authority Accounting in the United Kingdom 2007, the financial position of the 
Authority as at 31 March 2008 and its income and expenditure for the year then ended. 
 
 
 
Signature: …………………………………. Date: …….25 September 2008……………. 
 
Mr N Bellamy 
District Auditor 
Audit Commission 
Rivermead House 
7 Lewis Court 
Grove Park 
Enderby 
Leicestershire LE19 1SU 
 
________________________________________________________________________ 
 
Conclusion on arrangements for securing economy, efficiency and effectiveness 
in the use of resources 
 
Authority’s Responsibilities 
The Authority is responsible for putting in place proper arrangements to secure economy, 
efficiency and effectiveness in its use of resources, to ensure proper stewardship and 
governance and regularly to review the adequacy and effectiveness of these 
arrangements. 
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Auditor’s Responsibilities 
I am required by the Audit Commission Act 1998 to be satisfied that proper arrangements 
have been made by the Authority for securing economy, efficiency and effectiveness in 
its use of resources. The Code of Audit Practice issued by the Audit Commission requires 
me to report to you my conclusion in relation to proper arrangements, having regard to 
relevant criteria specified by the Audit Commission for principal local authorities. I 
report if significant matters have come to my attention which prevent me from 
concluding that the Authority has made such proper arrangements. I am not required to 
consider, nor have I considered, whether all aspects of the Authority’s arrangements for 
securing economy, efficiency and effectiveness in its use of resources are operating 
effectively. 
 
Conclusion 
I have undertaken my audit in accordance with the Code of Audit Practice and having 
regard to the criteria for principal local authorities specified by the Audit Commission 
and published in December 2006, I am satisfied that, in all significant respects, Leicester 
City Council made proper arrangements to secure economy, efficiency and effectiveness 
in its use of resources for the year ended 31 March 2008. 
 
Best Value Performance Plan 
I have issued my statutory report on the audit of the Authority’s best value performance 
plan for the financial year 2007/08 on 23 November 2007. I did not identify any matters 
to be reported to the Authority and did not make any recommendations on procedures in 
relation to the plan. 
 
Certificate 
I certify that I have completed the audit of the accounts in accordance with the 
requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued 
by the Audit Commission. 
 
 
 
Signature: …………………………………. Date: ……25 September 2008…………… 
 
Mr N Bellamy 
District Auditor 
Audit Commission 
Rivermead House 
7 Lewis Court 
Grove Park 
Enderby 
Leicestershire LE19 1SU 
 
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GUIDE TO THE CORE FINANCIAL STATEMENTS 
 
 
 
Income and Expenditure Account   
 
The Income and Expenditure Account shows the Council’s actual financial 
performance for the year and is fundamental to understanding a local authority’s 
activities.  It reports the net cost of all services and functions for which it is 
responsible and demonstrates how this has been financed from general government 
grants and income from local taxpayers.  This statement is a summary of the 
resources generated and consumed by the authority in the year. 
 
 
 
 
Statement of Movement on the General Fund Balance 
 
This statement shows how the balance of resources generated/consumed in the year, 
as shown in the Income and Expenditure Account, is reconciled with statutory 
requirements for raising council tax. 
 
 
 
 
Statement of Total Recognised Gains and Losses 
 
Not all gains and losses experienced by the authority are reflected in the Income and 
Expenditure Account. This statement is a demonstration of how the movement in net 
worth in the Balance Sheet is identified in the Income and Expenditure Account 
surplus/deficit and in other unrealised gains and losses.    
 
 
 
 
Balance Sheet 
 
The Balance Sheet summarises the City Council’s financial position as at 31 March 
2008.  It includes the assets and liabilities of all of the Council’s activities. 
 
 
 
 
Cash Flow Statement 
 
This statement summarises all cash inflows and outflows arising from financial 
transactions with third parties.  
 
 
 
 
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STATEMENT OF ACCOUNTING POLICIES 
 
 
1. General Principles 
 
The statement of accounts summarises the Council’s transactions for the 2007/08 
financial year and its position at the year-end of 31 March 2008. It has been prepared 
in accordance with the Code of Practice on Local Authority Accounting in the United 
Kingdom – A Statement of Recommended Practice 2007 (the SORP). The accounting 
convention adopted is historical cost, modified by the revaluation of certain categories 
of tangible and fixed assets. 
 
 
2. Significant Changes in the Accounting Policies in 2007/08 
 
There are a number of significant changes in accounting policies adopted during 
2007/08, and these were outlined in Section 8 of the introductory foreword.  Particular 
attention is drawn to Sections 16, 17, 18 of this Statement in respect of the accounting 
for financial assets, financial liabilities and the repurchase of borrowing. 
 
 
3. 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. For example: 
 
•  Fees, charges and rents due are accounted for as income at the date on which the 
Council provides the relevant goods or services 
•  Supplies are recorded as expenditure when they are consumed. Where supplies are 
held for future use they are shown as stocks on the balance sheet. 
•  Where income or expenditure has been recognised but cash has not been received 
or paid, a debtor or creditor for the relevant amount is recorded in the balance 
sheet. Where it is doubtful that debts will be settled, the balance of debtors is 
written down and a charge made to revenue for the income that might not be 
collected. 
•  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. 
 
 
4. Provisions 
 
Provisions are made where an event has taken place that gives the Council an 
obligation that probably requires settlement by a transfer of economic benefits, but 
where the timing of the transfer is uncertain.  Such obligations need not be legal 
obligations, but can arise where the Council has created valid expectations that an 
obligation will be discharged. 
 
 
 
 
 
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Provisions are charged to the appropriate revenue account when the authority 
becomes aware of the obligation, based on the best estimate of the likely settlement. 
When payments are eventually made, they are charged to the provision set up in the 
balance sheet. Estimated settlements are reviewed at the end of each financial year – 
where it becomes more likely than not that a transfer of economic benefits will not be 
required the provision is reversed and credited back to the relevant revenue account. 
 
Where some or all of the payment required to settle a provision is expected to be met 
by another party (eg from an insurance claim) this is only recognised as income in the 
relevant revenue account if it is virtually certain that reimbursement will be received 
if the obligation is settled. 
 
 
5. Reserves and Balances 
 
General Fund Balance 
The Council holds a general fund balance to meet future funding requirements and as 
a hedge against any unforeseen financial losses. The adequacy of the level of this 
reserve is reviewed annually by the Chief Finance Officer, as part of the authority’s 
financial strategy.  
 
HRA Balance
The Council also holds a ring-fenced HRA Balance which, similarly to the General 
Fund Balance, is held to meet future funding requirements and as a hedge against any 
unforeseen circumstances specifically relating to the Housing Revenue Account. 
 
Earmarked Reserves 
The Council sets aside specific amounts as “earmarked” reserves for future policy 
purposes, or to cover service specific contingencies and to “carry forward” 
departmental underspendings in accordance with the Council’s finance procedure 
rules. All such reserves are created by appropriating amounts through the Statement 
of Movements on the General Fund Balance. When expenditure to be financed from a 
reserve is incurred, it is charged to the appropriate revenue account in that year, to 
register against the Net Cost of Services. The reserve is then appropriated back into 
the Statement of Movements on the General Fund Balance so that there is no net 
charge against council tax for the expenditure. 
 
Pensions Reserve 
A reserve is kept to manage the processes for accounting for retirement benefits. This 
does not represent usable resources for the Council, and is explained in more detail in 
paragraph 7 below. 
 
Major Repairs Reserve 
The Council also holds a “Major Repairs” reserve which is held solely for the 
purposes of the Housing Revenue Account.  
 
 
 
 
 
 
 
 
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6. Government Grants and Contributions (Revenue) 
 
Whether paid on account, by instalments or in arrears, Government grants and third 
party contributions and donations are recognised as income at the date that the 
authority satisfies the conditions of the entitlement to the grant/contribution and there 
is reasonable assurance that the monies will be received. Revenue grants are matched 
in revenue accounts with the service expenditure to which they relate. Grant to cover 
general expenditure (eg. Revenue Support Grant) are credited to the Income and 
Expenditure Account after Net Operating Expenditure. 
 
 
7. Retirement benefits 
 
Employees of the Council may be members of one of two separate pension schemes: 
•  The Teachers Pension Scheme, administered by Capita Teachers’ Pensions on 
behalf of the Department for Children, Schools and Families. (DCSF). 
•  The Local Government Pension Scheme, administered by the Leicestershire 
County Council. 
 
Both schemes provide defined benefits to members (Retirement lump sums and 
pensions), to which entitlement is earned as employees work for the Council. 
 
However, the arrangements for the teachers’ scheme mean that liabilities for those 
benefits cannot be identified as specifically accruing to the Council. The scheme is 
therefore accounted for as if it were a defined contributions scheme – no liability for 
future payments of benefits is recognised in the balance sheet and revenue accounts 
are charged with the employer’s contributions payable to teachers’ pensions in the 
year. 
 
The Local Government Pension Scheme 
 
The Local Government Pension Scheme is accounted for as a defined benefits 
scheme: 
 
•  The liabilities of the Leicestershire County Council Pension Scheme attributable 
to the Leicester City Council are included in the balance sheet on an actuarial 
basis using the projected unit method – ie an assessment of the future payments 
that will be made in relation to retirement benefits earned to date by employees, 
based on assumptions about mortality rates, employee turnover rates etc and 
projections of future earnings for current employees. 
 
•  Liabilities are discounted to their value at current prices, using a discount rate of 
6.9% (based on the indicative rate of return on high quality corporate bonds). 
 
•  The assets of the Leicestershire County Council Pension fund attributable to the 
Leicester City Council are included in the balance sheet at their fair value: 
 
-   quoted securities   
-   
mid-market value 
- 
unquoted securities 
- 
professional estimate 
- 
unitised securities 
-  
average of the bid and offer rates 
- property 
 
- 
market 
value 
 
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•  The change in the net pensions liability between balance sheet dates is analysed 
into seven components: 
 
-  Current service cost – the increase in liabilities as a result of years of service 
earned this year, allocated in the Income and Expenditure Account to the revenue 
accounts of services for whom the employees worked. 
-  Past service costs – the increase in liabilities arising from current year decisions 
whose effect relates to years of service earned in earlier years – debited to the Net 
Cost of Services in the Income and Expenditure Account as part of Non-
Distributed Costs. 
-  Interest costs – the expected increase in the present value of liabilities during the 
year as they move one year closer to being paid – debited to Net Operating 
Expenditure. 
- 
Expected return on assets – the annual investment return on the fund assets 
attributable to Leicester City Council, based on an average of the expected long-
term return – credited to Net Operating Expenditure. 
-  Gains/losses on settlements and curtailments – the results of actions to relieve the 
Council of liabilities or events that reduce the expected future service of accrual of 
benefits of employees – debited to the Net Cost of Services as part of Non-
Distributed Costs. 
-  Actuarial gains/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 – not charged to revenue but 
shown in the Statement of Total Recognised Gains and Losses. 
-  Contributions paid to the Leicestershire County Council Pension Fund – cash paid 
as employer’s contributions to the pension fund. 
 
Statutory provisions limit the Council to raising council tax to cover the amounts 
payable by the Council to the pension fund in the year. This means that there are 
appropriations to and from the Pensions Reserve in the Statement of Movements on 
the General Fund Balance, to remove the notional debits and credits for retirement 
benefits and replace them with debits for cash paid to the pension fund and any 
amounts payable to the fund but unpaid at the year-end. 
 
 
8. Discretionary Benefits 
 
The Council also has limited powers to make discretionary awards of retirement 
benefits in the event of early retirements. Any liabilities estimated to arise as a result 
of an award to any member of staff (including teachers) are accrued in the year of the 
decision to make the award and accounted for using the same policies as are applied 
to the Local Government Pension Scheme. 
 
 
9. VAT 
 
Income and expenditure excludes any amounts related to VAT, as all VAT collected 
on income is paid over to HM Revenue and Customs and all VAT paid on 
expenditure is recovered from them. 
 
 
 
 
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10. Overheads and Support Services 
 
 
The costs of overheads and support services are charges to those that benefit from the 
supply or service in accordance with the costing principles of the CIPFA Best Value 
Accounting Code of Practice 2007. The total absorption costing principle is used – the 
full cost of overheads and support services are shared between users in proportion to 
the benefits received with the exception of: 
 
•  Corporate and Democratic Core – costs relating to the Council’s status as a 
multi-functional democratic organisation 
•  Non-Distributed Costs – the cost of discretionary benefits awarded to 
employees retiring early.  
These two categories are accounted for as separate headings in the Income and 
Expenditure Account, as part of the Net Cost of Services 
 
 
11. Intangible Fixed Assets   
 
Expenditure on assets that do not have physical substance but are identifiable and 
controlled by the Council (eg software licences) is capitalised when it will bring 
benefits to the Council for more than one financial year. The balance, calculated on a 
historic cost basis, is amortised to the relevant revenue account over the economic life 
of the investment to reflect the pattern of consumption of benefits. 
 
 
12. Tangible Fixed Assets 
 
Tangible fixed assets are assets that have physical substance and are held for use in 
the provision of services or for administrative purposes on a continuing basis. 
 
Recognition:  Expenditure on the acquisition, creation or enhancement of tangible 
fixed assets is capitalised on an accruals basis, provided that it yields benefits to the 
Council and the services that it provides for more than one financial year. Expenditure 
that secures but does not extend the previously assessed standards of performance of 
an asset (eg repairs and maintenance) is charged to revenue as it is incurred. 
 
Measurement: Assets are initially measured at cost, comprising all expenditure that 
is directly attributable to bringing the asset into working condition for its intended 
use. Assets are then carried in the balance sheet using the following measurement 
bases: 
 
•  Investment properties and assets surplus to requirements – lower of net current 
replacement cost or net realisable value 
•  Council dwellings – existing use value for social housing 
•  Other dwellings, other land and buildings– lower of net current replacement 
costs or net realisable value in existing use. 
•  Vehicles, plant and equipment – depreciated historical cost as a proxy for net 
realisable value on materiality grounds.  
•  Infrastructure assets – depreciated historical cost 
•  Community assets – nominal value or proxy for historical cost. 
•  Assets under construction – historical cost 
 
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Net current replacement cost is assessed as: 
 
•  Non-specialised operational properties – existing use value 
•  Specialised operational properties – depreciated replacement cost 
•  Investment properties and surplus assets – market value 
 
Assets included in the balance sheet at current value are revalued where there have 
been material changes in the value, but as a minimum every five years. Increases in 
valuations are matched by credits to the Revaluation Reserve to recognise unrealised 
gains. Exceptionally, gains might be credited to the Income and Expenditure Account 
where they arise from the reversal of an impairment loss previously charged to a 
service revenue account. 
 
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:  the values of each category of asset and of material individual assets 
that are not being depreciated are reviewed at the end of each financial year for 
evidence of reductions in value. Where impairment is identified this is accounted for 
by:- 
 
•  Where attributable to the clear consumption of economic benefits – the loss is 
charged to the relevant service revenue account 
 
•  Otherwise – written off against any revaluation gains attributable to the 
relevant asset in the Revaluation Reserve, with any excess charges to the 
relevant service revenue account 
 
Where an impairment loss is charged to the Income and Expenditure Account but 
there were accumulated revaluation gains in the Revaluation Reserve for that asset, an 
amount up to the value of the loss is transferred from the Revaluation Reserve to the 
Capital Adjustment Account. 
 
Disposals/ Capital Receipts : 
when an asset is disposed of or de-
commissioned, the value of the asset in the balance sheet is written off to the Income 
and Expenditure Account as part of the gain or loss on disposal. 
Receipts from disposals are credited to the Income and Expenditure Account 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 in the Revaluation Reserve are 
transferred to the Capital Adjustment Account.  Amounts in excess of £10,000 are 
categorised as capital receipts.  A proportion of receipts relating to Housing Revenue 
Account disposals (75% for dwellings and 50% for land and other assets net of 
deductions and allowances) is payable into a Government pool.  The balance of 
receipts is required to be credited to the Usable Capital Receipts Reserve, and can 
then only be used for new capital investment or set aside to reduce the council’s 
underlying need to borrow (the Capital Financing Requirement).  Receipts are 
appropriated to the reserve from the Statement of Movement on the General Fund 
Balance. 
 
The written-off value of disposals is not charged against council tax, as the cost of 
fixed assets is fully provided for under separate arrangements for capital financing.  
30 

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Amounts are appropriated to the Capital Adjustment Account from the Statement of 
Movement on the General Fund Balance. 
 
 Depreciation:  depreciation is provided for on all assets with a determinable finite 
life (except for investment properties), by allocating the value of the asset in the 
balance sheet over the periods in which the benefits from their use are expected to 
arise. 
 
Depreciation is calculated on the following bases: 
 
•  Council Dwellings – Straight line over the estimated remaining life of the 
asset. 
•  Other buildings- straight-line allocation over the life of the property as 
estimated by the valuer. 
•  Vehicles – on a five year annuity. 
•  Plant and Equipment - straight line over the estimated life of the asset. 
•  Infrastructure – straight-line allocation over 40 years. 
 
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 charged based on their historical cost being transferred each year from the 
Revaluation Reserve to the Capital Adjustment Account. 
 
Capital Grants and Contributions: 
 
where grants and contributions are 
received that are identifiable to fixed assets, with a finite useful life, the amounts are 
credited to the Government Grants Deferred Account. The balance is then written 
down to revenue to offset depreciation charges made for the related assets in the 
service revenue account, in line with the depreciation policy applied to them. 
  
 
13. Charges to Revenue for Fixed Assets 
 
Service revenue accounts, support services and trading accounts are charged with the 
following amounts to record the real cost of holding fixed assets during the year: 
 
•  depreciation attributable to the assets used by the relevant service;        
•  Impairment losses attributable to the clear consumption of economic benefits 
on tangible fixed assets used by the service and other loses where there are no 
accumulated gains in the Revaluation Reserve against which they can be 
written off; 
•  Amortisation of intangible fixed assets attributable to the service. 
 
The Council is not required to raise council tax to cover depreciation, impairment 
losses or amortisations. However, the Council’s policy is to make an annual provision 
from revenue to contribute towards the reduction in its overall borrowing 
requirements (equal to at least 4% of the underlying amount measured by the adjusted 
capital financing requirement). Depreciation, impairment losses and amortisations are 
therefore replaced by revenue provision in the Statement of Movement on the 
General Fund Balance, by way of an adjusting transaction with the Capital 
Adjustment Account for the difference between the two. 
 
 
 
 
31 

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14. Deferred Charges 
 
Deferred charges represent expenditure that may be capitalised but which does not 
result in the creation of tangible assets. Deferred charges incurred during the year 
have been written off as expenditure to the relevant service revenue account in the 
year. Where the Council has determined to meet the cost of the deferred charges 
account from existing capital resources or by borrowing, a transfer to the Capital 
Adjustment Account in the Statement of Movements on the General Fund Balance 
then reverses out the amounts charged to the Income and Expenditure Account, so 
there is no impact on the level of council tax. Similarly, where the cost is to be met by 
a grant or contribution this is credited to the revenue account so that there is no impact 
on the total cost of the relevant service.  
 
 
15. Leases 
 
 
Finance Leases 
The Council accounts for leases as finance leases when substantially all the risks and 
rewards relating to the leased property transfer to the Council. Rentals payable are 
apportioned between: 
 
•  A charge for the acquisition of the interest in the property (recognised as a 
liability in the balance sheet at the start of the lease, matched with a tangible 
fixed asset – the liability is written down as the rent becomes payable) and 
•  A finance charge (debited to Net Operating Expenditure in the Income and 
expenditure Account as the rent becomes payable) 
 
Fixed assets recognised under finance leases are accounted for using the policies 
applied generally to tangible fixed assets, subject to depreciation being charged over 
the lease term if this is shorter that the assets’ estimated useful life. 
 
Operating Leases 
Leases that do not meet the definition of finance leases are accounted for as operating 
leases. Rentals payable are charged to the relevant service revenue account over the 
term of the lease so that, in general, rentals are charged when they become payable. 
No values relating to operating leases are carried on the Council’s balance sheet 
except as either creditors or payments in advance. The City Council leases some of its 
properties to third parties. Rent is charged for the use of these properties, and the 
value of these assets is included in the Council’s balance sheet. 
  
 
16. Repurchase of Borrowing 
 
Gains on the repurchase or early settlement of borrowing are credited to Net 
Operating Expenditure in the Income and Expenditure Account in the year of 
repayment/settlement. Losses on the repurchase or early settlement of borrowing are 
debited to Net Operating Expenditure, which may be met by capital receipts, reducing 
the level of unapplied capital receipts carried forward, or from borrowing.  
 
 
 
32 

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However, where repurchase has taken place as part of a restructuring of the loan 
portfolio   that involves the modification or exchange of existing instruments, the 
premium or discount is respectively deducted from or added to the amortised cost of 
the new or modified loan and the write-down to the Income and Expenditure Account 
is spread over the life of the loan by an adjustment to the effective interest rate. 
 
Where premiums and discounts have been charged to the Income and Expenditure 
Account, regulations allow the impact on the General Fund Balance to be spread over 
future years.  The council has a policy of spreading the gain/loss over the term that 
was remaining on the loan against which the premium was payable or discount 
receivable when it was repaid.  The reconciliation of amounts charged to the Income 
and Expenditure Account to the net charge against the General Fund Balance is 
manged by a transfer to or from the Financial Instruments Adjustment Account in the 
Statement of Movement on the General Fund Balance. 
 
 
17.  Financial Liabilities 
 
Financial liabilities are initially measured at fair value and carried at their amortised 
cost.  Annual charges to the Income and Expenditure Account for interest payable are 
based on the carrying amount of the liability, multiplied by the effective rate of 
interest for the instrument.  For most of the borrowings that the Council has, this 
means that the amount presented in the Balance Sheet is the outstanding principal 
repayable and interest charged to the Income and Expenditure Account is the amount 
payable for the year in the loan agreement. 
 
However, the £9m residue of an £80m stock issue by the Council in 1994, is carried at 
a lower amortised cost than the outstanding principal, and interest is charged at a 
marginally higher effective rate of interest than the rate payable to stockholders, as a 
material amount of costs incurred in its issue is being financed over the life of the 
stock. 
 
 
18. 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 initially measured at fair value and carried at their 
amortised cost.  Annual credits to the Income and Expenditure Account for interest 
receivable are based on the carrying amount of the asset multiplied by the effective 
rate of interest for the instrument.  For most of the loans that the council has made, 
this means that the amount presented in the balance sheet is the outstanding principal 
receivable and interest credited to the Income and Expenditure Account is the amount 
receivable for the year in the loan agreement. 
 
 
 
33 

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When soft loans (loans at less than market rates) are made, a loss is recorded in the 
Income and Expenditure Account for the present value of the interest that will be 
forgone over the life of the instrument, resulting in a lower amortised cost that the 
outstanding principal.  Interest is credited at a marginally higher effective rate of 
interest than the rate receivable from voluntary organisations, with the difference 
serving to increase the amortised cost of the loan in the Balance Sheet.  Statutory 
provisions require that the impact of soft loans on the General Fund Balance is the 
interest receivable for the financial year – the reconciliation of amounts debited and 
credited to the Income and Expenditure Account to the net gain required against the 
General Fund Balance is managed by a transfer to or from the Financial Instruments 
Adjustment Account in the Statement of Movement on the General Fund Balance.  
 
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 Income and Expenditure Account.  
 
Any gains and losses that arise on the de-recognition of the asset are credited/debited 
to the Income and Expenditure Account. 
 
Available-for-Sale Assets 
Available-for-sale assets are initially measured and carried at fair value.  Where the 
asset has fixed or determinable payments, annual credits to the Income and 
Expenditure Account for interest receivable are based on the amortised cost of the 
asset multiplied by the effective rate of interest for the instrument.  Where there are 
no fixed or determinable payments, income (eg. Dividends) is credited to the Income 
and Expenditure Account when it becomes receivable by the Council.  
 
Assets are maintained in the Balance Sheet at fair value.  Values are based on the 
following principles: 
• 
Instruments with quoted market prices – the market price 
• 
Other instruments with fixed and determinable payments – discounted cash flow 
analysis 
• 
Equity shares with no quoted market prices – independent appraisal of company 
valuations (unless it is deemed not to be material then held at historical cost). 
 
Changes in fair value are balanced by an entry in the Available-for-Sale Reserve and 
the gain/loss is recognised in the Statement of Total Recognised Gains and Losses 
(STRGL).  The exception is where impairment losses have been incurred – these are 
debited to the Income and Expenditure Account, along with any net gain/loss for the 
asset accumulated in the Reserve. 
 
Where assets are identified as impaired because of a likelihood arising from a past 
event that payments due under the contract will not be made, the asset is written down 
and a charge made to the Income and Expenditure Account. 
 
Any gains or losses that arise on the derecognition of the asset are credited/debited to 
the Income and Expenditure Account, along with any accumulated gains/losess 
previously recognised in the STRGL. 
 
Where fair value cannot be measured reliably, the instrument is carried at cost (less 
any impairment losses). 
 
 
 
34 

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Instruments Entered into Before 1st April 2006 
Where the council has entered into financial guarantees that are not required to be 
accounted for as financial instruments, these are reflected in the Statement of 
Accounts, to the extent that provisions might be required, or a contingent liability 
disclosure is needed, under these accounting policies. 
 
 
19. Stocks and Work in Progress 
 
Stocks are included in the balance sheet at the lower of cost and net realisable value. 
Work in progress is subject to an interim valuation at the year-end and recorded in the 
balance sheet at cost plus any profit reasonably attributable to the works. 
 
 
20. Interest in Companies and Other Entities  
 
The Council has no material interests in any companies or other entities that require 
the preparation of group accounts. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35 

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36 

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---

STATEMENT OF TOTAL 
RECOGNISED GAINS AND LOSSES
This Statement brings together all the gains and losses of the council for the year and shows
the aggregate increase in its net worth (as shown in the Balance Sheet). In addition to the
(surplus) or deficit generated on the Income and Expenditure Account, it includes gains and
losses relating to the revaluation of fixed assets and re-measurement of the net liability for
retirement benefits.
2006/07
2007/08
(restated)
Note
£'000
£'000
(Surplus) / Deficit for the Year on the Income and 
38,970
8,605
Expenditure Account
575
(Surplus) / Deficit on the Collection Fund
544
(229,341)
(Surplus) arising from Revaluation of Fixed Assets
18
(172,995)
Actuarial (Gain) / Loss on Pension Fund Assets and 
(59,655)
42
(42,266)
Liabilities
Other - (Gain) on recognition of existing fixed assets not 
-
(1,221)
previously recorded on the Balance Sheet
(249,451)
Total Recognised (Gains) or Losses
36
(207,333)
Prior Period Adjustments 
Transfer of Premia and Discounts held at 31st March 
(2,176)
3 (d)
2007 to the Financial Instruments Adjustment Account
445
Financial Instruments - remeasurement under SORP 2007 3 (d)
Gain on consolidation of LCC's Share of ESPO's Assets 
(805)
3 (f)
and Liabilities
(251,987)
Restated Recognised (Gains) for 2006/07
 38

---

 

---

CASH FLOW STATEMENT 
 
 
2006/07
2007/08
(restated)
£'000
Note 
£'000
£'000
REVENUE ACTIVITIES
Cash Outflows
346,459 Cash paid to & on behalf of employees
369,279
276,983 Other operating costs
293,107
13,404 Precepts paid
14,538
89,488 NNDR Paid to pool
91,644
41,666 Housing Benefits paid out
45,096
11,351 Payments to the Capital Receipts Pool
10,737
779,351
824,401
Cash Inflows
(23,295) Council House Rents
(25,297)
(71,258) Council Tax Income
(74,709)
(90,776) NDR income collected
(92,001)
(127,004) NNDR income from pool
(134,680)
(24,669) Revenue Support Grant
(22,602)
(169,484) Dedicated Schools Grant
(181,457)
(2,987) Housing Revenue subsidy (including MRA)
(1,932)
(103,126) DWP Benefits Subsidies
(114,191)
(98,426) Other grants
49
(105,649)
(115,247) Cash received for goods and services
(110,407)
(826,272)
(862,925)
(46,921) Net Cashflow from revenue activities
44
(38,524)
 
 
2006/07
2007/08
(restated)
£'000
£'000
£'000
SERVICING OF FINANCE
Cash Outflows
17,953 Interest paid
16,009
0 Interest element of finance lease payments
0
16,009
Cash Inflows
(4,106) Interest received
(3,355)
13,847 Net Cashflow from servicing of finance
12,654
 
 
40 

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2006/07
2007/08
(restated)
£'000
CAPITAL ACTIVITIES
Note
£'000
£'000
Cash Outflows
91,790 Purchase of fixed assets
105,075
(3,314) Less Capital Creditors
(1,668)
16,379 Deferred charges
8,988
2,763 Investments
1,002
(5,514) Internal fees
(5,720)
102,104
107,677
Cash Inflows
(23,115) Capital receipts
(29,304)
(27,437) Capital grants rec'd to finance cap exp.
49
(66,156)
(18,570) External contrib. rec'd to finance cap exp.
(6,603)
(69,122)
(102,063)
32,982 Net Cashflow from capital activities
5,614
 
2006/07
2007/08
(restated)
£'000
CAPITAL FINANCING
£'000
£'000
Cash Outflows / (Inflow)
1,657 County Council principal repaid
1,591
(6,515) Temporary Loans
(5,628)
590 PWLB Loans
46,700
0 Stock Issue
0
(4,268)
45
42,663
11,930 Premia paid on early settlement of debt
0
(2,829) Discounts received from debt rescheduling
(9,415)
4,833 Net Cashflow from capital financing
33,248
 
2006/07
2007/08
(restated)
£'000
MANAGEMENT OF LIQUID RESOURCES
£'000
Cash Outflow / (Inflow)
(11,122) Movement In liquid Resources
(6,291)
(Cash held in short term deposits)
4,500 Longer Term deposits
(4,500)
(6,622) Net (decrease)/ Increase in liquid resources
46
(10,791)
 
2006/07
2007/08
(restated)
£'000
£'000
(46,921) Net Cashflow from revenue activities
(38,524)
13,847 Net Cashflow from servicing of finance
12,654
32,982 Net Cashflow from capital activities
5,614
4,833 Net Cashflow from capital financing
33,248
(6,622) Net Increase/(decrease) in liquid resources
(10,791)
(1,881) (inc)/dec in cash 
47
2,201
 
41 

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Notes to the Core Financial Statements 
 
 
1. General Fund Balance 
 
The General Fund balance has reduced during the year by  £0.1m as shown in the 
Statement of Movement on the General Fund Balance (page 37). 
 
 
2. General Fund Reconciling Items 
 
The Income and Expenditure Account shows the Council’s actual financial 
performance for the year, measured in terms of the resources consumed and 
generated over the financial period.  However, the authority is required to raise 
council tax on a different accounting basis, the main differences being: 
 
•  Capital investment is accounted for as it is financed, rather than when fixed 
assets are consumed; 
•  Retirement Benefits are charged as amounts become payable to pension funds 
and pensioners, rather than as future benefits are earned. 
 
The General Fund Balance shows the council has overspent by £0.1m against the 
council tax that it raised for the year, taking this into account the use of reserves built 
up in the past and contributions to reserves earmarked for future expenditure.  
 
The table below details the transactions included within the reconciling item shown in 
the Statement of Movement on the General Fund Balance (page 37): 
 
2006/07
2007/08
£'000
£'000
Amounts included in the Income and Expenditure Account but
required by statute to be excluded when determining the movement on
the General Fund Balance
(25)
Amortisation of intangible fixed assets
(36)
(17,707)
Depreciation and impairment of fixed assets 
(42,508)
(7,910)
Depreciation charged to the HRA in excess of the MRA
(8,507)
7,243 
Government grants deferred amortisation
6,757 
(9,286)
Write down of deferred charges to be financed from capital resources
(2,820)
(1)
Net (loss) / gain on sale of fixed assets
(5)
Difference between amounts charged to the Income and Expenditure 
(5,154)
Account for the amortisation of Premia and Discounts and the charge for 
9,023 
the year determined in accordance with statute.
(32,777)
Net charges made for retirement benefits in accordance with FRS 17
(26,978)
(65,617)
(65,074)
 
42 

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2006/07
2007/08
£'000
£'000
Amounts not included in the Income and Expenditure Account but
required to be included by statute when determining the movement on
the General Fund balance
11,158 
Capital expenditure charged in year to the general fund (inc. reserves)
2,453 
Transfer from usable capital receipts to meet payments to the housing receipts 
(12,343)
(8,750)
pool 
6,417 
Minimum revenue provision
8,375 
Employer's contributions payable to the Pension Fund and returement benefits 
26,500 
28,086 
payable direct to pensioners.
31,732 
30,164 
 
2006/07
2007/08
£'000
£'000
Transfers to or from the General Fund balance that are required to
be taken into account when determining the movement on the
General Fund balance for the year.
(460)
Transfer of HRA (deficit) / surplus to HRA balances
1,663 
2,999 
Voluntary revenue provision for repayment of debt
6,871 
(10,400)
Transfer (to) / from Unequal Pay Back Pay Account
9,700 
-
Transfer to / (from) ESPO Reserve
167 
2,733 
Net transfers to earmarked reserves
8,023 
(5,128)
26,424 
Net additional amount required to be (credited) / debited to the 
(39,013)
(8,486)
General Fund Balance for the year
 
 
3. Prior Year Adjustments  
 
There are a number of prior period adjustments to the comparative figures relating to 
2006/07.  Some of these have been imposed by changes to the code of practice on 
local authority accounting (the SORP), whilst others have arisen as a result of the 
authority constantly keeping under review its accounting practices.  
 
(a) Service Expenditure Analysis – Best Value 
The Best Value Accounting Code of Practice sets out how service expenditure should 
be analysed within the Income and Expenditure Account.  This ensures local 
authority accounts are presented in a comparable format.  The revised code for 2007 
has transferred the Children’s Social Care function to Education, forming a new 
Children’s and Education Services line.  The former Social Services line has been 
renamed Adult Social Care. The 2006/07 comparative figures within the Income and 
Expenditure have been restated, with £36.2m transferring from the former Social 
Services line to the new Children’s and Education Services line.  
 
43 

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(b) Investment Properties – Reclassification 
During the course of the year the authority has undertaken a review of its asset 
classification to ensure compliance with recommended practice.  This has resulted in 
all of the assets (£155m as at 31st March 2007) previously classified as non-
operational investment properties being reclassified in the Balance Sheet.  Note 18 
(Net Fixed Assets) demonstrates where these assets have been transferred to.  This 
also means that the Investment Property Trading Account (£1.946m in 2006/07) has 
been transferred to the net cost of services section of the Income and Expenditure 
Account.   In addition to these changes, the reclassification requires that the assets be 
depreciated, and accordingly a charge to the income and expenditure account of 
£0.9m has been made in 2006/07.  This does not have any impact the resources 
available to the authority to spend because a reversal has been made within the 
Statement of Movement on the General Fund Balance. 
 
(c) Housing Revenue Account (HRA) Depreciation Charges 
The authority has made a change to the methodology for the calculation of 
depreciation on council dwellings (see Section 8 of the Foreword).  Accordingly the 
comparative figures for 2006/07 have been recalculated resulting in an additional 
charge of £7.7m.  Again, this does not have any impact on the resources available to 
spend as it is reversed within both the Statement of Movement on the General Fund 
Balance and the Statement of Movement on the HRA Balance.      
 
(d) Financial Assets, Liabilities and the Repurchase of Borrowing 
There have been a number of changes to the code of practice relating to the 
accounting for financial instruments. (See Accounting Policy 16, 17 & 18)  These 
changes have resulted in the writing down of deferred premia and discounts held on 
the Balance Sheet at 31st March 2007, totalling a net credit of £2.2m.  Statutory 
regulations introduced during the year mean that this sum is allowed to be reversed 
by a compensatory transfer to a new Financial Instruments Adjustment Account.  
Other changes relating to way stepped rate loan interest is charged to the Income and 
Expenditure Account have resulted in a charge of £0.4m to against the General Fund 
Balance.      
 
(e) Revaluation Reserve 
The Balance Sheet figures for 31 March 2007 have been adjusted from those included 
in the Statement of Accounts for 2006/07 to accommodate the implementation of the 
Revaluation Reserve (See Accounting Policy 12).  The Revaluation Reserve replaces 
the Fixed Asset Restatement Account (FARA).  The credit balance of £1,298m on the 
FARA at 31st March 2007 has been written off to the Capital Financing Account 
(£162m) to form the new Capital Adjustment Account with a balance of £1,461m.  
The Revaluation Reserve has been included in the Balance Sheet with a zero opening 
balance.  The closing position on the reserve at 31st March 2008 shows the 
revaluation gains accumulated since 1st April 2007. 
 
(f) Eastern Shires Purchasing Organisation (ESPO) 
As outlined in the introductory foreword, the authority has reviewed the accounting 
treatment for this arrangement and determined that it should be accounted for as a 
Joint Authority Not an Entity (JANE).  This has required the restating of the Balance 
Sheet figures as at 31st March 2007 to incorporate the Council’s estimated share of 
ESPO’s assets and liabilities.  This has resulted in an increased in the authority’s net 
worth as at 31st March 2007 of £0.8m. It should be noted that these are notional sums 
that would only be realised if ESPO’s operations were to discontinue. 
 
 
44 

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4. Trading Accounts 
 
The net surpluses and deficits of the City Council’s trading accounts are shown in the 
Income and Expenditure Account.  This note provides a more detailed breakdown of 
the financial performance of these trading activities.  The City Council operates 15 
trading services which provide internal support to front line services.   
 
2006/07
2007/08
 Net Expenditure
Trading Service
Net Expenditure
(Surplus)/Deficit
Expenditure
Income
(Surplus)/Deficit
£’000
£’000
£’000
£’000
(159)
Housing Maintenance
20,552
(20,808)
(256)
66
City Catering
6,875
(6,844)
31
(5)
City Highways
10,131
(10,339)
(208)
(67)
Fleet Transport
6,941
(7,025)
(84)
1
Operational Transport
6,022
(6,022)
0
(146)
Creativity Works
2,657
(2,590)
67
(25)
I.T. Services
442
(374)
68
(44)
Temporary Staffing Agency
3,181
(3,213)
(32)
(157)
Design & Maintenance
4,965
(5,134)
(169)
(134)
Legal Services
3,432
(3,365)
67
40
Payroll
1,010
(1,035)
(25)
(37)
Post Room
582
(596)
(14)
(170)
Customer Accounts
1,105
(1,203)
(98)
3
Cashiers
603
(612)
(9)
(28)
Job Shop
121
(111)
10
(862)
68,619
(69,271)
(652)
 
 
 
5. Publicity 
 
Section 5 of the Local Government Act 1986 requires expenditure on publicity to be 
disclosed. Detailed below is the City Council’s expenditure incurred in 2007/08 
together with the comparative figures for 2006/07. 
 
2006/07
2007/08
Publicity
£’000
£’000
1,044
Recruitment advertising
936
225
Other advertising
257
260
Civic newspaper
189
400
Promotions
423
183
Other publicity
75
2,112
1,880  
 
 
6. Section 137 Expenditure 
 
The majority of the provisions of Section 137 of the Local Government Act 1972 
were repealed following by the Local Government Act 2000.   No expenditure was 
incurred during 2007/08 using powers granted by Section 137 (3). 
 
 
 
45 

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7. Dedicated Schools Grant 
 
From 2006/07 onwards the council’s expenditure on schools has been funded by the 
Dedicated Schools Grant (DSG), which is provided by the Department for Children, 
Schools and Families.  Previously funds were provided as part of the council’s overall 
Revenue Support Grant.   
 
DSG is ring-fenced and can only be applied to meet expenditure properly included in 
the Schools Budget.  The Schools Budget includes elements for a restricted range of 
services provided on an authority-wide basis and for the Individual Schools Budget, 
which is divided into a budget share for each school.  Over and under spends on the 
two elements are required to be accounted for separately.   
 
Details of the deployment of DSG receivable for 2007/08 are as follows: 
 
Schools Budget Funded by Dedicated Schools Grant
Central
Individual
Expenditure
Schools
Total
Budget
£'000
£'000
£'000
Original grant allocation to Schools Budget for the 
(32,713)
(149,857)
(182,570)
current year in the authority's budget
Transfers from central expenditure to schools
12,590
(12,590)
0
Adjustment to finalised grant allocation
1,204
-
1,204
DSG Receivable for the Year
(18,919)
(162,447)
(181,366)
Actual Expenditure for the Year
17,620
163,159
180,779
Over / (Under) Spend for the Year
(1,299)
712
(587)
Underspend brought forward from 2006/07 in Ring-
(2,393)
-
(2,393)
fenced DSG Earmarked Reserve
Top up of ISB from Ring fenced Schools Block 
-
(4,517)
(4,517)
Resources
Transfer to Schools Reserves - as shown in note 37 to 
-
3,805
3,805
these accounts.
Underspend carried forward to 2008/09 in Ring-
(3,692)
0
(3,692)
fenced DSG Earmarked Reserve
 
 
 
8. Local Authority (Goods & Services) Act 1970 
 
The Local Authority (Goods & Services) Act 1970 allows local authorities to provide 
goods and services to another public body or allow the use of plant and equipment by 
another public body for an appropriate charge. The Council incurred expenditure of 
£136,813 in relation to services provided under this Act in 2007/08 (£139,985 
2006/07) and received income of £136,813. 
 
 
 
 
 
46 

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9. Officers Remuneration 
 
The number of employees whose gross remuneration was £50,000 or more was: - 
 
2006/07
2007/08
Remuneration Band
No. of Employees
No. of Employees
125
£50,000 - £59,999
158
23
£60,000 - £69,999
24
31
£70,000 - £79,999
32
4
£80,000 - £89,999
8
3
£90,000 - £99,999
5
4
£100,000 - £109,999
0
0
£110,000 - £119,999
1
0
£120,000 - £129,999
3
0
£130,000 - £159,999
0
1
£160,000 - £169,999
0
0
£170,000 - £209,999
0
0
£210,000 - £219,999
1
 
 
 
 
10. Pooled Budgets 
 
The Council has entered into the following pooled budget arrangements under 
Section 31 of the Health Act 1999: 
 
Learning Disabilities Commissioning 
This arrangement is for the joint commissioning of various services and is in 
partnership with Leicester City Primary Care Trust.  Leicester City Council acts as 
the host and has lead responsibility for its operation.  The City Council contributed 
£11.8m to the pool during 2007/08 (£1.95m in 2006/07) and this expenditure is 
included in the Adult Social Care line of the Income and Expenditure Account. 
 
Supply of Community Equipment 
This is an arrangement for the supply of community equipment with Leicestershire 
County Council, Rutland County Council and six other primary care trusts in the 
areas covered by the councils.  Leicester City Primary Care Trust acts as the host 
partner.  The City Council contributed £0.4m to the pool during 2007/08 (£0.4m in 
2006/07) and this expenditure is also included in the Adult Social Care line of the 
Income and Expenditure Account. 
 
Summary of Income and Expenditure 
The table below sets out the respective income and expenditure of these partnership 
arrangements: 
 
47 

---

2006/07
2007/08
Exp'd
Income
Net
Pooled Budgets
Exp'd
Income
Net
£’000
£’000
£’000
£’000
£’000
£’000
5,228
(5,139)
89 Learning Disabilties Commissioning
25,343
(25,343)
0
2,642
(2,642)
0 Supply of Community Equipment
5,538
(5,538)
0
7,870
(7,781)
89
30,881
(30,881)
0
 
 
11. Local Area Agreement (LAA) Grant 
 
Since April 1 2006, the Council has been a partner to and accountable body for an 
LAA – a partnership with other public bodies involving the pooling of government 
grants to finance work towards jointly agreed objectives for local pubic services.  In 
2007/08, the LAA has completed the second year of its three-year agreement.   
 
The purpose of the LAA is to provide the core delivery mechanism for the Strategy 
for Leicester, The LAA provides partner organisations in Leicester with an 
opportunity to: 
 
•  Release the energy and potential of the city’s diverse and young population, 
whilst consolidating the city’s pioneering work in community cohesion 
•  Build upon the ongoing concerted effort across agencies and communities to 
support better outcomes for children and young people 
•  Narrow the gap in quality of life between disadvantaged neighbourhoods and 
other areas in terms of crime, health, education, jobs, housing and the quality 
of the environment. 
•  Maximise the local benefits of private and public capital investment in the city 
centre, cultural facilities and education and health services. 
 
The members of the Leicester Partnership are drawn from in excess of 40 local 
organisations and groups including: 
 
Voluntary Action Leicester   
 
 
Leicester Regeneration Company 
Leicester 
City 
PCT 
    Leicester Economic Partnership 
Leicestershire Fire and Rescue Service 
 
Faith groups 
Leicestershire Ethnic minority Partnership  
Leicestershire 
Constabulary  
Learning 
& 
Skills 
Council 
   Leicester 
University 
Neighbourhood/Community groups   
 
De Montfort University 
 
 
As stated above, the City Council acts as the accountable body for the LAA.  This 
means that we are responsible for managing the distribution of the grant paid by the 
Government Office to the partners involved.  The Council decides, in consultation 
with the Leicester Partnership, the allocation of the grant.   
 
The total amount of LAA grant received in 2007/08 is £20.1m (2006/07 £4.3m).  
However, of this sum, £4.7m (zero in 2006/07) was distributed to Connexions, which 
the authority had no control over and as such was essentially acting as an agent.  This 
sum has therefore not been included with the City Council’s financial statements.     
 
48 

---

As accountable body, the Council is potentially responsible for repaying to the 
Government any element of the grant that is found to have been misused by its 
partners.  Systems in place for distributing the grant are designed to limit the 
possibility that this will happen.  It has not been necessary to recognise any 
contingent liabilities for possible repayments and no provisions have been made for 
any such eventuality. 
 
 
12. Building Control Regulations 
 
The Building (Local Authority Charges) Regulations 1998 require the disclosure of 
information regarding the setting of charges for the administration of the building 
control function.  The City Council sets charges for work carried out in relation to 
building regulations, with the aim of covering all cost incurred. However, the cost of 
certain activities performed by the Building Control Unit cannot be recovered by 
charges, such as general advice and liaising with statutory authorities.  The statement 
below shows the total cost of operating the building control unit between chargeable 
and non-chargeable activities. 
 
2006/07
Building Control
2007/08
Chargeable
Non Chargeable
Chargeable
Total
£'000
£'000
£'000
£'000
(829)
Income
0
(762)
(762)
828
Expenditure
290
777
1,067
(1)
Net (Surplus) / Deficit
290
15
305
 
 
 
13. Members' Allowances 
 
Allowances to elected members are paid in accordance with the Council’s members' 
allowance scheme which came into effect on 4th May 2007. Payments for the year 1st 
April 2007 - 31st March 2008 were as follows: -  
 
2006/07
2007/08
Members' Allowances
£
£
379,988
Basic Allowance Payments
519,920
320,936
Special Responsibility Payments
297,139
80,129
General Expense Payments
69,435
781,053
Total 886,494  
 
 
14. Related Party Transactions 
 
In accordance with Financial Reporting Standard 8, material transactions with related 
parties not disclosed elsewhere in this statement of accounts are listed below. The 
purpose of these disclosures is to ensure that stakeholders are aware when these 
transactions take place, and to the amount and implications of such transactions. 
 
49 

---

 
a) Levies - paid to other bodies during 2007/08 were: - 
 
2006/07
2007/08
Levying Body
£'000
£'000
81
Environment Agency (Note 1)
94
81
94  
 
 Note 1: 
The majority of funding required for flood defence is now provided at 
national government level.  The amount levied on local authorities covers schemes 
which address local needs and priorities where the criteria for national funding are not 
met. 
 
 
b) HomeCome Ltd – This is a company established by the Council in 2004 the 
purpose of which is outlined in note 40 to the accounts. The Council provides 
property maintenance and some management and administrative functions to the 
company.  In 2007/08 the Council received income of £306,365 in relation for these 
services. 
 
 
c)  Elected Members and Directors. 
 
There were no transactions involving elected members or directors during the year to 
31st March 2008. 
 
 
15.  Audit Costs 
 
During the year the council incurred costs payable to the Audit Commission in respect 
of work to be carried out.  This work falls into 4 main categories, and the costs 
attributable to each are shown below: - 
 
2006/07
2007/08
Category of audit work
£'000
£'000
304
General Audit Work
318
21
Statutory Inspection
126
147
Certification of grant claims and returns
123
76
Other Services
0
548
567  
 
The increase in the statutory inspection fee relates to the Corporate Assessment which 
took place during 2007/08.  This assessment forms part of the Comprehensive 
Performance Assessment  (CPA), which is a framework for assessing the performance 
of all local authorities.  
 
 
 
 
 
 
50 

---

 
16.  Private Finance Initiative 
 
The council entered into a 25 year waste management contract with Biffa (Leicester) 
Ltd under the government’s Private Finance Initiative (PFI) in 2003.  The value of the 
contract is in excess of £300m over the 25 year period. The additional cost of this 
innovative contract (over and above the council’s existing budgetary provision for 
waste management) is met entirely through government funding (PFI credits).   
 
2007/08 was the fifth year of operation of the contract, costing a total of £11m (£11m 
2006/07), with £2.6m (£2.6m 2006/07) of this received in grant.  This cost is included 
in the Cultural, Environmental and Planning Services line of the Income and 
Expenditure Account. 
 
 
17. Exceptional Items 
 
Equal Pay Provision 
Many local authorities have received claims that predominantly female groups of 
staff have been underpaid in comparison with other, predominantly male, groups of 
employees and a potential breach of equal pay legislation. During 2007/08 the 
Council has made a number of settlements, which have been charged against the 
provision made in the 2006/07 Accounts.  To the extent that these settlements exceed 
the 2006/07 provision (£0.9m), the sum has been charged to the Income and 
Expenditure Account.   
 
In addition to this, a provision (£0.7m) for the estimated cost of potential claims not 
yet settled has also been charged to the Income and Expenditure Account.  This 
element of the charge is reversed in the Statement of Movement on the General Fund 
Balance and held in a notional “unequal pay – back pay account” on the Balance 
Sheet, until such a time as the potential claims are settled.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51 

---

 
18. Net Fixed Assets 
 
Fixed assets are recorded in the accounts on the basis of revaluations completed 
during the year less depreciation. Movements in fixed assets during the year were as 
follows: 
 
Operational Assets
Non-Operational Assets
n
ant 
o
ent 
e
s
llings
es Pl
cl
Assets
Total
Council 
Dwe
Buildings
Community 
Investm
Properti
Other Land & 
Vehi
& Equipment
Infrastructure
Assets Under 
Constructi
Surplus Assets
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Opening Net Book Value 
952,179
655,075
7,363
136,282
699
155,363
33,327
41,326
1,981,614
as at 31 March
PYA - ESPO Assets
2,211
215
2,426
PYA - Reclassification
75,653
1,478
3,172 (155,363)
75,060
0
PYA - Depreciation
(871)
(31)
(902)
Restated NBV as at 31 
952,179
732,068
7,578
137,729
3,871
0
33,327
116,386
1,983,138
March 2007
Movement in 2007/08
Capital Expenditure
22,270
16,990
6,937
20,148
894
0
36,875
947
105,061
Disposals
(12,314)
(5,606)
(35)
(11,481)
(29,436)
Previously de-minimus
338
6
877
1,221
Transfers
(132)
(2,286)
35
48
2,180
155
0
Revaluations:
47,349
74,302
1,140
723
2,000
47,481
172,995
Depreciation
(21,154)
(13,418)
(1,273)
(3,908)
(42)
0
0
(247)
(40,042)
Impairment
(1,717)
(19,440)
0
(181)
(1,292)
0
(259)
(956)
(23,845)
ESPO Movement
(19)
(19)
(38)
Impairment reversal
113
113
Net Book Value of Assets 
986,481
783,042
13,223
154,963
4,173
0
74,123
153,162
2,169,167
at 31 March 2008
 
 
 
 
19. Valuations of Fixed Assets 
 
The table shows the progress of the Council’s rolling programme for the revaluation 
of fixed assets.  Valuations are carried out by the Authority’s Property division, 
except for the valuation of council dwellings, which is carried out by Drivers Jonas, a 
firm of chartered surveyors.  The basis for valuation is set out in note 12 of the 
Statement of Accounting Policies. 
  
Operational Assets
Non-Operational Assets
l
a
ildings
Assets
Tot
Council 
u
Dwellings
B
Community 
Investment 
Properties
Other Land & 
Assets Under 
Construction
Vehicles Plant 
& Equipment
Infrastructure
Surplus Assets
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Valuations at historical cost
13,223
154,963
4,173
172,359
Market Value
986,481
986,481
Valued at Current Value at:
1 April 2003
47,875
6,805
54,680
1 April 2004
109,514
727
110,241
1 April 2005
237,331
4,148
241,479
1 April 2006
211,178
86,353
297,531
1 April 2007
177,144
74,123
55,129
306,396
Net Book Value at 31 March 
986,481
783,042
13,223
154,963
4,173
0
74,123
153,162
2,169,167
2008
 
52 

---

 
 
 
20. Fixed Assets 
 
The following is an analysis of the fixed assets held by the City Council. Items not of 
a material nature have been excluded.  
 
2006/07
2007/08
Housing
22,664
Council Dwellings          
22,446
Children and Young People
75
Primary Schools
72
14
Secondary Schools
14
8
Special Schools
7
9
Children and Family Homes
9
0
Childrens Centres
11
8
Adventure Playgrounds
8
Adults
8
O
  lder Pe
 rsons Homes
8
3
Older Persons Mental Health Day Centres
3
1
Intermediate Care Home
1
1
Learning Disabilities Centre
3
Regeneration and Culture
794km
Roads
794km
2
Markets
2
7
Le
  isure Centres
7
2
  Golf Courses
2
42
Parks
42
1
Athletics Stadium
1
18
Libraries
18
6
Museums
6
1
Astrotruf Stadium
1
Other Properties
53
Centrally Located Admin Buildings & Offices
53
17
Neighbourhood Centres
17
14
Neighbourhood Housing Offices
14
 
 
 
A small number of adjustments have been made to the prior year comparators to 
ensure a like for like comparison.  
 
 
 
21. Aided Schools 
 
There are 13 schools which are not owned by the authority and therefore are not 
included in the balance sheet. 
 
 
 
 
 
 
 
 
53 

---

 
22. Intangible Fixed Assets 
 
Intangible Fixed Assets are recognised in the Balance Sheet and the table below 
shows movements during the year. 
 
Purchased 
Software Licences
£'000
Original Cost
194
Amortisation to 1st April 07
(25)
169
Movement in 2007/08
Expenditure in Year
14
Written off to revenue in year
(40)
Balance as at 31st March 08
143  
 
 
23. Capital Financing of Fixed Assets and Deferred Charges 
 
The table below shows that there has been an increase in the Capital Financing 
Requirement to £456.3m; this is in line with the approved prudential indicator.  The 
method of financing 2007/08 capital expenditure is also shown in the table. 
 
2006/07
2007/08
Capital Financing
£'000
£'000
401,816 Opening Capital Financing Requirement
438,133
(9,416) Revenue Provision for Repayment of Debt
(15,246)
(865) Debt Repayment from Capital Receipts
(151)
Capital Investment
74,990 Operational Assets
67,239
16,744 Non Operational Assets
37,822
55 Intangible Fixed Assets
14
2,764 Investment
1,001
16,379 Deferred Charges
8,988
5,154 Loan Premia (HRA)
0
Sources of Finance
(10,177) Capital Receipts
(15,814)
(13,355) Major Repairs Reserve
(11,468)
(11,158) Revenue and Earmarked Reserves
(2,453)
(34,798) Grants & Contributions
(51,814)
438,133 Closing Capital Financing Requirement
456,251
Explanation of Movement in Year
Increase in underlying need to borrow (supported by 
18,906 Government financial asistance)
15,239
Increase in underlying need to borrow (unsupported by 
27,692 Government financial assistance)
18,276
(10,281) Repayment of Debt
(15,397)
36,317 Increase in the Capital Financing Requirement
18,118  
 
 
54 

---

 
24. Deferred Charges 
 
Deferred charges relate to expenditure that statutory provisions allow to be classified 
as capital expenditure for financing purposes.  This expenditure does not result in the 
creation of a fixed asset and has no lasting benefit to the authority, it is therefore 
charged to the Income and Expenditure Account in the year it is incurred.   
 
2006/07
2007/08
 
 
£'000
£'000
 
0  Balance as at 1st April
 
16,379  Expenditure
8,988
 
Amounts Charged to Revenue
 
(7,219)
 
  Loan Premia
-
 
(2,400)   Disabled facility Grants
(1,938)
 
(1,703)   Housing Renovation / Energy 
 
Efficiency grants etc
(3,063)
 
(1,328)   External Grant Funded Projects
(384)
 
(3,729)   Other
(3,603)
 
 
0   Balance as at 31st March
0
 
 
Of the £8.988m expenditure incurred in 2007/08 (£16.379 in 2006/07), £6.168m has 
been grant funded (£7.093m 2006/07).  
 
 
 
25. Capital Commitments 
  
The Council approves a capital programme for a three-year period. Details of 
contracts entered into, the approximate value and the period over which investment 
will take place are given below:  
 
Contract for Capital Invesment
Period
£'000
 
 
 
Building Schools for the Future
2008/09 - 2009/10
13,679
 
Digital Media Centre
2008/09 - 2009/10
7,000
 
CURVE
2008/09 - 2009/10
6,000
 
Upperton Road Viaduct
2008/09 - 2009/10
6,000
 
Taylor Road Primary School
2008/09 - 2009/10
4,834
 
City Centre Development
2008/09 - 2009/10
2,500
 
Classroom Replacement Extensions
2008/09 - 2009/10
2,251
 
Sparkhoe Primary School
2008/09 - 2009/10
1,370
 
 
 
 
 
 
 
 
 
55 

---

 
26. Leasing 
 
Operating Leases – Authority as lessee 
 
Lease rentals paid to lessors during the year in respect of operating leases for vehicles 
and equipment totalled £1,371,486 (2006/07 £1,731,403) and for land and buildings 
£1,688,787 (2006/07 £1,520,940). 
 
The Authority is committed to making payments of £2.8m under operating leases in 
2008/09: 
Operating leases which 
Land and 
Vehicles & 
Total
expire:
Buildings
Equipment
£’000
£’000
£’000
Within 1 year
721
202
923
2 – 5 Years
376
931
1,307
Over 5 years 
592
0
592
Total
1,689
1,133
2,822  
 
Operating Leases – Authority as lessor 
 
Lease rentals on council owned land and buildings received from lessees during the 
year in respect of operating leases totalled £6,328,669 (£6,239,698).  The 
approximate gross value of assets held for use in operating leases was £130m as at 
31st March 2008. 
 
Finance Leases 
 
The authority has no finance leases.  
 
 
27. Stocks and Work in Progress 
 
The value of stocks and work in progress at 31 March 2008 were: 
 
31st March
31st March
2007
2008
£'000
£'000
189
Work in Progress
186
1,928
Stock
1,834
674
Stock (ESPO - LCC's share)
746
2,791
2,766  
 
 
 
 
 
 
 
 
56 

---

 
28.  Debtors 
 
28a.  Long Term Debtors 
 
31st March
31st March
2007
2008
£'000
£'000
112
Mortgages
89
176
Car Loans to Employees
145
0
Other
0
288
234  
 
28b.  Short Term Debtors 
 
31st March
31st March
2007
2008
£'000
£'000
9,221
   Government Departments 
9,246
4,069
   VAT
4,418
4,132
   Other Local Authorities
3,973
14,544
   NNDR, Council Tax and Poll Tax
12,588
2,931
   Housing Rents
2,492
21,690
   Miscellaneous Debtors
19,264
4,806
   Pre payments
3,921
-
   Building Schools for the Future Pre payments
4,255
8,899
   Capital Debtors (Note 1)
24,784
70,292
84,941
(12,048)
Provision for Doubtful Debts (Note 2)
(10,271)
58,244
74,670  
 
 
Note 1 
The capital debtors figure relates to grants and contributions not yet received towards 
capital expenditure projects. 
 
Note 2 
The provision for doubtful debts as at 31 March 2008 includes the following: 
 
- 
Housing Rents £1.7m, Housing Benefits £2.1m 
-  Collection Fund Provision £3.7m. This is after the write-off of £1.9m for 
Council Tax, and £0.7m for NNDR. 
-  Other doubtful debt provisions amounting to £2.7m relate to general income 
and commercial rents. 
 
 
 
 
 
 
 
 
 
57 

---

 
29. Investments 
 
a)  Longer Term Investments 
 
31st March
31st March
2007
2008
£'000
£'000
6,749
Home Come Ltd
7,705
-
Leicester Millers Education Partnership (LMEP)
45
4,500
Money Market Investments
0
11,249
7,750  
 
Further details in relation to the Council’s investment in HomeCome Ltd and the 
Leicester Millers Education Partnership are provided at note 40 - related companies. 
 
b)  Short Term Investments 
Short term deposits total £63.997m as at the 31st March 2008  (£70.559m  as at 31st 
March 2007). 
 
c)  Other Investments  
Investments have been made in the Great Central Railway of £0.25m. The market 
value has been assessed as zero and therefore is not included in the accounts.  
 
 
30. Landfill Allowances Trading Scheme (LATS) 
 
This scheme commenced operation from 1st April 2005 and is underpinned by the 
Waste and Emissions Trading Act 2003.  Under this scheme the government allocates 
tradable landfill allowances for 15 years to each local authority that has 
responsibilities for waste disposal.    These authorities are able to buy and sell their 
allowances but only between each other.  At the end of each year their landfill usage 
is verified and any authority not holding sufficient allowances to meet this liability 
will be required to pay a penalty to the government. 
 
The authority has received allowances for the year 2007/08 of 75,159 tonnes.  The 
estimated landfill usage is 50,446 tonnes.  The authority did not buy or sell any 
allowances during the year.  Unused and carried forward allowances from 2005/06 
and 2006/07 were 35,395 tonnes, held in the balance sheet at £17.98 per tonne.  
During the course of the year DEFRA have verified the actual landfill for 2006/07, 
resulting in an reduction in the carry forward allowances of 4,018 to 31,377.     
 
Due to the lack of trading that has taken place during 2007/08 indications are that the 
fair value of unused allowances as at 31st March 2008 is zero.  Activities during 
2007/08 are summarised in the table below: 
 
58 

---

2006/07
2007/08
Total Value
Volume in 
Value per 
Total Value
Tonnes
Unit (£)
£'000
£'000
273
Balance Brought Forward
35,395
17.98
636
Adjustment for 2006/07 DEFRA verified  
122
(4,018)
17.98
-72
landfill
1,654
 In year Allowances - Initial recognition
75,159
17.98
1,351
Total Allowances held before 2007/08 
2,049
Landfill
106,536
17.98
1,915
(225)
Impairment of carried allowances to nil. 
(17.98)
(1,915)
Allowances held at 31st March          
1,824
106,536
0.00
0
(Current Asset)
Estimated Landfill
(1,188)
(50,446)
0.00
0
(Liability - Provision)
636
Unused Allowances
56,090
0.00
0
 
 
The allocation of allowances has been treated as grant income and impairment has 
been treated as expenditure.  These transactions have been included in the Cultural, 
Environmental and Planning Services line of the Income and Expenditure Account, 
and the resulting deficit has been transferred to the earmarked reserve (see note 37).  
This reserve was set aside to meet future costs or deficits arising from this scheme 
and as such the balance now stands at zero. 
 
 
31. Creditors 
 
31st March
31st March
2007
2008
£'000
£'000
12,115
Government Departments
8,644
3,600
PCT Grant
450
6,917
HM Revenue & Customs
7,398
4,331
Other Local Authorities
3,611
3,753
NNDR, Council Tax and Poll Tax
4,376
41,407
Miscellaneous Creditors
43,387
11,741
Receipts in advance
20,863
3,314
Capital Creditors
1,668
87,178
90,397  
 
 
 
 
 
 
 
 
 
 
 
59 

---

 
32. Long Term Borrowing 
 
Total
Total
Range of Interest Rates 
Outstanding
Source of Loan
Outstanding
Payable
31st March 07
31st March 08
£'000
%
£'000
222,652
Public Works Loan Board
3.70 - 10.13
175,239
109,599
Other Bodies
3.35 - 7.00
109,851
332,251
285,090  
 
An analysis of loans by maturity is: 
 
 
Outstanding
Outstanding
Maturity date
at 31st March 07
at 31st March 08
£'000
£'000
0
  1-2 years
4,712
4,712
  2-5 years
25,033
0
  5-10 years
0
327,539
 More than 10 years
255,345
332,251
285,090
 
 
33. Financial Instruments 
 
Credit risk 
 
Credit risk arises from deposits with banks and financial institutions, as well as credit 
exposures to the authority’s customers. 
 
The Council’s annual investment strategy lays down minimum credit rating criteria 
for investments with banks and financial institutions. Investments guaranteed by the 
UK government and investments with other local authorities do not require credit 
ratings. The Council primarily relies on credit ratings published by Fitch Ratings.  
 
The criteria set out in the investment strategy are minimum and management will 
apply stricter criteria when considered appropriate. In the second half of 2007/2008 
new deposits have only been made for short periods and the authority has avoided 
investments in banks and institutions which are the subject of adverse comments in 
the financial press.  
 
The main commercial customers are lessees, and the financial standing of potential 
lessees is checked before leases are granted. There is no uniform practice in respect of 
other customers, but many of these are receiving a service linked to the social aims 
and objectives of the Council where it would not be practicable to assess the 
customer’s financial standing as a precondition for the provision of that service. 
 
 
The following analysis summarises the authority’s potential maximum exposure to 
credit risk, based on experience of default and uncollectability over the last five 
financial years, adjusted to reflect current market conditions. 
 
 
Because of its prudent investment criteria the Council has never experienced any 
losses on investments. Credit ratings are regularly reassessed by credit rating agencies 
60 

---

to reflect changes in market conditions and hence adjusting the Council’s historical 
experience of defaults to reflect current market conditions maintains the maximum 
exposure to default as nil. 
 
Theoretical considerations suggest that an investment with any institution, however 
strong, carries some risk of default, even if that risk is very low. Often the events that 
give rise to such risks are rare or unforeseen and as such it is difficult to assess the 
risk of default either on the basis of recent experience or prospectively on the basis of 
information about the institution that is in the public domain. Subject to these 
unavoidable limitations the assessment that the maximum exposure is nil is 
considered to be a practical and pragmatic assessment. 
 
The historic experience of customers suggests a default rate on debts of 4.4%. 
However these accounts are prepared at a time of increasing economic stress in the 
UK economy. It has not been possible to systematically estimate the effect that this 
will have on the level of defaults but a prudent assessment has been made that the 
percentage level of default could increase from 4.4% to 5.0%. 
 
 
Amount at
Histrocial
Historical
Estimated
31st March 2008
experience
experience
maximum 
of default
adjusted for
exposure to
market conditions
default and
31st March 2008
uncollectability
£'000
%
%
£'000
A
B
C
 
 
A x C
Deposits with Banks 
63,351
0.00
0.00
nil
and financial insitutions
Customers
14,558
4.40
5.00
727.9
77,909
727.9
 
 
Loans totalling £525,000 have been made to HomeCome, a company that operates in 
close partnership with the Council.  The financial position of the company is 
considered to be sound and it is considered that there is no significant credit exposure 
to these loans. 
 
 
ACCOUNTS – 2007/08 
 
The authority does not generally allow credit for customers, such that the £14.6m 
balance outstanding can be analysed by age as follows: 
 
 £m 
Less than two months 
  7.9 
Two to six months 
  1.8 
Six months to one year 
  1.8 
More than one year 
  3.1
 
14.6 
 
 
 
 
 
 
61 

---

Liquidity risk 
 
As the authority has ready access to borrowings from the Public Works Loans Board, 
there is no significant risk that it will be unable to raise finance to meet its 
commitments under financial instruments. Instead, the risk is that the authority will be 
bound to replenish a significant proportion of its borrowings at a time of unfavourable 
interest rates. The strategy is to ensure that not more than 30% of loans are due to 
mature within the next financial year. The authority regularly assesses the maturity 
profile and the liquidity risk.  
 
The maturity analysis of financial liabilities is as follows: 
 
 £m 
Less than one year 
       0 
Between one and two years 
    4.7 
Between two and five years 
  25.0 
More than five years 
293.4
 
323.1 
 
All trade and other payable are due to be paid in less than one year. 
 
Market risk 
 
Interest rate risk 
 
The authority is exposed to significant risk in terms of its exposure to interest rate 
movements on its borrowings and investments. Movements in interest rates have a 
complex impact on the authority. For instance, a rise in interest rates would have the 
following effects: 
 
a) 
borrowings at variable rates — the interest expense charged to the Income and 
Expenditure Account will rise; 
b)  borrowings at fixed rates — the fair value of the liabilities borrowings will fall 
c)  investments at variable rates — the interest income credited to the Income and 
Expenditure Account will rise; 
d)  investments at fixed rates — the fair value of the assets will fall. 
 
Borrowings are not carried at fair value, so nominal gains and losses on fixed rate 
borrowings would not impact on the Income and Expenditure Account or STRGL. 
However, changes in interest payable and receivable on variable rate borrowings and 
investments will be posted to the Income and Expenditure Account and affect the 
General Fund Balance pound for pound. Movements in the fair value of fixed rate 
investments will be reflected in the STRGL. 
 
The authority has a number of strategies for managing interest rate risk. Its policy is to 
aim to keep a maximum of 45% of its borrowings in variable rate loans. During 
periods of falling interest rates, and where economic circumstances make it 
favourable, fixed rate loans will be repaid early to limit exposure to losses. The risk of 
loss is ameliorated by the fact that a proportion of government grant payable on 
financing costs will normally move with prevailing interest rates or the authority’s 
cost of borrowing and provide compensation for a proportion of any higher costs. 
 
 
 
62 

---

The Council actively assesses interest rate exposure during the year and this is 
reflected in the management of budgets. This allows any adverse changes to be 
accommodated. The analysis also informs the decision as to whether new borrowing 
taken out is fixed or variable. 
 
At 31 March 2008, if interest rates had been 1% higher with all other variables held 
constant, the financial effect would be: 
 
 
£’000 
Increase in interest payable on variable rate borrowings 
154 
Increase in interest receivable on variable rate investments 
(627) 
Increase in government grant receivable for financing costs 
(672) 
Impact on Income and Expenditure Account 
(1,140) 
Share of overall impact debited to the HRA 
515 
Decrease in fair value of fixed rate investment assets 
Nil 
Impact on STRGL 
Nil 
Decrease in fair value of fixed rate borrowings liabilities [no impact on 
46.6 
I+E Account or STRGL) 
 
The impact of a 1% fall in interest rates would be as above but with the movements 
being reversed. 
 
 
Price risk 
 
The authority does not generally invest in equity shares but does have shareholdings 
linked to its service objectives. 
 
The authority has shares to the value of £250,000 in the Great Central Railway 
Company. This is a non-profit distributing company and on this basis the value of this 
investment is assessed as nil and no additional price risk is possible. 
 
The authority also has shares to the value of £43,000 in the Leciester Millers 
Education Partnership. This shareholding is linked to the Council’s participation in a 
“Building Schools for the Future” programme and it is possible that the level and/or 
value of the investment may increase in the future. It is difficult to assess the fair 
value of this investment, although it possible that it might be difficult to find a willing 
buyer.  Given the small scale of this investment it is considered that there is no 
significant price risk. 
 
The authority has an investment in HomeCome Ltd.  This investment arises from the 
provision of affordable rent grants, in return for which the Council retains a 
proportionate equity share in the properties being purchased with the grant.  This 
equity share is index linked and will therefore rise and fall according to property 
values.  However, it is considered that much of this risk is mitigated by the fact that 
the authority provides significant support to Home Come in the form of grants and 
through a close working relationship. On this basis it is considered that there is no 
significant price risk. 
 
The authority has no significant financial assets or liabilities denominated in foreign 
currencies and thus has no significant exposure to loss arising from movements in 
exchange rates. 
 
 
63 

---

Note re fair value of assets and liabilities carried at amortised cost 
 
Financial liabilities and financial assets represented by loans and receivables are 
carried in the Balance Sheet at amortised cost. Their fair value can be assessed by 
using the following assumptions. 
 
•  The fair value of loans from the PWLB is estimated as the amount that the 
Council would have to pay to the PWLB to prematurely repay these loans. This 
calculation has been done for each individual loan and reflects the terms and 
conditions under which the PWLB accept the premature repayment of loans and 
the actual discount rates in force on 31st March. 
•  The fair value of the deferred debit in respect of assets transferred when the 
authority gained unitary status 1997 is shown at the balance sheet value as these 
charges are prescribed by statutory regulation. 
•  The fair value of other loans is assessed by calculating the present value of the 
cashflows. In the absence of an active market for these loans the fair values have 
been estimated on the basis of the terms and conditions under which the PWLB 
would accept the premature repayment had the loan been made by the PWLB. 
•  No early repayment or impairment is recognised. 
•  Where an instrument will mature in the next 12 months, the carrying amount is 
assumed to approximate to fair value. 
•  The fair value of trade and other receivables is taken to be the invoiced or billed 
amount. 
 
The fair values calculated are as follows: 
 
31-Mar-07
31-Mar-08
Carrying amount
Fair value
Carrying amount
Fair value
£m
£m
£m
£m
Short Term Liabilities
10
10
15
15
Long Term Liabilities
371.9
369.2
323.2
338.7
 
 
The fair value is more than the carrying amount because the authority’s portfolio of 
loans includes a number of fixed rates loans where the interest rate payable is higher 
than the rates available for similar loans at the Balance Sheet date. This commitment 
to pay interest rates above current market rates increases the amount that the authority 
would have to pay if the lender requested or agreed to early repayment of the loans. 
 
Discount rates used to estimate fair values 
 
The following table summarises the discount rates used to estimate the fair value of 
loans. 
 
Nominal value of loan@ 1/4/07
Nominal value of loan@ 1/4/08
Discount 
Loans from market 
Loans from market 
PWLB
PWLB
Rate
sources
sources
£m
£m
£m
£m
3.5% - 4%
-
75.9
39.5
33.6
4% - 4.5%
148.9
29.0
132.2
71.3
4.5% - 5%
65.0
-
-
-
5% - 5.5%
4.5
-
-
-
 
 
64 

---

 
31-Mar-07
31-Mar-08
Carrying amount
Fair value
Carrying amount
Fair value
£m
£m
£m
£m
Loans and receivables
88.7
88.7
78.6
78.6  
 
The borrowings and investments disclosed in the Balance Sheet are made up of the 
following categories of financial instruments: 
 
Long Term
Current
31-Mar-07
31-Mar-08
31-Mar-07
31-Mar-08
£m
£m
£m
£m
Financial liabilites at amortised cost
332.2
285.1
9.9
15.5
Financial liabilties at fair value through 
profit and loss
0.0
0.0
0.0
0.0
Total Borrowings
332.2
285.1
9.9
15.5
Loans and receivables
4.5
0.0
84.2
78.6
Available for sale financial assets
0.0
0.0
0.0
0.0
unquoted equity investment at cost
6.7
7.7
0.0
0.0
Total Investments
11.2
7.7
84.2
78.6
 
 
34. Deferred Liabilities 
 
Total deferred liabilities are £38,181,602.  This relates to debt raised by the County 
Council for which responsibility transferred to the City Council on Local 
Government Reorganisation. 4% of the outstanding debt at the previous balance sheet 
date (£39,772,500) has been repaid each year. 
 
 
35. Provisions  
 
The table below provides a list of provisions made by the authority at the end of the 
financial year: 
 
Balance at
Balance at
Increase / 
Note
1st April
 31st March
(Reduction)
2007
2008
£'000
£'000
£'000
Equal Pay
a
10,400
(9,700)
700
Insurance
b
7,282
(875)
6,407
Housing Benefits
c
2,537
3,709
6,246
Landfill Usage
d
1,188
(1,188)
0
Sec 117 Mental Health Act
e
848
(200)
648
Housing DSO - Stock
f
124
300
424
Job Evaluation
g
0
5,561
5,561
Total Provisions
22,379
(2,393)
19,986  
 
These provisions are described in more detail on the following page. 
 
 
 
 
 
 
65 

---

a) Equal Pay
During 2006/07 the authority has established a provision of £10.4m in respect of 
potential equal pay settlements. Many of these cases have been settled during 2007/08 
and the provision has been reduced to £0.7m. 
 
b) Payment of Insurance Claims
The authority holds funds to meet the costs of insurance claims, for both claims 
received but not yet settled and claims that will be received in the future. The sum of 
£6.4m is held as a provision, being the amount estimated by the Council’s actuaries 
that will be required to meet claims already received. A further sum of £4.2m is held 
as an earmarked reserve (as note 37 below), to meet the costs of liabilities incurred 
for which claims have not been received. 
 
c) Housing Benefit Subsidy Claims 
The 2005/06, 2006/07 and 2007/08 benefit subsidy grant claims are outstanding.  
This could potentially result in a claw back of subsidy from the City Council by the 
Department of Work and Pensions.  Accordingly, provisions totalling £6.2m have 
been established within the accounts.    
 
d) Landfill Usage 
This liability relates to the Landfill Allowances Trading Scheme as outlined in note 30 to 
these Accounts.  Due to the lack of trading taking place the fair value of both the landfill 
allowances and landfill usage has been written down to nil.   
 
e) Section 117 Mental Health Act 
The sum is a provision for refunds to people with mental health difficulties who have 
been charged for residential and nursing care.  The sum provided for is based on known 
cases, which could be payable over the next two to three years depending on a number of 
factors. 
 
f) Housing DSO Stock 
This sum is held against obsolete or damaged stock within the Housing Direct Service 
Organisation as at 31st March 2008.  During 2007/08 some DSO facilities have closed 
leading to a higher risk of residual obsolete stock, subsequently this provision has been 
increased. 
 
g) Job Evaluation
The Council is in the process of completing a review of pay grading for most of its 
non-teaching staff.  Whist the new scheme has not yet been implemented, it is 
expected that pay increases will be backdated to July 2007.  Therefore a provision has 
been made within the accounts for the estimated cost of these increases. 
 
 
 
 
 
 
 
 
 
 
 
 
 
66 

---

 
36. Movements on Reserves 
 
The table below shows the movements in the authority’s reserves during the year.  
Some are required to be held for statutory reasons, some are needed to comply with 
proper accounting practice, and others have been set up voluntarily to earmark 
resources for future spending plans. 
 
Balance at
Net 
Balance at
Further 
Reserves / 
1st April
Movement   31st March
details of 
Balances
2007
in Year
2008
 Purpose
movements
£'000
£'000
£'000
Store of gains on revaluation of 
Revaluation 
0
160,622
160,622 fixed assets not yet realised 
(a) below
Reserve
through sales
Capital 
Store of capital resources set 
Adjustment 
1,459,898
(30,584)
1,429,314
(b) below
aside to meet past expenditure
Account
Balancing account to allow for 
Financial 
differences in statutory 
Instruments 
2,176
9,023
11,199 requirements and proper 
(c) below
Adjustment 
accounting practices for 
Account
borrowing and investments
Proceeds of fixed asset sales 
Usable 
available to meet future capital 
Capital 
0
4,631
4,631
(d) below
investment (see further details 
Receipts
below)
HRA Major 
Resources available to meet 
Note 13 to the 
Repairs 
500
1,400
1,900 capital investment in council 
HRA
Reserve
housing
Deferred 
Stores deferred receipts pending 
Capital 
112
(23)
89
-
repayment of mortgages
Receipts
Balancing account to allow 
Note 42 to the 
Pension 
(142,377)
43,374
(99,003) inclusion of authority's share of  Core Financial  
Reserve
pension liability in balance sheet Statements
Stores the City Council's 
Note 40 to the 
ESPO 
805
167
972 estimated share of ESPO's net 
Core Financial 
Reserve
assets and liabilities.
Statements
 
 
67 

---

Balance at
Balance at
Net 
1st April
 31st March
Movement 
Further detail of 
Reserves / Balances
2007
in Year
2008
  Purpose
movements
£'000
£'000
£'000
Temporary reserve to hold 
Unequal  Pay 
Note 17 to the 
the deferred cost of providing 
Back Pay 
(10,400)
9,700
(700)
Core Financial 
for compensation until such 
Account
Statements
time as any payment is made.
Note 37 to the 
Earmarked 
Reserves earmarked for a 
55,691
8,023
63,714
Core Financial 
Reserves
specfic purpose
Statements
Resources available to meet 
Statement of 
future running costs for non 
General Fund 
Movement on 
7,667
(119)
7,548 housing services and as a 
Balance
General Fund 
contingency against any 
Balance
unforseen circumstances
Resources available to meet 
Statement of 
future running costs for 
Housing Revenue 
Movement on 
2,911
1,663
4,574 housing services and as a 
Account Balance
Housing Revenue 
contingency against any 
Account Balance
unforseen circumstances
The cumulative surpluses 
relating to council tax and 
NNDR collection.  These are  Collection Fund 
Collection Fund 
2,140
(544)
1,596 shared between the city 
Account -   Page 
Balance
Council and the precepting 
79
bodies (Leicestershire Police 
and Fire Authorities)
Total Reserves & 
1,379,123
207,333
1,586,456
Balances
 
 
Capital Accounting 
 
Accounting practice in local government requires the use of a number of technical and 
complex capital accounts, most of which are unique to local authorities.  The 
following tables provide further analysis of these accounts: 
 
2007/08
 (a) Revaluation Reserve
£'000
 Balance Brought Forward
0 
 Revaluation of Fixed Assets
172,995 
 Disposal of Fixed Assets
(10,533)
Impairment Reversal
113 
Write down of Revaluation Gains
(1,953)
Balance at 31st March 2008
160,622   
 
 
68 

---

2007/08
 (b)  Capital Adjustment Account
£'000
£'000
 Balances Brought Forward
 Capital Financing Account
162,790 
 Fixed Asset Restatement Account
1,298,010 
 Prior Year Adjustment (Investment Properties)
(902)
1,459,898 
 Capital Financing
 Revenue
2,453 
 Usable Capital Receipts
15,814 
 Major Repairs Reserve
11,468 
29,735 
 Transfers from Movement on the General Fund Balance
 Minimum Revenue Provision
8,375 
 Voluntary Set Aside
6,871 
 Amortisation of Intangible Assets
(36)
 Depreciation & Impairment
(42,508)
 Written off Deferred Charges
(2,820)
 Loss on Disposal of Fixed Assets
(5)
 Government Grants Deferred - Amortisation
6,757 
(23,366)
 Other Movements 
 Disposal of Fixed Assets
(29,436)
 Repayment of Debt from Receipts
151 
 Disposal - Write out from Revaluation Reserve
10,533
 Additions - STRGL
1,221
 Revaluation Gains - Write down 
1,953
 Depreciation  - HRA (Major Repairs Reserve)
(21,375)
(36,953)
Balance at 31st March 2008
1,429,314   
 
2007/08
 (c) Financial Instruments Adjustment Account
£'000
 Balance Brought Forward
0 
 Writing down of Premia and Discounts held in
 the Balance Sheet as at 31st March 2007
2,176 
 Transfers from the Statement of Movement on
9,023 
 General Fund Balance - 2007/08
Balance at 31st March 2008
11,199   
 
2006/07
2007/08
 (d)  Usable Capital Receipts
£'000
£'000
£'000
229  Balance Brought Forward
0 
23,157   Receipts in year
29,346 
(12,343)  Housing Revenue Account Pooled Receipts
(8,750)
20,596 
0   Applied to Repay Debt
(151)
(11,043)  Applied to fund Capital Expenditure
(15,814)
0 Balance at 31st March
4,631   
 
 
 
 
69 

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37. Earmarked Reserves 
 
The table below provides a list of earmarked reserves held by the authority at the end 
of the financial year.  A brief explanation of the nature and purpose of the more 
significant reserves is also provided below. 
 
 
Balance at
Receipts/
Payments/
Balance at
 
1st April
Transfers
Transfers
 31st March
2007
to reserve
from reserve
2008
 
£'000
£'000
£'000
£'000
 
  Schools Balances
15,483
3,835
(19)
19,299
Childrens Services Funds
12,342
2,161
(5,648)
8,855
 
Building Schools for the Future
3,088
5,573
(53)
8,608
  Insurance Reserve (see note 35)
6,466
2,536
(4,760)
4,242
  Transforming Leicester's Learning
0
3,826
(20)
3,806
  Job Evaluation
2,337
5,080
(4,652)
2,765
  Supporting People
2,416
44
0
2,460
  Equal Pay Reserve
0
982
0
982
  Other - Misc
885
492
(438)
939
IT Fund
731
312
(139)
904
 
Housing Maintenance
467
361
0
828
  On Street Parking
230
2,548
(1,997)
781
  Central Maintenance Fund
28
5,524
(4,945)
607
  Property - Schools Buy Back
274
1,257
(931)
600
  Area Committee Grants
501
33
0
534
  Butterwick House
409
0
0
409
  Business Improvement Project
1,145
0
(768)
377
HR Improvement Plan
0
355
0
355
  Economic Regeneration (LABGI Funds)
0
300
0
300
  Department Investment Reserve
197
40
(90)
147
  LPSA Rewards
799
0
(699)
100
  Communiy Cohesion Fund
95
5
0
100
  NNDR Revaluation
315
0
(218)
97
 
Cost of Elections
183
75
(183)
75
 
Landfill Allowances Trading Scheme
636
0
(636)
0
  Payback Fund
338
30
(400)
(32)
 
Total Revenue Reserves
49,365
35,369
(26,596)
58,138
 
Capital Reserve
6,326
(750)
5,576
 
  Total Earmarked Reserves
55,691
35,369
(27,346)
63,714
 
Schools’ Revenue Balances 
Statutory Schools Reserves provide for school surpluses to be carried forward into the 
following year and these reserves are retained by schools.  The total level of balances 
at 31st March 2008 is £19.3m: this includes 4 schools with deficits totalling £0.1m 
offset against the remaining school surpluses of £19.4m. 
 
Education Funds 
This amount comprises £6m of ring-fenced school reserves which are not devolved to 
schools, and includes unspent Dedicated Schools Grant of £3.7m.  These monies are 
ring-fenced to the schools block and not available for general spending.   In addition, 
the department holds £2m of reserves, which are held as a contingency to deal with 
budgetary pressures that arise in a department with a number of volatile budgets, and 
to meet the cost of the ongoing transformation of Children’s Services. 
 
 
 
70 

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Building Schools for the Future (BSF) 
Funding for the costs of borrowing to meet the BSF programme have already been 
made available by the DCSF.  As this was provided in advance of need, it needs to be 
set aside until required.  
 
Transforming Leicester’s Learning 
This is a major new initiative to improve educational attainment levels across the city 
and is the key priority for the Children’s Services Department.  This programme will 
require significant levels of resources during 2008/09 and 2010/11 and accordingly 
one off funds totalling £3.8m have been re-directed during 2007/08 for this purpose. 
 
Job Evaluation 
Job Evaluation is a project arising from the national Single Status Agreement in 1997 
that requires the authority to carry out a pay and grading review.  This reserve was 
established in 2004/05 to meet the expected costs of implementing a new job 
evaluation scheme, and the costs of pay protection when the scheme is operational. 
 
Supporting People 
This is a government programme working in partnership with local authorities, 
service users and support agencies to provide funding to support vulnerable people.  
The reserve relates to carried forward grant allocations that are ring-fenced for this 
programme and cannot be used for other purposes. 
 
Capital Reserve 
This reserve includes amounts set-aside from revenue to support the capital programme 
of expenditure. 
 
 
38. Analysis of Net Assets Employed 
 
A breakdown of the net assets employed by the General Fund and the Housing 
Revenue account is given below: 
 
Balance as at 31st 
Balance as at 31st 
March 2007
March 2008
£'000
£'000
         
48
      1,865 General Fund
         
632
     
,707
         
89
      7,258 Housing Revenue Account
         
953
     
,749
          1,37
 
9,123
         1,586
   
,456  
 
In legal terms both elements disclosed above constitute part of the General Fund. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
71 

---

 
39. Trust Funds  
 
Bradgate Park and Swithland Wood Charity 
 
The City Council, jointly with the Leicestershire County Council acts as Holding 
Trustee for the property of the Bradgate Park and Swithland Wood charity. Separate 
Trustees, some of whom are appointed by the City Council, are responsible for the 
administration of the charity.  
 
The net assets of the charity as at 31st March 2008 are estimated to be £0.6m (2007: 
£0.6m) 
 
The total expenditure for the year ended 31st March 2008 was estimated to be £0.9m 
(£0.8m in 2006/7) and total income £0.9m (including contributions from trustees) 
(£0.8m in 2006/07). 
 
The net assets are not included in the Balance Sheet and no account of the surpluses 
for previous years has been made in the Council’s Income and Expenditure Account.  
 
Education Trust Funds 
 
The City Council acts as trustee for a number of education funds. These trust funds 
were transferred from Leicestershire County Council on 1 April 1999. 
 
The total book values of investments plus cash balances of the funds are as follows: 
 
Balance at 
Balance at 
1st April 
Income
Expenditure 31st March 
2007
2008
£'000
£'000
£'000
£'000
Alderman Newton's School
  
13.3
           
1
               .1
0.0
14.4
Moat Community College
  
68.0
           
3
               .7
(35.0)
36.7
Others
  
8
            2.4
5
               .1
(0.4)
87.1
TOTAL
163.7
           
9.9
              
(35.4)
138.2  
 
 
40. Related Companies and Consortia 
 
ESPO 
The City Council along with six other local authorities is a member of the Eastern 
Shires Purchasing Organisation (ESPO).  This is a Joint Committee involved in the 
letting of contracts for supplies and services to its members and others, together with 
the provision of a central warehouse for the supply of items in common use.  During 
the year stores purchases and direct orders to ESPO from the City Council totalled 
£5.3m (£4.2m in 2006/07).   
 
The City Council’s estimated share of the assets and liabilities have been 
incorporated into the Balance Sheet for the first time in 2007/08 (comparative figures 
for 2006/07 have been amended (see note 3 – prior period adjustments).  
 
The table below provides a summary of ESPO’s assets and liabilities as at 31st March 
2008, together with the City Council’s estimated share – which has been incorporated 
into the Balance Sheet figures (shown on page 39)   
 
72 

---

31st March 2007
31st March 2008
ESPO
LCC's Share
ESPO
LCC's Share
£'000
£'000
£'000
£'000
13,616 2,439 
Fixed 
Assets
13,381 2,397 
13,523 2,422 
Current 
Assets
14,964 2,680 
(11,143)
(1,996)
Current Liabilities
(11,917)
(2,135)
(11,500)
(2,060)
Long Term Borrowing
(11,000)
(1,970)
4,496 805 
Total Assets less Liabilities
5,428 972 
1,906 
341 
Capital Adjustment Account
2,171 
389 
2,590 464 
Spendable 
Reserves
3,257 583 
4,496 805 
Net 
Worth
5,428 972 
 
 
HomeCome Ltd 
HomeCome Ltd is a not-for-profit limited company set up by the Council under its 
well being powers (Local Government Act 2000) in spring 2004. Other member 
bodies include the Leicestershire Chamber of Commerce and the Leicester Federation 
of Tenants Association.  The company was set up to create new affordable housing 
by purchasing properties from the City Council, on the open market and building new 
properties.  These properties are purchased by means of affordable rent grant from the 
Council (up to a maximum of 75% of the property value) with the remaining amount 
financed from external loans secured against the properties.  In return for this 
affordable rent grant the Council retains a proportionate equity share in the 
properties, which has been treated as an investment in these accounts.   The City 
Council has 49% of voting rights in the company and needs the support of one other 
member in order to change the constitution.   
 
The company made a profit of £62,889 for the year ending 31st August 2007, with 
accumulated profits of £68,199, at 31st August 2007.  As at 31st August 2007 the 
assets of the company stood at £10.9m, and liabilities were £10.8m of which £7.2m 
related to the City Council, and £3.6m external loans.   Copies of the HomeCome’s 
accounts are available from the City Council’s Adults and Housing Department. 
 
 
Leicester Millers Education Partnership (LMEP) 
During the course of 2007/08, the authority has entered into a partnership agreement 
with the Miller Consortium.  This is a contractual framework to establish a Local 
Education Partnership under the Building Schools for the Future programme.  It is 
envisaged that this programme will result in over £230m of investment to transform 
secondary education in the City.  The LMEP is mainly a private sector owned 
company in which the City Council has a 10% shareholding, with the Miller 
Consortium holding 80%, and PfS (an organisation created by the government) 
holding the remaining 10%.  The City Council’s investment of £45,277, which 
represents the 10% shareholding, is included within the Balance Sheet (Note 29).   
 
The partnership is a relatively new arrangement and therefore no financial reports are 
available. 
 
 
 
 
 
 
 
73 

---

 
41. Group Accounts  
 
The Council has considered the status of its relationships with partner organisations 
and has concluded that none of these necessitate the preparation of group accounts, as 
required by the CIPFA Statement of Recommended Practice. 
 
 
42. Pensions 
 
Introduction  
 
The authority is required to account for its pension costs under FRS 17 Retirement 
Benefits.  This means that FRS 17 based pension assets and liabilities are included in 
the accounts, rather than the actual payments made in relation to pension during the 
year.   The objective of FRS 17 is to ensure that the authority’s financial statements 
reflect the fair value of future pension liabilities which have been incurred, and the 
extent to which assets have already been set aside to fund them.  This note explains 
the accounting requirements and the assumptions used in implementing FRS 17 in the 
accounts. 
 
The Leicestershire County Council Pension Fund is treated as a defined benefit 
scheme under FRS 17, since the authority’s liabilities to its current and former 
employees can be identified within the fund, and the authority will be liable to meet 
these irrespective of the future performance of the fund.  
 
Impact on the Income and Expenditure Account  
 
The Council pays employers’ contributions into the Pension Fund that provides its 
members with defined benefits relating to pay and service.  The contributions are 
based on rates determined by the fund’s professionally qualified actuaries based on 
triennial valuations, the most recent of which was at 31 March 2007.  The actuarial 
valuation states that assets held at the valuation date were sufficient to cover 93% of 
accrued liabilities assessed at that date. Employer contributions are set so as to 
achieve 100% funding at a future date, as advised by the actuary. 
 
In 2007/08 the Authority paid a contribution of £25.1m (2006/07: £23.6m) based on 
15.0% of employees’ reckonable pay (2006/07: 15.0%). A further sum amounting to 
£1m (2006/07- £0.4m) was paid to compensate the pension fund for the additional 
strain placed on the fund as a result of employees retiring early. Under FRS 17 the 
current service cost (the increase in the value of scheme liabilities expected to arise 
from employee service in the current period) is charged to the income and 
expenditure account rather than the actual payments to the fund.  The actuary’s 
estimate of the current service cost in 2007/08 was £28.8m. (2006/07: £32.5m).  
 
The following table is a summary of the transactions within the Income and 
Expenditure Account under FRS 17 during 2007/08.  However, local authorities are 
not required to fund expenditure relating to FRS 17 and therefore the transactions are 
reversed before impacting on the General Fund Reserve balance as shown in note 3. 
 
74 

---

2006/07
2007/08
a) Transactions in the Income and Expenditure Account
£'000
£'000
32,500  Current Service Cost
28,820 
32  Past Service Cost
473 
845  Gains and Losses on Settlements and curtailments
345 
(38,100) Expected Return on Employer Pension Assets
(44,627)
37,500  Interest on Pension Liabilities
41,967 
32,777 26,978 
(23,600) Reversal of Payments to the Pension Fund
(25,137)
(2,900) Contributions in respect on Unfunded Benefits
(2,949)
(26,500)
(28,086)
6,277  Net Transfer from Pension Reserve
(1,108)  
 
Further costs arise, not covered by the pension fund, in respect of discretionary 
additional benefits granted to retired employees, and in 2007/08 these amounted to 
£1.2m for employees in the Local Government Pension Scheme (2006/07: £1.2m) and 
£1.8m for employees in the Teachers’ Pension Scheme (2006/07: £1.7m). These 
figures reflect decisions made over many years and include the costs arising from 
those employees retiring early as a result of Local Government Reorganisation 
(LGR). 
  
The City Council also paid £12.9m to the Teachers’ Pension Agency in respect of 
teachers’ pension costs.(2006/07: £12.2m)  This represented a contribution rate of 
14.1% of pensionable pay. (2006/07: 13.65%).  The Teachers’ Pension scheme is an 
unfunded scheme administered by the Teachers’ Pension Agency on behalf of the 
Department for Children, Schools and Families. 
 
Impact on the Balance Sheet 
 
The Authority had the following accumulated investment assets and estimated future 
pensions liabilities.  The net pension liabilities and the corresponding pension reserve 
in the Balance Sheet represent a significant decrease in the overall level of reserves.  
However, this does not represent a reduction in the cash reserves held by the 
authority, and does not impact on council tax levels. 
 
31 March 07
31 March 08
b) Analysis of Net Liability
£'000
£'000
767,777 Estimated Liabilities in scheme
705,121
625,400 Estimated Assets in scheme
606,118
142,377 Net Liability
99,003  
 
The following table summarises the movement during the year on the Pension 
Reserve: 
 
75 

---

31 March 07
c) Summary of Movement on Pension 
31 March 08
£'000 Reserve
£'000
195,755 Brought Forward
142,377
Transfer from the Income and Expenditure 
6,277
(1,108)
Account - as detailed in table (a) above
Actuarial (Gains) / Lossess - as detailed in 
(59,655)
(42,266)
table (f) below
142,377 Net Liability
99,003  
 
Liabilities have been assessed using the “projected unit” method which makes   
assumptions about mortality rates, and future salary levels. The fund liabilities have 
been assessed by Hymans Robertson, an independent firm of actuaries. The main 
assumptions used in their calculations are: 
 
2006/07
2007/08
per annum
d) Assumptions made by the Actuaries
per annum
%
%
3.2
Price Increases
3.6
4.7
Salary Increases
5.1
3.2
Pensions Increase
3.6
5.4
Rate for Discounting Scheme Liablilities
6.9
 
 
Assets in the fund are valued at “fair value”, principally market value for investments, 
and consist of the following categories, by proportion: 
 
Fund Value
e) Assets:
Long Term 
Fund Value
As at 31st March  Whole Fund
Return
As at 31st March 
2007
Per Annum
2008
%
%
%
71
Equity Investment
7.7
74
17
Bonds
5.7
16
9
Property
5.7
8
3
Cash
4.8
2
100
Total
100
 
 
The actuarial gains can be analysed into the following categories, measured as 
absolute amounts and as a percentage of assets or liabilities at 31 March 2008. 
 
 
76 

---

f) Analysis of Actuarial 
2003/04
2004/05
2005/06
2006/07
2007/08
(gain)/ loss
£'000
%
£'000
%
£'000
%
£'000
%
£'000
%
Differences between 
expected and annual return 
(55,400) (14.7) (14,300) (3.3) (75,795) (13.6) (11,355) (1.8)
75,928 12.5
on assets
Differences between 
actuarial assumptions about 
200
0.0
17,100
1.3
5,700
0.8
1,500 0.2
30,605 5.0
liabilities and actual 
experience
Changes in demographic 
and financial assumptions 
-
-
107,800 18.0
93,800
12.5 (49,800) (6.5) (148,799) 24.5
used to estimate liabilities
Actuarial (gain)/loss 
recognised in Statement of 
(55,200) (12.6) 110,600 18.5
23,705
3.2
(59,655) (7.8)
(42,266) 7.0
Total Recognised (Gains) 
and Losses
 
The liability as at 31 March 2008 arising from discretionary additional benefits 
granted to employees has been assessed at £47.4m by the actuary in accordance with 
FRS17 principles, (2006/07: £48.9m) and this figure is included in the Pensions 
Liability shown on the Balance Sheet. This figure is (essentially) an estimate of the 
total amount the Council will have to pay in future years. 
 
 
The figure of £47.4m comprises:- 
 
 
2006/07 
2007/08 
£ 
Amount arising from decisions taken in year 
877,100 
817,100
Amount arising from decisions taken in earlier years 
48,022,900 
46,576,900
 
For further information about the pension fund contact: 
The Director of Resources 
Leicestershire County Council 
County Hall 
Glenfield 
Leicester, LE3  8RB. 
 
 
43. Contingent Liabilities 
 
There are no contingent liabilities to disclose. 
 
 
 
 
 
 
 
 
 
 
 
77 

---

Notes to the Cash Flow Statement 
 
44. Net Cashflow From Revenue Activities 
 
As at 31st 
Reconciliation of (surplus) / deficit to net revenue cash flow Note As at 31st March 2008
March 2007
£'000
£'000
£'000
(Surplus) / Deficit for the year:
38,970   Income and Expenditure Account (surplus)/deficit
8,605
575   Collection Fund (surplus)/deficit
544
39,545
9,149
Non-cash transactions:
(17,707)  Depreciation and Impairment of Fixed Assets
(42,508)
(7,910) Transfer to Major Repairs Reserve
(8,507)
(9,286)  Deferred Charges written down
(2,820)
7,243  Government Grant Deferred Amortisation
6,757
(13,888) Net Charges for Premia and Discounts
9,416
(6,277)  Transfers to the Pensions Reserve
1,108
(17,617)  Internal capital financing and other non-cash transactions
(4,908)
(65,442)
(41,462)
(32,313)
Items on an accruals basis:
4,401   Increase/(decrease) in Revenue Debtors
(3,714)
(14,562)  ( Increase)/decrease in Revenue Creditors
(4,865)
(265)   Increase/(decrease) in Stocks and W.I.P
(25)
(10,598)   (Increase)/decrease in Provisions
2,393
(21,024)
48
(6,211)
(46,921) Net Cashflow from Revenue Activities
(38,524)
 
 
45. Movement in Financing Items 
 
As at 31st 
As at 31st 
March 2007
Movements in Borrowing
March 2008
Movement
£'000
£'000
£'000
Public Works Loan Board (PWLB):
(218,431)     Long Term
(171,731)
46,700
0       Short  Term
0
(8,568) Stock Issue
(8,568)
0
(6) City of Leicester Bonds
(6)
0
(96,300) LOBO Loans
(96,300)
0
(39,773) Leicestershire County Council
(38,182)
1,591
(9,777) Temporary Loans
(15,405)
(5,628)
(372,855) Net Movement
(330,192)
42,663  
 
 
 
 
 
 
78 

---

 
46. Movement in Liquid Resources 
 
As at 31st
As at 31st
Movement
Movements in cash and cash 
March 2007
March 2008
equivalents
£'000
£'000
£'000
4,500 Longer Term Deposits
0
(4,500)
68,517 Liquid Deposits
62,226
(6,291)
73,017 Net cash (inflow)/outflow
62,226
(10,791)  
 
 
47. Movement in Cash 
 
As at 31st
As at 31st
Movement
Movements in cash and cash 
March 2007
March 2008
equivalents
£'000
£'000
£'000
4,058 Cash and bank overdrawn
6,259
2,201
4,058 Net cash (inflow)/outflow
6,259
2,201  
 
 
48. Items on an Accruals Basis 
 
As at 31st
As at 31st
Movement
Movements in other current assets 
March 2007
March 2008
and liabilities
£'000
£'000
£'000
49,345 Revenue Debtors
45,631
(3,714)
(83,864) Revenue Creditors
(88,729)
(4,865)
2,791 Stock and W.I.P
2,766
(25)
(22,379) Provisions
(19,986)
2,393
(54,107) Net Movement
(60,318)
(6,211)  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
79 

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80 
 

---

HOUSING REVENUE ACCOUNT (HRA)
 INCOME AND EXPENDITURE ACCOUNT
2006/07
2007/08
(restated)
£'000
Note
£'000
Income
58,429
Dwellings Rents
4
60,755
1,121
Non- dwelling Rents
5
1,182
3,470
Service Charges
5
3,809
2,450
HRA Subsidy
9
2,719
291
Contributions from General Fund
297
65,761
Total Income
68,762
Expenditure
12,561
General Management
12,835
4,346
Special Management
2
3,208
24,849
Repairs & Maintenance
24,579
341
Rent, Rates, Taxes & Other Charges
363
195
Contribution to Bad Debt Provision
3
(96)
20,592
Depreciation and Impairment of Fixed Assets
12
23,140
65
Debt Management Expenses
49
62,949
Total Expenditure
64,078
(2,812)
"Net Cost of Services"
(4,684)
(199)
(Gain) or Loss on Sale of HRA Assets
5
9,106
Loan Charges - Interest
9,941
(569)
Investment Interest
(835)
4,797
Pensions - Interest on Liabilities
14
5,597
(4,874)
Pensions - Expected Return on Assets
14
(5,952)
(3)
Mortgage Interest
(2)
6,701
Amortisation of Premia and Discounts 
(2,765)
12,147
Deficit for the Year
1,305
STATEMENT ON MOVEMENT OF HRA BALANCE
2005/06
2006/07
(restated)
£'000
£'000
12,147
Income and Expenditure Account - Deficit for the Year
1,305
Additional items required by Statute and non-statutory proper 
practices to be taken into account in determining   the movement 
on the Housing Revenue Account Balance
Difference between amounts charged to Income and Expenditure 
(5,154)
- Account for amortisation of Premia and Discounts and the charge 
4,218
for the year determined in accordance with statute.
(1,012)
- HRA Share of contributions to/ (from) the Pension Reserve
14
(164)
199
- Gain or (Loss) on Sale of HRA Fixed Assets
(5)
-
- Impairment of Fixed Assets
12
(1,765)
1,550
- Capital Expenditure Financed from Revenue Account
10
2,400
640
- HRA Set-Aside (MRP)
855
(7,910)
- Transfers from Major Repairs Reserve
13
(8,507)
460
Net Movement on the Housing Revenue Account in Year
(1,663)
(3,371)
Balance Brought Forward
(2,911)
(2,911)
Balance Carried Forward - 31st March
(4,574)
Net Write-off of HRA Premia and Discounts held at 31st March 
(771)
2007 to the balance
Compensatory transfer to the Financial Instruments Adjustment 
771
Account
(2,911)
Balance Carried Forward - 1st April 2007
81

---

Notes to the Housing Revenue Account 
 
 
1. Housing Revenue Account 
 
The City Council is required by the provisions of the Local Government and Housing 
Act 1989 to maintain a separate Housing Revenue Account (HRA). The purpose of 
this account is to record transactions relating to dwellings available to provide 
accommodation and other properties ancillary to the housing function.  
 
 
2. Special Services 
 
These include group central heating schemes, caretaking services, security services to 
high rise complexes, maintenance of shrubberies and grassed areas and communal 
services. 
 
 
3. Rent Arrears and Provision for Bad Debts 
 
Rents and Service Charges: 
The provision considered to be necessary at 31 March 2008 in respect of 
uncollectable debts amounts to £1.719m (£2.187m in 2006/07).  This is calculated on 
a rent, water and service charge arrears balance of £2.492m (£2.931m in 2006/07).                      
 
 
4. Net Rent Income From Dwellings 
 
2006/07
2007/08
£'000
£'000
58,429
Total Rent Income from Dwellings
60,755
          (
   39,095)
Less Housing Benefit
   
(
         39,872)
19,334
20,883  
 
  
5. Non-dwelling Rents and Service Charges 
 
These include the charges made to tenants for central heating and garages; rents from 
shops; and security and cleaning services to flats. 
 
 
 
 
 
 
 
 82

---

 
6. Housing Stock 
 
The City Council was responsible for managing a stock of 22,446 dwellings at 31st 
March 2008, of which 14,077 were houses or bungalows and 8,369 were flats. During 
the year the following movements took place: 
 
2006/07
2007/08
293
Right To Buy Sales
210
42
Sales to H.A.s/Losses on Conversions/Others
8
335
Net decrease
218  
 
 
7. Value of HRA Assets 
 
 
 
Value at 1st 
Value at 31st
April 2007
March 2008
£'000
£'000
Operational
952,179
Dwellings
986,381
11,342
Other Land & Buildings
11,550
963,521
997,931
Non-Operational
3,100
Other Land & Buildings
2,225
966,621
1,000,156
  
 
 
 
The values as at 1st April 2007 have been restated to reflect the reclassification of 
investment properties outlined in Note 2 to the core financial statements.  
 
 
 8. Vacant Possession value of Council Dwellings 
 
The vacant possession value of council dwellings at 31st March 2008 was £1,973m. 
At the same date the balance sheet value of council dwellings was £986m. The 
difference of £987m reflects the fact that social housing rents generate a lower 
income stream than could be obtained in the open market. The value placed on 
operational assets in a commercial environment will reflect the required economic 
rate of return in relation to the income streams that the assets might be expected to 
generate throughout their economic life. To the extent that income streams are 
constrained to serve a wider social purpose, the value of capital assets employed for 
council housing will be reduced.  
 
1st April 2007
31st March 2008
£'000
£'000
1,904,358
Vacant Possession Values
1,972,762
 
 
 
 
 83

---

 
9. HRA Subsidy 
 
The amount of HRA Subsidy in the 2007/08 HRA accounts is £2.719m, comprising:  
 
2006/07 
2007/08 
£'000
£'000
            19
  
Prior year adjustments
         7
    94
12,682 Major Repairs Allowance (MRA) 
12,868
(10,251) Notional Account Surplus (Housing Element)
(10,943)
2,450
2,719  
 
 
10. Capital Expenditure  
 
The Major Repairs Reserve and the Major Repairs Allowance 
A large part of HRA capital expenditure is financed by the Major Repairs Reserve 
(MRR), which is itself funded by the Major Repairs Allowance (MRA). The MRA is 
part of housing subsidy and represents an annual amount intended to be equivalent to 
the cost of maintaining the housing stock in its current condition. It is calculated by 
the Government using a range of national and regional cost factors applied to the 
Council's stock profile. The calculated allowance is intended to reflect the annual cost 
to the authority of replacing individual building components as they reach the end of 
their useful life. 
 
HRA capital expenditure on land, houses and other property in 2007/2008 totalled 
£22.270m, financed as follows: - 
 
2006/07 
2007/08 
£'000
£'000
13,355 Major Repairs Reserve
11,468
4,296 Use of Supported Borrowing
5,500
5,366 Use of Unsupported Borrowing
488
- Useable Capital Receipts
14
1,550 Financing from Revenue Account
2,400
1,204 Primary Care Trust (PCT) Grant
2,400
25,771 Total
22,270  
 
 
 
 
 
 
 
 
 
 84

---

 
11. Capital Disposals 
 
HRA capital disposals in 2007/08 were as follows: -  
 
2006/07
2007/08
Total Receipts
Total Receipts
Usable
Pooled/Set-aside
£'000
£'000
£'000
£'000
16,379 Right to Buy (RTB) Sales
12,076
3,334
8,742
449 Non RTB Sales
3,452
3,452
-
25 Mortgages
11
3
8
16,853 Totals
15,539
6,789
8,750
 
 
 
 
12. Depreciation & Impairment of Fixed Assets 
 
A breakdown of the depreciation and impairment charges are provided in the table 
below (there were no impairment charges in 2006/07). 
 
2006/07
2007/08
Depreciation
Depreciation Impairment
Total
£'000
£'000
£'000
£'000
20,399 Dwellings
21,154
1,717
22,871
193 Other Land, Buildings and Garages
221
48
269
20,592 Total 21,375
1,765
23,140  
 
As noted earlier in this document, the methodology used to calculate depreciation on 
council dwellings has been revised during 2007/08 (see Note 2 to the core financial 
statements). Accordingly the prior period figures relating to 2006/07 have been 
amended resulting in an increase of £7.7m.  However this does not have any impact 
on the HRA balances, because it is reversed out by a transfer to the Major Repairs 
Reserve (see below).  The impairment charge of £1.765m comprises capital 
expenditure (mainly on disabled adaptations) of £1.717m which does not increase 
HRA asset values, and £0.048m on downward revaluations; this charge has no impact 
on HRA balances since it is reversed out in the “Statement on Movement of HRA 
Balance”.   
 
 
13. Use of the Major Repairs Reserve 
 
 
2006/07 
2007/08 
£'000
£'000
(1,173) Balance 1st April 
(500)
(20,592) Depreciation credited
(21,375)
7,910 Transfer to HRA
8,507
Capital Expenditure on Land, houses and 
13,355
11,468
other property within the authority's HRA 
(500) Balance as at 31st March
(1,900)
   
 
 
 85

---

 
14. HRA Contributions to the Pensions Reserve 
 
This table identifies the total HRA share of contributions to and (from) the pensions 
reserve and breaks the figure down to show the type of contribution to or (from) the 
reserve.  More detailed information on pensions is provided in note 42 to the core 
financial statements. 
 
2006/07 
2007/08 
£'000
£000
Pension Costs included in Net Cost of Service
(1,089) Current service cost
(519)
0 Past service cost
0
(1,089)
(519)
Pension Interest Cost and Expected Return on Assets
(4,797) Interest on liabilities
(5,597)
4,874 Expected return on assets
5,952
77
355
(1,012) Transfer to Pensions Reserve
(164)
 
 
 
 
 
 
 
 86

---

COLLECTION FUND 
INCOME AND EXPENDITURE ACCOUNT 
 
2006/07
2007/08
£'000
NOTE
£'000
£'000
INCOME
70,744
Council Tax Collectable
2
74,601
Transfers from General Fund:
22,743
Council Tax Benefits
22,275
87,748
Income from Business Ratepayers
91,113
181,235
Total Income
187,989
EXPENDITURE
Precepts and demands:
3
78,050
    Leicester City Council
81,281
9,990
    Leicestershire Police Authority
10,643
3,414
    Leicestershire Fire Authority
3,637
95,561
Business Rates:
86,678
   Payments to National Pool
4
90,268
61
   NNDR Interest Payment
83
530
   Costs of Collection
521
90,872
Contributions in respect of previous year's
5
1,761
1,747
surplus
Bad and Doubtful Debts:
6
1,104
   Write-offs
2,568
418
   Increase / (Reduction) to Provision
(1,862)
706
181,992
Total Expenditure
188,900
757
Fund (Surplus)/Deficit for the Year
911
(2,715)
Fund (Surplus)/Deficit brought forward
(2,140)
(182)
NNDR Discretionary Payments
(367)
(2,140)
FUND BALANCE AS AT 31ST MARCH
7
(1,596)
 
 
 
 
 
 
 
 87

---

Notes to the Collection Fund 
Income And Expenditure Account 
 
 
 
 
 
 
 
 
 
1. General 
 
This account fulfils the statutory requirement for the Council to maintain a separate 
Collection Fund.  
 
 
 
 
 
 
 
 
 
2. Council Tax 
 
The Council’s Tax Base i.e. the number of chargeable dwellings in each valuation 
band (adjusted for dwellings where discounts apply) converted to an equivalent 
number of Band D dwellings, was calculated as follows: 
 
Estimated No. of 
Band D 
Taxable Properties 
Band
Ratio
Equivalent 
After Effect of 
Dwellings
Discount
-A
141
5/9
78
A
61,846
6/9
41,231
B
19,915
7/9
15,489
C
12,109
8/9
10,764
D
4,975
1
4,975
E
2,480
11/9
3,032
F
1,147
13/9
1,657
G
517
15/9
862
H
35
18/9
69
103,165
78,157
Less adjustments for collection rates and for anticipated changes
to liability to pay the tax.
(1,564)
Council Tax Base
76,593  
 
 
The Council Tax collectable during 2007/08 was £96.8m. (including sums paid by 
means of Council Tax Benefits). This figure equates to an average number of Band D 
dwellings of 77,643.  This is an increase from the 76,593 dwellings existing when the 
2007/08 budget was prepared due to the following: 
 
1) New properties 
2) Changes in discounts and exemptions allowed 
3) Changes in the level of discount given to second homes and long term empty  
properties. 
 
 
88

---

 
3. Precepts and Demands 
 
The following sums were paid from the collection fund:- 
 
2006/07
2007/08
£'000
£'000
9,990
Leicestershire Police Authority
10,643
78,050
Leicester City Council
81,281
3,414
Leicestershire Fire Authority
3,637
91,454
95,561  
 
 
4. Income from Business Rates – 2007/08 
 
Under the national arrangements for business rates, the Council collects rates payable 
in the city, which are based on local rateable values multiplied by a uniform rate. The 
total amount, less certain reliefs and other deductions, is paid to a central pool (the 
NNDR pool) managed by Central Government, which in turn pays back to authorities 
their share of the pool, based on a standard amount per head of resident population.  
 
The total non-domestic rateable value at 31 March 2008 was £246,177,450 
(£245,245,495 at 31st March 2007).  The national non-domestic multiplier for the 
year was 44.4p (43.3p in 2006/07). 
 
 
5. Contributions to Collection Fund Surpluses and Deficits 
 
Share of Surpluses: 
 
Council Tax 
Every January, the Authority has to estimate the surplus for the collection fund at the 
end of the financial year. This has to be notified to the police and the fire authority, 
which are entitled to receive a share of any surpluses made in respect of Council Tax. 
This is detailed in the table below. 
 
City
Police
Fire
Total
£
£
£
£
Estimate Jan 2007
        
1
         ,503
             
192
      
                   6
    6
             1
     ,761  
 
 
 
 
 
 
 
89

---

 
 
6. Bad and Doubtful Debts   
 
The table below provides more detail on the bad debt write-offs and the reduction in 
the provision for bad and doubtful debts. 
 
Bad Debt Provision
Bad Debt 
Balance at 1st 
Increase / 
Balance at 31st  Write-offs in 
Provisions
April 2007
(Decrease)
March 2008
year
£'000
£'000
£'000
£'000
Council Tax
4,582
(1,651)
2,931
1,913
NNDR
995
(211)
784
655
Total
5,577
(1,862)
3,715
2,568  
 
 
 
7. Collection Fund Surpluses/Deficits 
 
The Collection Fund account shows a cumulative surplus of £1,595,697 at 31 March 
2008 (£2,140,407 at 31st March 2007). This is made up of £1,813,239 surplus on 
Council Tax, £42,322surplus on Community Charge and £259,865 deficit on NNDR. 
 
The surplus arising on the Council Tax during the financial year 2007/08 will be 
distributed between Leicester City Council, Leicestershire Police Authority and the 
Leicestershire Fire Authority in proportion to the respective precepts and demands. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
90

---

Glossary 
 
This Glossary explains terms that may be encountered in discussion of Local Government 
finance. Definitions are intended to assist a general audience, rather than reflecting exactly the 
technical sense in which the terms are used. 
 
Accruals 
CIPFA (Chartered Institute of Public 
The concept that items of income and 
Finance and Accountancy) 
expenditure are recognised as they are 
The principal accountancy body dealing 
earned or incurred, not as money is 
with local government finance. 
received or paid. 
 
 
Collection Fund 
Audit Commission 
An account kept by the Council into which 
The Audit Commission is responsible for 
Council Tax is paid, and through which 
appointing external auditors to local 
NNDR payments pass, and which pays out 
authorities and setting standards for those 
money to fund expenditure from the 
auditors. 
General Fund, and the precept made by 
 
the Police and Fire Authorities. 
Best Value Accounting Code of Practice 
 
(BVACOP) 
Balance Sheet  
The authority’s financial statements are 
The Balance Sheet shows the assets and 
produced in accordance with the 
liabilities of the Authority. 
BVACOP.  
 
 
Council Tax 
Capital Expenditure 
This is a tax, which is levied on the broad 
Expenditure on the purchase, construction 
(1990) capital value of domestic 
or enhancement of major items which 
properties, and charged to the resident or 
have a lasting value to the authority. 
owner of the property. 
 
 
Capital Financing 
Creditors 
The raising of money to pay for capital 
Amounts owed by the Authority for work 
expenditure. There are various methods of 
done, goods received or services rendered 
financing capital expenditure including 
but for which payment has not been made 
borrowing, direct revenue financing, 
by the end of the financial year. 
usable capital receipts, capital grants, 
 
capital contributions and revenue reserves. 
Debtors 
 
Amounts due to the Authority but unpaid 
Capital Financing Requirement 
at the end of the financial year. 
Reflects the authority’s level of debt 
 
relating to capital expenditure. 
Dedicated Schools Grant 
 
A ring-fenced grant from the government 
Capital Programme 
that has to be used to fund the delegated 
The capital schemes the Authority intends 
budget of each school, together with 
to carry out over a specified time period. 
certain items of related central 
 
expenditure. 
Capital Receipts 
 
Money the Council receives from selling 
Deferred Charges 
assets (buildings, land etc.). Capital 
These are charges resulting from capital 
receipts from sale of housing assets cannot 
expenditure that does not result in the 
be used entirely to fund new capital 
creation of a fixed asset and therefore has 
expenditure; a proportion must be paid to 
no continuing value to the authority.
government.  
 
 91

---

Emoluments  
Income and Expenditure Account 
All sums paid to or receivable by an 
This Statement reports the net cost of all 
employee and sums due by way of 
services and functions for which the 
expenses allowances and the money value 
authority is responsible for, and 
of any other benefits received other than 
demonstrates how this has been financed 
in cash. Pension contributions payable by 
from general government grants and 
either employer or employee are 
income from local  tax payers. 
excluded. 
 
 
Internal Audit 
Finance Procedure Rules 
An independent appraisal function 
These provide the framework within 
established by the management of an 
which the City Council conducts its 
organisation for the review of the 
financial affairs. Finance Procedure Rules 
internal control system as a service to 
are supplemented by Codes of Practice 
the organisation. 
giving detailed guidance for financial 
 
practice in the Authority. 
Leasing 
 
A method of financing the acquisition of 
Financial Reporting Standards (FRSs) 
assets, notably equipment, vehicles, plant, 
Statements prepared by the Accounting 
etc. over an agreed number of years. 
Standards Committee. Many of the 
 
Financial Reporting Standards (FRSs) and 
Levy 
the earlier Statements of Standard 
A charge made by an outside organisation, 
Accounting Practice (SSAPs) apply to 
which has to be met from within the 
local authorities and any departure from 
Council’s overall budget. 
these must be disclosed in the published 
 
accounts. 
LOBO Loans 
 
Lender Option, Borrower Option loans. 
General Fund 
This is a loan in which the lender can, at a 
The Council’s main revenue account, 
predetermined time, request to change the 
covering the net cost of all services other 
interest rate at which the loan is being 
than Council housing. 
charged. If the borrower does not agree to 
 
the rate change, the borrower then has the 
Housing Benefits 
option to repay the loan. 
A system of financial assistance to 
 
individuals towards certain housing 
Long Term Borrowing  
costs administered by local authorities 
Loans raised to finance capital spending 
and subsidised by central government. 
which have to be repaid over a period in 
 
excess of 1 year from the date of the 
Housing Revenue Account (HRA) 
accounts. 
A separate account to the General Fund, 
 
which includes the expenditure and 
Major Repairs Allowance (MRA) 
income arising with the provision of 
The MRA is an element of housing 
housing accommodation by the Authority. 
subsidy, and represents the capital cost of 
The HRA is ring-fenced: no cross subsidy 
keeping the HRA dwellings stock in its 
is allowed between the HRA and the 
current condition. It largely replaces credit 
General Fund. 
approvals as a means of financing HRA 
 
capital expenditure. 
Impairment Loss 
 
A material reduction in the value of fixed 
National Non-Domestic Rate (NNDR) 
assets outside the normal periodic 
Represents the rate of taxation on business 
revaluations. 
properties. Central Government have the 
 
responsibility for setting the rate and Local 
 
Authorities are responsible for the billing 
 
and collection of the tax. 
 
 
 92

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Operational Assets 
Revenue 
Fixed assets held and occupied in the 
Represents expenditure on day-to-day 
pursuit of strategic or service objectives. 
running expenses, e.g. salaries, fuel etc. 
 
 
Precept 
Revenue Support Grant (RSG) 
An amount charged by another authority 
The main Government grant received to 
to the Council’s Collection Fund. There 
pay for expenditure from the General 
are two preceptors on Leicester’s 
Fund.  
collection fund: the Police and Fire 
 
Authorities. 
Royal Institute of Chartered Surveyors 
 
(RICS) 
Private Finance Initiative 
A professional body for land, property, 
This is an initiative for utilising private 
construction and environmental related 
sector funding to provide public sector 
issues. 
assets.  
 
 
Specific Grants 
Provision 
Grants paid to the Council for a specific 
An amount of money set aside in the 
purpose, including housing benefit, 
budget to meet liabilities that are likely or 
housing improvement, etc. 
certain to arise in the future, but which 
 
cannot be quantified with certainty. 
Statement of Recommended Practice 
 
(the ‘SORP’) 
Prudential Borrowing 
This document specifies the principles and 
This gives local authority’s freedom to 
practices of accounting required to prepare 
borrow within prudent, affordable and 
this document. 
sustainable limits. 
 
 
Statement of Total Recognised Gains 
Prudential Indicator 
and Losses (STRGL) 
Linked to “Prudential Borrowing” above 
Demonstrates how the movement in net 
these are calculations that indicate if 
worth, shown in the balance sheet, is 
borrowing is within prudent, affordable 
identified to the Income and Expenditure 
and sustainable limits. 
Account surplus or deficit. 
 
 
Public Works Loan Board (PWLB) 
Stocks and Work in Progress 
A government agency providing long and 
Comprises the following categories; goods 
short-term loans to local authorities. 
or other assets purchased for resale; 
Interest rates are generally lower than the 
consumable stores; raw materials and 
private sector, and slightly higher than the 
components purchased for incorporation 
rates at which the Government itself may 
into products for sale; products and 
borrow. 
services in intermediate stages of 
 
completion, long term contract balances 
Reserves 
and finished goods. 
The amount of money still held at the end 
 
of a year, after allowing for all of the 
Trading Services 
expenditure and income that has taken 
These are services operated by the Council 
place. Earmarked reserves are those 
which largely trade with other departments 
established for a specific purpose. 
of the authority, and with external clients.  
 
 
 
 
 
 
 
 
 93

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Document Outline

• Title Page
• Contents
• Foreword
• Statement of Responsibilities
• Annual Governance Statement
• Audit Opinion
• Guide to the Core Statements
• Accounting Policies
• Income and Expenditure Account
• STRGL
• Balance Sheet
• Cash Flow Statement
• Notes to the Core Statements
• Housing Revenue Account
• Collection Fund
• Glossary

---