CONTENTS

1

STATEMENT OF ACCOUNTS 2011/12 OF

THE COUNTY COUNCIL OF THE CITY AND COUNTY OF CARDIF F Page No Foreword 5 Guide to the Financial Statements 11 Statement of Responsibilities for the Financial Statements 13 Auditor’s Report 14 Accounting Policies, critical judgements and assumptions 16 The Core Financial Statements

Movement in Reserves Statement for the year ended 31 March 2012 32 Comprehensive Income and Expenditure Statement for the year ended 31 March 2012

34

Balance Sheet as at 31 March 2012 36 Cash Flow Statement 38

Notes to the Core Financial Statements 40 The Supplementary Financial Statements

Housing Revenue Account 110 Cardiff and Vale of Glamorgan Pension Fund Accounts 116

Group Accounts 136 Trust Fund 162 The Annual Governance Statement 164 Glossary of Local Government Accountancy Terms 176

STATEMENT OF ACCOUNTS 2011/12 OF

CARDIFF PORT HEALTH AUTHORITY Foreword 180 Income and Expenditure Account and Balance Sheet 181 Certificate of the Chief Finance Officer and Auditor’s Report 182

2

3

STATEMENT OF ACCOUNTS

2011/12

OF

THE COUNTY COUNCIL OF THE CITY AND COUNTY OF CARDIFF

4

FOREWORD

5

Introduction This document presents the Statement of Accounts for Cardiff Council. These are prepared in accordance with proper accounting practices as contained in the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 and the Service Reporting Code of Practice 2011/12, supported by International Financial Reporting Standards (IFRS). The Financial Statements The Council’s financial statements covered by the Statement of Responsibilities and the Auditor’s Report, are set out on pages 32 to 161 and comprise:

• Accounting policies, critical judgements and assumptions • Movement in Reserves Statement • Comprehensive Income and Expenditure Statement • Balance Sheet • Cash Flow Statement • Notes to the Core Financial Statements • Housing Revenue Account (HRA) • Cardiff & Vale of Glamorgan Pension Fund Accounts • Group Accounts

The Council is lead authority for three Joint Committees: the Glamorgan Archives, Prosiect Gwyrdd, and the Welsh Purchasing Consortium. Cardiff Council’s share of the transactions and balances of these Joint Committees are incorporated in these financial statements. An explanation of the statements, their purpose and relationship between them as well as the main accounting policies adopted and critical judgements made in compiling the financial statements are provided in sections that follow after this foreword. Transformation Our Vision is that by 2020, Cardiff will be a world class European capital city with an exceptional quality of life at the heart of a thriving city region. All partners in the City have agreed to work to a set of shared outcomes

• People in Cardiff are healthy; • People in Cardiff have a clean, attractive and sustainable environment; • People in Cardiff are safe and feel safe; • People in Cardiff achieve their full potential; • Cardiff has a thriving and prosperous economy; • Cardiff is a great place to live, work and play; • Cardiff is a fair, just and inclusive society.

The level of UK Public Sector debt and government actions to minimise spending are likely to have a significant financial impact on the operation of the Council in future years, with forecasts of reductions in Central Government revenue and capital funding. In addition to this the Council has significant financial pressures, as identified in the February 2011 budget report. Cardiff Council, like many other public sector organisations, has to transform how it delivers services to its customers to meet the needs and expectations of Cardiff citizens. This will involve looking at how the services provided can be made more efficient and effective, making sure the customer continues to be at the centre of everything we do. Change, and the pace at which we make it, is now more important than ever. The global economic situation means that significant savings will have to be made in the short and medium term. The challenge of meeting the needs of growing numbers of customers with changing needs and expectations means that we will all have to work differently and even more efficiently to deliver services. The main aims of the Transformational Change Programme are:

FOREWORD

6

• Citizens, customers and communities will be empowered through improved access to services through their channel of choice

• Services will be developed to improve outcomes for citizens • Service areas will move towards a “single view” of citizens and their needs • Engagement with the workforce and Trade Unions throughout the change process • Services provided by the Council will better reflect the diversity of need which exists in the city • Robust business cases will ensure that strategic partnerships deliver efficiencies and service

improvements • Consistent review applied to externally produced business cases • Investment in services and the technology that underpins their delivery will enable service

transformation • The approach taken to secure efficiencies will be sustainable and enable the Council to

respond effectively to budgetary pressures • Compulsory redundancies will aim to be avoided through natural turnover and secondment

opportunities, retraining and redeployment Significant investment will be required to meet this change. This will increasingly impact on the financial and organisational structure of the Council as projects begin to deliver savings, customer service improvements are made and as functions are aligned to new service areas. A range of projects are being taken forward including ensuring fewer but better buildings, redesign of services to ensure they are citizen focused, sharing of services, generating efficiencies from procurement, enabling technology and ensuring staff are supported as the Council undertakes the transformation programme. Review of the Year Cardiff Council at its meeting on 24 February 2011 set a cash limit budget of £536.628 million for 2011/12. In addition a budget of £240,000 was set for discretionary rate relief which is outside the Budget Requirement. The outturn for the year compared to the budget is set out below. These figures are exclusive of Community Council precepts. Budget Outturn Variance £000 £000 £000 Financing: Revenue Support Grant (RSG) (315,272) (315,272) 0 Non-domestic Rates (NDR) (80,067) (80,067) 0 Council Tax (125,848) (130,384) (4,536) Other central grants (14,113) (13,831) 282 Budgeted transfers from balances/reserves (1,568) (1,568) 0 Total Funding (536,868) (541,122) (4,254) Net Expenditure Net budgeted expenditure 536,868 Net deficit on services on Comprehensive Income & Expenditure Statement 100,883 Adjust deficit figure for: Other Comprehensive Income & Expenditure impacting on General Fund & HRA

(2,271)

Items shown separately as financing (above) 541,122 Adjustments between accounting and funding bases under regulations for the General Fund Balance and HRA (as per Movement in Reserves Statement)

(99,843) Transfers (to)/from Earmarked Reserves (as per Note 2) (1,841) Other Movements in Reserves 2,656 Remove surplus on HRA 330 Total Expenditure 536,868 541,036 4,168

Net (surplus)/deficit for year transferred to Counc il Fund Balance

(86)

FOREWORD

7

The Council Fund Balance brought forward at 1 April 2011 was £11.256 million. The balance at 31 March 2012 has increased by £0.086 million to £11.342 million. The Housing Revenue Account balance increased to £7.167 million after taking into account the £0.330 million surplus in 2011/12. This will allow the continued investment required towards meeting the Welsh Housing Quality Standard (WHQS). The final revenue outturn position as reported to the Council’s Cabinet on 12 July 2012 indicated that the Council had maintained its spending within its overall net budget of £536 million in 2011/12. The surplus of £0.131 million amounts to 0.02% of the net budget and has been transferred to the Council Fund Balance. This does not include a deficit to building control account of £0.065 million and contribution to Council Fund balance of £0.02 million, which leads to surplus of £0.086m to the Council Fund Balance. During the year the monitoring process identified financial pressures in a number of areas, particularly Children’s Services, City Management and Education and this is reflected in the final outturn position with significant overspends being reported for these service areas at the year end. The overall position has been offset by other service area savings, a further exceptional level of NDR refunds on Council properties and by a surplus on Council Tax collection. In addition a number of one-off reimbursements have been received by the Council during the year particularly in relation to VAT refunds and insurance claims. In line with the intentions set out in previous monitoring reports, the receipt of these exceptional items has enabled a significant level of voluntary severance costs to be met in-year thereby reducing the need for future funding. It also provided an opportunity to set aside funding to meet future liabilities arising from the settlement of equal pay claims. Capital Programme Capital expenditure represents money spent on improving, acquiring and enhancing assets that are used in the provision of services as well as a number of items determined by legislation. The capital programme for 2011/12 was £155.2 million with actual expenditure in the year totalling £99.4 million. Expenditure during the year included:- £m

Schools & Lifelong Learning

Significant investment in property renewal including the Marion Centre at the Bishop of Llandaff school for children with autism and progression of schools organisation plan schemes in the East of the City and relating to provision of Welsh Medium education

13.5

Housing

Public Housing and Hostels including significant investment in kitchens and bathrooms to meet the Welsh Housing Quality Standard. Private House Improvement grants, disabled adaptations grants, renewal area and other environmental improvements including alleygating and energy efficiency.

38.7

Highways & Transportation

Highway and public realm improvements, drainage, street lighting, road safety schemes, public transport and telematics improvements. Implementation of the cycling strategy, energy efficiency improvements at Butetown tunnel, improvements to surface car parks, development work on a new Central Bus station, and a new highway salt barn.

15.6

Culture, Leisure, Parks and Tourism

Visitor and ticketing improvements at Cardiff Castle. New Dr Who visitor experience in Cardiff Bay. Radyr Library refurbishment; Bute Park improvements including refurbishment of West Lodge and Nursery Training and Education Centre; Play equipment replacement, allotment and other open space improvements.

7.0

Planning and Regeneration

Community Investment schemes improving public realm, local shopping parades, heritage and community grants.

4.2

Single Status / Equal Pay

Revenue expenditure recognised as capital following a direction from WG in relation to payments for Single Status and Equal Pay .

4.3

Other Including Improvements to property for the bereavement service, loans grants and equity to Business from Capital Cardiff Fund,

16.1

FOREWORD

8

Grants to Voluntary organisations and further loan to Glamorgan County Cricket Club, IT systems development, Waste Management infrastructure and rationalisation of Council office accommodation.

The Council pays for its Capital expenditure from a number of sources including borrowing. Borrowing must ultimately be repaid from existing and future income. The following chart shows how the capital monies spent during the year were paid for:-

Funding of Capital Expenditure

Direct Revenue Financing £8.6m

8.7%

Capital Receipts £8.7m 8.8%

Supported Borrowing £15.6m

15.6%

Grants and Contributions £31.2m 31.4%

General Capital Grant £5.2m 5.2%

Additional Borrowing £30.1m 30.3%

The Council is undertaking a number of projects which are both complex in their accounting requirements and also in the financial risks they represent. Such complex projects invariably involve a great deal of uncertainty, consultation and often involve significant time and work before they can be implemented. Significant levels of capital expenditure on new and existing assets were approved in the Council’s budget in February 2012. Such ongoing schemes include investment in the School Organisational Plan, significant investment in transportation and highway infrastructure particularly in the City Centre as part of the Central Business District, including a new transport interchange, the upgrade of kitchens and bathrooms in Council housing stock in order to meet the Welsh Housing Quality Standard, development of facilities to deal with residual and food waste, development of an innovation centre as well as essential investment in new technology as part of the Council’s transformation programme. The Capital programme approved in February 2012 has commitments which will require the Council to significantly increase its need to borrow. Some of this is on the basis that schemes will pay for themselves through income generation, savings or capital receipts. These schemes represent a significant financial risk to the Council, the largest of these being the School Organisation Plan and also including the Council’s Office accommodation review. Capital Receipts The sale of surplus assets and other income treated as capital receipts generated usable capital receipts of £8.97 million. Proceeds included sale of former operational properties, sale of land, council dwellings and recoupment of house renovation grants. Whilst proceeds from asset sales are required to support the capital programme and minimise the level borrowing in future years, the property market remains challenging and unpredictable. Movements in Property, Plant and Equipment and othe r Non Current assets Surplus land and some of the Councils’ operational property were re-valued during 2011/12 as part of a rolling programme of revaluation. Movements in such asset valuations have no impact on the council tax or rent as they are required to be neutralised from capital reserves. In line with current guidance

FOREWORD

9

the value of infrastructure assets are required to be shown at historic cost. This is likely to change in future years, but until then the asset values presented in the accounts understate the real value of infrastructure assets held and used by the Council. As reported in the previous year’s accounts, these accounts include new requirements in relation to what are known as Heritage Assets. The Councils holding of such assets, primarily the art and artefacts held at Cardiff castle have been valued at approximately £45 million. Valuations are only undertaken where the benefits of doing so outweighs the cost. Further detail is included within these accounts. Following the approval by WG of Foundation Status for Whitchurch High school, legislation requires the Council to transfer the ownership of land and buildings to the Governors at nil value. Such assets previously included in the accounts at circa £45 million, have been removed from the Council’s accounts for 2011/12 and shown as a loss on disposal of assets. During the year an appropriation of land was also undertaken, transferring land valued at £3 million from the General fund to the Housing Revenue Account. Treasury Management and Financial Instruments To manage daily cash flows and to pay for capital expenditure, the Council can borrow money. The Council has predominately long term loans of £440.0 million at the end of the year. £387.7 million is owed to the Public Works Loan Board (PWLB) and £52.3 million is owed to other bodies, primarily financial institutions. During the year external loans totalling £0.1 million were repaid to the PWLB and no new loans were raised, which has meant that the Council is using its temporary cash balances to pay for capital spend. Total interest payable on borrowing was £23.4 million during 2011/12, of which £4.4 million was paid for by the Housing Revenue Account. The average rate on the Council’s borrowing stood at 5.31% at the 31 March 2012 and the maturity profile is shown in the chart in note 21 of the core financial statements. Investments of £74.8 million at 31 March 2012 are represented by temporary cash balances, which are deposited for various maturities with Financial Institutions. The balance of investments is at a point in time and will fluctuate daily depending on the timing of income and expenditure e.g. payments to suppliers, receipt of grants. In the current economic climate, credit risks continue to be monitored. In April 2011, a further loan of £1.06 million was provided to Glamorgan County Cricket Club towards infrastructure development. As part of a review of financing at the club during the year, £5.77million owed to the Council was repaid and a new loan of £5.77 million was provided to the club, reflecting interest rates in the market at the time. The notes to the accounts provide further information on the Council’s financial assets and liabilities and the nature and extent of risks involved. In England during 2011/12, those councils who owned and operated their own housing stock, moved to a system of self financing, whereby any net income paid to or received from Central Government was converted to a one off adjustment of borrowing. Discussions are taking place in Wales during 2012/13 to implement a similar process which could see a significant increase in the level of debt of the Housing Revenue Account and Council. Pensions Assets and Liabilities Under International Accounting Standard 19 “Employee Benefits”, local authorities are required to account for the costs of pension entitlements earned in the year rather than the costs of contributions paid to the fund. Further details are given in Note 19 to the Core Financial Statements. The Council’s Actuary has estimated the Council’s pension liability to be £634 million at 31 March 2012. The effect upon the net worth of the Council is as follows:

FOREWORD

10

£000 Net Worth Excluding Pensions Liability 1,546,881 Net Worth as per Balance Sheet 912,881 Acknowledgements Finally, I wish to thank staff within Corporate Services, and their colleagues throughout the Council, who have worked on the preparation of these statements and enabled this year’s deadline to the accounts to be successfully met. I also wish to thank Corporate Directors, Chief Officers and Heads of Service for their assistance and co-operation throughout this process. Christine Salter Chief Corporate Services and S151 Officer Date 27 September 2012

GUIDE TO THE FINANCIAL STATEMENTS

11

Movement in Reserves Statement (Page 32) This statement shows the movement in the year on the different reserves held by the authority, analysed into ‘usable reserves’ (i.e. those reserves that the authority may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use) and other reserves. The surplus or (deficit) on the Provision of Services line show the true economic cost of providing the authority’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the Council Fund Balance and the Housing Revenue Account for council tax setting and dwellings rent setting purposes. The Net Increase/Decrease before Transfers to Earmarked Reserves line shows the statutory Council Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the council. Comprehensive Income and Expenditure Statement (Pag e 34) This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting costs. The taxation position is shown in the movement in reserves statement. Balance Sheet (Page 36) The Balance Sheet shows the value as at the balance sheet date of the assets and liabilities recognised by the authority. The net assets of the authority (assets less liabilities) are matched by the reserves held by the authority. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the authority may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves is those that the authority is not able to use to provide services. This category of reserves include reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that reflect ‘Adjustments between accounting basis and funding basis under regulations’. Pension Fund and Trust Fund balances are not included as these represent assets held in trust for third parties rather than in ownership of the Council. Cash Flow Statement (Page 38) The Cash Flow Statement shows the changes in cash and cash equivalents of the authority during the reporting period. The statement shows how the authority generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the authority are funded by way of taxation and grant income or from the recipients of services provided by the authority. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the authority’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (borrowing) to the authority. Housing Revenue Account Income & Expenditure Accoun t (Page 110) The HRA Income and Expenditure Account shows the economic cost in the year of providing housing services in accordance with generally accepted accounting practices rather than the amount to be funded from rents and government grants. Authorities charge rents to cover expenditure in accordance with regulations; this may be different from the accounting cost. The increase or decrease in the year, on the basis of which rents are raised, is shown in the Movement on the HRA Statement. Pension Fund Accounts (Page 116) The accounts include a Fund Account and Net Assets Statement for the Cardiff and Vale of Glamorgan Pension Fund, which the Council administers. The Cardiff & Vale of Glamorgan Pension Fund also publishes a separate, more detailed report.

GUIDE TO THE FINANCIAL STATEMENTS

12

Group Accounts (Page 136) Group Accounts are prepared in addition to the single entity accounts where local authorities have material interests in subsidiary and associated companies and joint ventures. The Group Accounts have been prepared to include Cardiff City Transport Services and comprise the Movement in Reserves Statement; the Comprehensive Income Expenditure Statement; the Balance Sheet; the Cash Flow statement and associated notes. Trust Funds (Page 162) Various bequests and donations are held in Trust Funds. Income generated from the investments is available for grants and awards in accordance with the objects of the relevant Trusts.

STATEMENT OF RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS

13

The Council’s Responsibilities The Council is required to:

• make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this Council for 2011/12 that officer was Christine Salter, Chief Corporate Services and Section 151 Officer who holds the statutory post of Chief Finance Officer.

• manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets;

• approve the statement of accounts Councillor Derrick Morgan Date: 27 th September 2012 Lord Mayor The Chief Finance Officer’s Responsibilities The Chief Finance Officer is responsible for the preparation of the Council’s financial statements in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (the Code). In preparing these financial statements, the Chief Finance Officer has:

• selected suitable accounting policies and then applied them consistently; • made judgements and estimates that were reasonable and prudent; • complied with the local authority Code.

The Chief Finance Officer has also:

• kept proper accounting records which were up to date; • taken reasonable steps for the prevention and detection of fraud and other irregularities.

The Chief Finance Officer’s Certificate The financial statements for Cardiff Council give a true and fair view of the financial position of the authority at 31 March 2012 and its income and expenditure for the year ended 31 March 2012. Christine Salter Date: 27 September 2012 Chief Corporate Services and Section 151 Officer

AUDITORS REPORT

14

Independent auditor’s report to the Members of the County Council of the City and County of Cardiff

I have audited the accounting statements and related notes of:

• the County Council of the City and County of Cardiff; • the County Council of the City and County of Cardiff Group; and • Cardiff and Vale of Glamorgan Pension Fund for the year ended 31 March 2012 under the Public Audit (Wales) Act 2004. The County Council of the City and County of Cardiff’s accounting statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement, the Movement on the Housing Revenue Account Statement and the Housing Revenue Account Income and Expenditure Statement. The County Council of the City and County of Cardiff’s Group accounting statements comprise the Group Movement in Reserves Statement, the Group Comprehensive Income and Expenditure Statement, the Group Balance Sheet and the Group Cash Flow Statement. Cardiff and the Vale of Glamorgan Pension Fund’s accounting statements comprise the Fund Account and the Net Assets Statement. The financial reporting framework that has been applied in their preparation is applicable law and the Code of Practice on Local Authority Accounting in the United Kingdom 2011-12 based on International Financial Reporting Standards (IFRSs).

Respective responsibilities of the responsible fina ncial officer and the independent auditor

As explained more fully in the Statement of Responsibilities for the Statement of Accounts set out on page 13, the responsible financial officer is responsible for the preparation of the statement of accounts, including group and pension fund accounts, which gives a true and fair view. My responsibility is to audit the accounting statements and related notes in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require me to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the accounting statements

An audit involves obtaining evidence about the amounts and disclosures in the accounting statements and related notes sufficient to give reasonable assurance that the accounting statements and related notes are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the County Council of the City and County of Cardiff, the County Council of the City and County of Cardiff Group and Cardiff and the Vale of Glamorgan pension fund’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the responsible financial officer and the overall presentation of the accounting statements and related notes. In addition, I read all the financial and non-financial information in the Foreword to identify material inconsistencies with the audited accounting statements and related notes. If I become aware of any apparent material misstatements or inconsistencies, I consider the implications for my report.

Opinion on the accounting statements of County Coun cil of the City and County of Cardiff

In my opinion the accounting statements and related notes:

• give a true and fair view of the financial position of County Council of the City and County of Cardiff as at 31 March 2012 and of its income and expenditure for the year then ended; and

• have been properly prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011-12.

Opinion on the accounting statements of County Coun cil of the City and County of Cardiff Group

In my opinion the accounting statements and related notes: • give a true and fair view of the financial position of County Council of the City and County of

Cardiff Group as at 31 March 2012 and of its income and expenditure for the year then ended; and • have been properly prepared in accordance with the Code of Practice on Local Authority

Accounting in the United Kingdom 2011-12.

AUDITORS REPORT

15

Opinion on the accounting statements of Cardiff and the Vale of Glamorgan pension fund

In my opinion, the pension fund accounts and related notes: • give a true and fair view of the financial transactions of Cardiff and the Vale of Glamorgan

Pension Fund during the year ended 31 March 2012 and of the amount and disposition of the fund’s assets and liabilities as at that date, other than liabilities to pay pensions and benefits after the end of the scheme year; and

• have been properly prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011-12.

Opinion on other matters

In my opinion, the information contained in the Foreword for the financial year for which the accounting statements and related notes are prepared is consistent with the accounting statements and related notes.

Matters on which I report by exception

I have nothing to report in respect of the Governance Statement on which I report to you if, in my opinion, it does not reflect compliance with ‘Delivering Good Governance in Local Government: Framework’ published by CIPFA/SOLACE in June 2007, or if the statement is misleading or inconsistent with other information I am aware of from my audit.

Certificate of completion of audit

I certify that I have completed the audit of the accounts of County Council of the City and County of Cardiff in accordance with the requirements of the Public Audit (Wales) Act 2004 and the Code of Audit Practice issued by the Auditor General for Wales. Anthony Barrett Appointed Auditor Wales Audit Office 24 Cathedral Road CARDIFF CF11 9LJ Date 28 September 2012

Electronic Publication of financial statements

The maintenance and integrity of the County Council of the City and County of Cardiff web site is the responsibility of the Council; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the statement of accounts since it was initially presented on the web site.

ACCOUNTING POLICIES

16

In accordance with the Accounts and Audit (Wales) Regulations 2005, this Statement of Accounts summarises the Council’s transactions for the 2011/12 financial year and its position at the year-end of 31 March 2012. The accounts are prepared in accordance with proper accounting practices as contained in the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 and the Service Reporting Code of Practice 2011/12, supported by International Financial Reporting Standards (IFRS). Accounting policies used when formulating the accou nts 1. Accounting policies issued but not yet adopted There are no instances of accounting policies issued but not yet adopted whose effects have been disclosed in these accounts. 2. Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when the cash payments are made or received. In particular:

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

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

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

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

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

• Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance is written down and a charge made to revenue for the income that might not be collected.

3. Carbon Reduction Commitment The authority is required to participate in the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. This scheme is currently in its introductory phase which will last until 31 March 2014. The authority is required to purchase and surrender allowances, currently retrospectively, on the basis of emissions i.e. carbon dioxide produced as energy is used. As carbon dioxide is emitted (i.e. as energy is used), a liability and an expense are recognised. The liability will be discharged by surrendering allowances. The liability is measured at the best estimate of the expenditure required to meet the obligation, normally at the current market price of the number of allowances required to meet the liability at the reporting date. The cost to the authority is recognised and reported in the costs of the authority’s services and is apportioned to services on the basis of energy consumption. 4. Cash and Cash Equivalents These are sums of money available for immediate use. Cash is represented by cash in hand, bank balances of cheque book schools and the net balance on all of the Council’s other accounts, including petty cash accounts. Cash equivalents are highly liquid investments including Call Accounts and Money Market Funds that are repayable without penalty on notice of not more than 24 hours. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand. 5. Contingent assets and liabilities These are potential benefits or obligations that arise from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the Council’s

ACCOUNTING POLICIES

17

control. Contingent assets and liabilities are not recognised in the accounting statements but are disclosed in a note to the accounts. 6. Deferred Liabilities Where the Authority receives income from developers and other organisations in respect of the future maintenance of assets, the amounts are held in the Balance Sheet as deferred liabilities until such time that the maintenance of the asset takes place. Obligations under finance leases are treated as deferred liabilities and measured on the basis disclosed in accounting policy 21. 7. Disposals and Capital Receipts When non current assets are disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet is written off to the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals are credited to the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account. Where sums are due but not yet received they are treated as deferred capital receipts. A proportion of receipts relating to Housing disposals (75% for dwellings – net of statutory deductions and allowances) are used to reduce the capital financing requirement of the Housing Revenue Account. Receipts from disposals are appropriated to the Capital Receipts Reserve from the Council General Fund Balance in the Movement in Reserves Statement and can only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow (the Capital Financing Requirement (CFR)). The written-off value of disposals is not a charge against council tax, as the cost of non current assets are fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the Council General Fund Balance in the Movement in Reserves Statement. 8. Employee Benefits Benefits Payable during Employment Short-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees and are recognised as an expense for services in the year in which employees render service to the Council. An accrual is made for the cost of holiday entitlements earned by employees but not taken before the year-end which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement so that there is no impact on Council Tax. Termination Benefits Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy, and are charged on an accruals basis to the relevant service line in the Comprehensive Income and Expenditure Statement. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year. An accrual is made for the pension strain to the pension fund and is included in the Balance Sheet as a long-term creditor to the extent that it is repayable to the pension fund over 5 years. In the Movement in Reserves Statement, appropriations are made to or from the Pensions Reserve to neutralise the impact of this accrual on Council Tax. Post Employment Benefits Employees of Cardiff Council are members of two separate pension schemes:

•••• The Teachers’ Pension Scheme, administered by the Teachers Pension Agency

ACCOUNTING POLICIES

18

•••• The Local Government Pensions Scheme, administered by Cardiff Council. The Council accounts for pension costs in the main accounting statements in accordance with International Accounting Standard 19 (IAS19). IAS19 requires recognition in the employer’s accounts of the fact that although retirement benefits are not actually payable until an employee retires, the Authority’s commitment to make those payments arises at the time that employees earn their future entitlements. The treatment of pension costs in the accounts depends on whether they are in respect of a defined benefit scheme or a defined contribution scheme. Defined Benefit Schemes In defined benefit schemes the retirement benefits payable are based on pay and service and the assets and liabilities of the scheme can be readily identified between the participating bodies in the scheme. The Local Government Pension Scheme is a defined benefit scheme. Under IAS19 the cost which is charged to net cost of services is the cost of pension entitlements earned in the year rather than the cost of contributions paid into the Fund. This cost is known as the current service cost and is determined by the actuary. The Net Pension Liability which represents the Authority’s attributable share of the Pension Fund’s assets and liabilities is shown in the Balance Sheet. The following accounting policies have been applied in determining the figures to be included in the Comprehensive Income and Expenditure Statement and Balance Sheet in respect of pensions costs for the Local Government Scheme:

•••• the attributable assets of the scheme have been valued at bid price •••• the attributable liabilities have been measured on an actuarial basis using the projected unit

method which assesses the future liabilities discounted to their present value •••• the surplus/deficit in the scheme has been calculated as the excess/shortfall in the value of the

assets in the scheme over/below the present value of the scheme liabilities •••• the current service cost has been based on the assumptions at the start of the year and the

estimated pensionable pay over that year. •••• the interest cost is based on the discount rate and the present value of the scheme liabilities at

the beginning of the period; discount rates are based on the annualised yields on the iBoxx over 15 year AA rated corporate bond index.

•••• the expected return on assets is based on the long-term expectations at the beginning of the period

•••• actuarial gains/losses have been calculated by updating values from the last actuarial valuation to reflect conditions at the balance sheet date

•••• past service costs cover items such as the provision of enhanced or discretionary benefits on retirement. The costs included in the accounts for 2011/12 are the full costs relating to early retirements granted in the year which have been calculated as the special contributions payable into the fund adjusted for the financial assumptions used under IAS19 to represent the approximate cost of the increase in benefits granted to members under IAS19.

Defined Contribution Schemes These are schemes where the employer pays fixed amounts into the scheme and has no obligation to contribute further amounts if the scheme does not have sufficient assets to pay employee benefits. Under IAS19, defined contribution schemes are accounted for by charging employer contributions to revenue as they become payable. The Teachers Pension Scheme is a defined benefit scheme but as the Authority cannot identify its share of the underlying assets and liabilities in the scheme on a consistent basis; this scheme is to be accounted for as if it were a defined contribution scheme under IAS19. In relation to retirement benefits, statutory provisions require the Council General Fund balance to be charged with the amount payable by the Council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end.

ACCOUNTING POLICIES

19

The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. 9. Events After the Balance Sheet Date Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:

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

• those that are indicative of conditions that arose after the reporting period – The Statement of Accounts is not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts. 10. Exceptional Items Exceptional items are material in terms of the Authority’s overall expenditure and not expected to recur frequently or regularly. When they occur they are included in the Comprehensive Income Expenditure Statement as a separate line if that degree of prominence is necessary to give a fair presentation of the accounts. Exceptional items in 2011/12 relate to income from prior year VAT trade waste and insurance claims (less fees incurred). 11. Financial Assets Financial assets are classified into three types:

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

• investments at fair value – assets that have a quoted market price and/or do not have fixed or determinable payments.

• fair value through profit and loss – assets that are held for trading (surplus funds invested by an external cash manager on the Council’s behalf).

Loans and Receivables: Initially measured at fair value and carried at their amortised cost. Credits to the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. Interest that is due but unpaid at the end of the year is recognised in the Balance Sheet as a current asset. 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 Comprehensive Income and Expenditure Statement. Any gains and losses that arise on the de-recognition of the asset are credited/debited to the Comprehensive Income and Expenditure Statement. Where loans or receivables are undertaken on behalf a third party or are legally required to be kept separate, Interest on these balances has been paid to the relevant third parties accordingly. Investments at Fair Value: available-for-sale assets are initially measured and carried at fair value. Where the asset has fixed or determinable payments, annual credits to the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the Council. Assets are maintained in the Balance Sheet at fair value. Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses). Changes in fair value are

ACCOUNTING POLICIES

20

balanced by an entry in the Available-for-Sale Reserve and the gain/loss is recognised in the Comprehensive Income and Expenditure Statement. The exception is where impairment losses have been incurred - these are debited to the Comprehensive Income and Expenditure Statement, along with any net gain/loss for the asset accumulated in the Reserve. Where assets are identified as impaired because of 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 Comprehensive Income and Expenditure Statement. Any gains and losses that arise on de-recognition of the asset are credited/debited to the Comprehensive Income and Expenditure Statement, along with any accumulated gains/losses previously recognised in the Statement of Total Recognised Gains and Losses. Investments at Fair Value through Profit and loss: These are initially measured at and carried at fair value. Any movements in fair value, gains and losses that arise on de-recognition of the asset and investment income is credited/debited to the Comprehensive Income and Expenditure Statement. 12. Financial Liabilities Financial liabilities are initially measured at fair value and carried at their amortised cost. Annual charges to the Comprehensive Income Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. Interest that is due but is unpaid at the end of the year is recognised in the Balance Sheet as a current liability. Premiums or Discounts incurred on the extinguishment of debt are charged immediately to the Comprehensive Income Expenditure Statement, with Regulation being used to mitigate the financial impact on the council taxpayer by an adjustment from the Financial Instruments Adjustment Account.

• Premiums are amortised to the Movement in Reserves Statement over the life of the replaced loan, replacement borrowing or other prudent period.

• Discounts are amortised to the Movement in Reserves Statement over the life of the replaced loan or 10 years (whichever is the shorter period).

Where restructuring of the loan portfolio 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 amortised to the Movement in Reserves Statement in accordance with statutory regulation. Transaction costs such as brokers’ fees and commission in relation to managing the Authority’s Financial Instruments, which are not considered material, are charged immediately to the Comprehensive Income and Expenditure Statement. 13. Foreign Currency Translation When transactions are required to be undertaken in a foreign currency, they are converted at the prevailing rate on the day of the transaction. The Council does not invest or borrow in any currency other than sterling and undertakes very few transactions involving foreign currency. 14. Grants - Revenue Grants and other contributions relating to revenue expenditure are accounted for on an accruals basis and recognised when:

• the Council will comply with the conditions for their receipt. • there is reasonable assurance that the grant or contribution will be received.

The accounting treatment will vary depending on whether it is deemed that conditions inherent in the agreement have been complied with. Monies advanced as grants for which conditions have not been yet been satisfied are carried in the Balance Sheet as Revenue Grants receipts in advance. When conditions have been satisfied, the grant or contribution is credited to the relevant service line (specific revenue grants and contributions) or Taxation and Non-Specific Grant Income (non-specific revenue grants) in the Comprehensive Income and Expenditure Statement. Where there is no reasonable

ACCOUNTING POLICIES

21

assurance that the conditions will be met, any cash received will not be recognised as a receipt of grant monies but as a repayment due to the awarding body. The cash received is held on the Balance Sheet as a liability. Where the conditions of a revenue grant or contribution have been complied with but it is yet to be used to fund expenditure for the purpose stipulated in the grant agreement, it is set aside as an Earmarked Reserve. 15. Grants and Contributions – Capital Grants and contributions that are applied in the year to fund capital schemes that are Revenue Expenditure Funded by Capital under Statute (REFCUS), are treated as revenue income and credited to the Comprehensive Income and Expenditure Statement to the relevant service line. Capital Grants and Contributions applied in paying for other capital works are credited to the “taxation and non-specific grant income” line in the Comprehensive income and expenditure statement. Where a specific Capital Grant or a Contribution has been received but remains unapplied, this is deemed to represent a condition in that the unused element could be returned to the funder. Capital grants and contributions are identified separately on the Balance Sheet. Contributions such as those arising from Town and Country Planning Act 1990 obligations usually come with conditions that the funding can be clawed back by the provider if not spent within a certain period of time or if not spent on a specific project. Such items are treated as capital contributions receipts in advance. The unapplied element of such grants or contribution would not be taken to the Comprehensive Income and Expenditure Statement when received and is treated as a Creditor. Where a specific Capital grant or Contribution is applied, but is not yet received, this is taken to Comprehensive Income and Expenditure Statement when applied and is treated as a Debtor. Non specific grants such as the General Capital Grant or Major Repair Allowance are recognised immediately in the comprehensive income and expenditure statement. If such a non specific grant remains unapplied at the end of the year, this element is held as Capital Grants received in advance. 16. Intangible Fixed Assets Expenditure on assets that do not have physical substance but are identifiable and controlled by the Council is capitalised. In the case of computer software and licences, this will be capitalised where it relates to the enhancement or development of systems, expenditure on which is deemed to generate long-term economic benefits to the Authority in the form of savings and improvements in service delivery. Intangible assets are included in the Balance Sheet at historic cost net of amortisation, are reviewed for impairment and are re-valued only where they have a readily ascertainable market value. The assets are amortised to the relevant service revenue account over the economic life of the investment to reflect the pattern of consumption of benefits Any amortisation, impairment, disposal gains or losses are not permitted to have an effect upon Council Fund Balance and are reversed in the Movement in Reserves Statement. 17. Interests in Companies and Other Entities The Council has interests in companies and other entities. Subject to the level of materiality and exposure to risk, these are consolidated to produce group accounts. In the Council’s own single entity accounts, the interests in such companies are recorded as Financial Assets in the Balance Sheet. 18. Inventories Inventories are measured and held at the lower of cost or net realisable value. When such inventories are sold, exchanged or distributed, the carrying amount is recognised as an expense in the Comprehensive Income and Expenditure Statement.

ACCOUNTING POLICIES

22

19. Investment Property Investment properties are those that are used solely to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost and subsequently at fair value, based on the amount at which the asset could be exchanged between knowledgeable parties at arm’s-length. Properties are not depreciated but were last revalued in 2010/11 and are due to be revalued again in 2012/13 according to market conditions at the year-end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. 20. Joint Committees The relevant proportion of the transactions and balances of Joint Committees are included within the Council’s Comprehensive Income Expenditure Statement and Balance Sheet. These reflect the transactions and balances as per the draft accounts prepared for each Joint Committee. To date, no audit opinion has been issued in respect of the accounts of the Joint Committees. 21. Leases Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Leases are reviewed at inception and classed as finance or operating by reviewing arrangements such as:

• Transfer of ownership at the end of lease contract • Option to purchase asset at price lower than fair value • Lease term is for major par of economic life of asset • Present value of minimum lease payments amounts to at least substantially all of the fair value

of leased asset • Leased assets are specialist and only lessee can use them without major modifications

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets. The Authority as Lessee Finance Leases Property, plant and equipment held under finance leases are recognised on the Balance Sheet at fair value measured at the lease’s inception. The asset recognised is matched by a liability for the obligation to pay the lessor. Lease payments are apportioned between:

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

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

Property, Plant and Equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Authority at the end of the lease period). For plant and equipment the Council has set a de-minimus level of £75,000 for leases to be recognised as finance leases.

ACCOUNTING POLICIES

23

The Authority is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the Council General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. Operating Leases Payments for operating leases are charged to the relevant service revenue account on an accruals basis. The charges are made evenly throughout the period of the lease. The Authority as Lessor Finance Leases Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance sheet is written off to the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. A gain, representing the Authority’s net investment in the lease, is credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal), matched by a lease (long-term debtor) asset in the Balance Sheet. Lease rentals receivable are apportioned between:

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

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

The gain credited to the Comprehensive Income and Expenditure Statement on disposal is not permitted by statute to increase the General Fund Balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the Council General Fund Balance to the Capital Receipts Reserve in the Movement in Reserves Statement. Where the amount due in relation to the lease asset is to be settled by the payment of rentals in future financial years, this is posted out of the Council General Fund Balance to the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. When the future rentals are received, the element for the capital receipt for the disposal of the asset is used to write down the lease debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts Reserve. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. Operating Leases Where the Authority grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). 22. Non-current Assets Held for Sale When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previously losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on Assets Held for Sale. If assets no longer meet the criteria to be classified as Assets Held for Sale, they are

ACCOUNTING POLICIES

24

reclassified back to non-current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as Held for Sale, and their recoverable amount at the date of the decision not to sell. Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale. 23. Overheads and Support Services Costs The costs of overheads and support services are allocated to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2011/12 (SERCOP). The total absorption costing principle is used – the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:

• Corporate and Democratic Core – costs relating to the Council’s status as a multifunctional, democratic organisation.

• Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring early and impairment losses chargeable on Assets Held for Sale.

These two cost categories are defined in SERCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement, as part of Net Cost of Services. 24. Prior Period Adjustments Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error.

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

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

Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment. 25. Private Finance Initiative (PFI) and similar co ntracts These are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor during the contract term. The Council does not have any such contracts. 26. Property, Plant, Equipment, Community and Herit age Assets Assets that have physical substance used in the production or supply of goods or services, those intended to be held indefinitely and those for the promotion of culture and knowledge and expected to be used during more than one financial year. Recognition: Expenditure on the acquisition, creation or enhancement of such assets is capitalised on an accruals basis. All expenditure incurred on existing assets is assumed to result in enhancement of the asset and will be shown in the accounts as an addition to the asset. Expenditure that maintains but does not add to an asset’s potential to deliver benefits or service potential (i.e. 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 specific asset into working condition for its intended use. The Council does not capitalise borrowing costs. These assets are then carried in the Balance Sheet using the following measurement bases:

ACCOUNTING POLICIES

25

• Infrastructure assets – depreciated historical cost. Not all roads and infrastructure are included in the Balance Sheet as the balance sheet values reflect historic expenditure incurred on such assets from a point in time. Any roads adopted by the Council are not individually identified on the balance sheet and are effectively recorded at nil value. Accordingly the balance sheet does not represent the true value and size of infrastructure assets. This is likely to change in future years, but until then the asset values presented in the accounts understate the real value of infrastructure assets held and used by the Council.

• Community assets and Assets under Construction are included in the Balance Sheet at historic cost.

• Heritage assets are included at historic cost if included in the accounts and only measured at fair value where justified the benefits of doing so outweigh the costs

• Council dwellings – Existing use value for social housing (EUV-SH) This is the estimated amount for which a property should exchange, on the date of valuation, between a willing buyer and a willing seller on the assumption that the property will continue to be let and used for social housing. The Council has used a discount factor of 34% to adjust beacon values to existing use value.

• all other assets – fair value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV).

Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value. Where non-property assets such as plant and equipment have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value. Assets included in the Balance Sheet at fair value are revalued regularly to ensure that their carrying amount is not materially different from their fair value at the year-end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service. 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. Charges to Revenue for Non-Current Assets: Services are debited with the following amounts to record the cost of holding assets during the year:

• depreciation attributable to the assets used by the relevant service • impairment losses on assets used by the service where there are no accumulated gains in the

Revaluation Reserve against which the losses can be written off

The Council is not required to raise council tax to fund depreciation, impairment losses or amortisations. However, it is required to make a prudent provision from revenue towards the reduction in its overall requirement to borrow. Depreciation, impairment losses and amortisations are therefore replaced by this prudent provision in the General Fund Balance by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. Impairment: Assets are assessed at each year-end as to whether there is any indication that an asset may be reduced in value. Where impairment losses are identified, they are accounted for by:

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

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

ACCOUNTING POLICIES

26

Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. Depreciation: Depreciation is provided for on all Property, Plant and Equipment assets by an allocation of their depreciable amounts over their estimated useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land, heritage and community assets) as well as assets that are not yet available for use (i.e. assets under construction). The Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 also requires depreciation of buildings categorised as surplus assets. However, the Council does not depreciate these on grounds of materiality. For assets depreciated by the Council, it charges a full year’s depreciation on capital expenditure incurred in the year. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account. Component Accounting: Where a single asset may have a number of different components each having a different useful life, three factors are taken into account to determine whether a separate valuation of components is to be recognised in the accounts in order to provide an accurate figure for depreciation.

•••• Materiality with regards to the Council’s financia l statements Componentisation will only be considered for individual non land assets that have a net book value of more than £1.5 million at the end of the financial year.

•••• Significance of component . For individual assets meeting the above threshold, where services within a building (Boilers / Heating / Lighting / Ventilation etc..) or items of fixed equipment (Kitchens / Cupboards) is a material component of the cost of that asset (> 30%) then those services / equipment will be valued separately on a component basis.

•••• Difference in rate or method of depreciation compa red to the overall asset . Only those elements that normally depreciate at a significantly different rate from the non land element as a whole, or that require a different method of depreciation will be identified for componentisation.

Assets that fall below the de-minimis levels and tests above can be disregarded for componentisation on the basis that any adjustment to depreciation charges would not result in a material mis-statement in the accounts. Where assets are material and to be reviewed for significant components, it is recommended that the minimum level of apportionment for the non-land element of assets is:

• Plant and equipment and engineering services. • Structure.

Professional judgement will be used in establishing materiality levels; the significance of components, useful lives, depreciation methods and apportioning asset values over recognised components. Revaluations of the Council’s property assets will continue to be undertaken on a 3 yearly rolling programme basis, at which point the revaluation takes into account the value and condition of the assets, relevant components and also de-recognition where relevant. Where there is a major refurbishment of an asset, a new valuation will be sought in the year of completion and a revision to the useful life. The Council does not currently undertake componentisation on Infrastructure assets. The Code for 2010/11 requires a revaluation decrease or impairment loss charged to the Surplus or Deficit in the Provision of Services (SDPS) to be reversed where there is a subsequent revaluation

ACCOUNTING POLICIES

27

gain on the same asset that removes the underlying reasons for the original loss. The Statement of Accounts complies with this requirement for revaluations undertaken from 2011/12 onwards. 27. Provisions, including back pay arising from une qual pay claims Provisions are made when, as a result of a past event, it is probable that a transfer of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount but the timing of the settlement is uncertain. Provisions are charged as an expense to the appropriate service revenue account in the year that 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 which is held on the Balance Sheet. Estimated settlements are reviewed at the end of each financial year, and provisions that are no longer required are credited back to the relevant service revenue account. In 2010/11 the Council had a provision for the costs of settling valid outstanding claims in respect of Equal pay back pay. Statutory arrangements allow settlements to be financed from the General Fund in the year that payments actually take place, not when the provision is established. The provision was therefore matched by an Equal Pay Back Pay Reserve that will be debited back to the General Fund balance in the Movement in Reserves Statement in future financial years as payments are made. This provision has now become cash backed therefore has gone through the income and expenditure account in 2011-12 and the Equal Pay Back Pay Reserve has been debited back to the General Fund. 28. Revenue Expenditure Funded from Capital under S tatute (REFCUS) Expenditure incurred during the year that may be capitalised under statutory provisions but that does not result in the creation of a non-current asset has been charged as expenditure to the relevant service in the Comprehensive Income and Expenditure Statement. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the level of council tax. 29. Reserves The Council sets aside amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against council tax for the expenditure. Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments, retirement and employee benefits and do not represent usable resources for the Authority. 30. Value Added Tax Apart from certain cases where the Council funds supplies of goods or services to other persons or organisations, the Council is reimbursed for VAT. The revenue accounts have, therefore been prepared exclusive of this tax. Critical judgements in applying accounting policies Accounting policies are only applied to material transactions of the Authority. In applying policies, the Authority has had to make certain judgements about complex transactions or those involving uncertainty about future events. Examples of critical judgements made in the Statement of Accounts are:

• Reducing levels of funding for local government requires budget prioritisation and a Transformation Programme to ensure resources are firmly aligned to priorities as outlined in the Corporate Plan. This programme will have a significant impact on future operating structure and the assets used to deliver services.

ACCOUNTING POLICIES

28

• Cardiff City Transport Services Limited is a private limited company, which is wholly owned by Cardiff Council but run at ‘arms length’. In November 2008 the Office of Fair Trading (‘OFT’) decided that, during the period from 19 April 2004 to 18 February 2005, Cardiff City Transport Services Limited (trading as Cardiff Bus) infringed the prohibition imposed by section 18(1) (the Chapter II prohibition) of the Competition Act 1998 (the Act), by engaging in predatory conduct which amounted to the abuse of its dominant position in the relevant markets. In January 2011 claims were issued by 2Travel Group PLC (in liquidation) and others in the Competition Appeal Tribunal.

In respect of the 2Travel claim the case has been heard and a decision was made on the 5th July 2012, the other claims are stayed. The decision ordered Cardiff Bus to pay 2Travel £33,818.79 for loss of profits, £13,311.70 for interest on loss of profits and £60,000.00 for exemplary damages. Other heads of loss of the claimant’s case were dismissed and costs were reserved. The Council will continue to keep the matter under review in respect of any cost applications that may be made by or against Cardiff Bus and the claims that have been stayed.

The Council is further informed, that in accordance with accounting principles and legislation relating thereto, Cardiff Bus, having taken appropriate advice, has had regard to the decision made, any cost applications that may be made by or against Cardiff Bus and the claims that have been stayed in settling the level of provisions required (if any) in its accounts.

In light of (i) the decision made in July 2012 as to the level of damages awarded and (ii) the information provided by Cardiff Bus in respect of its accounts (in particular any subsequent application for costs that may be made by or against it in respect of the same , the stayed claims and how the same has been accounted for, if at all, ) the Council has concluded that in respect of the Council's Statement of Accounts, which lists the Bus Company as an investment, that on the information made available, no liability, which would materially affect the value of this investment, exists at 31 March 2012. . In addition and based on the information provided by Cardiff Bus we are content that the costs of the claim incurred by Cardiff Bus for the year 2011/12 have been properly accounted for.

• The Council plans significant capital investment in the ongoing enhancement of existing assets or for specific capital schemes. Many of these programmes e.g. for Schools Organisation plan will result in a significant increase in the level of External borrowing that the Council will need to undertake. Such borrowing is required to be repaid from future savings, additional income or from the sale of assets. These items represent a significant risk to the Council. The Council sets aside from its revenue budget each year a prudent amount for the eventual repayment of that borrowing, to ensure that borrowing remains, affordable, prudent and sustainable.

• It is assumed that where provision for doubtful debtors has not been made, all other deferred

debtors and investment balances are recoverable and not impaired.

• All related parties are fully disclosed and figures included in the accounts produced by external organisations are robust and accurate.

• Where an accrual has been made for future pension strain liabilities as a result of voluntary

severance, it is assumed that these costs are not included in calculation of the pensions liability carried out by the actuary.

• Where cash has been received for a specific Capital grant or Contribution but remains

unapplied, this is deemed to represent a condition in that the unused element could be returned. Accordingly this unapplied element is treated as a Creditor. Where a specific Capital grant or Contribution is applied, but is not yet received, this is treated as a Debtor.

Where relevant, the notes to the accounts provide additional information on any risks and judgements. Assumptions made about the future and other sources of estimation uncertainty

ACCOUNTING POLICIES

29

The Statement of Accounts contains estimated figures that are based on assumptions made by the Authority about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. Significant disclosures are already made in the accounts in relation to the assumptions about financial instruments. However the other items in the Authority’s Balance Sheet at 31 March 2012 for which, by their nature, there is a significant risk of material adjustment in the forthcoming financial year are as follows: Item Uncertainty Effect if Actual Results Differ

from Assumptions Valuation of assets such as investments, land, property, plant, equipment and Investment in companies

Valuation involves assessment of a number of variables such as market conditions, useful life, cost of reconstruction, assessment of condition, use of a discount factor of 34% to adjust beacon values to Existing use value for social housing etc. These assumptions are made by professional qualified in-house or external valuation providers or use of industry data in order to determine figures for the Statement of accounts. Valuations are carried out within the Council by a qualified Chartered Surveyor, in accordance with the Practice Statements and Guidance Notes set out in the Royal Institution of Chartered Surveyors (RICS) Valuation Standards (The Red Book) and any other relevant guidance. Where it is difficult to provide valuations e.g valuations of the Council’s shareholding in Cardiff City Transport Services Ltd, a guide such as multipliers of EBITDA are used. CIPFA are reviewing accounting treatment of various assets such as Infrastructure and schools

Where required revaluations are carried out as part of a rolling programme. Any charges to services for non current assets is required to be reversed out in the accounts, so this will not have an impact on Council tax. Any transactions involving disposals may be valued on a different basis and would be the subject of an open market disposal, with any revisions in value reflected in the Balance Sheet. Any change in the fair value of Cardiff City Transport Services Ltd as a result of the use of multipliers has no impact on the level of Council tax. Any changes are reflected by a corresponding amendment in the available for sale reserve. Changes in future accounting practice could mean changes in valuation basis of non current assets and in which assets are required to be included on the Councils balance sheet and which are not. Any such changes will have no impact on the level of Council tax or rent.

Provisions in relation to legal claims

The Authority makes a number of provisions for liabilities that it may face where a reasonable estimate of value can be made. In most cases these are subject to legal claims such Insurance claims, Equal Pay back pay and other items as disclosed in the provisions note. A different approach has been used to estimate the Equal Pay back pay in 2011/12 with a financial model being used to calculate an estimated liability. This has led to an increase in the provision

The provisions are based on information known at the Balance Sheet date and best estimates and professional internal and external advice is used to determine value and number of provisions. The outcomes of such issues will have an impact on the outturn of the Council in future years, however due to the uncertain nature of these events, are difficult to quantify.

ACCOUNTING POLICIES

30

Item Uncertainty Effect if Actual Results Differ from Assumptions

required in 2011/12.

Provisions in relation to arrears

At 31 March 2012, the Authority had amounts it was owed for items such as sundry debtors, Council tax, NDR and rents. After taking into account trends in past collection experience and other relevant changes that may impact on collectability such as the economic climate, a level of impairment is assumed which may or may not be deemed to be sufficient.

Improvements in collection will improve future reported outturn position, however where customers are finding it difficult to pay for Council services, this will require increases in the level of provisions currently set aside.

Debtors and Creditors The level of debtors and creditors at the Balance Sheet may need to be manually determined or estimated.

There is a risk of under/overstatement which would impact on current and future reported position of revenue outturn or capital expenditure.

Employee leave benefits The level of leave, flexi time and time in lieu owed to staff is based on a sample of staff and extrapolated to arrive at a figure for all employees.

The level of creditor accrual may be under or over estimated. This will have no impact on the reported outturn position as statute allows the reversal of this figure to a reserve.

Pensions Liability Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries is engaged to provide the Authority with expert advice about the assumptions to be applied.

The effects on the net pension liability of changes in individual assumptions are difficult to measure as they interact in different ways.

ACCOUNTING POLICIES

31

MOVEMENT IN RESERVES STATEMENT AS AT 31 MARCH 2012

32

Cou

ncil

Fun

d B

alan

ce

Cou

ncil

Fun

d E

arm

arke

d R

eser

ves

HR

A

Bal

ance

HR

A

Ear

mar

ked

Res

erve

s

£000 £000 £000 £000

Balance at 31 March 2010 11,100 37,572 6,152 1,869 Movement in Reserves during 2010/11 (Restated)

Surplus or (deficit) on the provision of Services 80,419 0 (242,957) 0

Other Comprehensive Income and Expenditure

0 0 0 0

Total Comprehensive Income and Expenditure 80,419 0 (242,957) 0

Adjustments between accounting basis & funding basis under regulations (note 1)

(67,945) 0 243,642 0

Net Increase/(Decrease) before Transfers to Earmarked Reserves 12,474 0 685 0

Transfers to/(from) Earmarked Reserves (note 2)

(12,091) 12,091 0 0

Other Movements in Reserves (227) 0 0 0 Increase/(Decrease) in 2010/11 156 12,091 685 0

Balance at 31 March 2011 carried forward 11,256 49,663 6,837 1,869

Movement in Reserves during 2011/12

Surplus or (deficit) on the provision of Services (108,227) 0 7,344 0

Other Comprehensive Income and Expenditure

2,259 0 12 0

Total Comprehensive Income and Expenditure (105,968) 0 7,356 0

Adjustments between accounting basis & funding basis under regulations (note 1)

106,869 0 (7,026) 0

Net Increase/(Decrease) before T ransfers to Earmarked Reserves 901 0 330 0

Transfers to/(from) Earmarked Reserves (note 2)

1,841 (1,841) 0 0

Other Movements in Reserves (2,656) 0 0 0 Increase/(Decrease) in 2011/12 86 (1,841) 330 0

Balance at 31 March 2012 carried forward 11,342 47,822 7,167 1,869

MOVEMENT IN RESERVES STATEMENT AS AT 31 MARCH 2012

33

Cap

ital

Rec

eipt

s R

eser

ve

Tot

al

Usa

ble

Res

erve

s

Unu

sabl

e R

eser

ves

(Res

tate

d)

Tot

al

Aut

horit

y R

eser

ves

(Res

tate

d)

£000 £000 £000 £000

Balance at 31 March 2010 2,519 59,212 1,063,541 1,122,753

Movement in Reserves during 2010/11

Surplus or (deficit) on the provision of Services 0 (162,538) 0 (162,538)

Other Comprehensive Income and Expenditure (12) (12) 194,106 194,094

Total Comprehensive Income and Expenditure (12) (162,550) 194,106 31,556

Adjustments between accounting basis & funding basis under regulations (note 1)

(575) 175,122 (175,122) 0

Net Increase/(Decrease) before Transfers to Earmarked Reserves (587) 12,572 18,984 31,556

Transfers to/(from) Earmarked Reserves (note 2) 0 0 0 0

Other Movements in Reserves 227 0 0 0 Increase/(Decrease) in 2010/11 (360) 12,572 18,984 31,556

Balance at 31 March 2011 carried forward 2,159 71,784 1,082,525 1,154,309

Movement in Reserves during 2011/12

Surplus or (deficit) on the provision of Services 0 (100,883) 0 (100,883)

Other Comprehensive Income and Expenditure 73 2,344 (142,889) (140,545)

Total Comprehensive Income and Expenditure 73 (98,539) (142,889) (241,428)

Adjustments between accounting basis & funding basis under regulations (note 1)

(735) 99,108 (99,108) 0

Net Increase/(Decrease) before Transfers to Earmarked Reserves (662) 569 (241,997) (241,428)

Transfers to/(from) Earmarked Reserves (note 2) 0 0 0 0

Other Movements in Reserves 309 (2,347) 2,347 0 Increase/Decrease in 2011/12 (353) (1,778) (239,650) (241,428)

Balance at 31 March 2012 carried forward 1,806 70,006 842,875 912,881

COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 31 MARCH 2012

34

2010/11 2011/12

Gro

ss

Exp

endi

ture

(R

esta

ted)

Gro

ss In

com

e (R

esta

ted)

2010

/11

Net

E

xpen

ditu

re

(Res

tate

d)

Not

e

Gro

ss

Exp

endi

ture

Gro

ss In

com

e

2011

/12

Net

E

xpen

ditu

re

£000 £000 £000 £000 £000 £000 43,533 (39,948) 3,585 Central Services to the Public 47,742 (45,002) 2,740 62,658 (24,774) 37,884 Cultural & Related Services 68,189 (24,791) 43,398

56,457 (23,915) 32,542 Environmental & Regulatory Services

61,548 (23,186) 38,362

23,864 (14,038) 9,826 Planning Services 48,661 (14,102) 34,559 382,136 (71,704) 310,432 Children's and Education Services 358,519 (66,736) 291,783 74,455 (19,930) 54,525 Highways & Transport Services 79,165 (20,222) 58,943

305,896 (56,643) 249,253 Housing Revenue Account 57,548 (58,498) (950) 159,711 (151,858) 7,853 Housing Services (General Fund) 167,622 (161,443) 6,179 120,451 (31,896) 88,555 Adult Social Care 117,422 (29,624) 87,798

9,380 (554) 8,826 Corporate & Democratic Core 14,280 890 15,170 (127,966) (64) (128,030) Non-Distributed Costs 3 2,642 0 2,642

691 (4,455) (3,764) Exceptional Item 3 99 (3,957) (3,858) 1,111,266 (439,779) 671,487 Net Cost of Services 4 1,023,437 (446,671) 576,766

20,877 0 20,877 South Wales Police Authority Precept

6 21,994 0 21,994

211 0 211 Community Council Precepts 6 223 0 223 16,645 0 16,645 Levies & Contributions 6 16,857 0 16,857 4,488 (3,128) 1,360 (Gain)/loss on sale of fixed assets 51,824 (8,511) 43,313

42,221 (3,128) 39,093 Other Operating Expenditure 90,898 (8,511) 82,387

22,935 0 22,935 Interest Payable on debt 23,326 0 23,326 62 0 62 Interest element of finance leases 16 9 0 9

65,630 0 65,630 Pensions Interest cost 19 63,990 0 63,990 0 (46,900) (46,900) Expected return on pension assets 19 0 (53,160) (53,160) 0 (3,481) (3,481) Interest & Investment Income 0 (4,312) (4,312)

427 (1,394) (967) Change in fair value of Investment Properties

161 (200) (39)

89,054 (51,775) 37,279 Financing and Investment Income & Expenditure

87,486 (57,672) 29,814

0 (31,795) (31,795) Recognised Capital Grants & Contributions

0 (27,948) (27,948)

0 (303,037) (303,037) Revenue Support Grant 0 (315,272) (315,272) 0 (91,773) (91,773) Non-Domestic Rates 9 0 (80,067) (80,067)

2,404 (147,760) (145,356) Council Tax Income 8 1,634 (152,600) (150,966) 0 (13,360) (13,360) Other Central Grants 0 (13,831) (13,831)

2,404 (587,725) (585,321) Taxation & Non-Specific Grant Income

1,634 (589,718) (588,084)

162,538 (Surplus)/Deficit on Provision of Services

100,883

COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 31 MARCH 2012

35

(156,704) Revaluation Gains 30 (27,706) 0 Revaluation Losses 30 25,685

14,468 Impairment losses (chargeable to revaluation reserve)

0

0 Reversal of revaluation losses recognised in the Comprehensive Income & Exenditure Statement

(2,253)

0 (Surplus)/Deficit on revaluation of available for sale financial assets

30 9,100

(51,870) Actuarial gains/losses on pension assets/liabilities

19 135,810

12 Other gains/losses required to be included in the Comprehensive Income & Expenditure Statement

(91)

(194,094) Other Comprehensive Income & Expenditure

140,545

(31,556) Total Comprehensive Income & Expenditure

241,428

BALANCE SHEET AS AT 31 MARCH 2012

36

31 March 2011 (restated)

Note 31 March 2012

£000 £000 Property Plant & Equipment: 20

486,407 Council Dwellings 499,159 952,642 Other Land and Buildings 901,492

11,348 Vehicles, Plant, Furniture & Equipment 11,689 346,742 Infrastructure 338,686

15,502 Community Assets 16,240 9,341 Assets under construction 17,966

76,450 Surplus assets not held for sale 38,690

45,021 Heritage Assets 45,178

63,385 Investment Properties 63,808

1,105 Intangible assets including AUC 20 1,498

30,075 Long-term Investments 22,307 4,435 Long-term Debtors 3,967

2,042,453 Total Long Term Assets 1,960,680

89,825 Short-term Investments 71,998 5,630 Assets held for Sale 20 12,376 2,978 Inventories 3,124

58,115 Short-term Debtors 22 83,975 14,961 Cash and Cash Equivalents 23 10,671

171,509 Total Current Assets 182,144

(5,994) Short Term Borrowing 21 (6,905) (68,132) Short Term Creditors 24 (79,071)

(1,850) Pension Strain (1,969) (4,812) Provisions 26 (5,469)

(367) Deferred Liabilities 27 (956) (81,155) Total Current Liabilities (94,370)

(439,947) Long Term Borrowing 21 (439,895)

(9,021) Provisions 26 (14,696) (8,098) Deferred Liabilities 27 (8,522)

(12,854) Capital Contributions Receipts in Advance 28 (26,512) (5,622) Revenue Grants Receipts in Advance 31 (4,707) (4,020) Capital Grants Receipts in Advance 31 (2,020) (4,572) Pensions Strain (5,221)

(494,364) Net Pensions Liability 19 (634,000) (978,498) Total Long Term Liabilities (1,135,573) 1,154,309 NET ASSETS 912,881

Financed by:

11,256 Council Fund Balance 11,342

BALANCE SHEET AS AT 31 MARCH 2012

37

49,663 Council Fund Earmarked Reserves 2 47,822 6,837 Housing Revenue Account Balance 7,167 1,869 HRA Earmarked Reserves 2 1,869 2,159 Capital Receipts Reserve 29 1,806

71,784 Usable Reserves 70,006

266,171 Revaluation Reserve 242,948

1,306,118 Capital Adjustment Account 1,241,621 881 Deferred Capital Receipts 835

23,500 Available for Sale Financial Instruments Reserve 14,400 (3,735) Financial Instruments Adjustment Account (3,393)

(500,787) Pensions Reserve (641,190) (2,347) Equal Pay Back Pay Reserve 0 (7,276) Accumulated Absences Adjustment Account (12,346)

1,082,525 Unusable Reserves 30 842,875

1,154,309 TOTAL RESERVES 912,881

CASHFLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2012

38

2010/11 Note 2011/12

£000 £000

162,538 Net (Surplus) /Deficit on the provision of services 100,883

(233,969) 33 Adjust net surplus or deficit on the provision of services for non-cash movements

(120,034)

26,410 33 Adjust for items included in the net surplus or deficit on the provision of services that are investing and financing activities

(21,870)

(45,021) Net cash flows from operating activities (41,021)

(3,652) Interest Received (3,671) 22,882 Interest Paid 22,383

62 Finance lease interest paid 0 (370) Dividends received (450)

(63,943) Net cash flow from other operating activities (59,283)

74,588 Investing activities 37,954

80,440 Purchase of property, plant and equipment, investment property and intangible assets

82,863

48,735 Purchase of short-term and long-term Investments 11,855

13,924 Other payments for investing activities 14,919

(2,930) Proceeds from the sale of property, plant and equipment, investment property and intangible assets

(8,779)

(36,708) Capital Grants (31,265)

(26,661) Proceeds from short-term and long-term investments (31,871)

(2,212) Other receipts from investing activities 232

(29,580) Financing activities 7,357

(26,000) Cash receipts from short-term and long-term borrowing (15)

0 Other receipts from financing activities 0

423 Cash payments for the reduction of outstanding liabilities relating to finance leases

54

750 Repayments of short-term and long-term borrowing 134

(4,753) Other payments for financing activities 7,184

CASHFLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2012

39

(13) Net (increase)/ decrease in cash and cash equivalen ts 4,290

14,948 Cash and cash equivalents at the beginning of the reporting period

14,961

14,961 Cash and cash equivalents at the end of the reporti ng period represented by:

10,671

384 Cash held e.g. Imprest Accounts 391 822 Cash and Bank 6,435

13,755 Short-term deposits with financial institutions 3,845

NOTES TO CORE FINANCIAL STATEMENTS

40

1. Adjustments between Accounting Basis and Funding Basis under Regulations This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Authority in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Authority to meet future capital and revenue expenditure.

Usable Reserves

Gen

eral

F

und

Bal

ance

Hou

sing

R

even

ue

Acc

ount

Cap

ital

Rec

eipt

s R

eser

ves

Mov

emen

t in

Unu

sabl

e R

eser

ves

2011/12

£000 £000 £000 £000 Adjustments primarily involving the Capital Adjustm ent Account: Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement:

Charges for depreciation of non current assets 43,588 10,562 0 (54,150)

Impairment of non-current assets 45,239 178 0 (45,417) Amortisation of intangible assets 375 0 0 (375) Movements in the market value of Investment properties

(39) 0 0 39

Movement in the value of Held for Sale Assets 160 0 0 (160) Capital grants and contributions applied (17,754) (10,194) 0 27,948 Revenue expenditure funded from capital under statute

6,245 315 0 (6,560)

Amount of non-current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income & Expenditure Statement

43,740 (428) 8,512 (51,824)

Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement:

Statutory provision for the financing of capital investment

(20,625) (2,028) 0 22,653

Statutory repayment of Debt (Finance Lease liabilities)

(46) 0 0 46

Capital expenditure charged against the General Fund and HRA balances

(3,907) (4,858) 100 8,665

Use of the Capital Receipts Reserves to finance new capital expenditure

0 0 (8,730) 8,730

Capital Receipts set aside for the repayment of debt

0 0 (663) 663

Adjustments involving the Financial Instruments Adj ustment Account Amortisation of Premiums and Discounts (341) (2) 0 343

Adjustments involving the Pensions Reserve: Net retirement benefits as per IAS19 41,615 897 0 (42,512) Employer’s contributions to the Pension Scheme

(37,352) (1,334) 0 38,686

Pension Strain Future Years 902 (135) 0 (767)

Adjustments involving the Accumulating Compensated Absences Adjustment Account

NOTES TO CORE FINANCIAL STATEMENTS

41

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements.

5,069 1 0 (5,070)

Adjustments involving the Deferred Capital Receipts Reserve Transfers to the Capital Receipts Reserve upon receipt of cash

0 0 46 (46)

Total Adjustments 106,869 (7,026) (735) (99,108)

Usable Reserves

Gen

eral

F

und

Bal

ance

Hou

sing

R

even

ue

Acc

ount

Cap

ital

Rec

eipt

s R

eser

ves

Mov

emen

t in

Unu

sabl

e R

eser

ves

2010/11

£000 £000 £000 £000 Adjustments primarily involving the Capital Adjustm ent Account: Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement:

Charges for depreciation of non current assets 41,349 9,955 0 (51,304)

Impairment of non-current assets 46,993 249,800 0 (296,793)

Amortisation of intangible assets 79 0 0 (79) Movements in the market value of Investment properties

(1,394) 0 0 1,394

Movement in the value of Held for Sale Assets (64) 0 0 64 Capital grants and contributions applied (21,660) (10,135) 0 31,795 Revenue expenditure funded from capital under statute

4,269 (244) 0 (4,025)

Amount of non-current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income & Expenditure Statement

1,025 (216) 2,647 (3,456)

Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement:

Statutory provision for the financing of capital investment

(18,085) (1,623) 0 19,708

Statutory repayment of Debt (Finance Lease liabilities)

(423) 0 0 423

Capital expenditure charged against the General Fund and HRA balances

(2,928) (3,313) 0 6,241

Adjustments involving Capital Receipts Reserve Use of the Capital Receipts Reserves to finance new capital expenditure

0 0 (2,098) 2,098

Capital Receipts set aside for the repayment of debt

0 0 (1,409) 1,409

Contribution to the administrative cost of non current asset disposals

0 (51) 51 0

Adjustments involving the Financial Instruments Adj ustment Account Amortisation of Premiums and Discounts (340) (2) 0 342

Adjustments involving the Pensions Reserve:

NOTES TO CORE FINANCIAL STATEMENTS

42

Net retirement benefits as per IAS19 (78,267) 967 0 77,300 Employer’s contributions to the Pension Scheme

(36,760) (1,294) 0 38,054

Pension Strain Future Years 705 (181) 0 (524)

Adjustments involving the Accumulating Compensated Absences Adjustment Account

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements.

(2,444) (21) 0 2,465

Adjustments involving the Deferred Capital Receipts Reserve Transfers to the Capital Receipts Reserve upon receipt of cash

0 0 234 (234)

Total Adjustments (67,945) 243,642 (575) (175,122) 2. Earmarked Reserves This note sets out the amount set aside from the General Fund and HRA balances in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund and HRA expenditure in 2010/11 and 2011/12.

Bal

ance

as

at

31 M

arch

201

1 (R

ecla

ssifi

ed)

Fro

m R

even

ue

To

Rev

enue

Bal

ance

as

at

31 M

arch

201

2

£000 £000 £000 £000 SCHOOLS BALANCES Schools Reserves inc. Nursery schools 4,549 6,118 (7,690) 2,977 Cathays HS – Maint. of Playing Field 3 0 0 3 Primary/Special DSU Contingency 23 502 (362) 163 4,575 6,620 (8,052) 3,143 SCHOOLS RESERVES Cardiff Achievement Project 18 0 0 18 ICT Schools Practice Account 78 0 (30) 48 Schools Formula Funding Reserve (formerly LMS Contingency) 142 138 0 280 Music Service Reserve 49 0 0 49 Out of School Childcare 0 128 0 128 Schools Catering Reserve 792 98 0 890 Cleaning DSU 95 0 0 95 Schools Organisational Plan 11,131 7,400 (8,038) 10,493 S.E.N. Unit 102 0 0 102 12,407 7,764 (8,068) 12,103 OTHER EARMARKED RESERVES Approved Grants – Rev. Assistance to Industry 9 0 0 9 Asylum Seeker Leased Prop 803 9 0 812 Baycar Reserve 23 0 0 23 Bute Park Match Funding Reserve 212 11 0 223 C2C Refurbishment Reserve 100 0 (100) 0

NOTES TO CORE FINANCIAL STATEMENTS

43

Cardiff Academy Reserve 0 115 0 115 Cardiff Dogs’ Home Legacy 25 5 0 30 Cardiff Insurance Reserve 4,761 254 (200) 4,815 Care First Reserve 803 210 0 1,013 Central Market Minor Works Reserve 1 0 0 1 Central Square Public Realm 140 0 (140) 0 City Centre Street Cleansing 180 0 (39) 141 City Hall Functions Reserve 20 0 0 20 City Management Reserve 198 0 (60) 138 Cleaner Cardiff Reserve 98 0 0 98

Commonwealth Local Government Forum 11 0 0 11 Community Alarm Service Relocation Reserve 0 53 0 53 Community Safety 100 0 (100) 0 Corporate Initiatives Reserve 1,333 159 (427) 1,065

Corp Management Pension Fund VSS 4 0 (4) 0 Crematorium Improvement 733 326 (881) 178 CTS Vehicle Reserve 477 0 (112) 365 Design & Construction ICT Reserve 33 0 0 33 Drug Intervention Programme 242 0 (144) 98 Energy/Carbon Reduction Reserve 796 0 (300) 496 Energy Conservation Reserve 201 3 0 204 Equal Pay Reserve 1,889 5,610 (7,499) 0 Euroclad Reserve 25 0 0 25 Extracare Reserve 120 0 0 120 Flatholm Reserve 24 0 0 24 Fraud Detection Reserve 189 0 0 189 Grants Database Reserve 18 0 (18) 0 Grant Management IT Costs 44 0 0 44 Health & Wellbeing Reserve 30 0 (14) 16 Harbour Project & Contingency Fund 0 843 (315) 528 Highways Maintenance Reserve 249 0 (249) 0 Homelessness Reserve 614 944 0 1,558 House Mortgage Reserve 55 0 (11) 44 Housing Benefit Reserve 2,196 49 0 2,245 ICT Holding A/C Reserve 338 400 (329) 409 Integrated Partnership Strategy 11 0 0 11 Kitchen Improvement Reserve 448 100 (60) 488 Legal Case Management System 5 200 0 205 Libraries Book Fund Reserve 0 45 0 45 Local Plan Reserve 166 0 0 166 Local Service Board Initiative 69 0 0 69 Major Projects Reserve 20 0 0 20 Members Computer Hardware 10 0 (10) 0 Members Development 113 55 (112) 56 Municipal Election Reserve 104 160 0 264 New Theatre Upgrades 42 92 (55) 79 Parking Reserve 1,761 2,160 (2,278) 1,643 PDD – Impact on Design Reserve 61 0 0 61 POD Initiatives Reserve 576 64 (200) 440 Procurement Initiatives Reserve 123 206 0 329 Riding School Arena 14 0 (14) 0 Scrutiny Development & Training Reserve 40 0 0 40

NOTES TO CORE FINANCIAL STATEMENTS

44

Scrutiny Reserve 17 15 0 32 Single Status Reserve 5,000 5,000 (1,471) 8,529 Specialist Advice incl Prosiect Gwyrdd 171 99 (171) 99 Supporting Business Reserve 722 512 (1,234) 0 Supporting People 3,679 0 0 3,679 Telephone Switchboard Reserve 170 0 (17) 153

Transformational Services Reserve 1,394 0 (1,323) 71 Valuers Reserve 95 16 (31) 80 Voluntary Severance Reserve 0 2,893 (2,893) 0 Workshops Asset Maintenance 25 0 0 25

Youth and Community Education Reserve 345 150 0 495 32,275 20,758 (20,811) 32,222 CARDIFF’S SHARE OF RESERVES OF JOINT COMMITTEES Glamorgan Archives 214 1 0 215 Prosiect Gwyrdd 175 0 (55) 120 Welsh Purchasing Consortium 17 2 0 19 406 3 (55) 354 HRA RESERVES Dilapidation Reserve 665 0 0 665 HRA / Housing IT Reserve 1,129 0 0 1,129 HRA Tree Maintenance Reserve 25 0 0 25 HRA Vacants Clearance Team Depot 50 0 0 50 1,869 0 0 1,869 TOTAL EARMARKED RESERVES 51,532 35,145 (36,986) 49,691

The Schools Balances comprise two elements. Under Local Management of Schools regulations, schools are able to carry forward surpluses and deficits. These are committed to be spent on schools and are not available to the Council for general use. As at 31 March 2012 schools’ own balances, including the balances of nursery schools, amounted to £2,976,943 (£4,548,935 in 2010/11). In addition, the Council has established reserves to allow for contingencies affecting schools. Further details of each individual school’s balance at 31 March 2012 are shown on pages 45 to 48. The Schools Organisational Plan Reserve has been set up to fund the capital charges resulting from investment in the Schools Organisation Plan. The Corporate Initiatives Reserve has been set up to take advantage of various opportunities that will positively impact on the economic prosperity of Cardiff and its standing as a capital city. The Cardiff Insurance Reserve has been set up to protect the Council from potential future liabilities based on current insurance policies. The Care First Reserve is required to meet future and potential IT and management information developments and requirements in relation to Adults and Childrens Services (social care). The anticipated developments include electronic document and records management, information sharing, electronic time management and the possible replacement of the main social care case recoding system, Care First. The Harbour Project & Contingency Fund Reserve has been set up following the Deed of Variation made between the Council and Welsh Ministers signed on 5th April 2011. The purpose is to support the Council's performance of its functions under the Cardiff Bay Barrage Act 1993 and to fund expenditure for other improvements and enhancement of infrastructure, assets, activities or services in or around the Bay. Any project expenditure is subject to prior consultation with the Welsh Ministers.

NOTES TO CORE FINANCIAL STATEMENTS

45

The Homelessness Reserve was established in order to deal with pressures on homelessness in the city. Further pressures are predicted due to the effects of welfare reforms and the introduction of universal credits. The Housing Benefit Reserve will be used to fund home working and landlord liaison schemes and the training of new Benefits and Customer Services Assistants through to 2012/13. It will also be used to fund software development and office accommodation refurbishment costs and to provide further resources that may be required for Housing Benefit debt recovery. The Parking Reserve represents surpluses on street parking charges which are re-invested in parking, public transport and road traffic schemes. Further details of the parking reserve are shown on page 48. The Single Status Reserve has been set up to meet the costs associated with Single Status (Job Evaluation). The Supporting People Reserve has been set up to smooth the impact of anticipated future grant fall-out The Transformational Services Reserve has been set up to support the process of strategic transformation change where up-front investment is required to release savings. The Voluntary Severance Reserve has been set up to show the appropriation of surplus income received in the year from various sources to pay for the discretionary element of the costs of Voluntary Severance. Cardiff’s share of reserves of Joint Committees . These represent Cardiff’s percentage share of the accumulated balances and reserves of the Joint Committees of which it is a member. The Housing IT Reserve has been created to cover exceptional IT purchases including software. Schools Balances The individual balances of each school are as follows:

Balance Contributions Balance

31 March

2011 From

Revenue To

Revenue 31 March

2012 £000 £000 £000 £000 Primary Schools Adamsdown Primary School 111 11 0 122 Albany Primary School 108 22 0 130 Allensbank Primary School 57 4 0 61 All Saints C.W. Primary School 33 3 (33) 3 Baden Powell Primary School 101 0 (19) 82 Birchgrove Primary School 22 28 0 50 Bishop Childs C.W. Primary School 104 0 (34) 70 Bryn Celyn Primary School (11) 6 0 (5) Bryn Deri Primary School 50 0 (10) 40 Bryn Hafod Primary School 15 0 (5) 10 Caerau Infant School 0 0 0 0 Caerau Nursery School 0 0 0 0 Cefn Onn Primary School 9 54 0 63 Christ The King R.C. Primary School 44 36 0 80 Coed Glas Primary School 66 0 (7) 59 Coryton Primary School 26 6 0 32 Creigiau Primary School 35 0 (11) 24

NOTES TO CORE FINANCIAL STATEMENTS

46

Cwrt Yr Ala Junior School 0 0 0 0 Danescourt Primary School 35 53 (43) 45 Eglwys Newydd Primary School (29) 5 (34) (58) Eglwys Wen Primary School 105 0 (49) 56 Fairwater Primary School 56 10 (40) 26 Gabalfa Primary School 74 16 0 90 Gladstone Primary School 43 23 0 66 Glan Yr Afon Primary School 14 5 (3) 16 Glyncoed Primary School 26 1,663 (1,660) 29 Grangetown Primary School 58 24 0 82 Grangetown Nursery School 8 0 (1) 7 Greenway Primary School 42 1 0 43 Gwaelod-y-Garth Primary School 55 0 (45) 10 Hawthorn Primary School 21 0 (13) 8 Herbert Thompson Primary School 37 48 0 85 Holy Family R.C. Primary School 82 0 (39) 43 Hywel Dda Primary School 141 0 (47) 94 Kitchener Primary School 68 0 (23) 45 Lakeside Primary School 27 0 (6) 21 Lansdowne Primary School 84 0 (16) 68 Llandaff C.W. Primary School 43 15 0 58 Llanedeyrn Primary School 47 5 0 52 Llanishen Fach Primary School 20 2 0 22 Llysfaen Primary School 183 27 0 210 Marlborough Primary School 148 2,046 (2,028) 166 Meadowlane Primary School 38 34 (29) 43 Millbank Primary School 70 0 (25) 45 Moorland Primary School 35 20 (31) 24 Mount Stuart Primary School 50 1 (20) 31 Ninian Park Primary School 3 17 0 20 Oakfield Primary School (17) 23 0 6 Pencaerau Primary School 97 0 (41) 56 Pentrebane Primary School 26 5 (45) (14) Pentyrch Primary School 34 0 (13) 21 Pen-y-Bryn Primary School 74 0 (19) 55 Peter Lea Primary School 30 0 (30) 0 Radnor Primary School 42 0 (8) 34 Radyr Primary School 48 0 (23) 25 Rhiwbina Primary School 169 49 0 218 Rhydypenau Primary School 121 0 (24) 97 Roath Park Primary School 75 4 0 79 Rumney Primary School 97 0 (61) 36 Severn Primary School 83 31 0 114 Springwood Primary School 52 0 (25) 27 Stacey Primary School 65 0 (35) 30 St Alban's R.C. Primary School 45 3 (26) 22 St Anne's C.W. Infant School 137 0 (137) 0 St Bernadette's R.C. Primary School 19 10 0 29 St Cadoc's R.C. Primary School 99 0 (39) 60 St Cuthbert's R.C. Primary School 65 0 (8) 57 St David's C.W. Primary School (25) 25 0 0 St Fagan's C.W. Primary School 29 11 0 40 St Francis R.C. Primary School 46 0 0 46

NOTES TO CORE FINANCIAL STATEMENTS

47

St John Lloyd R.C. Primary School 72 0 (25) 47 St Joseph's R.C. Primary School 22 0 (25) (3) St Mary's R.C. Primary School 15 20 0 35 St Mary The Virgin C.W. Primary School 42 0 0 42 St Mellons C.W. Primary School 12 20 0 32 St Monica's C.W. Primary School 18 0 (15) 3 St Patrick's R.C. Primary School 12 13 0 25 St Paul's C.W. Primary School 30 0 (22) 8 St Peter's R.C. Primary School 91 3 0 94 St Philip Evans R.C. Primary School (31) 56 (14) 11 Thornhill Primary School 43 50 0 93 Tongwynlais Primary School 4 7 0 11 Ton-yr-Ywen Primary School 90 0 (3) 87 Tredegarville C.W. Primary School 134 0 (66) 68 Trelai Primary School 119 0 (16) 103 Tremorfa Nursery School 28 8 0 36 Trowbridge Infant School 0 0 0 0 Trowbridge Junior School 0 0 0 0 Trowbridge Primary School 57 0 (17) 40 Willowbrook Primary School 58 5 (37) 26 Windsor Clive Primary School 143 1 0 144 Ysgol Bro Eirwg 111 0 (21) 90 Ysgol Gymraeg Coed-y-Gof 25 7 0 32 Ysgol Melin Gruffydd 82 12 0 94 Ysgol Pencae 37 0 (22) 15 Ysgol Pwll Coch 62 0 (16) 46 Ysgol-y-Berllan Deg 57 0 (23) 34 Ysgol Mynydd Bychan 39 16 0 55 Ysgol Gymraeg Treganna 43 0 (9) 34 Ysgol-y-Wern 103 85 0 188 Ysgol Glan Morfa 33 25 0 58 Ysgol Nant Caerau 14 0 0 14 Ysgol Tan yr Eos (6) 28 0 22 Ysgol Pen y Groes 91 65 0 156 Ysgol Pen y Pil 88 0 (39) 49 Ysgol Glan Ceubal 45 5 0 50 ICC Ely/Vachell Rd Nursery 43 4 (16) 31 Total Primary Schools (net) 5,591 4,776 (5,191) 5,176 Secondary Schools Corpus Christi R.C. High School 45 0 (15) 30 Mary Immaculate High School 1 0 (74) (73) St Illtyd's R.C. High School 137 9 (25) 121 Bishop Of Llandaff C.W. High School (189) 13 (95) (271) Michaelston Community College (25) 0 (83) (108) Cantonian High School (555) 0 (306) (861) Cardiff High School 211 0 (112) 99 Cathays High School 81 27 (50) 58 Fitzalan High School 634 0 (561) 73 Glyn Derw High School 163 0 (7) 156 Llanedeyrn High School (1,329) 0 (690) (2,019) Llanishen High School 136 0 (34) 102 Llanrumney High School (485) 485 0 0 Radyr Comprehensive 7 67 0 74

NOTES TO CORE FINANCIAL STATEMENTS

48

Rumney High School (689) 689 0 0 St Teilo's C.W. High School (25) 47 0 22 Whitchurch High School (28) 0 (100) (128) Willows High School 142 0 (14) 128 Ysgol Gyfun Gymraeg Glantaf 199 0 (26) 173 Ysgol Gyfun Gymraeg Plasmawr 22 0 (17) 5 Total Secondary Schools (net) (1,547) 1,337 (2,209) (2,419) Special Schools The Court School 59 0 (28) 31 Riverbank School 96 0 0 96 Ty Gwyn School 95 0 (203) (108) Woodlands High School 66 0 (14) 52 Greenhill School 78 0 (15) 63 Meadowbank School 91 0 (23) 68 The Hollies School 20 5 (7) 18 Total Special Schools (net) 505 5 (290) 220 Total Schools Balances (net) 4,549 6,118 (7,690) 2,977

Parking Reserve The Parking Reserve is generated from surpluses achieved from Civil Parking Enforcement (CPE). The use of any surplus is governed by Section 55 of the Road Traffic Management Act 1984 which specifies that the surplus may be used to fund operational costs including subsidising the enforcement service, supporting public passenger transport services, transport planning and road safety, maintaining off-street car parks and highway improvement work.

2010/11 2011/12

£000 £000

Income

(2,192) On-street pay car parking fees (3,005)

(1,233) Penalty charge notices (2,004)

(79) Residents parking permits (133)

(225) Off-Street car parking fees (251)

0 Disabled bays (13)

0 Other income (1)

(3,729) Total Income (5,407)

Expenditure

487 Operational costs and Traffic Regulation Orders 856

2,052 Enforcement service 2,391

2,539 Total Expenditure 3,247

(1,190) Civil Parking Enforcement Net (Surplus)/Deficit (2, 160)

Appropriations to Parking Reserve:

(2,131) Balance 1 April 2011 (1,761) (523) Contributions from Parking A/c pre CPE 0

(1,190) Contributions from CPE (2,160)

2,083 Contributions to revenue* 2,278

(1,761) Balance 31 March 2012 (1,643)

NOTES TO CORE FINANCIAL STATEMENTS

49

* Eligible expenditure totalling £2.278 million was drawdown from the reserve in respect of the following leaving a balance of £1.643 million at the 31 March 2012. £000’s

- Contribution to overall provision for Transportation 1,567 - Pentwyn Park & Ride 450 - Off-street car park upgrades 189 - City Centre Mobility Assistance 61 - Project costs 11

3. Non-Distributed Costs and Exceptional Items The Non-Distributed Costs (NDC) amount is made up of £2.54 million in relation to IAS 19 past service costs and £0.1 million in relation to impairment losses for assets held for sale. Exceptional Items include £3.734 million income from VAT claims and expenditure of £0.99 million fees relating to this. There is also £0.223 million income in relation to residual income for an insurance claim that was included as an exceptional item in 2010-11.

NOTES TO CORE FINANCIAL STATEMENTS

50

4. Amounts reported for Resource Allocation Decisio ns The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the Service Reporting Code of Practice. However, decisions about resource allocation are taken by the Council’s Executive on the basis of budget reports analysed across Service Areas. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular: The service analysis, HRA and Harbour figures in the first three columns of the reconciliation to subjective analysis tables on pages 54 and 55 are based on the reported outturn for Council Fund services which will be reported to the Cabinet Meeting of the Council in July 2012. The outturn for the Housing Revenue Account (HRA) is reported separately at the same meeting. The figures for the Harbour Authority are based on the Council’s ledger at the same date. These figures include some depreciation charges and the corresponding reversing entry which is required in order to neutralise the impact on Council Tax. Not included in Net Cost of Services Certain types of income and expenditure which are included in the reported outturn are required to be excluded from the Net Cost of Services and shown as either corporate amounts or included in the statutory adjustment accounts. These include the following:

• Employers pension contributions • Appropriations to earmarked reserves and balances • Direct revenue financing costs • Voluntary revenue provision made by service areas • Transfers to capital reserves included in HRA and Harbour revenue accounts • Interest payable and receivable • Precepts and levies

Amounts not reported to management for decision making Items included in the above classification mainly cover adjustments that are required under the IFRS Code. The following are reversed out in the statutory adjustment accounts ensuring that they do not impact on Council tax:

• Adjustments required under IAS19 in respect of accounting for pension costs and accruing for untaken leave.

• Other items including the reclassification of certain operating lease rentals into finance leases; elimination of agency expenditure and income; a reclassification between income and expenditure.

Other items include:

• The Council’s share of the transactions of those Joint Committees of which it is a member are required to be added into its Comprehensive Income Expenditure Statement on a line-by–line basis instead of being shown as a contribution to each Joint Committee.

• Additional capital journals that are input as ‘technical adjustments’ after the reported outturn is determined.

Adjustment for recharges The presentation of figures in the Council’s outturn report is based on the cash limit budgets of service areas. Support service recharges are largely shown in the service area that is responsible for the expenditure. However, some internal income is netted off against expenditure. In the Comprehensive Income Expenditure Statement all internal recharging between service areas is eliminated.

NOTES TO CORE FINANCIAL STATEMENTS

51

Reconciliation to Net Cost of Services in Comprehen sive Income and Expenditure Statement This reconciliation shows how the figures in the analysis of Service Area income and expenditure relate to amounts included in the Comprehensive Income and Expenditure Statement. 2010/11 2011/12 £000 £000 Net expenditure in Service Area Analysis 524,485 536,523 Services not included in Service Area Analysis (HRA and Harbour) (1,685) (301) Amounts in the Comprehensive Income and Expenditure Statement not reported to management in the Analysis (84,755) 28,578

Amounts included in the Analysis not included in the Comprehensive Income and Expenditure Statement 227,878 (22,465)

Amounts in respect of presentation of internal recharges 5,564 34,331 Net Cost of Services in Comprehensive Income & Expe nditure Statement 671,487 576,666

NOTES TO CORE FINANCIAL STATEMENTS

52

Service Information for year ended 31 March 2012

Adu

lt S

ervi

ces

Chi

ldre

ns

Ser

vice

s

City

M

anag

emen

t

City

Ser

vice

s

£000 £000 £000 £000 Fees, charges and other service income (15,318) (1,629) (31,540) (10,273) Government grants (16,031) (1,955) (1,640) (9,137) Total Income (31,349) (3,584) (33,180) (19,410) Employee expenses 31,253 14,752 20,554 23,126 Other service expenses 76,781 29,867 39,203 23,442 Support service recharges 4,028 990 2,600 6,551 Depreciation, amortisation, impairment, & REFCUS

0 0 0 0

Total Expenditure 112,062 45,609 62,357 53,119

Net Expenditure as per Outturn Report 80,713 42,025 29,177 33,709

Comparative Service Information for year ended 31 M arch 2011

Adu

lt S

ervi

ces

Infr

astr

uctu

re

Hou

sing

&

Nei

ghbo

urho

od

Ren

ewal

Die

ct S

ervi

ces

£000 £000 £000 £000 Fees, charges and other service income (12,111) (13,741) (7,887) (27,090) Government grants (17,748) (3,019) (169,681) (3,578)

Total Income (29,859) (16,760) (177,568) (30,668) Employee expenses 33,445 14,098 15,155 34,306 Other service expenses 77,674 26,855 172,669 14,630 Support service recharges 1,002 1,673 2,011 2,835

Depreciation, amortisation, impairment, & REFCUS

1,176 8,499 1,019 11,583

Total Expenditure 113,297 51,125 190,854 63,354

Net Expenditure as per Outturn Report 83,438 34,365 13,286 32,686

NOTES TO CORE FINANCIAL STATEMENTS

53

Service Information for year ended 31 March 2012

Com

mun

ities

Edu

catio

n

Oth

er S

ervi

ce

Are

as

Tot

al

£000 £001 £000 £000 Fees, charges and other service income (30,159) (32,854) (27,050) (148,823) Government grants (189,950) (42,109) 208 (260,614) Total Income (220,109) (74,963) (26,842) (409,437) Employee expenses 41,586 226,877 49,668 407,816 Other service expenses 200,502 68,813 85,576 524,184 Support service recharges 3,600 2,517 (6,666) 13,620 Depreciation, amortisation, impairment, & REFCUS

0 0 340 340

Total Expenditure 245,688 298,207 128,918 945,960

Net Expenditure as per Outturn Report 25,579 223,244 102,076 536,523

Comparative Service Information for year ended 31 M arch 2011

Sch

ools

&

Life

long

Le

arni

ng

Str

ateg

ic

Pla

nnin

g &

E

nviro

nmen

t

Oth

er S

ervi

ce

Are

as

Tot

al

£000 £000 £000 £000 Fees, charges and other service income (21,545) (6,920) (79,152) (168,446) Government grants (40,749) (1,140) (17,306) (253,221) Total Income (62,294) (8,060) (96,458) (421,667) Employee expenses 216,033 12,448 87,167 412,652 Other service expenses 60,953 3,853 141,375 498,009 Support service recharges 2,393 1,312 (12,399) (1,173) Depreciation, amortisation, impairment, & REFCUS

6,324 1,745 6,318 36,664

Total Expenditure 285,703 19,358 222,461 946,152

Net Expenditure as per Outturn Report 223,409 11,298 126,003 524,485

* Due to the restructuring that was undertaken between 2010/11 and 2011/12, the disaggregation for service analysis to compare with 2011/12 was unavailable, therefore 2010/11 figures have not been restated.

NOTES TO CORE FINANCIAL STATEMENTS

54

Reconciliation to Subjective Analysis This reconciliation shows how the figures in the analysis of service area income and expenditure relate to a subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

Ser

vice

ana

lysi

s

HR

A

Har

bour

Not

incl

uded

in

Net

Cos

t of

Ser

vice

s

Adj

ustm

ents

re

pres

enta

tion

of

rech

arge

s

2011/12

£000 £000 £000 £000 £000 Fees, charges & other service income

(159,460) (60,772) (974) 28,479 33,057

Interest & investment income (4,062) (145) (3) 268 3,942 Income from Council Tax (2,901) 0 0 2,901 Government grants & contributions

(260,614) (62) (7,216) (840) (29,085)

Grants/contributions to fund REFCUS

0 0 0 10,613 8,892

Transfer from CAA re depreciation

0 2,016 0 15,650 (15,462)

Capital Financing reversals (Net)

17,600 0 0 (1,714) (17,889)

Pensions return on assets (IAS19)

0 0 0 0 0

Change in fair value of investment properties

0 0 0 0 0

Total Income (409,437) (58,963) (8,193) 52,456 (13,644) Employee expenses 407,816 8,923 2,832 (9,677) (576) Other service expenses 488,431 40,069 4,470 (33,245) (19,672) Support service recharges 13,620 5,241 891 0 (19,752)

Depreciation, amortisation, impairment & REFCUS

340 2 0 (2) 96,358

Interest payments 18,896 4,427 0 (4,427) (18,896)

Pensions interest cost (IAS19)

0 0 0 0 0

Precepts & levies 16,857 0 0 (16,857) 0 Capital financing 0 0 0 (10,713) 10,613

Gain/loss on disposal of fixed assets

0 0 0 0 0

Total expenditure 945,960 58,662 8,193 (74,921) 48,075

(Surplus)/deficit on provision of services

536,523 (301) 0 (22,465) 34,431

NOTES TO CORE FINANCIAL STATEMENTS

55

Not

rep

orte

d to

m

anag

emen

t fo

r de

cisi

on

mak

ing

Net

Cos

t of

Ser

vice

s

Cor

pora

te

Am

ount

s

Tot

al

£000 £000 £000 £000 Fees, charges & other service income

(8,554) (168,224) 0 (168,224)

Interest & investment income 0 0 (4,312) (4,312) Income from Council Tax 0 0 (150,966) (150,966) Government grants & contributions

65 (297,752) (409,170) (706,922)

Grants/contributions to fund REFCUS

0 19,505 (27,948) (8,443)

Transfer from CAA re depreciation

(2,204) 0 0

Capital Financing Reversals (Net)

1,803 (200) (200)

Pensions return on assets (IAS19)

0 0 (53,160) (53,160)

Change in fair value of investment properties

0 0 (39) (39)

Total Income (8,890) (446,671) (645,595) (1,092,266)

Employee expenses 7,808 417,126 0 417,126 Other service expenses 8,900 488,953 0 488,953 Support service recharges 0 0 0 0 Depreciation, amortisation, impairment & REFCUS

20,660 117,358 0 117,358

Interest payments 0 0 23,335 23,335

Pensions interest cost (IAS19) 0 0 63,990 63,990

Precepts & levies 0 0 39,074 39,074 Capital financing 100 0 0 0 Gain/loss on disposal of fixed assets

0 0 43,313 43,313

Total expenditure 37,468 1,023,437 169,712 1,193,149

(Surplus)/deficit on provision of services

28,578 576,766 (475,883) 100,883

NOTES TO CORE FINANCIAL STATEMENTS

56

Comparative movements for 2010/11 are as follows:

Ser

vice

ana

lysi

s

HR

A

Har

bour

Not

incl

uded

in N

et

Cos

t of S

ervi

ces

Adj

ustm

ents

re

pres

enta

tion

of

rech

arge

s

2010/11

£000 £000 £000 £000 £000

Fees, charges & other service income

(144,494) (57,438) (575) 18,274 22,354

Interest & investment income (3,302) (127) 0 178 3,302

Income from Council Tax (1,225) 0 0 0 1,225 Government grants & contributions

(253,221) (74) (8,821) 10,485 (429)

Grants/contributions to fund REFCUS

0 0 0 0 (8,818)

Transfer from CAA re depreciation

0 (257,847) (4,914) 264,556 0

Capital Financing reversals (Net)

(19,424) 1,857 0 (1,857) 19,424

Pensions return on assets (IAS19)

0 0 0 0 0

Change in fair value of investment properties

0 0 0 0 0

Total Income (421,666) (313,629) (14,310) 291,636 37,058

Employee expenses 412,652 9,290 3,214 (6,124) (146)

Past Service Cost Indexation 0 0 0 0 0

Other service expenses 462,619 38,423 5,298 (26,260) (18,935)

Support service recharges (1,173) 2,436 884 0 (2,147) Depreciation, amortisation, impairment & REFCUS

36,664 257,604 4,914 (2) 8,478

Interest payments 18,744 4,191 0 (4,191) (18,744) Pensions interest cost (IAS19)

0 0 0 0 0

Precepts & levies 16,645 0 0 (16,645) 0

Capital financing 0 0 0 (10,536) 0 Gain/loss on disposal of fixed assets

0 0 0 0 0

Total expenditure 946,151 311,944 14,310 (63,758) (31,494)

(Surplus)/deficit on provision of services

524,485 (1,685) 0 227,878 5,564

NOTES TO CORE FINANCIAL STATEMENTS

57

Not

rep

orte

d to

m

anag

emen

t for

de

cisi

on m

akin

g

Net

Cos

t of

Ser

vice

s

Cor

pora

te A

mou

nts

Tot

al

£000 £000 £000 £000

Fees, charges & other service income

(6,537) (168,416) 0 (168,416)

Interest & investment income (51) 0 (3,481) (3,481)

Income from Council Tax 0 0 (145,356) (145,356) Government grants & contributions

(10,485) (262,545) (439,965) (702,510)

Grants/contributions to fund REFCUS

0 (8,818) 0 (8,818)

Transfer from CAA re depreciation

(1,795) 0 0 0

Capital Financing Reversals (Net)

0 0 0 0

Pensions return on assets (IAS19)

0 0 (46,900) (46,900)

Change in fair value of investment properties

0 0 (967) (967)

Total Income (18,868) (439,779) (636,669) (1,076,448)

Employee expenses (555) 418,331 0 418,331

Past Service Cost Indexation (127,960) (127,960) 0 (127,960)

Other service expenses (995) 460,150 0 460,150

Support service recharges 0 0 0 0 Depreciation, amortisation, impairment & REFCUS

53,087 360,745 0 360,745

Interest payments 0 0 22,997 22,997 Pensions interest cost (IAS19)

0 0 65,630 65,630

Precepts & levies 0 0 37,733 37,733

Capital financing 10,536 0 0 0 Gain/loss on disposal of fixed assets

0 0 1,360 1,360

Total expenditure (65,887) 1,111,266 127,720 1,238,986

(Surplus)/deficit on provision of services

(84,755) 671,487 (508,949) 162,538

NOTES TO CORE FINANCIAL STATEMENTS

58

5. Harbour Authority & Associated Activities The following accounts are extracted from the Council’s accounts and relate to functions transferred to Cardiff Council following the winding up of Cardiff Bay Development Corporation (CBDC) on 31 March 2000. These accounts are required by the Welsh Government and comprise an Income and Expenditure Statement and Balance Sheet. They are consolidated into the accounts of Cardiff Council but are shown separately for information purposes.

2010/11 Harbour Authority Income & Expenditure Statement 20 11/12

£000 £000

Income (8,821) Government Grants (8,056)

(574) Fees and Charges (664) (75) Capital Grants Applied (419)

(9,470) Total Income (9,139) Expenditure

3,206 Employees 2,739 1,833 Premises 1,718

75 Transport 66 3,374 Supplies and Services 2,614

884 Support Services 891 16 Third Party Payments 6

0 Direct Revenue Financing 65 4,959 Depreciation 4,913

14,347 Total Expenditure 13,012

4,877 Net Expenditure for the year 3,873 Appropriations from reserves:

Contributions to/(from) Capital Adjustment Account in respect of (4,959) - Depreciation charged to income & expenditure (4,913)

75 - Capital Grants Applied 419 0 - Capital expenditure funded from revenue resources 0

10 Contribution from Accumulated Absences account (4) (3) Contributions to/(from) Pensions Reserve 97

Contributions to/(from) Project & Contingency Fund 528 0 (Surplus)/Deficit for the year 0

NOTES TO CORE FINANCIAL STATEMENTS

59

31 March 2011 Harbour Authority Balance Sheet

31 March 2012

£000 £000

Property, plant and equipment 4,291 Land and Buildings 5,716

82 Vehicles, Plant, Furniture & Equipment 134 179,262 Infrastructure 174,833

1,103 Community Assets 1,103 56 Heritage Assets 56 75 Assets under construction 138

184,869 Long-term assets 181,980

1,046 Stocks and Work in Progress 1,079 173 Debtors 289

1,531 Cash 600 475 Assets held for sale 475

3,225 Current assets 2,443

(526) Creditors (659) (526) Current liabilities (659)

0 Revenue Grants Receipts in Advance 0 (2,254) Capital Grants Receipts in Advance (1,946) (2,254) Long-term liabilities (1,946)

185,314 Net assets 181,818 Financed by:

183,922 Capital Adjustment Account 179,510 1,423 Revaluation Reserve 2,871

0 Project & Contingency Fund (528) (31) Accumulated absences account (35)

185,314 Total Reserves 181,818

NOTES TO CORE FINANCIAL STATEMENTS

60

6. Precepts and Levies

2010/11 2011/12 £000 £000 Precepts South Wales Police Authority 20,877 21,994 Community Councils: Lisvane 25 26 Pentyrch 71 71 Radyr 65 75 St Fagans 16 16 Old St Mellons 22 23 Tongwynlais 12 12 21,088 22,217 Levies & Contributions South Wales Fire & Rescue Service 16,340 16,552 Caldicot & Wentloog Drainage Board 168 168 Cardiff Port Health Authority 133 133 Newport Health Authority 4 4 South Wales Sea Fisheries Committee 0 0 16,645 16,857

7. Participation in Joint Committees During 2011/12 the Council was lead Authority for three Joint Committees:

• Glamorgan Archives Joint Committee which is responsible for the management and administration of the Glamorgan Records Office (GRO).

• Prosiect Gwyrdd has been established in order to jointly procure a residual waste treatment facility.

• The Welsh Purchasing Consortium has been established to support the Member Authorities in delivering joint, collaborative contracts and framework agreements for the procurement of goods and services.

For 2011/12 the revenue contributions made to these Committees were: Glamorgan Archives £271,846 (£292,676 in 2010/11); Prosiect Gwyrdd £192,048 (£148,471 in 2010/11); Welsh Purchasing Consortium £14,892 (£14,892 in 2010/11). The Council has included its share of the transactions and balances of each Joint Committee in its 2011/12 accounting statements on a line-by-line basis. The exception is the funding of the GRO, where each Authority included within its own accounts how it has paid for its contribution towards the GRO building. 8. Council Tax Council Tax income derives from charges raised according to the value of residential properties, which have been classified into nine valuation bands estimating 1 April 2003 values for this specific purpose. Charges are calculated by taking the amount of income required for the council and the police Authority for the forthcoming year and dividing this amount by the council tax base. The council tax base is the number of properties in each band adjusted to a proportion to convert the number to a band D equivalent, totalled across all bands and adjusted for discounts. Cardiff’s council tax base for 2011/12 was 136,311 (135,861 for 2010/11). The amounts for a band D property in Cardiff during 2011/12 were as follows:

NOTES TO CORE FINANCIAL STATEMENTS

61

2010/11 2011/12 Band D Council Tax:

£ £ Cardiff Council 906 923 South Wales Police Authority 154 161 TOTAL 1,060 1,084

The above amount (£1,084) is multiplied by the proportion specified for the particular band (see following table) to give the individual amount due. Community Council precepts are then added in each of the six Community Council areas. Band A B C D E F G H I Multiplier 6/9 7/9 8/9 1 11/9 13/9 15/9 18/9 21/9

Analysis of the net proceeds from council tax: 2010/11 2011/12 £000 £000 Council Tax collectable 147,760 152,600 Provision for non-payment of Council Tax (2,404) (1,634) 145,356 150,966

The following table shows the cumulative provision for non-payment of Council Tax held at the Balance Sheet date:

31 March 2011

31 March 2012

£000 £000 6,166 Council Tax Bad Debt Provision 6,150

9. Non-Domestic Rates NDR is organised on a national basis. The Welsh Government specifies an amount for the rate (42.8p in 2011/12 and 40.9p in 2010/11) and, subject to the effects of transitory arrangements; local businesses pay rates calculated by multiplying their rateable value by that amount. The Council is responsible for collecting rates due from ratepayers in its areas but pays the proceeds into the NDR pool administered by the Welsh Government. The sums collected are redistributed back to local authorities on the basis of a fixed amount per head of population. The NDR income, after relief and provision, of £172,339,059 for 2011/12, (£162,937,117 for 2010/11) was based on a total rateable value of £474,835,191 for the year (£477,480,424 for 2010/11). Analysis of the net proceeds from non-domestic rates: 2010/11 2011/12 £000 £000 Non-Domestic Rates collectable 162,937 172,339 Cost of collection allowance (820) (858) Provision for non payment of NDR (2,975) (3,279) Payment into national pool 159,142 168,202 Redistribution from national pool (91,773) (80,067)

10. Agency Income & Expenditure Cardiff Council acts as an agent on behalf of the Welsh Government for the collection of Non Domestic Rates. A net debtor of £12,506,283 (£5,322,098 in 2010/11) is shown in the balance sheet which

NOTES TO CORE FINANCIAL STATEMENTS

62

represents the amount by which the cash paid over to Welsh Government exceeds the amount collected from ratepayers. During 2011/12, the Council carried out work on behalf of the South Wales Trunk Road Agency under an agency agreement. The Council is fully reimbursed for this work. The total reimbursement received in 2011/12 was £697,817 (£974,253 in 2010/11). 11. Remuneration 11.1 The Accounts and Audit (Wales) (Amendment) Regulations 2010 requires that the number of employees, whose remuneration is over £60,000 per annum be disclosed within bands of £5,000. The following table includes all staff who fall within this category including teaching staff and those whose remuneration is disclosed in more detail in note 11.2. The figures include all taxable remuneration received in the year, including in some cases, severance payments but exclude employers pension contributions and any expenses that are not chargeable to UK income tax.

Number of Employees 2010/11 2011/12

£60,000 - £64,999 86 74 £65,000 - £69,999 42 29 £70,000 - £74,999 21 12 £75,000 - £79,999 5 7 £80,000 - £84,999 10 8 £85,000 - £89,999 5 4 £90,000 - £94,999 8 2 £95,000 - £99,999 4 3

£100,000 - £104,999 3 2 £105,000 - £109,999 1 1 £110,000 - £114,999 1 1 £115,000 - £119,999 0 0 £120,000 - £124,999 1 0 £125,000 - £129,999 1 0 £130,000 - £134,999 4 0 £135,000 - £139,999 0 0 £140,000 - £144,999 0 1 £145,000 - £149,999 0 0 £150,000 - £154,999 0 0 £155,000 - £159,999 0 0 £160,000 - £164,999 0 0 £165,000 - £169,999 0 0 £170,000 - £174,999 0 0 £175,000 – £179,999 0 1

11.2 Further disclosure is required in respect of the individual remuneration details of senior employees (Chief Officers and Heads of Function and above) whose salary is £60,000 or more per annum but less than £150,000, identified by job title. Employees whose salary is £150,000 on an annualised basis are required to be identified by name. No bonuses have been paid during 2011/12 (2010/11 - £nil)

NOTES TO CORE FINANCIAL STATEMENTS

63

The following persons fell within this definition for 2011/12

2011/12 Compensation for loss of employment

Post title

Sal

ary,

fees

R

etur

ning

O

ffice

r fe

es a

nd

allo

wan

ces

Tax

able

ben

efits

Rec

eive

d vi

a pa

yrol

l (t

axab

le)

Received via creditors (non

taxable) Em

ploy

ers

pens

ion

cont

ribut

ion

(21%

of s

alar

y)

Sal

ary,

fees

R

etur

ning

O

ffice

r fe

es a

nd

allo

wan

ces

£ £ £ £ £ £ Jonathan House, Chief Executive

179,663 0 0 0 39,496 219,159

Corporate Director, Social (Leaving Date 30/11/2011) (a)

112,168 118 0 29,700 19,248 161,234

Chief Corporate Services and Section 151 Officer

107,088 42 0 0 23,559 130,689

Chief Officer, Education

99,741 124 0 0 21,943 121,808

Corporate Chief Officer, Shared

99,741 0 0 0 21,943 121,684

Corporate Chief Officer, Communities

87,666 0 0 0 19,287 106,953

Chief Officer, City Management

83,991 0 0 0 18,478 102,469

Chief Officer, Children Services

83,991 0 0 0 18,478 102,469

Chief Officer, Adults Services

83,669 0 0 0 18,407 102,076

Chief Officer, Legal and Democratic Services (Commenced 09/05/2011) (c)

74,119 0 0 0 16,306 90,425

Chief Officer, City Services

73,491 0 0 0 16,168 89,659

Head of Service, Scrutiny, Performance and Improvement

70,128 0 0 0 15,428 85,556

Head of Service, Customer Services

70,128 0 0 0 15,428 85,556

Chief Officer, City Development

68,880 0 0 0 15,153 84,033

Head of Service, Regulatory and Supporting Services (Commenced 21/04/2011) (d)

66,741 221 0 0 14,706 81,668

Corporate Director, Built Environment (Leaving Date 31/08/2011) (b)

48,108 0 0 0 9,816 57,924

NOTES TO CORE FINANCIAL STATEMENTS

64

(a) Corporate Director Social leaving date 30/11/2011 has annualised salary of £131,235. (b) Corporate Director Built Environment leaving date 31/08/2011 has annualised salary £107,088. (c) Chief Officer Legal and Democratic Services starting date 09/05/2011 has annualised salary of £82,800. (d) Head of Service, Regulatory and Supporting Services starting date 21/04/2011 has annualised salary of £66,900. (e) As a result of re-organisation of the Councils senior management structure during 2011/12 the remuneration of the former Head of Function for Marketing, Tourism and Events is not required to be disclosed for 2011/12 as this individual no longer holds a senior role within the organisation. (f) As a result of the re-organisation of the Councils senior management structure during 2011/12 the remuneration of the former Head of Function for Legal Services is not required to be disclosed for 2011/12 as this individual no longer holds a senior role within the organisation. Comparative data for 2010/11 is as follows:

2010/11 Compensation for loss of employment

Sal

ary,

fees

R

etur

ning

Offi

cer

fees

and

al

low

ance

s

Tax

able

ben

efits

Rec

eive

d vi

a pa

yrol

l (t

axab

le)

(a)

Received via

creditors (non

taxable)

Em

ploy

ers

pens

ion

cont

ribut

ion

(21%

of

sal

ary)

Sal

ary,

fees

R

etur

ning

Offi

cer

fees

and

al

low

ance

s

Post title

£ £ £ £ £ £

Chief Corporate Services & Section 151 Officer, Returning Officer (d)

131,497 152 0 0 27,614 159,263

Corporate Director, Social 131,235 171 0 0 27,559 158,965

Corporate Director, Built Environment

107,088 0 0 0 22,488 129,576

Jonathan House, Chief Executive (b) (commenced 01.09.2010)

102,886 0 0 0 21,606 124,492

Chief Officer, Schools and Lifelong Learning

99,879 168 0 0 20,946 120,993

Chief Officer, Shared Services

99,741 0 0 0 20,946 120,687

Trefor Thomas Morgan, Chief Executive (c) (leaving date 30.09.2010)

88,188 0 2868 30,000 18,519 139,575

Chief Officer, Housing and Neighbourhood Renewal

83,991 250 0 0 17,638 101,879

Chief Officer, Infrastructure (leaving date 31.03.2011)

84,152 0 17,327 30,000 17,638 149,117

NOTES TO CORE FINANCIAL STATEMENTS

65

Chief Officer, Strategic Planning and Environment (leaving date 31.03.2011)

84,474 0 16,866 30,000 17,638 148,978

Chief Officer, Social Projects and Development (leaving date 31.03.2011)

83,991 0 17,220 24,402 17,638 143,251

Chief Officer, Adult Services

83,991 0 0 0 17,638 101,629

Chief Officer, Children's Services

83,991 0 0 0 17,638 101,629

Chief Officer, Direct Services

83,991 0 0 0 17,638 101,629

City & County Solictor (leaving date 31.03.2011)

84,488 378 30,000 16,842 131,708

Head of Function, Partnerships and Citizen Centred Services

70,128 0 0 0 14,727 84,855

Head of Function, Marketing, Tourism and Events

70,128 0 0 0 14,727 84,855

Head of Function, Clerk to the Council

70,128 0 0 0 14,727 84,855

Head of Legal Services (commenced 01.07.2010) (e)

66,183 28 0 0 13,898 80,109

Head of Function, Waste Management and Street Cleansing

65,990 0 0 0 13,858 79,848

Head of Function Development, Projects and Partnerships (commenced 02.06.2010) (f)

52,758 0 0 0 11,079 63,837

Head of Function, Information and Communication Technology (retired 10 Oct 2010) (g)

36,949 0 0 0 7,759 44,708

Head of Legal Services (leaving date 30.06.2010) (h)

17,935 21 2,868 30,000 3,682 54,506

(a) The compensation for loss of office includes a) voluntary severance payments over and above the first £30,000 which is received via the Creditors system and b) pay in lieu of notice.

NOTES TO CORE FINANCIAL STATEMENTS

66

(b) Jonathan House was appointed Chief Executive on 1 September 2010 on an annualised salary of £176,376.

(c) Trefor Thomas Morgan held the post of Chief Executive until he left on Voluntary Severance on 30 September 2010. His annualised salary was £176,376.

(d) Remuneration for Chief Corporate Services and Section 151 Officer includes returning officer’s fees of £24,408 for the 2010 Parliamentary election and the Welsh Assembly Referendum.

(e) Head of Legal Services appointed 1 July 2010 has annualised salary of £66,900 (f) Head of Function Development, Project and Partnerships appointed 2 June 2010 has

annualised salary of £64,218. (g) Head of Function Information and Communication Technology retired 10 October 2010 has

annualised salary of £70,128. (h) Head of Legal Services who left the authority on 30 June 2010 has annualised salary of

£70,128. The numbers of exit packages with total cost per band and the total cost of the compulsory and other redundancies for 2010/11 and 2011/12 are set out in the table below: 2011/12

Exit package cost band (including special payments)

Num

ber

of

com

puls

ory

redu

ndan

cies

Num

ber

of o

ther

de

part

ures

ag

reed

Tot

al n

umbe

r of

ex

it pa

ckag

es b

y co

st b

and

Tot

al c

ost o

f exi

t pa

ckag

es in

eac

h ba

nd

£

£0 - £20,000 6 69 75 787,936 £20,001 – £40,000 10 69 79 2,257,199 £40,001 – £60,000 0 12 12 600,051 £60,001 – £80,000 0 20 20 1,421,437 £80,001 – £100,000 1 5 6 538,177 £100,001 – £150,000 2 4 6 707,492 £150,001 - £200,000 0 0 0 0 £200,001 - £250,000 1 0 1 232,665 Total 20 179 199 6,544,957

2010/11

Exit package cost band (including special payments)

Num

ber

of

com

puls

ory

redu

ndan

cies

Num

ber

of

othe

r de

part

ures

ag

reed

Tot

al n

umbe

r of

exi

t pa

ckag

es b

y co

st b

and

Tot

al c

ost o

f ex

it pa

ckag

es

in e

ach

band

£ £0 - £20,000 0 129 129 1,419,099 £20,001 – £40,000 3 137 140 4,054,360 £40,001 – £60,000 0 39 39 1,929,457 £60,001 – £80,000 0 18 18 1,225,952 £80,001 – £100,000 0 7 7 620,638 £100,001 – £150,000 0 5 5 586,186 Total 3 335 338 9,835,692

NOTES TO CORE FINANCIAL STATEMENTS

67

The total amount of Members’ Allowances (including basic and special responsibility) paid in 2011/12 was £1,167,562 (£1,153,885 in 2010/11). As required by the Code this figure includes all remuneration paid to members including basic and special allowances, care allowances, and expenses which are directly reimbursed. 12. Health Act 1999 Pooled Funds and Similar Arrang ements On January 1 2012, a joint equipment store with pooled contributions from Cardiff and Vale University Health Board, Cardiff Council and Vale of Glamorgan Council commenced operation. In the final quarter of 2011/12, contributions of £373,113 were made by partner organisations covering expenditure of £373,035 in relation to the operation of the joint equipment service over the same period. 13. Related Parties The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the council or to be controlled or influenced by the council. Disclosure of these transactions allows readers to assess the extent to which the council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council. Central Government has effective control over the general operations of the Council. It is responsible for providing the statutory framework, within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. housing benefits). Grants received from government departments are set out in the subjective analysis in note 31 on reporting for resources allocation decisions. Grant receipts outstanding at 31 March 2012 are shown in Note 31. Members of the Council have direct control over the Council’s financial and operating policies. The total of members’ allowances paid in 2011/12 is shown in note 11. Members’ interests in other organisations have been identified by an inspection of the Members’ and Officers’ Declaration of Interest Register. During 2011/12, goods and services to the value of £1,637,459 were commissioned from companies in which members had an interest (£1,259,638 in 2010/11). Grants totalling £311,944 (£351,894 in 2010/11) were paid to voluntary organisations in which members had an interest. Officers - details of Officers’ emoluments are shown in note 11 to the Core Financial Statements. During 2011/12, the Council received income of £11,912 from Chief Officers relating to the repayment of loans taken out under the Assisted Car Purchase Scheme (£13,946 in 2010/11). Goods and services to the value of £649,035 (£512,986 in 2010/11) were commissioned from companies in which Chief Officers had an interest. Subsidiary Companies - Cardiff Council has three subsidiary companies, Cardiff City Transport Services Ltd. (Cardiff Bus), Cardiff Business Technology Centre (CBTC) and Cardiff & Co. Details of transactions with these companies are shown in note 25 to the Core Financial Statements. Cardiff Medicentre is a joint venture between Cardiff Council, Cardiff University, the Welsh Government and Cardiff and Vale University Health Board. Details of transactions with Medicentre are shown in note 25 to the Core Financial Statements. Pension Fund – details of pension contributions paid over to the Pension Fund are shown in note 19 to the Core Financial Statements. Precepts and Levies – details of precepts collected on behalf of other organisations and an analysis of amounts levied on the Council by other bodies can be found in note 6 to the Core Financial Statements. South Wales Police Authority (SWPA) – the precept paid to SWPA during 2011/12 is detailed in note 6 to the Core Financial Statements. In addition to this, the Council made payments of £0.077 million to SWPA during 2011/12 (£0.442 million in 2010/11).

NOTES TO CORE FINANCIAL STATEMENTS

68

Related Party Balances As at 31 March 2012 the following balances were held in respect of related parties:

31 March 31 March 2012 2011 Debtors Creditors £000 £000 £000 6,909 Central Government Grants 26,996 (6,663) (130) Cardiff City Transport Services Ltd 59 (217)

178 Cardiff Medicentre/CBTC/Cardiff & Co. 204 (17)

13 Chief Officers and above – outstanding car loan balances 1 0 0 Precepting Bodies 0 0

0 Companies in which members’ interests declared/other 7 (8) 14. External Audit Costs In 2011/12 the Council incurred the following fees relating to external audit and inspection:

2010/11 2011/12

£000 £000

Fees payable to Wales Audit Office for external audit services 438 489

Fees payable to Wales Audit Office in respect of statutory inspection

0 0

Fees payable to Wales Audit Office for the certification of grant claims and returns

103 111

Fees payable in respect of other services provided by the appointed auditor

0 0

Total 541 600 15. Trading Accounts Summary The following table summarises the results of the Council’s trading activities in those areas where it is operating in a commercial environment. The following figures have been compiled in accordance with the requirements of the 2011/12 Code and SERCOP. Net capital charges, which include depreciation and impairment, are shown separately.

2010/11 2011/12

Trading (Surplus)

/Deficit (Restated)

Income Net

Capital Charges

Other Expenditure

Trading (Surplus)

/Deficit

£000 £000 £000 £000 £000 Schools Building Maintenance (462) (10,780) 0 10,616 (164) Schools & Staff Catering (422) (7,876) 0 8,146 270 Land & Buildings (2,183) (3,925) 25,615 1,916 23,606 St. David’s Hall 2,409 (4,700) 956 5,867 2,123 Leisure Centres 6,826 (5,243) 7,837 10,726 13,320 New Theatre 1,234 (3,569) 78 4,503 1,012 Education Cleaning 120 (3,894) 0 4,018 124 Materials Recycling Facility 610 (2,883) 13 3,085 215 Venues Catering (44) (3,281) 42 3,088 (151) Bereavement & Registration Services

436 (2,822) 240 2,914 332

NOTES TO CORE FINANCIAL STATEMENTS

69

Cardiff Castle 859 (2,742) 67 3,001 326 Other trading accounts * 1,244 (16,481) 1,425 19,535 4,479 Total 10,627 (68,196) 36,273 77,415 45,492

* Other trading accounts totalled 20 in 2011/12 (20 in 2010/11). The figures for 2010-11 have been restated to reflect new Service Area structures. The Civil Parking Enforcement account is shown in Note 2 to the accounts. 16. Leasing Under IFRS, a number of leases that were previously accounted for as operating leases are now required to be accounted for as finance leases. Where applicable, the comparative figures below have been adjusted to reflect this reclassification. Authority as Lessee Operating leases Operating leases exist in respect of properties, vehicles and other items of equipment. The following sums were charged to revenue in 2011/12: 2010/11 2011/12 £000 £000 Property leases 2,493 2,522 Other leases 1,435 1,276

The Council was committed at 31 March 2012 to making payments of £2.274 million under operating leases in 2012/13 (£2.725 million at 31 March 2011 for 2011/12) comprising the following elements: 2010/11 2011/12 Property

Leases £000

Other Leases

£000

Property Leases

£000

Other Leases

£000 Leases expiring within 1 year 98 182 316 95 Leases expiring between 2 and 5 years 707 361 292 196 Leases expiring after 5 years 1,377 0 1,349 26

Finance Leases The Council leases a number of its vehicles under contract hire arrangements. The vehicle leases have been reviewed under the Code and as a result a small number of leases have been reclassified from operating leases to finance leases. Details of assets acquired under these leases are carried as Property, Plant and Equipment in the Balance Sheet at the following amounts:

2010/11 2011/12 £000 £'000 3,509 Value as at 1 April 48

0 Additions 0 0 Revaluations 0

(2,721) Disposals 0 788 Gross Book Value 48

(740) Accumulated Depreciation (less release on disposals) (24) 48 Value as at 31 March 24

NOTES TO CORE FINANCIAL STATEMENTS

70

The aggregate finance charges made during 2011/12 were as follows: 2010/11 2011/12

£000 £000

Vehicles 62 9 Obligations under finance leases:

2010/11 2011/12 £000 £000

46 Obligations payable within 1 year 28 41 Obligations payable between 2 and 5 years 13

0 Obligations payable after 5 years 0 87 Total liabilities as at 31 March 41

Authority as Lessor Operating Leases Operating leases exist in respect of land and buildings and the Council received revenue of £2.996 million in 2011/12 (£3.101 million in 2010/11) The Council was committed as at 31 March 2012 to receiving income of £2.999 million (£2.904 million as at 31 March 2011) under operating leases for Land & Buildings comprising the following elements: 2010/11 2011/12 £000 £000 Leases expiring within 1 year 20 17 Leases expiring between 2 and 5 years 141 296 Leases expiring after 5 years 2,743 2,686

Finance Leases The Council does not provide any leases of this type. 17. Investment Properties The following items of income and expense have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. 2010/11 2011/12 £000 £000 Rental income from investment property 2,743 3,132 Direct operating expenses arising from investment property (823) (2,067) Net gain / (loss) 1,920 1,065

There are no restrictions on the authority’s ability to realise the value inherent in its investment property or on the authority’s right to the remittance of income and the proceeds of disposal. The authority has no contractual obligations to purchase, construct or develop investment property or repairs, maintenance or enhancement. 18. Prudent Revenue Provision The Council is required to set aside from its revenue budget a prudent amount for the repayment of external loans undertaken to pay for capital expenditure. The amount is set in accordance with Council policy approved in the budget report and is used to reduce the Council’s underlying need to borrow, the Capital Financing Requirement (CFR).

NOTES TO CORE FINANCIAL STATEMENTS

71

Depreciation, impairment charges and finance lease charges included in the Comprehensive Income & Expenditure Statement are accounting charges. These are reversed and replaced by the prudent revenue provision via an appropriation to/from the Capital Adjustment Account in the Movement in Reserves Statement.

2010/11 2011/12 £000 £000 Non Housing revenue provision 18,509 20,671 HRA provision 1,623 2,028 Prudent revenue provision 20,132 22,699

19. Pensions Participation in Pension Schemes As part of the terms and conditions of employment of its officers and other employees, the Council offers retirement benefits. Although these benefits will not actually be payable until employees retire, the Authority has a commitment to make the payments and this commitment needs to be disclosed at the time that employees earn their future entitlement. The Council participates in two different pension schemes both of which provide members with benefits related to pay and service: The Local Government Pension Scheme The Council’s non-teaching employees have the option to join the Cardiff and Vale of Glamorgan Pension Fund, for which Cardiff Council acts as Administering Authority. This is a defined benefit scheme based on final pensionable salary. Both the Authority and the employees pay contributions into the fund, calculated at a level intended to balance the pensions’ liabilities with the pensions’ assets. The Local Government Pension Scheme is a funded scheme i.e. it has assets as well as liabilities. In addition, the Council has unfunded pension liabilities in respect of its commitment to make payments directly to certain pensioners arising from arrangements made in earlier years to award enhanced benefits. Teachers’ Pension Scheme Teachers employed by the Council are members of the Teachers’ Pension Scheme unless they opt out. The scheme is administered by the Teachers’ Pensions Agency (TPA) and provides teachers with defined benefits upon their retirement. The Authority contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. Although the scheme is unfunded the TPA uses a notional fund as the basis for calculating the employers’ contribution rate which is paid by local education authorities to the Teachers Pension Scheme. The Local Government Pension Scheme The disclosures below relate to the funded liabilities within the Cardiff and Vale of Glamorgan Pension Fund (‘the Fund’) and, where applicable, certain unfunded benefits provided by the Employer as referred to above. Transactions relating to retirement benefits The main accounting statements have been compiled in accordance with IAS19 and for the Local Government Pension Scheme, include the cost to the Authority of pension entitlements earned in the year rather than the cost of contributions paid into the Fund. The cost of entitlements earned, which is known as the current service cost has been recognised in the Net Cost of Services in the Comprehensive Income and Expenditure Statement. However, the charge that is required to be made against Council Tax in respect of pensions is to be based on the cash payable to the pension fund during the year. To achieve this, IAS 19 costs are reversed out in the Movement in Reserves Statement and replaced with the employers’ contribution payable during the year.

NOTES TO CORE FINANCIAL STATEMENTS

72

The following table sets out the requisite transactions that have been made in the Comprehensive Income and Expenditure Statement and Movement in Reserve Statement during the year: 2010/11 2011/12 Funded

scheme Unfunded liabilities Total Funded scheme

Unfunded liabilities Total

£000 £000 £000 £000 £000 £000 Comprehensive Income Expenditure Statement (CI&E St atement)

Net Cost of Services:

Current Service Cost 31,930 0 31,930 29,142 0 29,142

Past Service Costs * (124,940) (3,020) (127,960) 2,330 210 2,540 Financing & Investment Income & Expenditure 0

Interest Cost 63,500 2,130 65,630 61,880 2,110 63,990 Expected return on scheme assets (46,900) 0 (46,900) (53,160) 0 (53,160) Net charge to C I&E Statement (76,410) (890) (77,300) 40,192 2,320 42,512 Movement in Reserves Statement Reversal of net charges made for retirement benefits in accordance with IAS19 76,410 890 77,300 (40,192) (2,320) (42,512)

Actual amount charged against Council Tax in respec t of pensions for the year: Employers contributions payable to the scheme 34,704 0 34,704 35,200 0 35,200 Payments in respect of unfunded pensions liabilities ** 0 3,350 3,350 0 3,490 3,490

34,704 3,350 38,054 35,200 3,490 38,690 ** Included in this figure are enhanced benefits awarded to teachers for which the Council is responsible and some unfunded liabilities which are administered by Rhondda Cynon Taff (RCT) Council on behalf of Cardiff Council. Contributions for year ending 31 March 2013 Local Government Scheme - employer’s regular contributions to the Fund for the accounting period ending 31 March 2013 are estimated to be £35.04 million. In addition strain on Fund Contributions may be required. Unfunded liabilities - in the accounting period ending 31 March 2013 the Council expects to pay £3.45 million directly to beneficiaries. Basis for estimating assets and liabilities The latest actuarial valuation of Cardiff Council’s liabilities in the Cardiff and Vale of Glamorgan Pension Scheme took place as at 31 March 2010. The latest actuarial valuation of unfunded benefits also took place as at 31 March 2010. The principal assumptions used by the independent qualified actuaries in updating the latest valuation for IAS19 purposes were: (a) Principal financial assumptions

NOTES TO CORE FINANCIAL STATEMENTS

73

31 March 2011 31 March 2012 % pa % pa Rate of inflation - RPI 3.7 3.5 Rate of inflation - CPI 2.8 2.5 Rate of general increase in salaries * 4.7 4.5 Rate of increase to pensions in payment** 2.8 2.5 Rate of increase to deferred pensions 2.8 2.5 Discount rate for scheme liabilities 5.4 4.7

*In addition, allowance has been made for the same age related promotional salary scales as used at the actuarial valuation of the Fund as at 31 March 2010. ** In excess of Guaranteed Minimum Pension increases in payment where appropriate (b) Mortality assumptions 31 March 2011 31 March 2012 Men Women Men Women Future lifetime from age 65:- Currently age 65 23.8 26.6 23.9 26.7 Currently age 45 25.6 28.6 25.6 28.7

(c) Take-up option to convert annual pension into retirement lump sum

31 March

2011 31 March

2012 Pre 2010 50% 50% Post 2010 75% 75%

Expected return on assets Cardiff Council employs a building block approach in determining the rate of return on Fund assets. Historical markets are studied and assets with higher volatility are assumed to generate higher returns consistent with widely accepted capital market principles. The assumed rate of return on each asset class is set out below. The overall expected rate of return on assets is then derived by aggregating the expected return for each asset class over the actual asset allocation for the Fund as at 31 March 2012. 31 March 2011 31 March 2012

LT expected

rate of return

Approx split of assets

LT expected

rate of return

Approx split of assets

% pa % % pa % Equities 8.4 74.7 8.1 72.1 Property 7.9 4.2 7.6 6.3 Government Bonds 4.4 4.9 3.1 7.7 Corporate Bonds 5.1 11.2 3.7 8.8 Cash 1.5 1.1 1.8 1.3 Other * 8.4 3.9 8.1 3.8 Average long-term expected rate of return 7.7 100 7.2 100

*Other holdings include hedge funds, currency holdings, asset allocation futures and other. It is assumed that these will get a return in line with equities where applicable.

NOTES TO CORE FINANCIAL STATEMENTS

74

Reconciliation of funded status to balance sheet 31 March 2011 31 March 2012 Funded

scheme Unfunded liabilities Total

Funded scheme

Unfunded liabilities Total

£000 £000 £000 £000 £000 £000

Notional value of assets 690,686 0 690,686 711,530 0 711,530 Present value of liabilities (1,145,070) (39,980) (1,185,050) (1,303,680) (41,850) (1,345,530) Net pension (liability) (454,384) (39,980) (494,364) (592,150) (41,850) (634,000)

Assets and Liabilities in relation to Retirement Be nefits Changes to the present value of liabilities during the accounting period: 31 March 2011 31 March 2012

Funded scheme

Unfunded liabilities Total

Funded scheme

Unfunded liabilities Total

£000 £000 £000 £000 £000 £000

Opening present value of liabilities (1,248,160) (42,660) (1,290,820) (1,145,070) (39,980) (1,185,050) Current service cost (31,930) 0 (31,930) (29,140) 0 (29,140) Interest cost (63,500) (2,130) (65,630) (61,880) (2,110) (63,990) Contributions by participants (10,060) 0 (10,060) (9,680) 0 (9,680)

Actuarial gains/(losses) on liabilities * 47,500 (1,560) 45,940 (94,840) (3,040) (97,880) Net benefits paid out ** 36,140 3,350 39,490 39,260 3,490 42,750 Past service cost 124,940 3,020 127,960 (2,330) (210) (2,540)

Closing present value of liabilities (1,145,070) (39,980) (1,185,050) (1,303,680) (41,850) (1,345,530)

Includes changes to the actuarial assumptions. Changes to the fair value of assets during the acco unting period:

31 March

2011 31 March

2012 £000 £000 Opening fair value of assets 629,230 690,680 Expected return on assets 46,900 53,160 Actuarial gains/(losses) on assets 5,930 (37,930) Contributions by employer 34,700 35,200 Contributions by participants 10,060 9,680 Net benefits paid out ** (36,140) (39,260) Closing fair value of assets 690,680 711,530

NOTES TO CORE FINANCIAL STATEMENTS

75

** The figures for net benefits paid out consists of net cash-flow out of the Fund in respect of the employer, excluding contributions and any death in service lump sums paid, and including an approximate allowance for the expected cost of death in service lump sums. Actual return on assets 31 March 2011 31 March 2012 £000 £000

Expected return on assets 46,900 53,160 Actuarial gain/(loss) on assets 5,930 (37,930) Actual return on assets 52,830 15,230

Analysis of amount recognised in the Comprehensive Income & Expenditure Statement 31 March 2011 31 March 2012

Funded Scheme

Unfunded Liabilities

Total gain

/(loss) in CI&E

Funded Scheme

Unfunded

Liabilities

Total gain

/(loss) in CI&E

£000 £000 £000 £000 £000 £000

Total Actuarial Gain/(Loss) 53,430 (1,560) 51,870 (132,770) (3,040) (135,810) History of total gains and losses recognised in the Comprehensive Income & Expenditure Statement

2007/08 2008/09 2009/10 2010/11 2011/12 £m £m £m £m £m

Total gain/(loss) –funded scheme 22.61 (152.42) (156.35) 53.43 (132.77)

Total gain/(loss) –unfunded liabilities 3.11 (1.59) (3.51) (1.56) (3.04)

Cumulative gain/(loss) (118.44) (272.45) (432.31) (380.44) (516.25) History of asset values, present value of liabiliti es and surplus/(deficit)

31 March

2008 31 March

2009 31 March

2010 31 March

2011 31 March

2012 £000 £000 £000 £000 £000

Fair value of assets 544,790 466,250 629,232 690,680 711,530 Present value of funded liabilities (824,280) (904,360) (1,248,160) (1,145,070) (1,303,680) Present value of unfunded liabilities (37,760) (39,880) (42,660) (39,980) (41,850)

Surplus/(deficit) (317,250) (477,990) (661,588) (494,370) (634,000) History of experience gains and losses Year

ending 31.3.08

Year ending

31.3.09

Year ending

31.3.10

Year ending

31.3.11

Year ending 31.3.12

£m £m £m £m £m

Experience gains/(losses) on assets (79.97) (131.32) 125.15 5.93 (37.93) Experience gains/(losses) on funded liabilities (19.46) (3.47) 10.25 52.02 (8.24) Experience gains/(losses) on unfunded liabilities 1.93 (0.48) 1.32 (0.15) (0.94)

NOTES TO CORE FINANCIAL STATEMENTS

76

Experience gains and losses expressed as a percenta ge of assets / liabilities Year ending 31

March 2011 Year ending 31

March 2012 % % Experience gains on assets expressed as a percentage of assets

0.9 (5.3)

Experience gains on funded liabilities expressed as a percentage of liabilities *

4.5 (0.6)

Experience gains on unfunded liabilities expressed as a percentage of unfunded liabilities *

(0.4) (2.2)

*This item consists of gains/ (losses) in respect of liability experience only – and excludes any change in liabilities in respect of changes to the actuarial assumptions used. The Teachers’ Pension Scheme Teachers employed by the Council are members of the Teachers’ Pension Scheme, administered by the Teacher’s Pension Agency on behalf of the Department for Education. The scheme is defined benefit scheme and although it is unfunded, Teachers pensions use a notional fund as a basis for calculating the employer’s contribution rate paid by Local Education Authorities. However, it is not possible for the Authority to identify a share of the underlying liabilities of the scheme attributable to its own employees and so for the purposes of the Statement of Accounts it is accounted for on the same basis as a defined contribution scheme, i.e. the cost charged to Net Cost of Services in the year is the cost of the employer’s contributions to the scheme. In 2011/12 the Council paid £15.934 million in respect of teachers’ pension costs, which represents 14.1% of teachers’ pensionable pay (£15.961 million representing 14.1% of teachers’ pensionable pay in 2010/11) In addition, the authority is responsible for the costs of any additional benefits awarded on early retirement outside of the Teachers’ scheme. These benefits are fully accrued in the pensions liability for unfunded liabilities. 20. Non-Current Assets Non-Current assets valuation Non-Current assets are valued as per the accounting policies shown on Pages 16 to 30.

NOTES TO CORE FINANCIAL STATEMENTS

77

NOTES TO CORE FINANCIAL STATEMENTS

78

Movements in PPE, Investment properties, Assets Hel d for Sale and Heritage Assets during 2011/12 are summarised as follows:

Property, Plant & equipment

Council

Dwellings

Other Land &

Buildings

Vehicles, Plant &

Equipment

Infrastructure Assets

Community Assets

Surplus Assets

£000 £000 £000 £000 £000 £000

Cost or Valuation At 1 April 2011 496,331 989,622 32,436 511,828 15,502 76,450

Additions 22,992 17,901 3,516 12,957 556 13

Impairment losses/reversals to RR *

0 0 0 0 0 0

Impairment losses / reversals to SDPS **

0 0 0 0 0 0

Derecognition - disposals

(281) (45,460) (1,616) 0 0 (5,534)

Reclassified (to)/from Held for Sale

0 (30) 0 0 0 (7,910)

Other reclassifications 436 7,962 692 4,682 182 1,155

Revaluation increases /(decreases) to RR*

0 2,191 0 0 0 (170)

Revaluation increases /(decreases) to SDPS**

0 (32,988) 0 0 0 (25,314)

At 31 March 2012 519,478 939,198 35,028 529,467 16,240 38,690

Depreciation

At 1 April 2011 9,924 36,980 21,088 165,086 0 0

Depreciation charge 10,400 14,362 3,867 25,695 0 0

Depreciation written out on impairment

0 0 0 0 0 0

Derecognition -disposals

(5) (578) (1,616) 0 0 0

Depreciation written out to SDPS **

0 (174) 0 0 0 0

Reclassifications 0 0 0 0 0 0

Depreciation written out on revaluation

0 (12,884) 0 0 0 0

At 31 March 2012 20,319 37,706 23,339 190,781 0 0

Net Book Value:

At 31 March 2012 499,159 901,492 11,689 338,686 16,240 38,690 At 31 March 2011 486,407 952,642 11,348 346,742 15,502 76,450

NOTES TO CORE FINANCIAL STATEMENTS

79

P,P & E under

construction

Total Property, Plant &

Equipment

Investment properties

Assets Held for

Sale

Heritage Assets

£000 £000 £000 £000 £000 Cost or Valuation At 1 April 2011 9,341 2,131,510 63,385 5,630 45,021 Additions 24,153 82,088 54 9 157 Impairment losses/reversals to RR *

0 0 0 0 0

Impairment losses / reversals to SDPS **

0 0 (109) 0 0

Derecognition - disposals

0 (52,891) (89) (1,043) 0

Reclassified (to)/from Held for Sale

0 (7,940) 0 7,940 0

Other reclassifications (15,528) (419) 419 0 0 Revaluation increases /(decreases) to RR*

0 2,021 0 0 0

Revaluation increases /(decreases) to SDPS**

0 (58,302) 148 (160) 0

At 31 March 2012 17,966 2,096,067 63,808 12,376 45,178

Depreciation At 1 April 2011 0 233,078 0 0 0 Depreciation charge 0 54,324 0 0 0 Depreciation written out on impairment

0 0 0 0 0

Derecognition -disposals 0 (2,199) 0 0 0 Depreciation written out to SDPS**

0 (174) 0 0 0

Reclassifications 0 0 0 0 0 Depreciation written out on revaluation

0 (12,884) 0 0 0

At 31 March 2012 0 272,145 0 0 0 Net Book Value: At 31 March 2012 17,966 1,823,922 63,808 12,376 45,178 At 31 March 2011 9,341 1,898,432 63,385 5,630 45,021

* RR = Revaluation Reserve ** SDPS = Surplus or deficit on Provision of Services

NOTES TO CORE FINANCIAL STATEMENTS

80

Comparative Movements in 2010/11 (restated):

Property, Plant & Equipment (PPE)

Council Dwellings

Other Land &

Buildings

Vehicles, Plant &

equipment

Infrastructure Assets

Community Assets

Surplus Assets

£000 £000 £000 £000 £000 £000

Cost or Valuation At 1 April 2010 754,933 878,089 30,549 483,800 13,957 69,347 Additions 19,814 18,123 4,617 17,280 529 54 Impairment losses/reversals to RR *

0 (1,392) 0 0 0 (10)

Impairment losses / reversals to SDPS**

(316) (2,885) 0 0 0 (508)

Derecognition - disposals

(117) 0 (3,095) 0 0 0

Reclassified (to)/from Held for Sale

0 0 0 0 0 (2,955)

Other reclassifications 0 9,443 365 10,748 1,016 7,751 Revaluation increases /(decreases) to RR*

0 135,206 0 0 4,084

Revaluation increases /(decreases) to SDPS**

(277,983) (46,962) 0 0 0 (1,313)

At 31 March 2011 496,331 989,622 32,436 511,828 15,502 76,450

Depreciation At 1 April 2010 29,880 32,539 20,189 140,779 0 0 Depreciation charge 9,925 13,673 3,450 24,307 0 0 Depreciation written out on impairment

0 (278) 0 0 0 0

Derecognition -disposals 0 0 (2,551) 0 0 0 Depreciation written out to SDPS**

0 (51) 0 0 0 0

Reclassifications 0 0 0 0 0 0 Depreciation written out on revaluation

(29,881) (8,903) 0 0 0 0

At 31 March 2011 9,924 36,980 21,088 165,086 0 0 Net Book Value:

At 31 March 2011 486,407 952,642 11,348 346,742 15,502 76,450 At 31 March 2010 725,053 845,550 10,360 343,021 13,957 69,347

NOTES TO CORE FINANCIAL STATEMENTS

81

P,P & E under

construction

Total Property, Plant &

Equipment

Investment Properties

Assets Held

for Sale

Heritage Assets

£000 £000 £000 £000 £000 Cost or Valuation At 1 April 2010 20,778 2,251,453 61,703 6,090 44,338 Additions 19,680 80,097 211 0 303 Impairment losses/reversals to RR *.

0 (1,402) 0 0 0

Impairment losses / reversals to SDPS **

(563) (4,272) 0 0 0

Derecognition - disposals 0 (3,212) (346) (3,479) 0

Reclassified (to)/from Held for Sale

0 (2,955) 0 2,955 0

Other reclassifications (30,554) (1,231) 851 0 380 Revaluation increases /(decreases) to RR*

0 139,290 0 0 0

Revaluation increases /(decreases) to SDPS**

0 (326,258) 966 64 0

At 31 March 2011 9,341 2,131,510 63,385 5,630 45,021

Depreciation At 1 April 2010 0 223,387 0 0 0 Depreciation charge 0 51,355 0 0 0 Depreciation written out on impairment

0 (278) 0 0 0

Derecognition -disposals 0 (2,551) 0 0 0 Depreciation written out to SDPS **

0 (51) 0 0 0

Reclassifications 0 0 0 0 0 Depreciation written out on revaluation

0 (38,784) 0 0 0

At 31 March 2011 0 233,078 0 0 0 Net Book Value: At 31 March 2011 9,341 1,898,432 63,385 5,630 45,021 At 31 March 2010 20,778 2,028,066 61,703 6,090 44,338

* RR = Revaluation Reserve ** SDPS = Surplus or deficit on Provision of Services

NOTES TO CORE FINANCIAL STATEMENTS

82

Intangible Assets Movements in Intangible assets during 2011/12 are summarised as follows:

Internally

Generated Assets

Other Assets

Intangible AUC

Total

£000 £000 £000 £000

Cost or Valuation At 1 April 2011 0 577 888 1,465 Additions 768 768 Other reclassifications 1,478 (1,478) 0

At 31 March 2012 0 2,055 178 2,233 Amortisation At 1 April 2011 0 360 0 360 Amortisation 375 375

At 31 March 2012 0 735 0 735 Net Book Value:

At 31 March 2012 0 1,320 178 1,498 At 31 March 2011 0 217 888 1,105

Comparative Movements in 2010/11:

Internally

Generated Assets

Other Assets

Intangible AUC

Total

£000 £000 £000 £000

Cost or Valuation At 1 April 2010 0 577 348 925 Additions 0 0 540 540

At 31 March 2011 0 577 888 1,465 Amortisation At 1 April 2010 0 282 0 282 Amortisation 0 78 0 78

At 31 March 2011 0 360 0 360 Net Book Value:

At 31 March 2011 0 217 888 1,105 At 31 March 2010 0 295 348 643

Non-Current Assets The non-current assets of the Council include the following: Allotment Gardens (27) Cardiff International Whitewater Centre Caravan Park Parks & Public Open Spaces (Approx 1500 ha) Cardiff Bay Barrage Play Centres (7) Cardiff Castle Residential Establishments (8) Cardiff International Sports Stadium Road Safety Centre Cemeteries (7) Roads - Non-Principal (1,002 km) Central Bus Station Roads - Principal (86 km)

NOTES TO CORE FINANCIAL STATEMENTS

83

City Hall Schools - Nursery (2) Civic Residence Schools - Primary (75) Community Halls (7) Schools - Secondary (13) Council Dwellings Schools - Special (7) County Hall Schools – Grant Maintained (1) Crematorium Schools – Integrated Children’s Centre (1) Day Centres and Clubs (9) Sports and Leisure Centres (7) Depots (6) and Workshops (10) St David’s Hall Eastern Park & Ride Storey Arms Outdoor Pursuits Centre Family Centres (2) Surface Car Parks (13) Heliport Swimming Pools (3) Horse Riding School Traveller Sites (2) Maindy Cycle Track Various Administrative Buildings Libraries (20) Various Property & Land Holdings Indoor Market Vehicles, Plant, Furniture & Equipment

Mental Health Day Centres (1) Works of Art, Civic Regalia & other heritage assets

New Theatre Youth & Neighbourhood Learning Centres (35) Voluntary Aided, Voluntary Controlled, and Foundati on Schools Only the parcels of land that are legally owned by the Council but held in respect of Voluntary Aided and Voluntary Controlled Schools are recognised on the Authority’s Balance Sheet. No other assets, including any buildings on this land, are recognised. Assets in respect of Foundation Schools are not recognised in the Balance Sheet. The detailed note in respect of asset disposals reflects the disposal of land and buildings relating to Whitchurch High School, which was granted Foundation Status on 1 September 2011. Depreciation is calculated on the following bases:

Asset category Initial Useful Life in years

Intangible Assets 3-5 Council Dwellings 50 Land n/a Buildings * 3-125 Vehicles, Plant, Furniture and Equipment 5-15 Infrastructure ** 7-120 Community Assets, Investment Properties, Heritage Assets, Surplus Assets and Assets Held for Sale

n/a

* Included within Buildings is City Hall with an initial useful life of 125 years ** Included within Infrastructure is the Cardiff Bay Barrage which is being depreciated over the design life of 120 years Heritage Assets The code for 2011-12 includes new accounting guidance in respect of heritage assets. Heritage assets are defined as assets of historic, artistic or scientific importance that are maintained principally for their contribution to knowledge and culture at either a national or local level. This requires their identification, recognition and disclosure in the accounts where relevant and material. Previously, heritage assets were either recognised as community assets (at cost) in the property, plant and equipment classification in the balance sheet, or were not recognised at all, due to the difficulties in obtaining a valuation.

NOTES TO CORE FINANCIAL STATEMENTS

84

The Council has no material intangible heritage assets, however it does hold tangible heritage assets which can be identified into four main categories:- • public art • scheduled ancient monuments for which it is responsible • paintings, artefacts and civic regalia • rare and antiquarian books The Council is one of the constituent bodies of the Glamorgan Records Office (GRO) which holds assets and data accumulated over time. The GRO prepares a separate set of accounts, with only the Council’s share of any asset values included in these accounts. No valuations are recorded by the GRO for heritage assets. Recognition, Measurement, Impairment and Depreciati on The Council recognises heritage assets where it may have incurred separately identifiable expenditure on their acquisition or preservation at historic cost or where it has information on the value of the asset. Given the nature of heritage assets, determining a value for them is complex. Valuations may lack reliability, there may be no market, providing an estimate of replacement cost may be difficult and the cost of determining a valuation for accounting purposes only may not be justified on cost benefit grounds. These difficulties are recognised by the Code and so many individual assets are not recorded in the accounts, but additional narrative disclosures are made about the nature and scale of such assets. Compared to the other assets held by the Authority, it is deemed that heritage assets not included in the balance sheet are not material. Where heritage assets are recognised in the accounts, they are deemed to have indefinite lives and so no depreciation is provided. Heritage assets are reviewed periodically for impairment. The notes below indicate the treatment of each of the above four categories in these accounts. Public Art In total there over 100 pieces of public art owned by the Council across the City. This includes freestanding artworks and significant pieces integrated into the design of buildings. Commissions have taken place over the past 150 years. Individually and in total, these assets are not identified or valued separately in the Council’s balance sheet as the Council is of the opinion that conventional valuation approaches lack sufficient reliability and the costs of obtaining valuations for these items would be disproportionate to the benefits. Details of these assets are held within the Cardiff Public Art Register, which is available on the Council’s internet site www.cardiff.gov.uk under the Environment, Planning and Public Art section. Further information and advice can be obtained from the Council’s City Development, Strategic Planning and Regeneration division. Scheduled Ancient Monuments The Council is responsible for a number of the 28 scheduled ancient monuments in the City. These are required to be protected for their contribution to knowledge and culture and include prehistoric burial sites and mounds, castles and forts, religious sites, defence structures as well as other sites of industrial significance. Unless expenditure has been incurred on these assets previously, these sites are not included in the Councils accounts at historic cost or value. Given the unique and often diverse nature of these assets, the Council is of the opinion that conventional valuation approaches lack sufficient reliability and the costs of obtaining valuations for these items would be disproportionate to the benefits. Further information and advice can be obtained from the Council’s City Development, Strategic Planning and Regeneration division. Paintings, artefacts and civic regalia The Council also has a collection of paintings, artefacts and civic regalia, much of which is related to local interest. The main items in terms of number and value are collections at the castle reflecting its historic significance and interpretation for visitors. Other items held at public buildings have been accumulated over a number of years. These items are included in the Council’s balance sheet as heritage assets at an insurance valuation of £30.8 million undertaken in November 2008, by Mr AN Schoon, Antiques and Fine Art Valuer. This is an increase of £21.3 million on the previously recorded historic cost valuation.

NOTES TO CORE FINANCIAL STATEMENTS

85

Rare and antiquarian books The rare and antiquarian books ranged from some of the earliest printed books (pre 1500) to special press books from the early 20th Century and were recorded in the Council’s accounts as assets held for sale. Much of the Council’s collection was sold in 2010/11 for £1.2 million to secure well being benefits. Of the remaining items, one is held on behalf of the Council at the National Library of Wales and the other items held as part of the Council’s library stock. These items are not separately valued and recognised in the Council’s accounts as the Council is of the opinion that conventional valuation approaches lack sufficient reliability and the costs of obtaining valuations for these items would be disproportionate to the benefits. The table below lists Heritage assets and their treatment in the Council’s accounts Heritage Category

Item Nature / Type Identified separately in Balance Sheet (Yes/No)

Valuation Basis of any asset or expenditure incurred

Public Art Various – Per Public Art Register

Statues, Street Art No n/a

Scheduled Ancient Monuments

Wenallt Camp Castle, Fort, Camp – Pre Roman

No n/a

Caerau Fort Castle, Fort, Camp – Iron Age

No n/a

Ely Roman Villa Domestic – Roman

No n/a

Penylan Roman Site Remains – Roman No n/a Morganstown Castle

Mound Castle, Fort, Camp – Medieval

No n/a

Dominican Friary Religious – Medieval

No n/a

Llandaff Cathedral Bell Tower

Religious – Medieval

No n/a

Old Bishops Palace Religious – Medieval

No n/a

Sea Wall Rumney Sea Defences – Post Medieval

No n/a

Leckwith Bridge Bridge – Post Medieval

No n/a

Wreck of the Louisa Industry – Post Medieval

No n/a

Coal Discharger Industry – Post Medieval

No n/a

Melingriffith Water Wheel

Industry – Post Medieval

Yes Historic Cost

Gun Batteries -Flatholm Island

Defence – Post Medieval

No n/a

Coastal and Aircraft Defences – Flathom Island

Defence – Modern No n/a

Cardiff Castle and Roman Fortress

Castle, Fort, Camp – Roman

Yes Historic Cost

Paintings Artifacts and Civic Regalia

Various, primarily at Castle also at City Hall Mansion House and County Hall

Furniture, paintings, ornaments, jewellery,

Yes Valuation for Insurance Purposes

NOTES TO CORE FINANCIAL STATEMENTS

86

ceramics etc. Rare and Antiquarian Books

In library Stock and held at National Library

First editions, Book of Aneirin

No n/a

Movements in the value of Heritage assets held in the Council’s accounts

Heritage Category NBV as at 31 st March 2011

£000

Additions £000

NBV as at 31 st March 2012

£000 Scheduled Ancient Monuments 14,191 157 14,348 Paintings, Artefacts and Civic Regalia 30,830 0 30,830

Council policy on acquisitions, disposals, care and conservation Where resources allow, the Council will seek to create, acquire and preserve heritage resources for the benefits of its Citizens in partnership with other public and private sector bodies using grant and other funding opportunities. Acquisitions are rare, although public art is often commissioned as part of regeneration schemes. Given limited resources and the cost of preserving heritage assets, the Council may consider various options such as community asset transfer and disposal to ensure the preservation of assets. For assets held at the castle, acquisition, disposal and care is undertaken in accordance with the museum accreditation scheme. The statutory requirements placed upon the owners of Scheduled Ancient Monuments are likely to make the disposal of assets within Council ownership unviable. Before any work, alteration or controlled archaeological excavations are undertaken, consent is obtained from the National Assembly for Wales, a function administered by CADW. Ownership falls within the responsibility of various service areas primarily within City Development. Restatement In applying the new accounting policy retrospectively to 31 March 2010, assets that were previously held as community assets within property plant and equipment at a historic cost of £22.99 million should now be recognised as heritage assets and continue to be measured at cost. In addition, assets previously held as community assets within property plant and equipment at a historic cost of £9.5 million should now be recognised as heritage assets and measured at £30.8 million, with the increase reflected in the revaluation reserve. The 31 March 2010 and 31 March 2011 balance sheets, and 2009/10 and 2010/11 comparative figures, have thus been restated in the 2011/12 statement of accounts. Comprehensive Income and Expenditure Account 2009/10 and 2010/11 No restatement is required of the comprehensive income and expenditure account as no impairment was identified and no depreciation was chargeable on heritage assets. Effect on Balance Sheet at 31 March 2011 As Previously

Stated 31 March 2010

Restatement As Restated 31 March 2010

Movements in 2010/11

As Restated 31 March 2011

£000 £000 £000 £000 £000 Community Assets 36,946 (22,989) 13,957 1,545 15,502 Heritage Assets 0 44,338 44,338 683 45,021 Long Term Assets 2,172,335 21,349 2,192,684 (150,231) 2,042,453 Total Net Assets 1,101,404 21,349 1,122,753 31,556 1,154,309

NOTES TO CORE FINANCIAL STATEMENTS

87

Unusable Reserves 1,042,192 21,349 1,063,541 18,984 1,082,525 Total Reserves 1,101,404 21,349 1,122,753 31,556 1,154,309

The effect of the change in accounting policy in 2009/10 has been that heritage assets are recognised at £44.34 million on the balance sheet resulting in an increase to the revaluation reserve of £21.35 million and community assets being restated by the amount of heritage assets previously recognised at cost in community assets of £22.99 million. The code indicates that movements on heritage assets over the past five years be disclosed. As a small part of the Council’s overall assets, the movements to date in the net book value of heritage assets are not material to the Statement of Accounts. On this basis, we conclude that it is not practical to make those disclosures. Further information regarding the movements during 2010/11 and 2011/12 is available within the existing disclosures of non-current assets. Detailed disclosure will be considered in future years if the level, value and frequency of movements in heritage assets are material to the accounts and the users understanding of these accounts. Capital Expenditure and Capital Financing The total amount of capital expenditure incurred in the year is shown in the following table, together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Authority that has yet to be paid for. The CFR is analysed in the second part of this note.

2010/11 2011/12 £000 £000

422,671 Opening Capital Financing Requirement 446,866 Capital Expenditure:

80,097 Property, Plant and Equipment 82,088 303 Heritage Assets 157

0 Assets Held for Sale 9 211 Investment Properties 54 540 Intangible Assets 768 270 Loans 1,360

12,900 Expenditure on REFCUS 15,003 Sources of Finance:

(2,098) Capital Receipts (8,730) (40,614) Government grants and other contributions (36,391)

(6,241) Direct revenue contributions and reserves (8,665) (21,116) Prudent revenue and capital provision for loan repayment (23,316)

(57) Adjustment to St. Donats provision 0 446,866 Closing Capital Financing Requirement 469,203

Explanation of movements in year:

(1,111) Decrease in underlying need to borrow (supported by government financial assistance) (5,690)

25,306 Increase in underlying need to borrow (unsupported by government financial assistance) 28,027

24,195 Increase in Capital Financing Requirement 22,337

NOTES TO CORE FINANCIAL STATEMENTS

88

Revenue Expenditure funded from Capital under Statu te The following amounts were treated as capital expenditure to be paid for from capital resources. This is expenditure on items that do not result in the creation or enhancement of an asset for the Council.

2010/11

(Reclassified) 2011/12

£000 £000 Movements in Year: Housing Improvement grants 8,655 7,435 Buildings not owned by Cardiff Council 1,749 2,510 REFCUS resulting from capitalisation directive 1,955 4,538 Grants awarded (not Housing grants) 541 458 Costs associated with capital disposal 0 62 Charged to Income and Expenditure Account 12,900 15,003 Funded by: Grants and Contributions 8,818 8,443 St Donats Remediation – reduction in provision 57 0 Borrowing, receipts and other capital resources 4,025 6,560 12,900 15,003

Asset Disposals The main asset disposals during the year are identified below:-

• Whitchurch High School land and buildings to be transferred to its Governing Body at nil value in according with statute and ministerial direction.

• Sale of former Ty Gwyn Special School • Sale of former Countisbury Home, Minehead Road • Sale of land at Brython Drive • Sale of land at Albert Walk

Significant capital expenditure contractual commitm ents At 31 March 2011 the total of significant capital expenditure contractual commitments was £21.357 million. At 31 March 2012 the figure for significant capital expenditure commitments scheduled for completion in 2012/13 and future years is £10.450 million and includes the following: £000 Bryn Celyn English & Welsh Primary School 1,978 Single Assessment Centre 1,725 Marion Centre, Bishop of Llandaff 1,552 Butetown Youth Centre 1,425 Butetown Community Centre 1,305 Llysfaen Primary School 1,114 Coed Glas Primary School 710 Pencaerau Primary School 641

A contract for a scheme at St Teilos Church in Wales High School for £19.338 million was signed on 15th June 2012. 21. Financial Instruments Financial Instrument Balances

NOTES TO CORE FINANCIAL STATEMENTS

89

The following table discloses the Council’s Financial Instruments (Assets and Liabilities) at their carrying value. Further detail and where applicable a fair value, are shown in the sections below. Debtors and Creditors are shown separately in the respective notes rather than as financial instruments:-

31 March 2011 31 March 2012

Long Term Short Term Total Long Term

Short Term Total

£000 £000 £000 £000 £000 £000

Investments/Financial Assets Loans & Receivables at amortised cost

6,935 105,960 112,895 8,115 83,550 91,665

Investments at Fair Value

24,692 0 24,692 15,592 0 15,592

Fair value through Profit and Loss

0 0 0 0 0 0

Total 31,627 105,960 137,587 23,707 83,550 107,257 Borrowings/Financial Liabilities Financial Liabilities at Amortised Cost (439,948) (5,994) (445,942) (439,895) (6,905) (446,800)

Investments / Financial Assets Loans and receivables include :

• Loan and interest payable by Glamorgan County Cricket Club of £5.92 million. In April 2011, a further loan of £1.06 million was provided to the club towards infrastructure development. As part of a review of financing at the club during the year, £5.77million owed to the Council was repaid and a new loan of £5.77 million was provided to the club, reflecting interest rates in the market at the time. The consolidated loan is to be fully recovered by October 2023 as opposed to January 2028, with repayments of principal and interest commencing in July 2013.

• Car loans to eligible Council staff. Loans are repaid with interest, over a specified period, not greater than five years, as set out in a loan agreement. Over 605 such agreements existed during 2011/12 and the value of loans outstanding total £2.343 million as at 31 March 2012.

• Financial support to Small and Medium Enterprises (SMEs) £0.93 million. • Temporary cash balances of £74.8 million, deposited for various maturities with financial

institutions. Such balances fluctuate daily and are not comparable year on year. The fair value of loans and receivables is higher than the carrying amount because the Council’s portfolio of investments includes a number of fixed rate loans where the interest rate receivable is higher than rates available for similar financial assets at the Balance Sheet date.

31 March 2011 31 March 2012

Carrying amount

Fair value

Carrying amount

Fair value

£000 £000 £000 £000 Cash and Cash Equivalents 14,961 14,961 10,671 10,671

Deposits with banks and building societies 89,869 89,984 71,791 71,932

Assisted Car Purchase Loans 2,724 2,724 2,343 2,343

Loans to External Organisations / Subsidiary 5,341 5,341 6,860 6,860

Financial assets 112,895 113,010 91,665 91,806

NOTES TO CORE FINANCIAL STATEMENTS

90

Investments at Fair value include: • The Council’s 100% shareholding in Cardiff City Transport Services Limited. Whilst the

council’s shareholding is not listed on any quoted market, accounting rules require a valuation be estimated to comply with accounting for Financial Instruments. Any change in value within the Council’s accounts does not have an impact on the Council Tax payer, revenue budget or Cash flow in any one year as any movement in value of the asset is reflected in a corresponding reserve, the ‘available for sale reserve’ as it is required to be called. The fair value of the investment at 31 March 2012 is deemed to be £14.4 million, a reduction of £9.1 million from the £23.5 million valuation previously determined in 2010/11. This value is determined by applying a multiplier to the Company’s Earnings Before Interest Tax Depreciation and Amortisation (EBITDA), both of which have reduced over the period. Any valuation undertaken using this method is likely to fluctuate dependent on the companies performance and economic climate in which it operates.

• A 44.5% interest in the Medicentre, a Joint Venture between the Council, University of Wales

College of Medicine, the Welsh Government and the Cardiff and Vale NHS Trust (£1.19 million), and minority holdings in SMEs.

Borrowings / Financial Liabilities include:

• Borrowing undertaken to fund the long term capital expenditure requirements of the Council and any short term cash flow requirements. This includes debt instruments (Lender Option Borrower Option Loans) totalling £51 million which allow the lender to change the rate of interest at specified periods, allowing the Council to either accept the new rate or repay the loan before the contractual maturity date. The date of maturity for such instruments is assumed to be the contractual period to maturity rather than the next date that the ender could request a change in the rate. It should also be noted that the carrying amounts below include accrued interest payable at 31 March 2012.

• The Council has not granted any financial guarantees that need to be recognised on the

Balance Sheet, nor has any debt rescheduling occurred during the year. The fair value of borrowing and financial liabilities is more than the carrying amount because the Council’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the rates available for similar loans at the Balance Sheet date. Interest rates on similar loans have seen a reduction compared to the same point last financial year. The commitment to pay interest above current market rates increases the amount that the Council would have to pay in the form of a premium or penalty if the lender agreed to early repayment of the loans.

31 March 2011 31 March 2012

Carrying amount Fair value

Carrying amount Fair value

£000 £000 £000 £000 Public Works Loan Board Loans (392,742) (408,527) (393,588) (469,333)

Lender Option Borrower Option Loans (51,632) (54,737) (51,642) (48,704)

Market loans, Bonds and Temporary Balances

(1,568) (1,917) (1,570) (1,948)

Bank overdraft 0 0 0 0

Financial liabilities (445,942) (465,181) (446,800) (519,985) Fair value calculations used the following assumptions:

• For PWLB debt, the discount rate used is the rate for new borrowing on 31 March 2012. The PWLB provided a fair value of £563.85 million based on the premature repayment rates in force at 31 March 2012.

• For other market debt and investments the discount rate used is the rate available for an instrument with the same terms from a comparable lender.

NOTES TO CORE FINANCIAL STATEMENTS

91

• Interpolation techniques between available rates have been used where the exact maturity period was not available.

• No early repayment or impairment is recognised. Financial Instrument Gains/Losses The table below shows the gains and losses recognised in the Comprehensive Income and Expenditure Statement in relation to Financial Instruments disclosed above:

Financial Liabilities Financial Assets

Liabilities at

Amortised Cost Loans &

Receivables Investments at

Fair Value Fair Value

through P&L Total

2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Interest Expense 22,935 23,326 0 0 0 0 0 0 22,935 23,326 Losses on De-recognition 0 0 0 0 0 0 0 0 0 0 Impairment Losses 0 0 0 0 0 0 0 0 0 0 Interest Payable and Similar Charges 22,935 23,326 0 0 0 0 0 0 22,935 23,326 Interest / Dividend Income 0 0 (1,583) (2,131) (370) (450) (292) 0 (2,245) (2,581) Gains on De-recognition 0 0 0 0 0 0 0 0 0 0 Interest and Investment Income 0 0 (1,583) (2,131) (370) (450) (292) 0 (2,245) (2,581) Gains on Revaluation 0 0 0 0 0 0 0 0 0 0 Losses on Revaluation 0 0 0 0 0 9,100 0 0 0 9,100 (Surplus) / Loss arising on revaluation of financial assets 0 0 0 0 0 9,100 0 0 0 9,100 Net (gain) / loss for the year 22,935 23,326 (1,583) (2,131) (370) 8,650 (292) 0 20,690 29,845

The Council’s external fund manager who was investing a proportion of the Council’s temporary cash balances was dismissed in March 2011 and all such balances were managed internally during 2011/12. The £9.1 million reduction in the fair value of the Council’s shareholding in Cardiff Bus is as a result of changes in estimates of multipliers and recent trend of reducing EBITDA for the company. It should be noted that given there is no accurate measure of value for such unquoted assets, any valuation is likely to vary significantly from year to year for what is an accounting requirement. Nature and Extent of Risks arising from Financial I nstruments The authority’s activities in relation to financial instruments expose it to a variety of financial risks as defined in the table below. Risk Definition Credit Risk The possibility that

other parties may fail to pay amounts due to the authority

Credit risk arises from lending of temporary cash balances to banks, building societies, other local authorities and money market funds as part of the Council’s Treasury Management Activities. It also arises from exposure to the authority’s customers and organisations to whom it may have provided a loan.

NOTES TO CORE FINANCIAL STATEMENTS

92

Risk Definition Liquidity and Re-financing Risk

The possibility that the authority may not have funds available to meet its commitments to make payments or have to renew a financial instrument on maturity at disadvantageous interest rates or terms

The Council borrows money to pay for capital expenditure as well as for the prudent management of its day to day financial affairs. The main risk is that the authority may be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates.

Market Risk The possibility that financial loss might arise for the authority as a result of changes in such measures as interest rates and quoted market movements

Interest rate risk - movements in interest rates occur on a daily basis, subject to conditions in the financial markets. The Council is exposed to interest rate risk in two different ways; the first being the uncertainty of interest paid/received on variable rate instruments, and the second being the effect of fluctuations in interest rates on the fair value of an instrument. Price risk – Money Market Funds may invest in Certificates of Deposit and Gilts which can result in gains or losses from movements in prices subject to the holding at any one point in time. The Council, excluding the pension fund, does not invest in tradeable equity shares or marketable bonds. Foreign exchange risk - The authority’s exposure to loss arising from movements in exchange rates is minimal. Investments are only made in sterling.

The Council has adopted the CIPFA Treasury Management Code of Practice and sets Treasury Prudential Indicators to control key financial instrument risks in accordance with the Prudential Code of Capital Finance in Local Authorities. The Council has Treasury Management Practices, setting out the manner in which it will achieve treasury policies and objectives, and prescribing how it will manage and control those activities. The Council sets at the start of the year a Treasury Management Strategy, which for 2011/12 can be found on the Council’s external website, Cardiff.gov.uk. by clicking on the following, Your Council / Council Finance / Council Finances. Responsibility for the execution and administration of treasury management decisions rests with the Chief Corporate Services & S151 Officer. Scrutiny of the accounting, audit and commercial issues of its Treasury management Strategy and Practices were undertaken by the Council’s Audit Panel due to the technical nature of the documents. Updates on the Council’s borrowing and Investments are provided in a strategy report published at the start of each financial year, a mid year report and an outturn report prepared at the end of the financial year. Further details in relation to each type of risk are disclosed in the following sections where relevant. Credit Risk – further disclosures The following table summarises the Council’s main exposures to credit risk.

Credit Risk Likelihood of Default 31 March

2011 £000

31 March 2012 £000

Deposits – banks, buildings

In accordance with its Treasury Management Strategy which includes an investment strategy, Council policy is to place deposits only with banks

103,624 75,636

NOTES TO CORE FINANCIAL STATEMENTS

93

societies and building societies that have Fitch minimum criteria of F1 (i.e. highest credit quality). Lending is restricted to a prudent maximum amount and duration for each financial institution, also taking into account extent of public ownership and sovereign rating. Ratings are regularly reviewed. A risk of non-recoverability applies to all of the authority’s deposits which require rigorous monitoring of credit risk and credit criteria. The Council uses treasury management advisors who assist in monitoring credit risk of counterparties. To date, the authority has not experienced default of any institution and as the counterparty exposure table below shows this is not deemed to be a significant factor, thus requiring no provisions or losses to be recognised. See table below.

Car Loans

Repayments in respect of car loans are recovered directly from employees pay and indemnity insurance is a condition of the loan. Default experience is minimal.

2,724 2,343

Loans to External Bodies

Glamorgan Cricket Club loan, £5.92m, Loans to SME’s £0.93m. Repayments are dependant on financial and operating performance, which are monitored closely for large amounts. Where there is deemed to be a risk of non-repayment a provision is made.

5,341 6,860

Customers

The authority does not generally allow credit for customers and provision is made for non-payment based on the age profile of outstanding debt, adjusted for large invoices known to have been settled after balance sheet date and any other material factors that could affect the ultimate sum collectable. The bad debt provision for 2011/12 was based on the adjusted age profile disclosed below. 2010/11 2011/12 £000 £000 Less than 1 year

15,699 11,789

1 – 2 years 957 892 2 – 3 years 419 538 3 – 4 years 307 231 4 – 5 years 428 134 Over 5 years 1,116 711 Total 18,926 14,295

Other debt such as grant income due from government bodies and year-end accruals of income is considered to be 100% collectable and provision against non payment is not usually considered necessary.

19,045 14,842

Total 130,734 99,681

NOTES TO CORE FINANCIAL STATEMENTS

94

Counterparty Exposure at 31 March 2012

Counterparty Country Fitch Investment Long Term £000

Bank of Scotland (Lloyds Banking Group) UK A 12,000 Barclays Bank UK A 12,000 Cater Allen (Santander UK) UK A+ 13,000 Development Bank of Singapore (DBS) Singapore AA- 5,000 National Australia Bank Australia AA- 9,000 Nationwide Building Society UK A+ 10,000 Oversea-Chinese Banking Corporation Singapore AA- 10,000 Royal Bank of Scotland UK A 3,835 Total 74,835

Using historic data adjusted for current financial market conditions and based on the level of counterparty exposure at 31 March 2012, the probability of any default is low at 0.025% or £18,709. Liquidity Risk – further disclosures The Council manages its daily liquidity position by undertaking cash flow modelling. The Council has ready access to funds from the Market and Public Works Loan Board in order to raise finance to meet its commitments under financial instruments and for the purposes of the prudent management of its financial affairs. Within its Treasury Management Strategy limits are set on the proportion of its fixed rate loans maturing during specified periods. The loan portfolio is regularly reviewed with any new loans carefully planned as well as taking opportunities for early repayment where economic to do so. The amounts of fixed rate debt maturing in any period are disclosed in the table below:-

31 March 2011 Loans Outstanding 31 March 2012 £000 £000

387,815 Public Works Loans Board 387,695 52,266 Market Debt / LOBOs / Bonds 52,265

440,081 Total 439,960

133 Less than 1 Year 65 52 Between 1 and 2 years 2,100

15,437 Between 2 and 5 years 19,955 17,329 Between 5 and 10 years 16,499

407,130 More than 10 years 401,341 440,081 Total 439,960

The total values in the above table can be reconciled to the carrying amount of all financial liabilities carried at amortised cost by the addition of accrued interest of £6.545 million and short term borrowing of £0.296 million The Council’s debt maturity profile is shown in the following graph on the assumption that all loans run to their final maturity. Currently, £24 million of the Lender Option Borrower Option loans (LOBO’s) are subject to the lender having the right to change the rate of interest payable every six months. The Council has the right to refuse the change, triggering early repayment and the need to re-finance.

NOTES TO CORE FINANCIAL STATEMENTS

95

Maturity Profile of Debt

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

45000000

50000000

2012

/13

2014

/15

2016

/17

2018

/19

2020

/21

2022

/23

2024

/25

2026

/27

2028

/29

2030

/31

2032

/33

2034

/35

2036

/37

2038

/39

2040

/41

2042

/43

2044

/45

2046

/47

2048

/49

2050

/51

2052

/53

2054

/55

2056

/57

2058

/59

2060

/61

2062

/63

2064

/65

2066

/67

2068

/69

2070

/71

2072

/73

2074

/75

2076

/77

2078

/79

Year

£

Fixed Period LOBO

In respect of trade and other payables, the Council aims to make payment within 30 days in respect of undisputed invoices. Market Risk – further disclosures The main impacts of interest rate movements are set out below:- Variable affected by interest rate fluctuations

Impact of Variation Actions to mitigate interest ra te risk

Interest earned on variable rate investments

Interest rate rises will increase income credited to the Comprehensive Income Expenditure Statement, while reductions may result in less income than budgeted.

Interest paid on variable rate borrowings

If interest rates rise, lenders may exercise options to increase rates in a Lender Option Borrower option loan potentially increasing the interest expense charged to the Comprehensive Income Expenditure Statement, should the council accept the higher rate.

Fair value of fixed rate financial assets

Interest rate rises will cause fair value to fall. This will not impact on the Comprehensive Income Expenditure Statement or Balance Sheet values for the majority of assets held at amortised cost, but will impact on the disclosure note for fair value.

Fair value of fixed rate financial liabilities

Fair value will fall if interest rates rise. This will not impact on the Comprehensive Income Expenditure Statement or Balance Sheet values for the majority of assets held at amortised

• Production and Council approval of a Treasury Management Strategy at the start of each financial year, setting limits for fixed and variable rate exposure. • Interest rate forecasts based on advice from treasury management advisors are built into the budget and monitored regularly throughout the year. • By borrowing fixed rate, the Council aims to minimise the revenue impact of interest fluctuations to provide stability for planning purposes. Where financially beneficial, opportunities are taken to restructure borrowing to reduce the average rate paid and achieve a balanced debt portfolio. • Diversification of investments.

NOTES TO CORE FINANCIAL STATEMENTS

96

Variable affected by interest rate fluctuations

Impact of Variation Actions to mitigate interest ra te risk

cost, but will impact on the disclosure note for fair value.

An indication of the authority’s sensitivity to interest rate change is disclosed below. The table indicates the potential impact on the Comprehensive Income and Expenditure Statement had interest rates during 2011/12 been on average 1% higher with all other variables held constant.

Interest Rate Risk Income and Expenditure Account £000 Increase in interest payable on borrowings (190) Interest in interest receivable on investments 658 Impact on Income and Expenditure Account 468 Increase in interest transferred to HRA (50) Increase in interest transferred to other balances and accounts (70) Net Income / (Expenditure) 348

Changes in Fair Value £000 Decrease in Fair Value of Fixed Rate Investments 138 Decrease in Fair Value of Fixed Rate Borrowings 71,341

The impact of a 1% fall in interest rates may not have exactly the opposite effect, since financial instruments with calls may not be exercised by the lender or borrower. Price Risk The Council’s 100% shareholding in Cardiff City Transport Services Ltd is not quoted on a recognised exchange and thus not subject to gains or losses from market price movements. A general shift of 5% in the fair value (positive or negative) would result in a £0.72 million gain or loss being recognised in the Movement in Reserves Statement. Whilst the Council could invest directly in products such as Bank Certificates of Deposits and Gilts, at the Balance Sheet date, the Council did not have any direct holding. These products can result in gains or losses from movements in prices subject to the holding at any point in time. 22. Debtors

31 March 2011

(restated)

31 March 2012

£000

£000 32,966 Central Government Bodies 51,375

1,680 Other Local Authorities 3,138 3,377 NHS Bodies 2,838

46 Public Corporations & Trading Funds 51 20,046 Other Entities and Individuals 26,573 58,115 Total Debtors Net of Impairments 83,975

23. Cash and Cash Equivalents The balance of Cash and Cash Equivalents is made up of the following elements:

NOTES TO CORE FINANCIAL STATEMENTS

97

31 March 2011

(restated)

31 March 2012

£000 £000 384 Cash 391 822 Bank (including cheque book schools) 6,435

13,755 Short-term deposit with banks and building societies 3,845

14,961 Total Cash and Cash Equivalents 10,671 Included within the bank figure above are bank balances of chequebook schools totalling £2.132 million (£1.787 million in 2010/11). In addition to the above, at 31 March 2012 the Council held £0.649 million (£0.497 million at 31 March 2011) on behalf of third parties, mainly Adult Services social care clients. This amount is not included on the balance sheet as this money does not belong to the Council. 24. Creditors

31 March 2011

31 March 2012

£000

£000 10,543 Central Government Bodies 9,440

1,703 Other Local Authorities 3,279 361 NHS Bodies 320 294 Public Corporations & Trading Funds 74

55,231 Other Entities and Individuals 65,958 68,132 Total Creditors 79,071

25. Interests in companies and other organisations The Council has interests in 3 subsidiary companies and one joint venture. The interest in Cardiff City Transport Services Ltd is consolidated into the Council’s group accounts, on Pages 136 to 144. The interests in the other organisations are considered immaterial in terms of both the turnover and the net assets of the group. The Council does not depend upon these organisations for statutory service provision and it is not considered that they expose the Authority to a material level of commercial risk. They have therefore been excluded from the consolidation in 2011/12. Cardiff City Transport Services Ltd. (Cardiff Bus) Cardiff City Transport Services Limited is a private limited company with a share capital £4,618,000, which is wholly owned by Cardiff Council. Cardiff City Transport Services Ltd. was set up in accordance with the provisions of the Transport Act 1985 to run the Council’s municipal bus operation and started operations in October 1986. The company’s operating results for 2011/12 as summarised below are provisional: Year to 31 March

2011 (Restated)

Year to 31 March 2012

£000 £000 Turnover (33,010) (33,964) Operating and other expenditure 31,889 34,330 Net (Profit) / Loss before Taxation (1,121) 366 Less: Taxation 548 8 (Profit )/ Loss after Taxation (573) 374

NOTES TO CORE FINANCIAL STATEMENTS

98

A summary of the company’s financial position is as follows: 31 March 2011

(restated) 31 March 2012

£000 £000 Bus and other operating assets 19,254 18,417 Current Assets 6,290 5,669 Less Current Liabilities (4,598) (5,643) Net Assets 20,946 18,443

Creditors: Amounts falling due after more than one year (2,425) (1,081)

Provisions & Long term liabilities (3,317) (3,446)

Deferred Taxation (253) 0 Pension Liability (5,801) (6,347) Total Assets less liabilities 9,150 7,569 Represented by: Share Capital 4,618 4,618 Profit and Loss account 7,047 5,491 IAS19 Pension Reserve (5,801) (6,347) Revaluation Reserve 3,286 3,807 Net Worth 9,150 7,569

The 2010/11 figures above have been restated to reflect the figures in the final certified accounts for Cardiff Bus for 2010/11. In 2011/12 the Council made payments totalling £10.879 million to Cardiff Bus (£10.697 million in 2010/11) and received income of £0.165 million (£0.131 million in 2010/11). During 2011/12 Cardiff Bus declared and paid to the Council a dividend of £450,000 (£370,000 in 2010/11). At 31 March 2012, Cardiff Bus had inter-company balances with Cardiff Council as follows: debtors £0.217 million (£0.165 million in 2010/11); creditors £0.059 million (£0.035 million in 2010/11). For the year ended 31 March 2012 Deloitte LLP have audited the accounts and an unqualified audit opinion has been issued. Cardiff Business Technology Centre Ltd. (CBTC Ltd.) CBTC is a company limited by guarantee, which is wholly owned by the Council. The Council’s guarantee to CBTC Ltd is to pay costs not exceeding £10 in the event of the company being wound up. The company’s principal activity is to promote and assist in the development of new and existing high technology companies through the provision of business/incubator premises with a high level of support services. CBTC Ltd has an unsecured loan from Cardiff Council, of which £17,807 is outstanding at 31 March 2011. The most recent operating results are shown below:

Year to 31

March 2011 Year to 31

March 2012 £000 £000 Net (Profit)/Loss before taxation (5) (25) Less: Taxation 0 0 (Profit)/Loss for year after taxation (5) (25)

A summary of the company’s financial position is as follows:

NOTES TO CORE FINANCIAL STATEMENTS

99

31 March 2011

31 March 2012

£000 £000 Total assets less current liabilities 1,120 885 Creditors: falling due after more than one year (19) (26) Provision for taxation 0 0 Pension Liability (70) (119)

Total Assets less liabilities 1,031 740

Represented by: Retained Profit 121 139 Revaluation Reserve 980 720 IAS19 Pension Reserve (70) (119) Net Worth 1,031 740

During 2011/12 the Council received income of £25,667 (£25,742 in 2010/11) from CBTC Ltd. At 31 March 2012 CBTC Ltd. owed Cardiff Council £148,843 (£185,998 at 31 March 2011) and was owed £10,850 (£10,850 at 31 March 2011). The accounts for the year ended 31 March 2012 have been audited by Gerald Thomas & Co., Chartered Accountants and Registered Auditors and an unqualified audit opinion has been issued. A full copy of the most recently approved accounts can be obtained from Centre Administrator, Cardiff Business Technology Centre Ltd, Senghenydd Road, Cardiff CF24 4AY. Cardiff & Co. Cardiff & Co. is a company that was set up during 2007/08 to promote and publicise the City of Cardiff and surrounding area. It is a company limited by guarantee and is a wholly owned subsidiary of Cardiff Council. The liability of its directors, who are its members, is limited to £1 per member. The company’s most recent operating results are summarised below: Period to 31

March 2011 Period to 31 March 2012

£000 £000 Net (Profit)/Loss before taxation (35) (45) Taxation 0 0 (Profit)/Loss for year after taxation (35) (45)

A summary of the company’s financial position is as follows: 31 March 2011 31 March 2012 £000 £000 Total assets less current liabilities 174 218 Creditors falling due after more than one year 0 0 Total Assets less liabilities 174 218 Represented by: Retained Profit 174 218

During the year Cardiff Council made core funding payments of £0.55 million (£0.5 million in 2010/11) to Cardiff & Co. and received income from the Company of £65,006 (£50,020 in 2010/11). The Council also made other payments totalling £23,554. In addition the Council provides a payroll service for Cardiff & Co. for which it receives direct reimbursement (£406,490 in 2011/12). At 31 March 2012 the Company owed the Council £47,198 (£14,765 in 2010/11) and was owed £5,640 by the Council.

NOTES TO CORE FINANCIAL STATEMENTS

100

The company’s auditors are Broomfield & Alexander Ltd. An unqualified audit opinion has been issued in respect of the accounts for year ending 31 March 2012. Cardiff Medicentre Joint Venture Cardiff Medicentre was established to provide facilities for small firms in the medical and health care sector and is the result of a joint collaboration between Cardiff Council, Cardiff University, Welsh Government and the Cardiff and Vale University Health Board. The Council owns a 44.5% share which is shown in Cardiff Council’s balance sheet as an investment. During 2011/12 the Council received a total income of £5,022 from Medicentre (£9,522 in 2010/11. No profit distribution was made in respect 2011/12 surplus (£nil in 2010/11). At 31 March 2012 Medicentre owed the Council £0 (£5,022 at 31 March 2011). A net surplus of £44,499 was made in 2011/12 (net deficit of £2,151 in 2010/11). The accounts for the year ended 31 March 2012 have been audited by Gerald Thomas & Co., Chartered Accountants and Registered Auditors and an unqualified audit opinion has been issued. A full copy of the accounts can be obtained from the Centre Administrator, Cardiff Medicentre, Heath Park Cardiff CF14 4UJ. 26. Provisions

Balance 1 April 2011

Utilised/ Released in

year

Transfers to Provisions

Balance 31 March 2012

£000 £000 £000 £000 Cardiff Insurance Provisions 10,892 (5,067) 5,137 10,962 South Glamorgan Insurance Fund 123 0 1 124 Equal Pay Back Pay Provision 2,347 0 5,153 7,500 Capital Provision 38 (38) 0 Other Provisions 433 (74) 1,220 1,579 Total Provisions 13,833 (5,179) 11,511 20,165

Not later than one

year Later than one

year Balance 31 March

2012

£000 £000 £000 Cardiff Insurance Provisions 4,492 6,470 10,962

South Glamorgan Insurance Fund 5 119 124

Equal Pay Back Pay Provision 0 7,500 7,500 Capital Provision 0 0 0 Other Provisions 972 607 1,579 Total Provisions 5,469 14,696 20,165

The Cardiff Insurance provisions represent sums set aside to meet the cost of claims received, but not yet settled, by the Council. Cardiff Council operates a system of self insurance which provides cover either in part or in total for a considerable number of the Council’s insured risks. Major risks including property, liability and motor vehicle are partially self-funded whereas full cover is provided for secondary risks such as ‘All Risks’. In total, insurance is provided for 32 different types of risk which have the potential to have a serious affect on the financial position of individual establishments and service areas. These risks have been selected for insurance after consultation with the Council’s insurance brokers.

NOTES TO CORE FINANCIAL STATEMENTS

101

Charges are made to service areas on the basis of the assets insured for vehicle and property related insurances and on the basis of claims’ experience for public and employers’ liability insurances. The balance on the South Glamorgan Insurance Fund provision represents the current surplus in the Fund. Claims are still being processed and when the fund is eventually wound up any surplus or deficit will be split between Cardiff Council and the Vale of Glamorgan Council in their respective proportions. The Equal Pay Back Pay provision represents an estimate of the possible cost of the Council’s future liability in respect of unsettled equal pay claims. The amount estimated in the provision is the total amount of individual claims that were estimated to be paid in 2011/12 and based on latest negotiating position between the Council and the Trade Unions. There is currently no certain timescale for when these negotiations will be completed or when the claims will be settled. 27. Deferred Liabilities

Balance 1 April 2011

Utilised/ Released in

year

Transfers to Provisions

Balance 31 March 2012

£000 £000 £000 £000 Commuted Maintenance Sums 8,378 (124) 1,183 9,437 Vehicles Finance Lease 87 (46) 0 41 Total Deferred Liabilities 8,465 (170) 1,183 9,478

Not later than one

year Later than one

year Balance 31 March

2012

£000 £000 £000 Commuted Maintenance Sums 928 8,509 9,437 Vehicles Finance Lease 28 13 41

Total Deferred Liabilities 956 8,522 9,478 The commuted maintenance sums are amounts received from developers and other organisations for the future maintenance of assets adopted by the Council and include £2 million received from the former CBDC. During 2009/10 £2.826 million of commuted sums were temporarily used to help fund the voluntary severance costs. This amount was due to be repaid over five years by charges to service revenue accounts. The first annual repayment of £565,000 was made during 2010/11 and one service area made a further repayment of £18,000 during the year. In addition, the Council utilised £1 million exceptional income (VAT refunds) received during the year to make a further earlier than planned repayment. The outstanding balance was fully repaid in 2011/12. 28. Capital and other Contributions Receipts in Adv ance This represents the sums received from developers and from other external sources. Schemes to be funded are specific and very often time limited. The movements are as follows:

2010/11 2011/12 £000 £000

(14,777) Balance as at 1 April (12,854) Movements during Year:

(3,076) Contributions received during the year (19,158) 4,480 Contributions applied to expenditure during the year 5,126

519 Reclassification 374

(12,854) Balance as at 31 March (26,512)

NOTES TO CORE FINANCIAL STATEMENTS

102

During the year, £17 million was received from Welsh Government towards a new transport interchange, public realm improvements and other sustainable travel initiatives in relation to a transfer of liabilities in respect of Herbert Street Bridge. 29. Usable Reserves Movements in the Authority’s usable reserves are detailed in the Movement in Reserves Statement. Usable Capital Receipts Reserve The Usable Capital Receipts Reserve represents the capital receipts available to finance existing capital commitments and future capital expenditure, after setting aside any voluntary amounts as provision to repay external loans. The movements are as follows:

2010/11 2011/12 £000 £000 2,519 Balance as at 1 April 2,159

Movements during Year: 2,594 Sale of Land, Buildings and other assets 8,044

327 Sale of Council Dwellings 724 8 Private Mortgage Repayments 2

226 Recoupments of grant 199 3,155 8,969

(2,098) Finance Capital Expenditure (8,730) (1,409) Provide for Repayment of External Loans (663) (3,507) (9,393)

0 Reclassification 73

(8) Additional set aside from Private Mortgage Repayments (2)

2,159 Balance as at 31 March 1,806 30. Unusable Reserves Revaluation Reserve The Revaluation Reserve contains the gains made by the Authority arising from increases in the value of its non current assets. The balance is reduced when assets with accumulated gains are:

• Revalued downwards or impaired and the gains are lost • Used in the provision of services and the gains are consumed through depreciation, or • Disposed of and the gains are realised

The Reserves contain only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account. The movements are as follows:

2010/11 2011/12 (restated)

£000 £000 129,080 Balance as at 1 April 266,171 156,704 Upward revaluation of assets 27,706

(14,468) Downward revaluation of assets and impairment losses not charged to the Surplus/Deficit on the Provision of Services

(25,685)

142,236 Surplus or deficit on revaluation of non-current assets not posted to the Surplus or Deficit on the Provision of Services

2,021

NOTES TO CORE FINANCIAL STATEMENTS

103

(2,140) Difference between fair value depreciation and historical cost depreciation

(2,129)

(3,005) Accumulated gains on assets sold or scrapped (23,115)

(5,145) Amount written off to the Capital Adjustment Account (25,244)

266,171 Balance as at 31 March 242,948 Capital Adjustment Account The Capital Adjustment Account reflects differences between normal accounting practice and statutory requirements. The Account is credited with the amounts used as finance for capital expenditure. It contains accumulated gains and losses on Investment Properties, amounts set aside to repay external loans and also revaluation gains accumulated on non current assets before 1 April 2007, the date the Revaluation Reserve was created to hold such gains. Note 1 provides details of the source of all of the transactions posted to the Account, apart from those involving the Revaluation Reserve.

2010/11 2011/12 (restated)

£000 £000 1,593,499 Balance as at 1 April 1,306,118

Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement:

(55,348) Charges for depreciation and impairment of non-current assets (54,150)

0 Reverse previous impairment on revaluation 2,253 (291,772) Revaluation losses on Property, Plant and Equipment (47,670)

(79) Amortisation of intangible assets (375) (4,025) Expenditure on REFCUS (6,560)

(4,006) Amounts of non current assets written off on disposal or sale as part of

the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

(51,824)

(355,230) (158,326)

5,145 Adjusting amounts written out of the Revaluation Reserve (historic cost adjustment)

25,244

(350,085) Net written out amount of the cost of non-current assets consumed in the year

(133,082)

Capital financing applied in the year: 2,098 Capital Receipts 8,730 3,857 Direct Revenue Financing 6,961 2,384 Reserves and provisions 1,704

70 Insurance settlement 47 31,725 Grants and contributions 27,901 19,708 Prudent Revenue Provision 22,654

1,409 Capital receipts used to repay external loans 663 423 Leased vehicles 46

61,674 68,706

966 Movements in the market value of Investment Properties 39 64 Movement in the value of Held for Sale assets (160)

1,306,118 Balance as at 31 March 1,241,621

NOTES TO CORE FINANCIAL STATEMENTS

104

Deferred Capital Receipts Reserve The Deferred Capital Receipts Reserve holds the gains recognised on the disposal of non-current assets but for which cash settlement has yet to take place. Under statutory arrangements, the Authority does not treat these gains as usable for financing new capital expenditure until they are backed by cash receipts. When the deferred cash settlement eventually takes place, amounts are transferred to the Useable Capital Receipts Reserve. The movements are as follows:

2010/11 2011/12 £000 £000 1,115 Balance as at 1 April 881

0 Transfer of deferred sale proceeds credited as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

0

(234) Transfers to the Capital Receipts Reserve upon receipt of cash (46)

881 Balance as at 31 March 835 Following consent given to Cardiff City Football Club for the development of the hotel site and former coach park in 2009/10, a £720,000 premium became payable to the Council which is deferred for five years. This is shown under deferred capital receipts. The payment of the premium is to be made over five years commencing in 2015/16 and will include accrued interest. Any sum due to the Council becomes payable immediately should the Club be promoted to the Premier League. Available for Sale Financial Instruments Reserve Available for Sale Financial Instruments Reserve contains the gains made by the Authority arising from increases in the value of its investments that have quoted market prices or otherwise do not have fixed or determinable payments. The balance is reduced when investments with accumulated gains are:

• revalued downwards or impaired and the gains are lost • disposed of and the gains are realised.

2010/11 2011/12 £000 £000

23,500 Balance as at 1 April 23,500

0 Downwards revaluation of investments not charged to the Surplus/Deficit on the Provision of Services

(9,100)

23,500 Balance as at 31 March 14,400 Whilst the council’s shareholding in Cardiff Bus is not listed on any quoted market, accounting rules require a valuation be estimated to comply with accounting for Financial Instruments. Any change in value within the Council’s accounts does not have an impact on the Council Tax payer, revenue budget or Cash flow in any one year as any movement in value of the asset is reflected in a corresponding reserve, the ‘available for sale reserve’ as it is required to be called. The fair value of the investment at 31 March 2012 is deemed to be £14.4m, a reduction of £9.1m from the valued previously determined in 2009/10. This value is determined by applying a multiplier to the Company’s EBITDA, both of which have reduced over the period and are likely to fluctuate. Financial Instruments Adjustment Account The Financial Instruments Adjustment Account contains entries required by legislation to ensure that the impact on Council Tax, resulting from accounting for various Financial Instruments is neutralised.

2010/11 2011/12 £000 £000 (4,078) Balance as at 1 April (3,736)

NOTES TO CORE FINANCIAL STATEMENTS

105

342 Proportions of premiums and discounts incurred in previous financial years to be charged against the General Fund Balance in accordance with statutory requirements

343

(3,736) Balance as at 31 March (3,393) Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post employment benefits and for funding benefits in accordance with statutory provisions. The Authority accounts for post employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require a benefit earned to be financed as the Authority makes employer’s contributions to pension funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the Authority has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

2010/11 2011/12 £000 £000

(667,487) Balance as at 1 April (500,787)

51,870 Actuarial gains or losses on pensions assets and liabilities (135,810)

77,300 Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement *

(42,512)

(524) Reversal of amounts accrual in respect of pension strain for future years (767)

38,054 Employer’s pensions contributions and direct payments to pensioners payable in the year

38,686

(500,787) Balance as at 31 March (641,190) * During 2010/11 there was a significant variation in respect of the retirement benefits figures calculated by the actuary. The reason for this is the basis of the calculation having changed from the Retail Price Index (RPI) to the Consumer Price Index (CPI). Accumulated Absences Account The Accumulated Absences Account absorbs the differences that would otherwise arise on the Council General Fund Balance from accruing for compensated absences earned but not taken in the year e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to and from the Account.

2010/11 2011/12 £000 £000

(9,741) Balance as at 1 April (7,276)

2,465

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

(5,070)

(7,276) Balance as at 31 March (12,346)

NOTES TO CORE FINANCIAL STATEMENTS

106

31. Grant Income The Authority credited the following grants and contributions to the Comprehensive Income and Expenditure Statement in 2011/12: 2010/11 2011/12 £000 £000 Credited to Taxation and Non Specific Grant Income Revenue Support Grant 303,037 315,272 Outcome Agreement Grant 3,165 3,217 Concessionary Fares Grant 10,195 10,614 Non-Domestic Rates 91,773 80,067 Capital Grants: 27,910 23,222 Developers’ Contributions 3,885 4,726 Total 439,965 437,118 Credited to Services (Revenue Grants) Central Government Bodies 262,522 269,788 Other Local Authorities 0 2 NHS Bodies 0 6 Public Corporations & Trading Funds 0 112 Other Entities and Individuals 110 145 Total 262,632 270,053

The Authority has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver. The balances at the year-end are as follows:

31 March 2011

31 March

2012 £000 £000

Capital Grants Receipts in Advance 4,020 Central Government Bodies 2,020

0 Other Local Authorities 0 0 NHS Bodies 0 0 Public Corporations and Trading Funds 0 0 Other Entities and Individuals 0

4,020 Total 2,020

31 March 2011

31 March 2012

£000 £000

Revenue Grants and Contributions Receipts in Advanc e 5,428 Central Government Bodies 4,492

3 Other Local Authorities 0 0 NHS Bodies 0

90 Public Corporations and Trading Funds 105 101 Other Entities and Individuals 110

5,622 Total 4,707

NOTES TO CORE FINANCIAL STATEMENTS

107

32. Contingent Assets & Liabilities Assets The Council holds a proportion of equity in a number of properties arising primarily from the affordable housing contribution that developers provide on new build developments. The equity proportions range from 20% to 40%, with the buyer nominated by the Council providing the balance of the resources to purchase the property. These properties were aimed at first time buyers who could not afford to buy a home on the open market. When the owner of the property wishes to sell their home, the Council have the first opportunity to nominate a purchaser from the assisted home ownership waiting list. If there is no nomination, the owner is free to sell on the open market and the Council is entitled to its relevant proportion of the market value of disposal in accordance with the charge on the property. This is treated as a capital receipt in the year that it is received. The estimated total value of equity provided at 31st March 2012 is £5.185 million. In addition to the £3.734 million received from HMRC for VAT claims in 2011/12, there are further outstanding claims that could be due to the Council in the future. This includes further trade waste claims, parking claims and cultural exemption claims. The amount of these claims is still uncertain but it is estimated that £2.9 million (less fees) may be paid. Certain claims would also be subject to due interest being added to the amount received. Liabilities As at 31 March 2012 there existed ten claims against the Council for which there is no insurance cover. The claims are in respect of, inter alia, unfair dismissal, racial and disability discrimination, repayment of LLC search fees and breach of contract. The maximum liability in respect of the ten claims is estimated to be £579,000. The Council is resisting liability in all cases. The former authorities of South Glamorgan County Council and Cardiff City Council are creditors of Municipal Mutual Insurance (MMI) Ltd and are legally bound by the Scheme of Arrangement. MMI ceased taking new business on 30 September 1992. The scheme allows new claims to be made against MMI and outstanding claims with MMI to be settled. At the present time the Scheme has not been triggered. It remains in the background as a possible option, which would involve the claw back of a percentage previously paid claims. If the scheme is triggered the Council will become liable to repay to MMI all payments of claims under the Scheme, less £50,000 per Authority, plus any further outstanding claims. As at 31 March 2012 this liability amounted to £2.605 million for the former South Glamorgan County Council (shared 72/28 with the Vale of Glamorgan) and £0.333 million for the former Cardiff City Council. A reserve of £700,000 has been included within the Insurance Fund earmarked reserve. The Council has worked in partnership with the Wales European Funding Office concerning European Commission monies that have been paid to the Council in respect of certain grant funded projects. This matter is currently being dealt with at a member state level and is part of a wider audit review of the management of the 1997-1999 Industrial South Wales ERDF Programme. An estimate of the potential maximum liability for the Council and partner organizations involved with the programme is £2.4 million. The extent of any Council liability is unclear and given that the programme is due to close in August 2012, any payment is deemed unlikely. In 1993 the former South Glamorgan County Council and the then Secretary of State for Wales (now Welsh Government) entered into an agreement which required the Council to pay for the costs of widening the M4 motorway which only became necessary due to the construction of junction 30. This could result in funding of circa £1 million - £3 million being claimed by Welsh Government. This is currently the subject of negotiations between Welsh Government, their advisors and the Council in respect of costs and also the benefits of the initial work undertaken by the Authority in relation to the overall WG scheme. The Council will aim to challenge any payment but this is the subject of ongoing negotiations. The Council has made a critical judgement in respect of the impact on the Statement of Accounts for 2011-12 of the legal actions taken against Cardiff Bus, a wholly owned company by Cardiff Council but run at arms length, by 2 Travel in Liquidation, D Francis, N Short and B Fowles. The critical judgement concluded, based on the level of damages awarded in respect of the claim brought by 2 Travel, (and

NOTES TO CORE FINANCIAL STATEMENTS

108

subject to the point below as regards costs of the 2 Travel claim and the progress of the stayed claims by the individuals) that the claims do not represent an additional liability over and above any provision made (if any) at 31 March 2012 that should be recognised in the underlying accounts and consequently the Council’s Group Statement of Accounts. The decision in relation to the claim brought by 2 Travel reserved the costs of that claim. The Council will continue to keep the matter under review in respect of any cost applications that may be made by or against Cardiff Bus in respect of that claim and the progress of the claims that have been stayed. We have also conducted an assessment in respect of the position of Cardiff Bus and concluded {in light of (i) the decision made in July 2012 as to the level of damages awarded and (ii) the information provided by Cardiff Bus in respect of its accounts (in particular any subsequent application for costs that may be made by or against it in respect of the same , the stayed claims and how the same has been accounted for, if at all, )} that in respect of the Council's Statement of Accounts, which lists the Bus Company as an investment, that on the information made available, no liability, which would materially affect the value of this investment, exists at 31 March 2012. The Council has made a provision for Equal Pay Claims that have been submitted up to the 31 January 2012. There is still the possibility that further claims can be made relating to Equal Pay back pay. The value and number of these claims is uncertain. 33. Notes to Cash Flow Statement Adjust net surplus or deficit on the provision of s ervices for non cash movements 2010/11 2011/12 £000 £000 Depreciation and impairment (348,177) (99,942) Charges made for retirement benefits (IAS19) less employers contributions

115,354 (8,896)

Contributions (to)/from provisions (1,538) (7,428) Changes in fair value of investment properties 967 (121) Increase/(decrease) in stock 131 146 Increase/(decrease) in debtors (exc capital) (4,946) 19,161

(Increase)/decrease in creditors (exc capital creditors) & super fund 4,240 (22,954)

(233,969) (120,034) Items in net surplus/ deficit on provision of servi ces that are investing and financing activities 2010/11 2011/12 £000 £000 REFCUS (4,025) (6,560) Net gain/(loss) on sale of non-current assets (1,360) (43,312) Repayments of liabilities under finance leases 0 54 Capital grants/contributions recognised in I&E 31,795 27,948 26,410 (21,870)

34. Voluntary and Compulsory Severance During the year, circa 200 people left the Council under its voluntary severance scheme. It is likely that this will continue during 2012/13 as the Council continues to transform. In total the severance costs incurred during the year amounted to £4.05 million of which £0.06 million related to staff working under the Asylum Seeker contract, the Harbour Authority or the HRA. The balance of £3.99 million severance cost related to Council fund services. This was paid from within in-year revenue resources.

NOTES TO CORE FINANCIAL STATEMENTS

109

35. Post Balance Sheet Events (i) On the 1st May 2012 the Council received £1.979 million (less fees) relating to trade waste claims. As this claim existed before the 31st March, this was adjusted in the accounts for 2011/12 and is included as an exceptional item within the Comprehensive Income & Expenditure account. (ii) Cardiff City Transport Services Limited is a private limited company, which is wholly owned by Cardiff Council but run at ‘arms length’. In November 2008 the Office of Fair Trading (‘OFT’) decided that, during the period from 19 April 2004 to 18 February 2005, Cardiff City Transport Services Limited (trading as Cardiff Bus) infringed the prohibition imposed by section 18(1) (the Chapter II prohibition) of the Competition Act 1998 (the Act), by engaging in predatory conduct which amounted to the abuse of its dominant position in the relevant markets. In January 2011 claims were issued by 2Travel Group PLC (in liquidation) and others in the Competition Appeal Tribunal. In respect of the 2Travel claim the case has been heard and a decision was made on the 5th July 2012, the other claims are stayed. The decision ordered Cardiff Bus to pay 2Travel £33,818.79 for loss of profits, £13,311.70 for interest on loss of profits and £60,000.00 for exemplary damages. Other heads of loss of the claimant’s case were dismissed and costs were reserved. The Council will continue to keep the matter under review in respect of any cost applications that may be made by or against Cardiff Bus and the claims that have been stayed. 36. Date of Authorisation of the Accounts for Issue This Statement of Accounts was authorised for issue on 18 June 2012 by Christine Salter, Chief Corporate Services & Section 151 Officer. Post Balance Sheet events have been considered up to this date.

HOUSING REVENUE ACCOUNT: INCOME & EXPENDITURE ACCOU NT FOR THE YEAR ENDED 31 MARCH 2012

110

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

2010/11

2011/12

£000 Note £000

Expenditure 16,687 Repairs and maintenance 16,537 11,805 Supervision and management 12,152

1,583 Rents, rates, taxes and other charges 1,402 14,481 Housing Revenue Account subsidy payable 15,355

616 Provision for bad and doubtful debts 322

259,755 Depreciation, impairment and revaluation of non-current assets 10 10,740

597 Sums directed by the Welsh Government that are expenditure in accordance with the Code

11 364

39 Debt management costs 20 305,563 Total Expenditure 56,892

Income

(49,526) Dwelling rents 2 (52,385) (80) Non-dwelling rents (78)

(5,863) Charges for services and facilities (5,341)

(841) Sums directed by the Welsh Government that are income in accordance with the Code (50)

(56,310) Total Income (57,854)

249,253 Net Cost of HRA Services as included in the Comprehensive Income and Expenditure Statement (9 62)

42 HRA Services’ share of Corporate and Democratic Core 42 249,295 Net Cost for HRA Services (920)

HRA share of the operating income and expenditure included in the Comprehensive Income & Expenditure Statement:

(216) (Gain)/loss on sale of HRA non-current assets (428) 4,191 Interest payable and similar charges 4,429

0 Changes in fair value of investment properties 0 Amortisation of Premiums 2

(178) Interest and Investment income 4 (245) (10,135) Capital Grants and Contributions applied (10,194)

242,957 (Surplus)/Deficit for year on HRA services (7,356)

MOVEMENT ON THE HOUSING REVENUE ACCOUNT STATEMENT

111

2010/11 2011/12 £000 Note £000

(6,152) Balance on the HRA at the end of the previous year (6,837)

242,957 (Surplus) or deficit for the year on the HRA Income and Expenditure Statement

(7,356)

(243,642) Adjustments between accounting basis and funding basis under regulations 1 7,026

(685) Net (increase)/decrease before transfers to or from reserves (330)

0 Transfers to/(from) reserves 0 (685) Increase or decrease in the year on the HRA (330)

(6,837) Balance on the HRA at the end of the current year (7,167)

NOTES TO THE HOUSING REVENUE ACCOUNT

112

1. Adjustments between Accounting Basis and Funding Basis Under Regulations

2010/11 2011/12 £000 £000

Adjustments primarily involving the Capital Adjustm ent Account:

Reversal of items debited or credited to the HRA Income and Expenditure Statement:

259,755 Charges for depreciation and impairment of non-current assets 10,740 0 Movement in the market value of investment properties 0

(244) Sums directed by Welsh Government 315

(306) Non-current assets written off as part of the gain/loss on disposal to the

HRA Income and Expenditure Statement (428) (10,135) Capital grants and contributions applied (10,194)

Insertion of items not debited or credited to the HRA Income and Expenditure Statement:

(1,623) Prudent Provision for the financing of capital investment (2,028) (3,313) Capital expenditure funded by the HRA (4,758)

Adjustments involving the Pensions Reserve: 967 Net Retirement Benefits per IAS19 897

(181) Pension Strain Accrual – future years (135) (1,294) Employers Contributions to pension schemes (1,334)

Adjustments involving the Capital Receipts Reserve:

(51) Non-current assets written off as part of the gain/loss on disposal to the

HRA Income and Expenditure Statement (100) Adjustments involving the Revaluation Reserve:

90 Non-current assets written off as part of the gain/loss on disposal to the

HRA Income & Expenditure Account 0

Adjustments involving the Accumulated Compensated A bsences Account:

(21)

Amount by which officer remuneration charged to the HRA Income & Expenditure Account on an accruals basis is different from remuneration chargeable in accordance with statutory requirments 1

Adjustments involving the Financial Instruments Adj ustment Account: (2) Amortisation of premiums and discounts (2)

243,642 Total Adjustments (7,026)

NOTES TO THE HOUSING REVENUE ACCOUNT

113

2. Rental Income This is the total rent income due for the year after allowance is made for voids etc. Vacancies accounted for 1.13% of rental income (1.28% in 2010/11). Average rents were £74.63 per week (£70.44 in 2010/11) based on a 52 week year. 3. Rent Arrears and Bad Debt Provision

As at 31 March 2011 As at 31 March 2012 Rent arrears Bad debt

provision Rent arrears Bad debt

provision £000 £000 £000 £000

HRA properties 2,181 1,782 2,267 1,889 Leasehold properties 115 115 105 105 Hostels 70 70 108 108 Total 2,366 1,967 2,480 2,102

In addition the following sums were also due from tenants: As at 31 March 2011 As at 31 March 2012

Arrears Bad debt provision

Arrears Bad debt provision

£000 £000 £000 £000 Service Charges 91 55 96 58 Tenants recoverables 478 478 414 414 Total 569 533 510 472

During 2011/12 a number of old debts totalling £201,854 were written off as irrecoverable (£477,594 in 2010/11). 4. Investment Income The figure for HRA investment income includes mortgage interest, interest earned on notional cash balances and repayments of retained equity. 5. Pension Costs In accordance with IAS19 the amount included within Management and Maintenance in respect of employee costs includes the current service cost for pensions. In order that the bottom line pension cost borne by the HRA equals the total employer’s contributions paid to the Pension Fund in the year plus any discretionary benefits payable to ex-housing staff, a transfer has been made to the Pensions Reserve as follows: 2010/11 2011/12 £000 £000 Cost of employer’s contributions plus discretionary benefits 1,294 1,334 Current service cost (967) (897) Net transfer to Pensions Reserve 327 437

No attempt has been made to apportion a share of the pensions interest cost and expected return on pensions assets to the HRA as there is no valid basis of apportionment. 6. Mortgages on Sold Council Houses Mortgage arrears amounted to £23,394 (£30,026 in 2010/11) and prepayments were £50,585 (£61,642 in 2010/11). 7. Housing Stock The Council's housing stock is shown below:

NOTES TO THE HOUSING REVENUE ACCOUNT

114

31st March 2011 31st March 2012

Houses 7,307 7,301 Bungalows 623 624 Flats/Bedsits 5,127 5,126 Maisonettes 288 288 Retirement complexes 358 358 Total 13,703 13,697

The Council also had:

31st March 2011 31st March 2012

Bed spaces in hostels 24 24 Flats in hostels 0 0 Leased properties 8 0 Total 32 24

8. Capital Expenditure and Capital Financing

2010/11 2011/12 £000 £000

76,093 Opening Capital Financing Requirement 80,997 Capital Expenditure:

19,814 Council dwellings 22,992 1,160 Other land & buildings 1,987

0 Vehicles, plant & equipment 194 0 Assets under construction 1,537

615 Expenditure on REFCUS 364 Sources of Finance: 3,000

(627) Capital Receipts (1,270) (10,978) Government grants and other contributions * (10,244)

(3,313) Direct revenue contributions and reserves (4,758) (1,832) Prudent revenue and capital provision for loan repayment (2,496)

(18) Adjustment to St Donats Provision 0 83 Adjustment to funding re Single Assessment Centre 0

80,997 Closing Capital Financing Requirement 92,303 Explanation of Movements in Year:

(1,692) Decrease in Underlying need to borrow (supported by government financial assistance - relating to previous years) (1,917)

6,602 Increase in Underlying need to borrow (unsupported by government financial assistance - relating to previous years) 13,223

4,910 Increase in capital financing requirement 11,306

• £9.6 million (£9.6 million in 2010/11) of Major Repairs Grant was received and applied in the year.

9. Capital Receipts Proceeds from the disposal of HRA Assets during 2011/12 were as follows:

• Council Dwellings, Repayment of Discount & Home Purchase Contributions £0.724 million (£0.327 million in 2010/11)

• Land £0.484 million (£0.370 million in 2010/11)

NOTES TO THE HOUSING REVENUE ACCOUNT

115

10. Depreciation, Impairment and revaluation charge d Depreciation and impairment was charged on HRA assets as follows: 2010/11 2011/12 £000 £000

Council dwellings 258,344 10,399 Land and buildings 1412 313 Vehicles, plant & equipment 0 28 Investment properties 0 0

Total depreciation, impairment and revaluation 259,756 10,740

During 2010/11, council dwellings were revalued. The discount factor used was 34%, this being lower than the previous factor used in valuing such property and is based on guidance issued by the Department of Communities and Local Government in England. Such changes do not have any impact on the amount required to be collected from rents as all such adjustments to non-current assets are required to be neutralised from capital reserves. 11. Sums directed by the Welsh Government Revenue expenditure funded from capital under statute totalling £0.364 million was charged to the Housing Revenue Account in 2011/12 (£0.615 million in 2010/11).

2010/11

(Reclassified) 2011/12

£000 £000 Movements in Year: Buildings not owned by Cardiff Council 555 364 Grants awarded (not Housing grants) 60 0 Charged to Income and Expenditure Account* 615 364 Funded by: Grants and Contributions 579 50 Borrowing, receipts and other capital resources 36 314 615 364

*Sum for 2010/11 offset by £18,000 reduction in provision for St Donat’s remediation

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

116

Foreword Cardiff Council is the administering Authority for the Cardiff & Vale of Glamorgan Pension Fund which is itself part of the national Local Government Pension Scheme (LGPS) for England & Wales, governed by Westminster. Although economic uncertainties continued to produce volatile equity markets during 2011/12 the Pension Fund’s assets maintained their value at £1.2 billion. The Fund’s triennial actuarial valuation results for 31 March 2010, and subsequent estimates, showed that liabilities have continued to increase. This is largely as a result of record low gilt yields, further increases in life expectancy and the lower investment returns of recent years. While it is recognised that factors such as gilt yields and investment returns are likely to be temporary relative to the long-term nature of the Fund’s liabilities, it does appear likely that employer contributions will rise at the next valuation in 2013. Debate around the affordability of the LGPS and other public sector schemes led to the publication of the Hutton report in 2011. The government subsequently agreed that all public sector schemes should implement a rise in retirement age and a move to career average accrual. Given the unique funded nature of the LGPS the government allowed representatives of employers and members to agree the details for a proposed new scheme in 2014. Outline draft proposals were issued in June 2012 which should lead to detailed draft regulations next year. The impact of this new scheme on future employer contributions can then be considered as apart of the 2013 triennial valuation. A busy year therefore lies ahead as pension matters will continue to be a major topic for discussion for government, employers and members for the foreseeable future. The Fund and its employers will need to give their feedback on proposals as the consultation process develops. Christine Salter Chief Corporate Services & Section 151 Officer 18 June 2012

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

117

Actuarial Statement Cardiff and Vale of Glamorgan Pension Fund Introduction

The Scheme Regulations require that a full actuarial valuation is carried out every third year. The purpose of this is to establish that the Cardiff and Vale of Glamorgan Pension Fund (the Fund) is able to meet its liabilities to past and present contributors and to review employer contribution rates. The last full actuarial investigation into the financial position of the Fund was completed as at 31 March 2010 by Aon Hewitt Limited, in accordance with Regulation 36 of the Local Government Pension Scheme (Administration) Regulations 2008. Actuarial Position 1. The valuation as at 31 March 2010 showed that the funding ratio of the Fund was unchanged since the previous valuation, with the market value of the Fund’s assets at that date (of £1,031.2M) covering 71% of the liabilities allowing, in the case of current contributors to the Fund, for future increases in pensionable remuneration. 2. The valuation also showed that the required level of contributions to be paid to the Fund by participating Employers (in aggregate) with effect from 1 April 2011 was as set out below:

• 14.9% of pensionable pay to meet the liabilities arising in respect of service after the valuation date.

Plus • Monetary amounts to restore the assets to 100% of the liabilities in respect of service prior to

the valuation date over a recovery period of 25 years from 1 April 2011,amounting to £22.9M in 2011/12, and increasing by 4.8% p.a. thereafter, before any phasing in or 'stepping' of contribution increases.

This would imply an average employer contribution rate of about 23.2% of pensionable pay in total, if the membership remains broadly stable and pay increases are in line with the rate assumed at the valuation of 4.8% p.a. 3. The majority of Employers participating in the Fund pay different rates of contributions depending on their past experience, their current staff profile, and the recovery period agreed with the Administering Authority. In addition the Administering Authority agreed that the significant increases in contribution requirements could be phased in for some employers over periods of up to 6 years. The resulting aggregate deficiency contributions in 2012/13 are £22.7M. The aggregate deficiency contributions payable are anticipated to remain lower than indicated by point 2 above until 2014/15. 4. The rates of contributions payable by each participating Employer over the period 1 April 2011 to 31 March 2014 are set out in a certificate dated 28 March 2011 which is appended to Aon Hewitt's report of the same date on the actuarial valuation. 5. The contribution rates were calculated taking account of the Fund’s funding strategy as described in the Funding Strategy Statement, and for the majority of Employers using the projected unit actuarial method. 6. The main actuarial assumptions were as follows: Discount rate

Scheduled Bodies 6.9% p.a Admission Bodies

In service: 6.25% p.a. Left service 4.75% p.a.

Rate of general pay increases 4.8% p.a.

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

118

Rate of increases to pensions in payment 3.3% p.a. Valuation of assets market value Further details of the assumptions adopted for the valuation were set out in the actuarial valuation report. 7. Contribution rates for all employers will be reviewed at the next actuarial valuation of the Fund as at 31 March 2013. 8. This statement has been prepared by the Actuary to the Fund, Aon Hewitt Limited, for inclusion in the accounts of City and County of Cardiff. It provides a summary of the results of the actuarial valuation which was carried out as at 31 March 2010. The valuation provides a snapshot of the funding position at the valuation date and is used to assess the future level of contributions required. This statement must not be considered without reference to the formal actuarial valuation report which details fully the context and limitations of the actuarial valuation. Aon Hewitt Limited does not accept any responsibility or liability to any party other than our client, City and County of Cardiff, in respect of this statement. Aon Hewitt Limited May 2012

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

119

FUND ACCOUNT FOR YEAR ENDED 31 st MARCH

2011 2012 £000 £000 £000

CONTRIBUTIONS AND BENEFITS Contributions receivable

51,308 from employers (Note 5) 54,530 15,923 from employees (Note 5) 15,534 4,167 Transfers in 2,366 1,790 Deficit Funding (Note 5) 5,362 3,692 Other Income (Capitalised Payments) 3,496

76,880 81,288 Benefits Payable

(42,464) Pensions (Note 6) (46,179) (16,530) Lump Sums (Note 6) (13,915)

Payments to and on account of leavers (4) Refunds of contributions (5)

(4,540) Transfers out (2,157) (0) Group Transfer Out (1,688)

(854) Admin & Other expenses (Note 8) (823)

(64,392) (64,767) Net Additions/(Withdrawals) from

12,488 dealings with Members of the Fund 16,521

RETURNS ON INVESTMENT

14,062 Investment Income (Note 9) 14,670 66,813 Change in market value of investments (Note 10) 16,154

(3,568) Investment management expenses (Note 8) (3,513)

77,307 Net Returns on Investments 27,311

89,795 Net Increase/(Decrease) in the Fund During Year 43,832

1,032,716 Opening Net Assets of the Scheme 1,122,511

1,122,511 Closing Net Assets of the Scheme 1,166,343

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

120

NET ASSETS STATEMENT AS AT 31 ST MARCH 2011 2012

£000 £000 £000

1,096,135 Investments at market value (Note 10) 1,131,865

15,066 Cash & investment proceeds due (Note 10) 20,448

1,111,201 1,152,313 Current assets

257 UK & Overseas Tax 309 5,489 Contributions due from Employers 6,154 1,152 Investment Income accrued 1,152

346 Sundry Debtors (Note 14) 167 2,651 Pension Strain costs due within one year 2,354

9,895 10,136 Non current assets

- Contributions due from Employers 445 4,523 Pension strain costs due after one year 5,227

5,672 Current liabilities

(1,947) Unpaid Benefits (1,016) (1,161) Sundry Creditors (Note 14) (762)

(3,108) (1,778)

1,122,511 Net Assets of the Scheme 1,166,343

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

121

NOTES TO THE ACCOUNTS 1. The Statement of Accounts summarises the transactions and net assets of the Pension Fund for the financial year 2011/2012. The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom, 2011/2012 which is based upon International Financial Reporting Standards (IFRS), as amended for the UK public sector.

The accounts summarise the transactions of the scheme and deal with the net assets at the disposal of

the administering Authority. They do not take account of obligations to pay pensions and benefits which fall due after the year end. Under IAS26 the Fund is required to disclose the ‘’actuarial present vale of the promised retirement benefits’’. This figure has been calculated by the Actuary as at 31 March 2010 as £1,950.4m, with a comparator value as at the 31 March 2007 valuation of £1,499.8m.

The actuarial position is summarised in the Actuarial Statement which is included on pages 117 and 118.

This shows that the overall funding level as at 31 March 2010 is 71%. 2. Accounting Policies

(a) Basis of Preparation Bond and dividend income has been taken into account on the contractual payment date. Property and private equity income is credited on receipt. The Fund does not account for any benefits payable or receivable in respect of members wishing to transfer from one scheme to another until assets (either cash investments or other form) have been received by the receiving scheme. All other income and expenditure has been accounted for on an accruals basis, except the liability to pay pensions and other benefits in the future. As per IAS 26, a disclosure has been made of the Fund’s pension liability i.e. the actuarial present value of promised retirement benefits (b) Valuation of Investments Quoted bond and equity investments are valued at bid market value at close of business on the last working day in March 2012 (bid market value is the price at which an investment can be sold at a given date). Private Equity Fund investments are valued at fair value, as determined by the administrators of the Fund, based on valuations provided by the general partners of the underlying investments. Where this is a publicly traded investment the valuation is based upon the closing market prices at the balance sheet date of the Fund. If the investment is not publicly traded, the general partner will consider the operational results of the company or any recent transactions in the company. If the company’s year end does not coincide with the Pension Fund’s year end, the valuation is updated with regard to the calls and distributions made between the Private Equity Fund’s audited account date and the Pension Fund’s year end. Pooled vehicles are normally valued at bid prices where available. Overseas investments have been converted at WM/Reuters closing spot rates of exchange. Official SETS prices have been used for FTSE100 securities (plus the reserve list). Derivatives are stated at market value. The value of futures contracts is determined using exchange prices at the reporting date. The future value of forward currency contracts is based on market forward exchange rates at the year end date and determined as the gain or loss that would arise if the outstanding contract were matched at the year end with an equal and opposite contract.

(c) Critical judgements in applying accounting policies Unquoted private equity investments. These are inherently based on forward looking estimates and judgements valued by the investment managers using two main sets of valuation guidelines that apply to private equity; the Private Equity Valuation Guidelines (PEVG) in the US and the International Private Equity and Venture Capital Valuation Guidelines(IPEVCG) outside the US. The value of unquoted private equities at 31.03.2012 was £84.1 m (73.6m at 31.03.2011). Pension fund liability. This is calculated by the actuary every three years with an annual statement in the intervening years. This is calculated in accordance with IAS19 and the main assumptions used in the

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

122

calculation are summarised in the actuary’s statement on page 117 and 118. This estimate is based on significant variances based on changes to the underlying assumptions.

(d) Assumptions made about the future and other major sources of estimation uncertainty. The Statement of Accounts contains estimated figures based on assumptions made taking into account historical experience, current trends and other factors. As balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates.

Item Uncertainties Effect if actual results differ from assumptions

Actual present value of promised retirement benefits

Estimations of the liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries increase, changes in mortality rates and expected returns on pension fund assets. The actuary provides the fund with advice regarding the assumptions to be used.

The effects on the net pension liability of changes in individual assumptions can be measured. For instance, an increase in the discount rate assumption would result in a decrease in the pension liability. An increase in assumed earnings inflation or assumed life expectancy would increase the value of the liabilities.

Private Equity Private equity investments are valued at fair value in accordance with international accounting standards. These investments are not publicly listed and as such there is a degree of estimation involved in the valuation.

The total private equity investments in the financial statements are £84.1 million. There is a risk that this investment may be under, or overstated in the accounts.

(e) Acquisition costs of Investments Acquisition costs are included with the original book cost at the time of purchase. At the year end, however, investments on the balance sheet are valued at market value. The difference is recorded in the Accounts as “Change in Market Value of Investments”. 3. Taxation (a) UK Income, Capital Gains Taxes. The Fund is an exempt approved fund able to recover UK income tax. No Capital Gains Tax

is chargeable. (b) Value Added Tax. The accounts are shown exclusive of VAT. As the County Council is the administering authority,

VAT is recoverable on all Fund activities. (c) Overseas Withholding Tax.

Foreign investment income usually suffers withholding tax in the country of origin, some of which may be recoverable. Irrecoverable tax is netted off against income.

4. Titles of Ownership Evidences of ownership for the property unit trusts and private equity holdings are held at County Hall. All other evidences of ownership were held at 31 March 2012 by The Northern Trust Company for the benefit of the Council. Statements of holdings have been provided by Northern Trust.

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

123

5. Employing Bodies – Contributions

No. of

contributors at

31.03.12

Contribution rates (% of

pensionable pay)

Additional lump sum

(memo)

Employers Employees Total

£000 £000 £000 £000 SCHEME EMPLOYERS: Barry Town Council 13 26.6 0 71 17 88 Cardiff City Transport 61 22.3 521 904 112 1,016 Cardiff Council 8,745 22.0 0 33,828 9,816 43,644 Cardiff and Vale College 393 13.0 311 1,160 413 1,573 Cowbridge Town Council 4 26.6 0 17 4 21 Dinas Powys Comm Council 1 18.2 1 6 2 8 Llantwit Major Town Council 1 26.6 0 8 2 10 Penarth Town Council 12 26.6 0 61 15 76 Public Services Ombudsman for Wales

3 30.3 0 40 9 49

Radyr & Morganstown Community Council

1 18.2 1 4 1 5

St Cyres Comp GM 32 15.8 22 99 30 129 St Davids Sixth Form Coll 19 15.8 16 77 25 102 Stanwell Comp GM 69 15.8 28 156 48 204 Cardiff Metropolitan University (UWIC)

597 13.0 867 2,743 959 3,702

Vale of Glamorgan Council 2,855 21.5 0 10,386 3,071 13,457 Sub-total 12,806 49,560 14,524 64,084 NON-SCHEME EMPLOYERS Cardiff & Co 8 16.0 0 37 16 53 Cardiff Business Technology 3 29.2 8 33 6 39 Cardiff Gypsy & Traveller Project

1 24.0 0 8 2 10

Cardiff Institute for Blind 3 22.7 57 71 4 75 Cardiff University 72 25.7 1,266 1,709 112 1,821 Career Wales (Cardiff & Vale) 124 16.1 0 526 190 716 Children in Wales 19 22.2 0 112 33 145 Citizens Advice Bureau 0 26.0 7 18 6 24 Civic Trust For Wales 1 24.0 0 9 2 11 Design Commission for Wales 4 22.2 0 37 14 51 Dimensions (UK) * 24.4 88 1 1 2 Colleges Wales (Fforwm) 7 25.9 16 94 21 115 Glamorgan Holiday Hotel * 22.6 0 25 1 26 Housing for Wales * 22.5 0 1 0 1 Memorial Hall 6 20.5 0 26 8 34 One Voice Wales 3 20.0 0 19 6 25 Opportunity Housing Trust 6 24.0 0 53 15 68

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

124

Play Wales 8 23.5 0 62 18 80 Royal National Eisteddfod 12 25.3 30 144 31 175 Sport Wales 121 21.5 75 977 286 1,263 Wales & West Housing Assoc 1 22.7 76 101 8 109 Welsh Council for Voluntary Action

108

22.6

125 747 183 930

Workers Education Assoc 30 22.6 0 160 47 207 Sub-total 537 4,970 1,010 5,980 Total 13,343 54,530 15,534 70,064

From 1st April 2011, the deficiency contribution applicable to individual employers has been calculated as an additional monetary amount. The total employer contribution payable is the sum of the employer contribution rate plus the deficiency contribution. Barry College and Coleg Glan Hafren amalgamated from August 2011 to become the Cardiff and Vale College and UWIC changed it’s name to Cardiff Metropolitan University. The last remaining members of Housing for Wales, Glamorgan Holiday Hotel and Dimensions left during the year. Housing for Wales and Dimensions have paid the full amount of the cessation payment. Glamorgan Holiday Home is paying via instalments over five years. In October 2011, The Citizen’s Advice Bureau was liquidated and ceased to be a member of the Fund. Additional deficit funding Scheme Employer £000

Housing for Wales 4,233 Careers Wales (Voluntary) 249 Dimensions 66 Public Services Ombudsman (Voluntary) 129 Glamorgan Holiday Home 685 Total 5,362

6. Employing Bodies - Benefits Paid Retirement

Pensions

£000

Lump Sums on

Retirement £000

Death Grants

£000

Commutation Payments

£000

SCHEME EMPLOYERS: Barry College 228 35 0 0 Barry Town Council 58 0 0 0 Cardiff City Transport 1,877 756 5 0 Cardiff Council 29,921 8,449 969 99 Coleg Glan Hafren 176 18 0 0 Cowbridge Town Council 5 0 0 0 Dinas Powys Town Council 8 0 70 0 Llantwit Major Town Council 16 15 0 0 Mary Immaculate High School 13 0 0 0 Penarth Town Council 34 40 0 0 Probation Service 230 0 0 0 Public Services Ombudsman for 153 0 0 0

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

125

Retirement Pensions

£000

Lump Sums on

Retirement £000

Death Grants

£000

Commutation Payments

£000

Wales Royal Welsh College of Music & Drama 58 4 0 0 S Wales Magistrates Courts 210 17 0 0 St Cyres Comprehensive GM 30 4 0 0 St Davids Sixth Form Coll 50 108 0 0 Stanwell Comprehensive GM 22 0 0 0 Cardiff Metropolitan University (UWIC) 1,081 335 44 0 Vale of Glamorgan Council 8,919 1,736 164 19 Sub-total 43,089 11,517 1,252 118 NON-SCHEME EMPLOYERS:

Cardiff Bay Arts Trust 10 0 0 0 Cardiff Bay Devt Corp 445 65 0 0 Cardiff Business Technology 11 0 0 0 Citizens Advice Bureau (Cardiff) 5 68 0 0 Cardiff Gypsy Sites 4 0 0 0 Cardiff Institute for Blind 70 10 4 0 Cardiff University 886 125 0 0 Careers Service 137 272 0 0 Catholic Children’s Society 2 0 0 0 Channel View Centre 4 0 0 0 Children in Wales 12 0 0 0 Citizens Advice Bureau (Vale) 9 0 0 0 Civic Trust for Wales 3 0 0 0 Community Relations (Race Equality) 0 0

6

0

Fforwm 3 0 0 0 Glam & Gwent Hsg Assoc 53 0 0 0 Higher Ed Development Wales 2 9 0 0 Housing for Wales 131 0 0 0 Intervol 17 0 0 0 Land Authority for Wales 277 0 0 0 National Eisteddfod 25 0 0 0 Opportunity Housing Trust 20 0 0 0 Play Wales 13 0 95 0 Glamorgan Holiday Hotel 50 0 0 0 S E Wales Com Trust 6 0 0 0 Sport Wales 630 205 3 15 STAR 6 0 0 0 Wales & West Housing Ass 133 8 0 0 Wales Youth Agency 51 0 0 0 Welsh Council for Voluntary Action 68 143 0 0 Workers Education Authority 7 0 0 0 Sub-total 3,090 905 108 15 TOTAL

46,179 12,422 1,360 133

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

126

7. Membership of the Fund

Fund membership at 31 March 2012 is as follows: 2010/11 2011/12

Contributing Employers 41 38 Contributors 13,507 13,343 Pensioners 8,981 9,293 Deferred pensioners 9,430 10,040 Total membership 31,918 32,676

8. Investment and Administration Expenses

Investment Management and Administration Expenses fully charged to the Fund are: 2010/11

£000 2011/12

£000 Management fees 3,457 3,404 Custody fees 111 109 Sub-total 3,568 3,513 Support Service Charges 171 125 Other Administration Expenses 683 698 Sub-total 854 823 TOTAL 4,422 4,336

Investment fees have increased in line with the rise in investment values. 9. Investment Income

2010/11 2011/12 £000 £000 UK Fixed Interest Securities 5,944 5,612 Overseas Fixed Interest Securities 1,917 1,759 UK Equities & Private Equity Funds 2,042 2,525 Pooled investments 736 827 Overseas Equities (net of irrecoverable tax) 1,943 2,455 Property Unit Trust Income 1,359 1,353 Interest on UK cash 90 107 Securities Lending 31 32 14,062 14,670

10. Investments at Market Value

31 March 2011 31 March 2012 £000 £000 £000 £000

UK Fixed Interest: Public Sector 55,064 35,246 Other (Pooled) 71,799 75,527

126,863 110,773

Overseas Fixed Interest:

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

127

Public Sector (Pooled) 0 4,903 Other 53,895 75,785

53,895 80,688 UK quoted Equities & Convertibles 59,124 62,746 Foreign quoted Equities 92,030 94,833 UK Property Unit Trusts 45,914 73,094 Private Equity 73,614 84,150

Pooled Funds

UK 393,421 377,985

Overseas 251,274 247,596

644,695 625,581

1,096,135 1,131,865 Derivatives: Forward Currency contracts (1,137) 1,941 Futures 0 0 Cash: UK 9,194 3,863 Overseas 6,908 14,641 Net investment proceeds due 101 3

16,203 18,507 1,111,201 1,152,313

Gross purchases in the year (excluding cash) were £183.191m, whilst sales were £166.338m. From these a net realised profit was accrued to the Fund of £8.4m. Profits and losses are calculated on historical costs. When only part of a holding is sold, the average cost method is used. The managing companies of all the pooled managed Funds are UK registered. Private Equity Funds are not quoted on recognised stock exchanges and may not be realisable as readily as quoted investments. Other than pooled funds, no single investment accounted for more than 5% of the Fund’s assets.

Value at 31/03/11

Purchase at Cost

Sale Proceeds

Change in

market value

Value at 31/03/12

£000's £000's £000's £000's £000's Fixed Interest Securities 180,758 76,601 (76,216) 10,318 191,461 Equities 151,154 61,586 (52,184) (2,977) 157,579 Pooled Funds 644,695 6,957 (23,450) (2,621) 625,581 Property unit trusts 45,914 25,427 0 1,753 73,094 Private equity 73,614 12,620 (11,488) 9,404 84,150 Sub total 1,096,135 183,191 (163,338) 15,877 1,131,865

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

128

Forward Currency (1,137) 283,519 (279,456) (985) 1,941 Futures 0 322,629 (322,629) 0 0 Total Derivatives (1,137) 606,148 (602,085) (985) 1,941 Debtors 523 1,202 Creditors (422) (1,199) Managers’ Cash 8,328 1,262 14,738 Internal Cash 6,341 732 Currency Overlay 1,433 3,034 Total Cash 16,203 1,262 18,507 Total Cash and Investment Proceeds due 15,066 277 20,448 Total 1,111,201 16,154 1,152,313

Value at 31/03/10

Purchase at Cost

Sale Proceeds

Change in

market value

Value at 31/03/11

£000's £000's £000's £000's £000's Fixed Interest Securities 170,295 36,593 (26,197) 67 180,758 Equities 140,726 54,819 (52,825) 8,434 151,154 Pooled Funds 590,601 1,111 (660) 53,643 644,695 Property unit trusts 40,950 3,000 0 1,964 45,914 Private equity 64,744 14,576 (8,727) 3,021 73,614 Sub total 1,007,316 110,099 (88,409) 67,129 1,096,135 Forward Currency (1,169) 275,396 (280,752) 5,388 (1,137) Futures 0 253,514 (253,514) 0 0 Total Derivatives (1,169) 528,910 (534,266) 5,388 (1,137) Debtors 0 523 Creditors (242) (422) Managers’ Cash 9,927 (5,704) 8,328 Internal Cash 4,597 6,341 Currency Overlay 2,008 1,433 Total Cash 16,290 (5,704) 16,203 Total Cash and Investment Proceeds due 15,121 (316) 15,066 Total 1,022,437 66,813 1,111,201

Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs incurred during the year amounted to £648k. In addition, indirect costs are incurred through the bid-offer spread on investments within pooled investment vehicles. The amount of indirect costs is not separately provided to the scheme. Analysis of derivatives Objectives and policies for holding derivatives Most of the holding in derivatives is to hedge liabilities or hedge exposures to reduce risk in the fund. The use of derivatives is managed in line with the investment management agreement between the fund and the various investment managers.

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

129

Forward foreign currency In order to maintain appropriate diversification and to take advantage of overseas investment returns, a proportion of the fund’s quoted equity portfolio is in overseas stock markets. To reduce the volatility associated with fluctuating currency rates, the fund has a passive currency overlay in place managed by the fund’s custodian. The fund hedges 50% of the Euro and Yen exposure within the portfolios managed by State Street and Nikko Asset Management 11. Summary of Manager’s Portfolio Values at 31 Mar ch 2012 £000 % of Fund Aberdeen Asset Management 200,297 17.4 Aberdeen Emerging Markets 41,466 3.6 Blackrock Investment Management 138,793 12.0 Invesco Perpetual 59,418 5.2 J P Morgan 41,398 3.6 Majedie 66,007 5.7 Nikko 43,177 3.8 Schroder Investment Managers 54,219 4.7 State Street Global Advisers 305,202 26.5 Mesirow 18,587 1.6 Goldman Sachs 20,798 1.8 Property Unit Trusts 73,094 6.4 Private Equity Managers 84,150 7.3 Passive currency overlay 4,975 0.4 Internally managed (Cash) 732 0 1,152,313 100.0

12. Financial Instruments

a) Classification of financial instruments

31/03/2011 31/03/2012 Fair Value through

profit and loss

Loans and

receivables

Financial liabilities

at amortised

cost

Fair Value through

profit and loss

Loans And

receivables

Financial liabilities

at amortised

cost £000 £000 £000 Financial

assets £000 £000 £000

180,758 Fixed Interest Securities

191,461

151,154 Equities 157,579 644,695 Pooled Funds 625,581

45,914 Property Unit Trusts

73,094

73,614 Private Equity 84,150 74,220 Derivatives 64,513

16,102 Cash

18,504

1,675 Other investment balances

2,354

13,266 Debtors 14,074 1,172,030 29,368 1,198,732 32,578

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

130

Financial liabilities

(75,357) Derivatives (62,572) (422) Other

investment balances

(1,199)

(3,108) Creditors (1,778) Borrowings

(75,779) (3,108) (63,771) (1,778)

1,096,251 29,368 (3,108) 1,134,961 32,578 (1,778)

b) Net gains and losses on financial instruments 31/03/2011 31/03/2012

£000 Financial Assets £000 67,129 Fair value through profit and loss 15,877

0 Loans and receivables 0 Financial liabilities

0 Fair value through profit and loss 1,262 (316) Loans and receivables (985)

66,813 Total 16,154

c) Fair value of financial instruments and liabili ties 31/03/2011 31/03/2012

Carrying value Fair value Carrying value Fair valu e £000 £000 £000 £000

Financial assets

886,214 1,172,030 Fair value 906,170 1,198,732

29,368 29,368 Loans and receivables

32,578 32,578

915,582 1,201,398 Total financial assets

938,748 1,231,310

Financial liabilities (75,779) Fair value (63,771)

(3,108) (3,108) Financial liabilities

(1,778) (1,778)

(3,108) (78,887) Total financial liabilities

(1,778) (65,549)

d) Valuation of financial instruments carried at fair value Level 1 - Quoted prices for similar instruments. Products classified as level 1 comprise quoted equities, quoted fixed securities, quoted index linked securities and unit trusts. Level 2 - Directly observable market inputs other t han Level 1 inputs. Where an instrument is traded in a market which is not considered to be active, or where valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data. Level 3 - Inputs not based on observable market da ta. The values of investment in private equity are based on valuations provided by the general partners to the private equity funds. If the

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

131

company’s year end does not coincide with the Pension Fund’s year end, the valuation is updated with regard to the calls and distributions made between the Private Equity Fund’s audited account date and the Pension Fund’s year end. Quoted

market price Using observable inputs

With significant unobservable inputs

Values as at 31 st March 2012

Level 1 £000

Level 2 £000

Level 3 £000

Total £000

Financial assets Financial assets at fair value

449,293 527,682 195,554 1,174,319

Loans and receivables 32,578 32,578 Total financial assets 481,871 527,682 195,554 1,206,897

Financial liabilities

Financial liabilities at fair value

(1,199) (38,159) (39,358)

Financial liabilities at amortised cost

(1,778) (1,778)

Total financial liabilities

(2,977) (38,159) (41,136)

Net financial assets 478,894 527,682 157,395 1,165,761 13. Nature and extent of risks rising from financi al instruments The fund maintains positions in a variety of instruments, as dictated by the statement of investment principles (SIP), and is consequently exposed to credit and liquidity risk, as well as market risk including foreign exchange and interest rate risks. The Fund’s primary long-term risk is that the fund’s assets will fall short of its liabilities and will be unable to pay the promised benefits to members. The aim of investment risk management is to minimise the risk of an overall reduction in the value of the fund and to maximise the opportunity for gains across the whole fund portfolio. The fund achieves this through asset diversification to reduce exposure to market risk and credit risk to an acceptable level. In addition, the fund manages its liquidity risk to ensure there is sufficient liquidity to meet the fund’s forecast cash flows. The management of risk is a key objective of the Pension Fund. A policy of diversification of its asset classes and investment managers helps the Pension fund to lower risk arising from financial instruments. Benchmarks for asset allocation and targets against which investment managers are expected to perform are further measures which are put in place in order to manage risk. Market Risk Market risk is the risk that the fair value or future cashflows of an institution will fluctuate because of a change in market price. In order to manage risk, the Fund invests in a diversified pool of assets, split between a number of managers with different performance targets and investment strategies. In order to mitigate risk, the Fund regularly reviews the pension fund investment strategy together with regular monitoring of asset allocation and investment performance. Interest rate risk is the risk to which the Pension Fund is exposed to fluctuations in interest rates and mainly relates to changes in bonds. To mitigate the risk, the Fund holds a fixed interest portfolio managed by Aberdeen, the appointed active bond manager.

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

132

Interest Rates can vary and can affect both income to the fund and the value of the net assets available to pay benefits. The analysis below shows the effect of a 100 basis point (1%) movement in interest rates on the net assets available to pay benefits Asset Type Carrying amount

as at 31.03.2012 Change in year in the net assets available to

pay benefits + 100bps - 100bps £000 £000 £000 Cash 18,504 185 (185) Fixed interest securities 191,461 1,915 (1,915) Total 209,965 2,100 (2,100)

Asset Type Carrying amount

as at 31.03.2011 Change in year in the net assets available to

pay benefits + 100bps - 100bps £000 £000 £000 Cash 16,102 161 (161) Fixed interest securities 180,758 1,808 (1,808) Total 196,860 1,969 (1,969)

Currency risk is the risk to which the Pension Fund is exposed to fluctuations in foreign currency exchange rates. The Fund has appointed two active currency managers who manage the currency risk in several countries and the fund’s Japanese and European portfolios have a 50% passive currency overlay in place. Fund managers will also take account of currency risk in their investment decisions. Currency risk – sensitivity analysis Following analysis of historical data, the fund’s aggregate currency change has been calculated as 9.6%. A 9.6% strengthening/weakening of the pound against the various currencies in which the fund holds investments would increase/decrease the net assets available to pay benefits as follows:

Currency exposure – asset type

Asset value as at 31.03.2012

Change to net assets available to pay benefits

+ 9.6% - 9.6% £000 £000 £000 Overseas quoted securities 504 552 456 Overseas corporate bonds (quoted)

161

176 146

Total change in assets available

665 728 602

Currency

exposure – asset type Asset value as at 31.03.2011

Change to net assets available to pay benefits

+ 9.6% -9.6% £000 £000 £000 Overseas quoted securities 1,030 1,129 931 Overseas corporate bonds (quoted)

32 35 29

Total change in assets available

1,062 1,164 960

Price risk is the risk of losses associated with the movement in prices of the underlying assets. By diversifying investments across asset classes and managers, the Pension Fund aims to reduce the

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

133

exposure to price risk. Diversification of asset classes seeks to reduce correlation of price movements, whilst employing specialist managers enables the Fund to benefit from investment expertise. Price risk sensitivity analysis Potential price changes are determined based on the observed historical volatility of asset class returns. The potential volatilities are consistent with a one standard deviation movement in the change in value of assets over the last three years, applied to the period end asset mix. Asset type Value as at

31.03.2012 Percentage change

Value on increase Value on Decrease

£000 % £000 £000 UK Equities 440,731 14.1% 502,830 378,632 Overseas Equities 342,429 15.7% 396,122 288,736 Total Bonds 191,461 4.6% 200,192 182,730 Cash 20,448 0.0% 20,452 20,444 Alternatives 84,150 9.3% 91,976 76,324 Property 73,094 8.8% 79,451 66,647 Total Assets 1,152,313 1,291,023 1,013,513

Asset type Value as at

31.03.2011 Percentage change

Value on increase Value on Decrease

£000 % £000 £000 UK Equities 452,545 14.1% 516,309 388,781 Overseas Equities 343,304 15.7% 397,134 289,474 Total Bonds 180,758 4.6% 189,001 172,515 Cash 15,066 0.0% 15,069 15,063 Alternatives 73,614 9.3% 80,445 66,783 Property 45,914 8.8% 49,964 41,864 Total Assets 1,111,201 1,247,922 974,480

Credit Risk Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation and cause the fund to incur a financial loss. The Fund reviews its exposure to credit and counterparty risk through its external investment managers. The Fund is also exposed to credit risk through its securities lending programme. This is run by the Fund’s custodian, Northern Trust who manage and monitor the counterparty risk, collateral risk and the overall lending programme. The Pension Fund’s bank account is held with the Co-operative bank. Surplus cash is not invested with the Co-op but is placed with a selection of AAA Money Market institutions. The fund’s cash holding under its treasury management arrangements as at 31.03.2012 was 732k (6.4m at 31.03.2011). This was held with the following institutions: Rating Balance at 31.03.2012 Balance at 31.03.2011 Money market funds £000 £000 Insight AAA 0 2,372 Deutsche AAA 0 4,080 Bank current account Co-operative A- 732 (110) Total 732 6,342

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

134

Liquidity Risk Liquidity risk represents the possibility that the Fund may not have funds available to meet it’s financial obligations. The current position of the fund is that it is cash positive, which reflects the fact that contributions into the Fund exceeds benefits being paid out. The Pension fund’s cash is kept in a separate bank account and the cash position is monitored on a daily basis. Surplus funds are deposited in money market funds on a short term basis. At an investment level, the Funds investments are substantially made up of listed securities which are considered readily realisable.

14. Sundry Debtors & Creditors 2010/11 2011/12 £000 £000 Debtors Pensions Administration 295 106 Miscellaneous 51 61 346 167 Creditors Management & Custody Fees (659) (662) Miscellaneous (502) (100) (1,161) 762 Total (815) (595)

15. Additional Voluntary Contributions

Scheme members may elect to make additional voluntary contributions to enhance their pension benefits. Contributions are made directly from scheme members to the AVC provider and are therefore not represented in these accounts.

The amount of AVC contributions paid during the year amounted to £0.523m and the market value of separately invested AVC’s as at 31/03/2012 was £3.198m.

16. Commitments

As at 31 March 2012 the Fund had outstanding private equity commitments of a maximum of £65.92m (£58.35m at 31 March 2011).

As at 31st March 2012 the Fund had forward currency contracts amounting to £64.513m of purchases

and £62.572m of sales, showing an unrealised loss of £1.941m. 17. Securities Lending At the year end the value of quoted equities on loan was £30.019m (£20.688m at March 2011) in exchange for which the custodian held collateral of £31,942m (£22.444m at March 2011). For the year ending 31st March 2012, the Fund received income of £31k from the lending of stock.

18. Contingent Liabilities The Fund has no contingent liabilities.

19. Related Party Transactions The relationship between the employers and the Pension Fund is by its very nature close, therefore each participating employer is considered a related Party as shown in notes 5 and 6.

CARDIFF AND VALE OF GLAMORGAN PENSION FUND ACCOUNTS

135

Other related party transactions with Cardiff Council are:

• Cash invested internally by Cardiff Council (for working capital purposes) - see note 10; • Administration expenses charged to the Fund by the Council are shown in note 8.

Responsibility for Fund has been delegated to the Chief Corporate Services and Section 151 Officer. Her financial relationship with the fund (expressed as a cash-equivalent transfer value is set out below.

Accrued pension

as at 31 st March 2012

Accrued pension as at 31 st March 2011

£ £ C. C. Salter, Chief Corporate Services and Section

151 Officer 985,077 902,355

20. Post Balance Sheet Events

There are no post balance sheet events to report.

GROUP ACCOUNTS

136

INTRODUCTION The group accounts that follow comply with the requirement of the 2011/12 Code that a local authority with interests in subsidiaries, associates and joint ventures should prepare group accounts in addition to its single entity accounts. These accounts consolidate the operating results and balances of Cardiff Council and its subsidiary Cardiff City Transport Services Ltd (Cardiff Bus). The Council has interests in two other subsidiaries: Cardiff Business Technology Centre (CBTC) and Cardiff & Co., and in Cardiff Medicentre Joint Venture. The interests in these organisations are considered immaterial in terms of both the turnover and the net assets of the group. The Council does not depend upon these organisations for statutory service provision and it is not considered that they expose the authority to a material level of commercial risk. Therefore they have been excluded from the consolidation in 2011/12. Details of the Council’s interests in these organisations are included in note 25 to the Core Financial Statements. ACCOUNTING POLICIES APPLICABLE TO THE GROUP ACCOUNT S Basis of Consolidation The group accounts have been prepared on the basis of a full consolidation of the financial transactions and balances of the Council and Cardiff City Transport Services Ltd. Inter- group transactions and balances between the Council and its subsidiary have been eliminated in full. Accounting policies The financial statements in the group accounts are prepared in accordance with the policies set out in the Statement of Accounting Policies on pages 16 to 30 with the following additions and exceptions: 1. Retirement Benefits Cardiff City Transport Services Ltd. operates two defined benefit funded pension schemes which it accounts for in accordance with IAS19. The level of contributions made to the schemes and the cost of contributions included in the financial statements are based on the recommendations of independent actuaries. Accounting policies consistent with those of the Council have been adopted although the financial assumptions used may differ. Both these schemes are now closed to new members. The company also has a money purchase pension scheme for new employees. Pension costs charged to the profit and loss account represent the contributions payable by the group to the pension scheme during the year. 2. Value Added Tax VAT paid by other group entities is accounted for in the Group Comprehensive Income and Expenditure Statement to the extent that it is irrecoverable from HM Revenue and Customs. 3. Goodwill The Council’s interest in its subsidiary dates back to its inception and therefore there is no goodwill to be accounted for. 4. Charges to Income and Expenditure for Fixed Asse ts A charge is made from the revaluation reserve of the subsidiary company to the group income and expenditure reserve for the difference between depreciation charged on the current value of fixed assets held by the subsidiary and what would have been the historical cost depreciation for the year. 5. Derivatives Financial Instruments Cardiff Bus is exposed to price risk arising from fluctuations in oil prices and the company enters into energy hedges to fix the price of fuel. In the opinion of the Board of Directors there is no material exposure to price risk. The company does not hold derivates for speculative purposes.

GROUP ACCOUNTS

137

GROUP ACCOUNTS

138

THE GROUP MOVEMENT IN RESERVES STATEMENT FOR THE YEAR ENDED 31 MARCH 2012

Cou

ncil

Fun

d B

alan

ce

Cou

ncil

Fun

d E

arm

arke

d R

eser

ves

HR

A B

alan

ce

HR

A

Ear

mar

ked

Res

erve

s

£000 £000 £000 £000

Balance at 31 March 2010 11,100 37,572 6,152 1,869

Movement in Reserves during 2010/11

Surplus or (deficit) on the provision of Services

80,419 0 (242,957) 0

Other Comprehensive Income and Expenditure

0 0 0 0

Total Comprehensive Income and Expenditure 80,419 0 (242,957) 0

Adjustments between accounting basis & funding basis under regulations

(67,945) 0 243,642 0

Net Increase/(Decrease) before Transfers to Earmarked Reserves 12,474 0 685 0

Transfers to/(from) Earmarked Reserves

(12,091) 12,091 0 0

Other Movements in Reserves (227) 0 0 0 Increase/(Decrease) in 2010/11 156 12,091 685 0

Balance at 31 March 2011 carried forward

11,256 49,663 6,837 1,869

Movement in Reserves during 2011/12

Surplus or (deficit) on the provision of Services

(108,227) 0 7,344 0

Other Comprehensive Income and Expenditure

2,259 0 12 0

Total Comprehensive Income and Expenditure (105,968) 0 7,356 0

Adjustments between accounting basis & funding basis under regulations

106,869 (7,026) 0

Net Increase/(Decrease) before Transfers to Earmarked Reserves 901 0 330 0

Transfers to/(from) Earmarked Reserves

1,841 (1,841) 0 0

Other Movements in Reserves (2,656) 0 0 0

Increase/(Decrease) in 2011/12 86 (1,841) 330 0

Balance at 31 March 2012 carried forward 11,342 47,822 7,167 1,869

GROUP ACCOUNTS

139

Cap

ital

Rec

eipt

s R

eser

ve

Tot

al U

sabl

e R

eser

ves

Unu

sabl

e R

eser

ves

(incl

udin

g G

roup

R

eser

ves)

R

esta

ted

Tot

al

Aut

horit

y R

eser

ves

Res

tate

d

£000 £000 £000 £000

Balance at 31 March 2010 2,519 59,212 1,047,984 1,107,196

Movement in Reserves during 2010/11

Surplus or (deficit) on the provision of Services

0 (162,538) 540 (161,998)

Other Comprehensive Income and Expenditure

(12) (12) 193,662 193,650

Total Comprehensive Income and Expenditure (12) (162,550) 194,202 31,652

Adjustments between accounting basis & funding basis under regulations

(575) 175,122 (175,122) 0

Net Increase/(Decrease) before Transfers to Earmarked Reserves (587) 12,572 19,080 31,652

Transfers to/(from) Earmarked Reserves

0 0 0 0

Other Movements in Reserves 227 0 0 0 Increase/(Decrease) in 2010/11 (360) 12,572 19,080 31,652

Balance at 31 March 2011 carried forward

2,159 71,784 1,067,064 1,138,848

Movement in Reserves during 2011/12

Surplus or (deficit) on the provision of Services

0 (100,883) (567) (101,450)

Other Comprehensive Income and Expenditure

73 2,344 (134,606) (132,262)

Total Comprehensive Income and Expenditure 73 (98,539) (135,173) (233,712)

Adjustments between accounting basis & funding basis under regulations

(735) 99,108 (99,108) 0

Net Increase/(Decrease) before Transfers to Earmarked Reserves (662) 569 (234,281) (233,712)

Transfers to/(from) Earmarked Reserves

0 0 0 0

Other Movements in Reserves 309 (2,347) 2,347 0

Increase/Decrease in 2011/12 (353) (1,778) (231,934) (233,712)

Balance at 31 March 2012 carried forward 1,806 70,006 835,130 905,136

GROUP ACCOUNTS

140

THE GROUP COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 31 MARCH 2012

2010/11 2011/12

Gro

ss

Exp

endi

ture

(R

esta

ted)

Gro

ss In

com

e (R

esta

ted)

2010

/11

Net

E

xpen

ditu

re

(Res

tate

d)

Not

e

Gro

ss

Exp

endi

ture

Gro

ss In

com

e

2011

/12

Net

E

xpen

ditu

re

£000 £000 £000 £000 £000 £000 43,533 (39,948) 3,585 Central Services to the Public 47,742 (45,002) 2,740 62,658 (24,774) 37,884 Cultural & Related Services 68,189 (24,791) 43,398 56,383 (23,915) 32,468 Environmental & Regulatory Services 61,555 (23,186) 38,369 23,864 (14,038) 9,826 Planning Services 48,661 (14,102) 34,559

382,038 (71,704) 310,334 Children's and Education Services 358,716 (66,736) 291,980 96,255 (42,873) 53,382 Highways & Transport Services 121,783 (64,496) 57,287

305,896 (56,643) 249,253 Housing Revenue Account 57,548 (58,498) (950) 159,711 (151,858) 7,853 Housing Services (General Fund) 167,622 (161,443) 6,179 120,451 (31,896) 88,555 Adult Social Care 117,422 (29,624) 87,798

9,380 (554) 8,826 Corporate & Democratic Core 14,281 890 15,171 (127,966) (64) (128,030) Non-Distributed Costs 2,642 0 2,642

691 (4,455) (3,764) Exceptional Item 6 2,075 (3,957) (1,882) 1,132,894 (462,722) 670,172 Net Cost of Services 1,068,236 (490,945) 577,291

20,877 0 20,877 South Wales Police Authority Precept 21,994 0 21,994

211 0 211 Community Council Precepts 223 0 223 16,645 0 16,645 Levies & Contributions 16,857 0 16,857 4,488 (3,128) 1,360 (Gain)/loss on sale of fixed assets 51,824 (8,526) 43,298

42,221 (3,128) 39,093 Other Operating Expenditure 90,898 (8,526) 82,372

23,165 0 23,165 Interest Payable on debt 23,326 0 23,326 62 0 62 Interest element of finance leases 4 174 0 174

68,430 (50,039) 18,391 Pensions Interest cost & Expected Return

67,331 (57,050) 10,281

0 (3,144) (3,144) Interest & Investment Income 0 (3,879) (3,879)

427 (1,394) (967) Change in fair value of Investment Properties

161 (200) (39)

92,084 (54,577) 37,507 Financing and Investment Income & Expenditure

90,992 (61,129) 29,863

0 (31,795) (31,795) Recognised Capital Grants & Contributions

0 (27,948) (27,948)

0 (303,037) (303,037) Revenue Support Grant 0 (315,272) (315,272) 0 (91,773) (91,773) Non-Domestic Rates 0 (80,067) (80,067)

2,404 (147,761) (145,357) Council Tax Income 1,634 (152,600) (150,966)

0 (13,360) (13,360) Other Central Grants 0 (13,831) (13,831)

2,404 (587,726) (585,322) Taxation & Non-Specific Grant Income

1,634 (589,718) (588,084)

548 0 548 Tax expenses - Corporation Tax payable

8 0 8

GROUP ACCOUNTS

141

1,270,151 (1,108,153) 161,998 (Surplus)/Deficit on Provision of Services

1,251,768 (1,150,318) 101,450

(156,704) Revaluation Gains (28,410) 0 Revaluation Losses 25,685

14,468 Impairment losses (chargeable to revaluation reserve)

(2,253)

0 (Surplus)/Deficit on revaluation of available for sale financial assets

0

(51,870) Actuarial gains/losses on pension assets/liabilities

135,810

12 Other gains/losses required to be included in the Comprehensive Income & Expenditure Statement

(91)

444 Share of other comprehensive income & expenditure of subsidiaries

1,521

(193,650) Other Comprehensive Income & Expenditure

132,262

(31,652) Total Comprehensive Income & Expenditure

233,712

GROUP ACCOUNTS

142

GROUP BALANCE SHEET AS AT 31 MARCH 2012

31 March 2011

Restated Note

31 March 2012

£000 £000 Property Plant & Equipment: 7

486,407 Council Dwellings 499,159 958,241 Other Land and Buildings 907,042

25,002 Vehicles, Plant, Furniture & Equipment 24,556 346,742 Infrastructure 338,686

15,502 Community Assets 16,240 9,341 Assets under construction 17,966

76,450 Surplus assets not held for sale 38,690

45,021 Heritage Assets 45,178

63,385 Investment Properties 63,808

1,105 Intangible Fixed Assets including AUC 7 1,498

6,575 Long-term Investments 7,908 4,435 Long-term Debtors 3,967 2,039 Deferred tax asset 2,171

2,040,245 Total Long Term Assets 1,966,869

89,825 Short-term Investments 71,998 5,630 Assets held for Sale 7 12,376 3,262 Inventories 3,424

58,903 Short-term Debtors 9 85,047 19,980 Cash and Cash Equivalents 14,809

177,600 Total Current Assets 187,654

(5,994) Short Term Borrowing (6,905) (71,372) Short Term Creditors 11 (83,212)

(1,850) Pension Strain (1,969) (6,205) Provisions 12 (7,020) (1,646) Deferred Liabilities 13 (2,300)

(389) Deferred tax liability 0 (87,456) Total Current Liabilities (101,406)

(439,947) Long Term Borrowing (439,895)

(10,360) Provisions (16,187) (10,523) Deferred Liabilities (9,603) (12,854) Capital Contributions Receipts in Advance (26,512)

(5,622) Revenue Grants Receipts in Advance (4,707) (4,020) Capital Grants Receipts in Advance (2,020) (4,572) Pensions Strain (5,221)

(502,204) Net Pensions Liability (642,518)

GROUP ACCOUNTS

143

(1,439) Deferred tax liability (1,318)

(991,541) Total Long Term Liabilities (1,147,981)

1,138,848 NET ASSETS 905,136

Financed by:

11,256 Council Fund Balance 11,342 49,663 Council Fund Earmarked Reserves 47,822

6,837 Housing Revenue Account Balance 7,167 1,869 HRA Earmarked Reserves 1,869 2,159 Capital Receipts Reserve 1,806

71,784 Usable Reserves 70,006

268,603 Revaluation Reserve 245,841

1,306,120 Capital Adjustment Account 1,241,621 881 Deferred Capital Receipts 835

4,618 Available for Sale Financial Instruments Reserve 4,618 (3,736) Financial Instruments Adjustment Account (3,393)

(506,589) Pensions Reserve (647,537) (2,347) Equal Pay Back Pay Reserve 0 (7,276) Accumulated Absences Adjustment Account (12,346)

6,790 Reserves (group entities) 5,491

1,067,064 Unusable Reserves 835,130

1,138,848 TOTAL RESERVES 905,136

GROUP ACCOUNTS

144

GROUP CASH FLOW STATEMENT AS AT 31 MARCH 2012

2010/11 Note 2011/12

£000 £000

161,998 Net (Surplus) /Deficit on the provision of services 101,450

(230,804) 14 Adjust net surplus or deficit on the provision of services for non-cash movements

(122,214)

26,414 15 Adjust for items included in the net surplus or deficit on the provision of services that are investing and financing activities

(21,628)

(42,392) Net cash flows from operating activities (42,392)

(3,684) Interest Received (3,688) 23,337 Interest Paid 22,383

292 Finance lease interest paid 165 (250) Dividends received (450)

0 Taxation (group only) 193 (62,087) Net cash flow from other operating activities (60,995)

71,545 Investing activities 38,927

83,984 Purchase of property, plant and equipment, investment property and intangible assets

83,963

48,735 Purchase of short-term and long-term Investments 11,855 13,924 Other payments for investing activities 15,369

(2,930) Proceeds from the sale of property, plant and equipment, investment property and intangible assets

(8,765)

(36,708) Capital Grants (31,265) (26,664) Proceeds from short-term and long-term investments (31,871)

(8,796) Other receipts from investing activities (359)

(29,580) Financing activities 8,636 (26,000) Cash receipts from short-term and long-term borrowing (15)

0 Other receipts from financing activities 0

423 Cash payments for the reduction of outstanding liabilities relating to finance leases

1,333

750 Repayments of short-term and long-term borrowing 134 (4,753) Other payments for financing activities 7,184

(427) Net (increase)/ decrease in cash and cash equivalen ts 5,171

16,630 Cash and cash equivalents at the beginning of the reporting period

19,980

17,057 Cash and cash equivalents at the end of the reporti ng period represented by:

14,809

384 Cash held e.g. Imprest Accounts 391 2,918 Cash and Bank 7,982

13,755 Short-term deposits with financial institutions 6,436

GROUP ACCOUNTS

145

NOTES TO THE GROUP ACCOUNTS The notes to the Council’s Core Financial Statements as set out on pages 40 to 109 apply also to the Group Accounts with the following additions and exceptions: 1. Remuneration (a) The number of employees of the Council and its subsidiary whose remuneration is over £60,000 per annum is disclosed below.

Number of Employees

2010/11 2011/12 £60,000 - £64,999 86 74 £65,000 - £69,999 42 29 £70,000 - £74,999 22 12 £75,000 - £79,999 6 7 £80,000 - £84,999 10 10 £85,000 - £89,999 5 4 £90,000 - £94,999 8 2 £95,000 - £99,999 4 3

£100,000 - £104,999 4 2 £105,000 - £109,999 1 1 £110,000 - £114,999 1 2 £115,000 - £119,999 0 0 £120,000 - £124,999 1 0 £125,000 - £129,999 1 0 £130,000 - £134,999 4 0 £135,000 - £139,999 0 0 £140,000 - £144,999 0 1 £145,000 - £149,999 0 0 £150,000 - £154,999 0 0 £155,000 - £159,999 0 0 £160,000 - £164,999 0 0 £165,000 - £169,999 0 0 £170,000 - £174,999 0 0 £175,000 – £179,999 0 1

Further information regarding the remuneration of directors and employees of Cardiff Bus is contained in the company’s 2011/12 Financial Statements. (b) The disclosure for Members allowances is the same as for the single entity accounts. 2. Related Parties Disclosures Related party transactions and balances of the group are as contained in note 13 to the single entity financial statements with the following addition: PTI Cymru During the year Cardiff City Transport Services received £12,754 (£13,299 in 2010/11) from PTI CYMRU Ltd. for the rent of a call centre in Cardiff and in turn was charged £16,873 (£16,674 in 2010/11) in respect of calls handled. At 31 March 2012 there was a net balance of £1,402 (£1,970 in 2010/11) owed by Cardiff City Transport Services Ltd. to PTI Cymru Ltd. 3. External Audit Costs In 2011/12 the following fees were paid by the Council and its subsidiary in respect of audit and inspection:

GROUP ACCOUNTS

146

2010/11 2011/12 £000 £000

Fees payable to Wales Audit Office for external audit services 438 489

Fees Payable to other external auditors in respect of external audit services

26 26

Fees payable to Wales Audit Office in respect of statutory inspection 0 0

Fees payable to external auditors for the certification of grant claims and returns

107 116

Fees payable in respect of other services provided by external auditors 12 8

Total 583 639 4. Leasing Operating Leases Operating leases exist in respect of properties, vehicles and other items of equipment. Payments made during 2011/12 were as follows: 2010/11 2011/12 £000 £000 Property Leases 2,559 2,598 Other Leases 1,435 1,276

The group was committed at 31 March 2012 to making payments of £2.350 million under operating leases in 2011/12 comprising the following elements:

Property Leases

£000

Other Leases

£000 Leases expiring in 2012/13 316 95 Leases expiring between 2013/14 and 2015/16 368 196 Leases expiring after 2015/16 1,349 26

Finance Leases Finance leases exist in respect of vehicles and equipment. The aggregate finance charges made during 2011/12 were as follows: 2010/11 2011/12 £000 £000 Vehicles, Plant & Equipment 292 174

The assets acquired under finance leases are carried as Property, Plant and Equipment in the Balance Sheet at the following net amounts:

2010/11 2011/12 £000 £000 6,779 Vehicles, Plant, Furniture and Equipment 6,092

GROUP ACCOUNTS

147

Obligations under finance leases:

2010/11 2011/12 £000 £000 1,325 Obligations payable within 1 year 1,372 1,385 Obligations payable between 2 and 5 years 1,094 1,081 Obligations payable after 5 years 0 3,791 Total liabilities as at 31st March 2,466

5. Pensions The following sums were charged to the Group Comprehensive Income Expenditure Statement in the year in respect of pensions: 2010/11 2011/12

£000 (Restated) £000

Net Cost of Services Current Service Cost 33,120 30,271 Past Service Costs (127,960) 2,540 Net Operating Expenditure Interest Cost 65,630 66,924 Expected Return on Scheme Assets (47,239) (56,643) Net charge to Group Income & Expenditure Account (76,449) 43,092 Appropriation to/(from) Pensions Reserve to Council Fund Balance 115,354 (3,822) Appropriation to/(from) Pensions Reserve to Profit and Loss Accounts of subsidiaries

(1,031) (1,402)

Net charge to Council Fund Balance and Profit & Los s Accounts of Subsidiaries in respect of Pensions

37,874 37,868

Presented by: Employers Contributions charged to Council Tax: Employers Contributions Payable to the Scheme (34,704) (35,200) Payments in Respect of Unfunded Pensions Liabilities (3,350) (3,490) Employers Superannuation Contributions Made by Subsidiaries to Defined Benefit Schemes in the Year

180 822

Pensions Assets and Liabilities of Cardiff Bus The disclosures in note 5 relate solely to the pensions' arrangements of Cardiff City Transport Services Ltd. and have been taken directly from the 2011/12 financial statements of Cardiff City Transport Services Ltd. The company operates its own pension scheme, the Cardiff City Transport Services Limited Pension Scheme, as well as contributing to the Cardiff and Vale of Glamorgan Pension Fund on behalf of employees who were formerly employed by the Cardiff City Council Transport Department. Both schemes provide benefits based on final pensionable pay and the assets of the schemes are held separately from those of the company. Company contributions are determined by a qualified actuary on the basis of triennial valuations. Since 1 August 2001, the Cardiff City Transport Services Limited Pension Scheme (final salary) has been closed to new members and a money purchase scheme has been introduced. Cardiff City Transport Services Limited Pension Sch eme The most recent actuarial valuation of the Cardiff City Transport Services Limited Pension Scheme, as required under section 224(2)(a) of the Pensions Act 2004, was carried out as at 1 April 2009. For the purpose of the valuation of the defined benefit section, it was assumed that the investment return on

GROUP ACCOUNTS

148

assets prior to pension liabilities coming into payment will be 2.5% per annum higher than the rate of future annual wage and salary growth and 3.5% per annum higher than the rate of future price inflation. The investment return for pension liabilities once in payment was assumed to be 2.5% higher than the rate of future price inflation. The valuation showed that the total market value of the scheme’s assets, net of members’ AVCs, was £16.4m and that this value represented 66% of the value of the benefits that had accrued to members at the valuation date, after allowing for expected future increases in earnings and pensions. The basic rate of company contributions required to meet the cost of defined benefits, without allowance for any recovery of deficit, was found to be 15.1% of members’ pensionable pay from 1 January 2012. Employee contributions were payable in addition. For the majority of defined benefit section members, contributions were required at the rate of 5% of pensionable pay (a small number contribute at the lower rate of 4%). Company and employee contributions for members of the defined contribution section are payable in accordance with the scheme rules. An actuarial valuation was carried out on the Cardiff City Transport Services Limited Pension Scheme as at 31 March 2012 by a qualified independent actuary. The major assumptions used by the actuary were:

31 March 2010 31 March 2011 31 March 2012

Rate of increase in salaries 4.2% per annum 4.2% per annum 3.9% per annum Discount rate 5.7% per annum 5.6% per annum 4.9% per annum Inflation assumption 3.2% per annum 3.2% per annum 2.9% per annum Pension increases 3.0% per annum 2.8% per annum 2.3% per annum Inflation assumption (CPI) N/A 2.8% per annum 2.3% per annum

Mortality assumption The mortality assumptions are based on the PA92 mortality tables which allow for future mortality improvements. The assumptions are that a member aged 65 at the valuation date will live on average for a further 22.1 years if they are male and for a further 25.2 years if they are female. For a member who is 45 at the valuation date and retires at age 65 the assumptions are that they will live on average for a further 23.1 years after retirement if they are male and for a further 26.1 years after retirement if they are female. The assets in the fund and expected rates of return were:

2009/10 2010/11 2011/2012

Long-term expected return on assets

Fair value

£000

Long-term expected return on assets

Fair value

£000

Long-term expected return on assets

Fair value

£000

Equities 8.0% pa 16,337 8.0% pa 12,470 7.0% pa 9,197 Diversified growth N/A 0 7.8% 5,997 6.8% 8,217 Convertible Bonds N/A 0 7.5% pa 5,260 6.5% 7,614 Bonds 5.0% pa 4,025 N/A 0 N/A 0 Cash 2.0% pa 1,049 2.0% pa 71 2.0% pa 100

21,411 23,798 25,128

The net pension liability measured under IAS19 comprised the following:

GROUP ACCOUNTS

149

At 31 March 2010 £000

At 31 March 2011 £000

At 31 March 2012 £000

Total market value of assets 21,411 23,798 25,128 Present value of scheme liabilities (23,724) (24,719) (25,239) Net IAS19 Scheme Deficit (2,313) (921) (111)

At 31 March

2010 £000

At 31 March 2011 £000

At 31 March 2012 £000

Analysis of amount charged to operating profit Current service cost and total operating charge (494) (760) (709) Analysis of amount credited/(charged) to interest receivable/payable

Expected return on pension scheme assets 1,160 1,689 1,873 Interest on pension scheme liabilities (1,161) (1,360) (1,384)

Net finance income/(charge) (1) 329 489 Analysis of amount recognised in the primary statem ents

At 31 March

2010 £000

At 31 March 2011 £000

At 31 March 2012 £000

Actual return less expected return on pension assets

4,245 211 (826)

Changes in financial assumptions underlying the scheme/(liabilities)

(5,022) 630 867

Actuarial gain/(loss) recognised in the primary statements

(777) 841 41

Movements in scheme deficit during the year

At 31 March

2010 £000

At 31 March 2011 £000

At 31 March 2012 £000

At 1 April b/f (3,127) (2,313) (921) Movement in year: Total operating charge (494) (760) (709) Contributions 2,086 982 989 Net finance income/(charge) (1) 329 489 Actuarial gain/(loss) in the primary statements (777) 841 41 At 31 March c/f (2,313) (921) (111)

The Cardiff City Transport Services Limited pension fund valuation has anticipated the fact that future pension increases are likely to be based on CPI rather than RPI. Accordingly, it has been assumed that CPI will be 0.4% below RPI. The resulting credit of £0.64 million has been taken directly to reserves.

GROUP ACCOUNTS

150

Cardiff and Vale of Glamorgan Pension Fund Cardiff Bus also participates in the Local Government Pension Scheme, which is a defined benefit scheme based on final pensionable salary. The latest complete minimum funding requirement valuation of the Cardiff and Vale of Glamorgan Pension Fund was made as at 31 March 2011. The result of this valuation revealed that the company’s required contributions to this scheme in respect of its employees who are members will be 22.3% of pensionable pay from 1 April 2012 continuing into 2013/14. In addition to this rate, Cardiff City Transport Services Limited is required to pay £521,000 per annum. The most recent completed valuation was carried out as at 31 March 2011, and has been updated by independent actuaries to the Cardiff and Vale of Glamorgan Pension Fund (the Fund) to take account of the requirements of IAS19 in order to assess the liabilities of the fund as at 31 March 2012. Liabilities are valued on an actuarial basis using the projected unit method which assesses the future liabilities discounted to their present value. The company’s contribution rate over the accounting period was 12.0% of pensionable pay plus a monetary amount of £521,000. The contribution rates certified for the company at the 31 March 2011 valuation are as follows: April 2012 to March 2014 - 22.3% of pensionable pay plus £521,000 These figures include the past service element of the contribution rate. The Scheme is now closed to the company’s employees and the company’s condition of continued participation is to pay contributions as required. The main assumptions used for the purposes of IAS19 are as follows:

At 31 March 2010

At 31 March 2011

At 31 March 2012

Rate of increase in salaries 4.1% pa 4.2% pa 3.9% pa

Discount rate 5.7% pa 5.6% pa 4.9% pa

Rate of increase in pensions in payment 2.9% pa 2.8% pa 2.3% pa

Rate of increase in deferred pensions 3.1% pa 2.8% pa 2.3% pa

Rate of inflation (RPI) 3.1% pa 3.2% pa 2.9% pa

Rate of inflation (CPI) N/A 2.8% pa 2.3% pa

Mortality assumption The mortality assumptions are based on standard mortality tables which allow for future mortality improvements. The assumptions are that a member currently aged 65 will live on average for a further 22.2 years if they are male and for a further 25.3 years if they are female. For a member who is currently 45 and retires at age 65 the assumptions are that they will live on average for a further 23.2 years after retirement if they are male and for a further 26.1 years after retirement if they are female. The assets in the fund and expected rates of return were:

GROUP ACCOUNTS

151

2009/10 2010/11 2011/2012 Long-term expected return on

assets

Fair

value £000

Long-term expected return on

assets

Fair

value £000

Long-term expected return on

assets

Fair

value £000

Equities 8.0% pa 14,421 8.4% pa 15,829 8.1% pa 15,264 Government Bonds 5.0% pa 961 4.4% pa 1,038 3.1% pa 1,630 Corporate Bonds 5.0% pa 2,453 5.1% pa 2,373 3.7% pa 1,863 Property 8.0% pa 804 7.9% pa 890 7.6% pa 1,334 Cash 2.0% pa 177 1.5% pa 233 1.8% pa 275 Other assets 8.0% pa 804 8.4% pa 827 8.1% pa 804

19,620 21,190 21,170

The net pension liability measured under IAS19 comp rised the following:

At 31 March 2010 £000

At 31 March 2011 £000

At 31 March 2012 £000

Total market value share of assets 19,620 21,190 21,170

Present value of scheme liabilities (25,540) (28,110) (29,410)

Net IAS19 Scheme Deficit (5,920) (6,920) (8,240) Analysis of amount charged to operating profit:

At 31 March 2010 £000

At 31 March 2011 £000

At 31 March 2012 £000

Current service cost (360) (430) (420) Past service cost 0 0 (0) Total Operating Charge (360) (430) (420)

Analysis of amount credited/(charged) to interest receivable/payable:

At 31 March 2010 £000

At 31 March 2011 £000

At 31 March 2012

£000 Expected return on pension scheme assets 920 1,450 1610 Interest on pension scheme liabilities (1,410) (1,440) (1,550) Net Finance Income/(Charge) (490) 10 60

GROUP ACCOUNTS

152

Analysis of amount recognised in the primary state ments:

At 31 March 2010 £000

At 31 March 2011 £000

At 31 March 2012 £000

Actual return less expected return on pension assets/(liabilities)

3,980 240 (1,140)

Changes in financial assumptions underlying the scheme (liabilities)/assets

(3,280) (1,720) (720)

Actuarial (loss)/gain recognised in the primary statements.

700 (1,480) (1,860)

Movements in scheme deficit during the year:

At 31 March 2010 £000

At 31 March 2011 £000

At 31 March 2012 £000

At 1 April (6,700) (5,920) (6,920) Movement in year: Total operating charge (360) (430) (420) Contributions 930 900 900 Net finance income/(charge) (490) 10 60 Actuarial (loss)/gain in the primary statements 700 (1,480) (1,860) At 31 March (5,920) (6,920) (8,240)

The Cardiff and Vale of Glamorgan Pension Fund valuation has anticipated the fact that future pension increases are likely to be based on CPI rather than RPI. Accordingly it has been assumed that CPI will be 0.4% below RPI. The resulting credit of £1.07 million has been taken directly to reserves. The total net pension liability measured under IAS19 for both schemes is as follows:

The Group and the Company 31 March 2011

31 March 2012

£000 £000 Cardiff City Transport Scheme 921 111 Cardiff & Vale of Glamorgan Pension Scheme 6,920 8,240 Deferred Tax Asset (2,040) (2,171) Total 5,801 6,180

6. Exceptional Item Exceptional Items include £3.734 million income from VAT claims and expenditure of £0.99 million fees relating to this. There is also £0.223 million income in relation to residual income for an insurance claim that was included as an exceptional item in 2010/11. The exceptional item included in the group accounts on the face of the comprehensive income and expenditure account before operating profit also include an amount which relates to non-recurring legal costs incurred in the defence of a competition claim brought against the company by 2 Travel Group PLC (for events which took place in 2004/05).

GROUP ACCOUNTS

153

GROUP ACCOUNTS

154

7. Non-Current Assets Note

Property, Plant & equipment

Council

Dwellings

Other Land &

Buildings

Vehicles, Plant &

Equipment

Infrastructure Assets

Community Assets

Surplus Assets

£000 £000 £000 £000 £000 £000

Cost or Valuation At 1 April 2011 496,331 995,686 66,306 511,828 15,502 76,450 Additions 22,992 17,901 4,616 12,957 556 13 Impairment losses/reversals to RR *

0 0 0 0 0 0

Impairment losses / reversals to SDPS **

0 0 0 0 0 0

Derecognition - disposals

(281) (45,460) (1,719) 0 0 (5,534)

Reclassified (to)/from Held for Sale

0 (30) 0 0 0 (7,910)

Other reclassifications 436 7,962 692 4,682 182 1,155 Revaluation increases /(decreases) to RR*

0 2,191 0 0 0 (170)

Revaluation increases /(decreases) to SDPS**

0 (33,472) 0 0 0 (25,314)

At 31 March 2012 519,478 944,778 69,895 529,467 16,240 38,690

Depreciation At 1 April 2011 9,924 37,445 41,304 165,086 0 0 Depreciation charge 10,400 14,631 5,754 25,695 0 0 Depreciation written out on impairment

0 0 0 0 0 0

Derecognition -disposals

(5) (579) (1,719) 0 0 0

Depreciation written out to SDPS **

0 (173) 0 0 0 0

Reclassifications 0 0 0 0 0 0 Depreciation written out on revaluation

0 (13,588)

0 0 0 0

At 31 March 2012 20,319 37,736 45,339 190,781 0 0 Net Book Value:

At 31 March 2012 499,159 907,042 24,556 338,686 16,240 38,690 At 31 March 2011 486,407 958,241 25,002 346,742 15,502 76,450

* RR = Revaluation Reserve SDPS = Surplus or deficit on Provision of Services

GROUP ACCOUNTS

155

P,P & E under

construction

Total Property, Plant &

Equipment

Investment properties

Assets Held for Sale

Heritage Assets

£000 £000 £000 £000 £000 Cost or Valuation At 1 April 2011 9,341 2,171,444 63,385 5,630 45,021 Additions 24,153 83,188 54 9 157 Impairment losses/reversals to RR *

0 0 0 0 0

Impairment losses / reversals to SDPS **

0 0 (109) 0 0

Derecognition - disposals

0 (52,994) (89) (1,043) 0

Reclassified (to)/from Held for Sale

0 (7,940) 0 7,940 0

Other reclassifications (15,528) (419) 419 0 0 Revaluation increases /(decreases) to RR*

0 2,021 0 0 0

Revaluation increases /(decreases) to SDPS**

0 (58,786) 148 (160) 0

At 31 March 2012 17,966 2,136,514 63,808 12,376 45,178

Depreciation At 1 April 2011 0 253,759 0 0 0 Depreciation charge 0 56,480 0 0 0 Depreciation written out on impairment

0 0 0 0 0

Derecognition -disposals

0 (2,303) 0 0 0

Depreciation written out to SDPS**

0 (173) 0 0 0

Reclassifications 0 0 0 0 0 Depreciation written out on revaluation

0 (13,588) 0 0 0

At 31 March 2012 0 294,175 0 0 0 Net Book Value: At 31 March 2012 17,966 1,842,339 63,808 12,376 45,178 At 31 March 2011 9,341 1,917,685 63,385 5,630 45,021

GROUP ACCOUNTS

156

Comparative Movements in 2010/11: Property, Plant & Equipment (PPE)

Council Dwellings

Other Land &

Buildings

Vehicles, Plant &

equipment

Infrastructure Assets

Community Assets

Surplus Assets

£000 £000 £000 £000 £000 £000

Cost or Valuation At 1 April 2010 754,933 883,239 62,064 483,800 13,957 69,347 Additions 19,814 19,037 7,247 17,280 529 54 Impairment losses/reversals to RR *

0 (1,392) 0 0 0 (10)

Impairment losses / reversals to SDPS**

(316) (2,885) 0 0 0 (508)

Derecognition - disposals

(117) 0 (3,370) 0 0 0

Reclassified (to)/from Held for Sale

0 0 0 0 0 (2,955)

Other reclassifications 0 9,443 365 10,748 1,016 7,751 Revaluation increases /(decreases) to RR*

0 135,206 0 0 0 4,084

Revaluation increases /(decreases) to SDPS**

(277,983) (46,962) 0 0 0 (1,313)

At 31 March 2011 496,331 995,686 66,306 511,828 15,502 76,450

Depreciation At 1 April 2010 29,880 32,770 38,343 140,779 0 0 Depreciation charge 9,925 13,907 5,787 24,307 0 0 Depreciation written out on impairment

0 (278) 0 0 0 0

Derecognition -disposals 0 0 (2,826) 0 0 0 Depreciation written out to SDPS**

0 (51) 0 0 0 0

Reclassifications 0 0 0 0 0 0 Depreciation written out on revaluation

(29,881) (8,903) 0 0 0 0

At 31 March 2011 9,924 37,445 41,304 165,086 0 0 Net Book Value:

At 31 March 2011 486,407 958,241 25,002 346,742 15,502 76,450 At 31 March 2010 725,053 850,469 23,721 343,021 13,957 69,347

GROUP ACCOUNTS

157

P,P & E under

construction

Total Property, Plant &

Equipment

Investment Properties

Assets Held for Sale

Heritage Assets

£000 £000 £000 £000 £000 Cost or Valuation At 1 April 2010 20,778 2,288,118 61,703 6,090 44,338 Additions 19,680 83,641 211 0 303 Impairment losses/reversals to RR *.

0 (1,402) 0 0 0

Impairment losses / reversals to SDPS **

(563) (4,272) 0 0 0

Derecognition - disposals

0 (3,487) (346) (3,479) 0

Reclassified (to)/from Held for Sale

0 (2,955) 0 2,955 0

Other reclassifications (30,554) (1,231) 851 0 380 Revaluation increases /(decreases) to RR*

0 139,290 0 0 0

Revaluation increases /(decreases) to SDPS**

0 (326,258) 966 64 0

At 31 March 2011 9,341 2,171,444 63,385 5,630 45,021

Depreciation At 1 April 2010 0 241,772 0 0 0 Depreciation charge 0 53,926 0 0 0 Depreciation written out on impairment

0 (278) 0 0 0

Derecognition -disposals

0 (2,826) 0 0 0

Depreciation written out to SDPS **

0 (51) 0 0 0

Reclassifications 0 0 0 0 0 Depreciation written out on revaluation

0 (38,784) 0 0 0

At 31 March 2011 0 253,759 0 0 0 Net Book Value: At 31 March 2011 9,341 1,917,685 63,385 5,630 45,021 At 31 March 2010 20,778 2,046,346 61,703 6,090 44,338

GROUP ACCOUNTS

158

Movements in Intangible assets during 2011/12 are s ummarised as follows:

Internally

Generated Assets

Other Assets Intangible AUC

Total

£000 £000 £000 £000

Cost or Valuation At 1 April 2011 0 577 888 1,465 Additions 768 768 Other reclassifications 1,478 (1,478) 0

At 31 March 2012 0 2,055 178 2,233 Amortisation At 1 April 2011 0 360 0 360 Amortisation 375 375

At 31 March 2012 0 735 0 735 Net Book Value:

At 31 March 2012 0 1,320 178 1,498 At 31 March 2011 0 217 888 1,105

Comparative Movements in 2010/11:

Internally

Generated Assets

Other Assets Intangible AUC

Total

£000 £000 £000 £000

Cost or Valuation At 1 April 2010 0 577 348 925 Additions 0 0 540 540

At 31 March 2011 0 577 888 1,465 Amortisation At 1 April 2010 0 282 0 282 Amortisation 0 78 0 78

At 31 March 2011 0 360 0 360 Net Book Value:

At 31 March 2011 0 217 888 1,105 At 31 March 2010 0 295 348 643

8. Financial Instruments In addition to the financial instrument disclosures in the single entity accounts it should be noted: Consolidation Adjustment On consolidation, the Council’s shareholding in Cardiff Bus ceases to be a financial instrument, as the consolidated balance sheet includes the net assets of the subsidiary and their corresponding net worth. The increase to fair value is eliminated in the consolidation process. Derivative Financial Instruments Cardiff Bus enters into energy hedges to fix the price of fuel. At 31 March 2012, the company had no contracts to buy fuel.

GROUP ACCOUNTS

159

The company was contracted to buy 2,400 metric tonnes of fuel at £527.50 per tonne from March 2011 to August 2011. As at 31 March 2011, the fair value is considered to be a liability of £257,616. The company does not hold derivatives for speculative purposes. 9. Debtors

31 March 2011

(restated)

31 March 2012

£000

£000 33,233 Central Government Bodies 51,674

3,483 Other Local Authorities 3,340 1,692 NHS Bodies 2,840

46 Public Corporations & Trading Funds 51 20,449 Other Entities and Individuals 27,142 58,903 Total Debtors Net of Impairments 85,047

10. Investments This figure represents cash temporarily available for investment at balance sheet date and includes £2.585 million (£2.419 million in 2010/11) which Cardiff City Transport Services Ltd. holds in an escrow account against future insured liabilities. 11. Creditors

31 March 2011

31 March 2012

£000

£000 11,074 Central Government Bodies 9,768

1,703 Other Local Authorities 3,363 361 NHS Bodies 320 294 Public Corporations & Trading Funds 74

57,940 Other Entities and Individuals 69,687 71,372 Total Creditors 83,212

12. Provisions

Balance 1 April 2011

Utilised/ Released in

year

Transfers to Provisions

Balance 31 March 2012

£000 £000 £000 £000 Cardiff Insurance Provisions 10,892 (5,067) 5,137 10,962 South Glamorgan Insurance Fund

123 0 1 124

Cardiff Bus Insurance Provision 2,732 (1,643) 1,953 3,042 Equal Pay Back Pay Provision 2,347 0 5,153 7,500 Capital Provision 38 (38) 0 0 Other Provisions 433 (74) 1,220 1,579 Total Provisions 16,565 (6,822) 13,464 23,207

GROUP ACCOUNTS

160

Not later than one

year Later than one

year Balance 31 March 2012

£000 £000 £000 Cardiff Insurance Provisions 4,492 6,470 10,962

South Glamorgan Insurance Fund 5 119 124

Cardiff Bus Insurance Provision 1,551 1,491 3,042 Equal Pay Back Pay Provision 0 7,500 7,500 Capital Provision 0 0 0 Other Provisions 972 607 1,579 Total Provisions 7,020 16,187 23,207

13. Deferred Liabilities

Balance 1 April 2011

Utilised/ Released in

year

Transfers to Provisions

Balance 31 March 2012

£000 £000 £000 £000 Commuted Maintenance Sums 8,378 (124) 1,183 9,437

Cardiff Bus Finance Lease Liability 3,704 (1,279) 0 2,425

Vehicles Finance Lease Liability 87 (46) 0 41 Total Deferred Liabilities 12,169 (1,449) 1,183 11,903

Not later than one

year Later than one

year Balance 31 March 2012

£000 £000 £000 Commuted Maintenance Sums 928 8,509 9,437 Cardiff Bus Finance Lease 1,344 1,081 2,425 Vehicles Finance Lease 28 13 41

Total Deferred Liabilities 2,300 9,603 11,903 14. Adjust net surplus or deficit on the provision of services for non cash movements 2010/11 2011/12 £000 £000 Depreciation and impairment (350,747) (102,583) Charges made for retirement benefits (IAS19) less employers contributions

118,087 (7,587)

Contributions (to)/from provisions (1,657) (7,428) Changes in fair value of investment properties 967 (121) Cardiff Bus Taxation 0 193 Increase/(decrease) in stock 107 162 Increase/(decrease) in debtors (exc capital) (2,698) 19,404

(Increase)/decrease in creditors (exc capital creditors) & super fund 5,137 (24,254)

(230,804) (122,214)

GROUP ACCOUNTS

161

15. Adjust for items included in the net surplus/de ficit on provision of services that are investing and financing activities

2010/11 2011/12 £000 £000 REFCUS financed from grants and contributions (4,025) (6,560) Net gain/(loss) on sale of non-current assets (1,356) (43,327) Net gain/(loss) on sale of investments 0 257 Repayments of liabilities under finance leases 0 54 Capital grants/contributions recognised in I&E 31,795 27,948 26,414 (21,628)

16. Segmental Reporting Please refer to note 4 in the Notes to Core Financial Statements for the Council’s segmental reporting analysis. The group report is not prepared on the basis that Cardiff Bus prepares its accounts in accordance with UK GAAP.

TRUST FUNDS

162

Trust Funds During 2011/12, the Chief Corporate Services & Section 151 Officer had financial responsibility for a number of charities. Although their financial administration is integrated with that of the Council, the charities are legally separate from it and separate financial statements are produced, which are in accordance with applicable accounting standards and the Statement of Recommended Practice on Accounting by Charities, published by the Charity Commissioners. The charities are managed and expenditure is approved in accordance with criteria set out in the governing document of each one. The Council is the sole trustee of the following charities the purposes of which are outlined below. Numbers in brackets are the charity registration numbers. Llandaff War Memorial Fund (219060) – For defraying the cost of upkeep of the war memorial at Llandaff. Maindy Park Foundation (524137) – Recreation or other leisure-time occupation for the benefit of the inhabitants of the City of Cardiff with the object of improving the conditions of life for those inhabitants. Cardiff Further Education Trust Fund/Craddock Wells Trust – Apart from the provision of premises for educational purposes, the Trust makes grants to students, usually through the Council, and makes a small annual payment to University of Wales, Cardiff. Norwegian Church Preservation Trust - The Norwegian Church Preservation Trust was transferred to the County Council, under the management of the Cardiff Harbour Authority in May 2006. It is intended to continue to retain and enhance the cultural, arts programmes and the links between Wales and Norway of this important visitor’s attraction on the Cardiff Bay Waterfront for future generations. A financial summary for each fund follows. Detailed financial statements may be obtained from: Christine Salter Chief Corporate & Section 151 Officer County Hall Cardiff CF10 4UW.

TRUST FUNDS

163

Balance as at

31 March 2011

Income Asset

Revaluation Expenditure

Balance as at

31 March 2012

£ £ £ £ £ General Funds Llandaff War Memorial Fund 1,459 8 0 12 1,455 Maindy Park Foundation 77,045 342 0 37 77,350 Norwegian Church Preservation Trust

0 52,965 0 52,965 0

Further Education Cardiff Further Education Trust/ Craddock Wells

25,797,666 139,030 45,415 133,377 25,848,734

Total funds for which the council is sole trustee

25,876,170 192,345 45,415 186,391 25,927,539

Other funds administered by the Council

R Fice Memorial Trust 49,935 2,112 611 2,356 50,302 The Howardian Trust 25,164 891 182 814 25,423 Total other funds which are administered by the Council

75,099 3,003 793 3,170 75,725

Total 25,951,269 195,348 46,208 189,561 26,003,264 The accounts for the Cardiff Further Education Trust are required by the Charity Commission to be independently examined. The accounts for year ended 31st March 2012 have yet to be examined, this is due to be undertaken in January 2013 which is within the statutory deadlines set.

THE ANNUAL GOVERNANCE STATEMENT

164

Scope of Responsibility 1. Cardiff 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. Cardiff County Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

2. In discharging this overall responsibility, Cardiff Council is responsible for putting in place proper

arrangements for the governance of its affairs, and facilitating the effective exercise of its functions, including arrangements for the management of risk. The activities to which the Annual Governance Statement refers, relate to the core activities of the Council and not the Group

3. Cardiff Council has approved and adopted a Governance Framework, which is consistent with

the principles of the CIPFA/SOLACE Framework - Delivering Good Governance in Local Government. A copy of the framework can be obtained from the Audit and Risk Manager. This statement explains how Cardiff Council complied with the Governance Framework and also meets the requirements of the Accounts and Audit Regulations 2005.

The Purpose of the Governance Framework 4. 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.

5. 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 Cardiff 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.

6. The following paragraphs summarise the core principles of Cardiff Council’s Governance

Framework and reflects the arrangements in place to meet the six core principles of effective governance:

• Focusing on the purpose of the authority and on outcomes for the community and

creating and implementing a vision for the local area • Members and Officers working together to achieve a common purpose with clearly

defined functions and roles • Promoting values for the authority and demonstrating the values of good governance

through upholding high standards of conduct and behaviour • Taking informed and transparent decisions which are subject to effective scrutiny and

managing risk • Developing the capacity and capability of Members and Officers to be effective • Engaging with local people and other stakeholders to ensure robust public

accountability

Focusing on the purpose of the authority and on out comes for the community and creating and implementing a vision for the local area 7. Cardiff Council sets out its key priorities and performance measures in its Corporate Plan, linked

to ‘What Matters’ – the 10 Year Strategy for Cardiff which brings together the Community Strategy; the Children & Young People’s Plan; the Health, Social Care & Wellbeing Strategy and the Community Safety Strategic Assessment into a single plan which is based on a vision of

THE ANNUAL GOVERNANCE STATEMENT

165

delivering 7 shared outcomes. The Corporate Plan provides direction for more detailed service plans which set out the key objectives and risks associated with service delivery.

8. There is alignment between the What Matters Strategy, Corporate Plan, Everyone Matters

Strategic Equality Plan, Improvement Plan, Service Plans, Risk Assessments and the Medium Term Financial Plan in order to direct resources to priority areas. The Budget, where possible, provides dedicated funds for service improvements. The Council has in place a Transformation Portfolio to undertake targeted reviews to drive further efficiencies to improve service delivery.

9. Services are delivered by the Council, by third party providers contracted to the Council, and

through partnership arrangements with other public bodies. A Cardiff Partnership Board comprising the Chief Executive Officers of key public service and third sector providers in the city meet monthly to co-ordinate actions to address specific challenges, service gaps or performance challenges. As of November 2011 the Local Service Board (LSB) became the new Cardiff Partnership Board (CPB) for the city and draws together the range of collaborative activity into one place. This is Chaired by the Council’s Chief Executive.

10. Due to the growing agenda for partnership working within Cardiff through the CPB and in order to

implement the requirements of the Local Government (Wales) Measure, the Council has adopted a more outcome based approach in conjunction with its partners. The Council has, therefore, participated in the development of 7 Citizen Outcomes with the CPB partners and has formally adopted these in the approach to strategic planning by structuring the Corporate Plan 2012/15 around these outcomes. To reflect the step change needed to enable transformation, the Council has added an 8th Outcome which specifically references and demonstrates the approach to working in partnership.

11. The Council has agreed a performance management framework based on these 8 outcomes

and a range of performance measures that demonstrate progress in meeting the priorities in the Corporate Plan. This framework also includes the statutory National Strategic Indicators as specified by Order. The annual outturns against these indicators are submitted to the Welsh Government to be audited as part of the revised Wales Programme for Improvement as the result of the Local Government (Wales) Measure. This framework ensures that there is alignment between the What Matters Strategy, Corporate Plan, Strategic Equality Plan, Service Plans and Personal Performance and Development Plans. Performance against the Council’s targets and objectives are reported publicly on a quarterly and annual basis.

12. The Corporate Plan and Service Plans include key performance targets and these are monitored

on a regular basis. Every quarter, each service area has provided monitoring reports to the Senior Leadership Team (SLT) and Executive with Scrutiny involvement where required. This enabled the Council to track progress against the key objectives, monitor performance against targets and inform remedial action where required.

13. An annual Improvement Plan reports the progress over the previous financial year in terms of;

• a review against the key objectives which will in future be based on the Council’s contributions to delivering the 8 Outcomes,

• progress and comparative information regarding the National Strategic Indicators and a balanced set of Core and Local Indicators which will in future be based on the measures in the Corporate Plan,

• an assessment of the key risks, • sets out the challenges for the future which in future will be part of the requirements of

the Corporate Planning regime. 14. The Local Government (Wales) Measure amends the statutory basis of the Improvement

Agenda and from 2010 the drafts of the Corporate Plan and Improvement Plan have been discussed at Scrutiny and the Executive before being debated and approved by Full Council prior to publication. Both Plans assist the Council in meeting the statutory obligations under the Local Government (Wales) Measure and form part of the Regulation and Inspection Regime undertaken by the Wales Audit Office on behalf of the Welsh Government. This regime was amended under the Measure and the Council will receive two assessments each year that will

THE ANNUAL GOVERNANCE STATEMENT

166

culminate in an overall picture of the ‘ability to improve’. The assessment has been reported to the Audit Panel, Policy Review and Performance Scrutiny Committee and the Executive Business Meeting.

Members and Officers working together to achieve a common purpose with clearly defined functions and roles 15. The Council aims to ensure that the roles and responsibilities for governance are defined and

allocated so that accountability for decisions made and actions taken are clear. It has done this by appointing a Leader, and an Executive which has collective decision making powers. Additionally, the Council has appointed a number of Committees to discharge regulatory and scrutiny functions. These leadership roles, and the delegation of responsibilities to officers, are set out in the Council’s Constitution which is reviewed regularly by the Constitution Committee and recommendations made to Council.

16. The Council’s Constitution includes key sections which set out the particular roles and

responsibilities of Officers and Members and provide clarity on the interfaces between these roles. These include:

• Scheme of Delegations • Members’ Code of Conduct • Employees’ Code of Conduct • Protocol on Member/Officer Relations • Cardiff Undertaking - upon election all Members sign “The Cardiff Undertaking” which

underlines their duties to the City and its citizens. 17. The Council’s Constitution also sets out the Terms of Reference for each of its Committees. 18. An Audit Panel, the membership made up of 4 independent external members and 3 Councillors,

provides assurance to the Council on the effectiveness of its governance, risk management, and internal control arrangements In providing such assurance the Audit Panel followed a wide ranging work programme focusing on strategic risks and fundamental financial processes. For 2011/12 they were pleased to note the positive comments about the quality of the Council's financial management. They also fulfil a significant role in relation to treasury management.

19. In 2012/13, as a result of the Local Government Measure (Wales) 2011 the Audit Panel will

become a revised Audit Committee. The first meeting of the Audit Committee will be held in September 2012 when a Chair will be appointed by the Committee. Membership of the committee was determined at the June 2012 Council meeting in accordance with the Measure.

20. The Chief Executive leads the Council’s officers and chairs the Senior Leadership Team

meetings, which are held fortnightly. 21. All staff, including senior management, have clear conditions of employment and job

descriptions which set out their roles and responsibilities. The Employment Conditions Committee maintains an overview of such conditions.

22. The Chief Corporate Services & Section 151 Officer has overall responsibility for the financial

administration of the Council. The Authority’s financial management arrangements conform to the governance requirements of the CIPFA Statement on the Role of the Chief Financial Officer in Local Government (2010).

23. Finance staff provide advice and guidance to all services areas, where appropriate. All reports to

the Council, the Executive and Committees are required to be considered from a financial perspective. All staff should be aware of the authority’s Financial Procedure Rules and the Contract Standing Order and Procurement Rules.

24. The Chief Officer Legal and Democratic Services is the Authority’s Monitoring Officer who has

overall responsibility for legal issues. Legal staff work closely with service areas to provide

THE ANNUAL GOVERNANCE STATEMENT

167

advice where appropriate. All reports to the Council, the Executive, and Committees are considered from a legal perspective.

Promoting values for the authority and demonstratin g the values of good governance through upholding high standards of conduct and behaviour 25. The Council has defined its values – Accountability, Flexibility, Openness, Professional Integrity,

Diversity, Working with Others and Respect. The Council supports a culture of behaviour based on these values which guide how the long term vision of the Council is put into effect, as well as how Members and Officers deliver their day to day roles. The Council’s values have been actively communicated across the Council and the organisation’s personal performance and development arrangements include specific tools to support staff in reflecting on how best to bring these values to life in their day to day work.

26. All staff undertake induction training which provides information on a range of policies,

procedures and regulations including those relating to Financial Control, Health & Safety, Equalities and IT Security.

27. The Council takes fraud, corruption and maladministration very seriously and has the following

policies to prevent, and deal with, such occurrences:

• Whistleblowing Policy • Anti-Fraud, Anti-Corruption and Bribery Policy • Anti-Money Laundering Policy • HR policies regarding discipline of staff involved in such incidents;

28. Under the Anti-Fraud, Anti-Corruption and Bribery Policy all service area managers are required

to notify the Audit and Risk Manager where there is any suspicion of fraud or impropriety, which helps to ensure a consistent and high standard of investigation is undertaken. The policy was updated and approved by Constitution Committee in January 2012. At the same Constitution Committee the Anti-Money Laundering Policy was formally adopted and has since been made available to officers via the CIS site.

29. All Members and Officers are expected to comply fully with Codes of Conduct as set out in the

Constitution. Governance and conduct matters are monitored by the Standards and Ethics Committee of which public meetings are held regularly and are chaired by an independent person.

30. The Council has a Complaints Policy which encourages the public and other stakeholders to

complain, where deemed necessary, so that the Council can take remedial action and learn from past mistakes where those complaints are upheld.

Taking informed and transparent decisions which are subject to effective scrutiny and managing risk 31. Responsibility for decision making in relation to the functions of the Council is clearly set out in

the Council’s Constitution. This describes the roles and relationships for decision making, between the Full Council, the Executive, Scrutiny and other Non-Executive Committees. It also details decisions delegated to Senior Officers through the different management tiers.

32. All decisions taken by Members are on the basis of written reports by officers which include

assessments of the legal and financial implications arising from the decision. Such reports also address the key risks involved in particular decisions and alternative courses of action which are available. Decisions Registers for the Executive, Senior Officers, and for the Regulatory Committees are published on the Council’s website.

33. The Council’s Scrutiny Committees operate to review various aspects of policy and have the

facility to “call in” matters for scrutiny and report back to the Executive and to Council. The

THE ANNUAL GOVERNANCE STATEMENT

168

Committees engage in selective “pre-decision” scrutiny, providing the Executive with reflections and recommendations to inform future decisions.

34. The Council is entering into an increasing number of collaborative scrutiny arrangements with its

partners. Notable examples under way in 2011/12 are the Prosiect Gwyrdd five Council Joint Scrutiny Panel and the CPB Joint Scrutiny Panel.

35. The Council’s Risk Management Policy, Strategy and Methodology was updated during 2010/11

and approved by the Executive in April 2011. Work is continually ongoing to review the extent to which risk management is becoming embedded within the Council. The Council has a Risk Management Steering Group which is made up of Chief Officers, a Member Risk Champion and dedicated officers from Internal Audit, Insurance, Improvement & Information Management and Partnership & Citizen Focus. The group oversees the development of risk management throughout the Council and a network of service area risk champions assist with identifying, assessing and managing risks.

36. A Corporate Risk Register (CRR) is maintained which highlights the strategic risks facing the

Council. The CRR is reviewed by SLT quarterly and by Policy Review and Performance Scrutiny, the Executive and Audit Panel on a 6 monthly basis. At year end 2011/12 there were 25 corporate risks on the register. Each year an assessment is undertaken to cross reference the CRR to the Corporate Plan which incorporates the strategic objectives. This forms the focus for Senior Managers in identifying their business risks, as detailed in their Service Plans.

37. On 31st December 2009 the Authority appointed Marsh Ltd as the Authority’s Strategic Risk

Management Partner on a three year contract. The partner should provide both independent challenge to the Cardiff risk management process and share with Cardiff their experience on the risks relating to both private and public sector. During 2011/12 representatives from Marsh have met with the Chief Executive and a proposal of work relating to transformation portfolio risk management has been developed by Marsh. A draft report has been completed and will be finalised when taken through the Portfolio Management Board.

38. All major programmes and projects are required to develop and maintain an up to date risk

register as an integral part of the project quality assurance (PQA) process. 39. Risk assessment continues to be a key strand to the Budget Strategy where risks are considered

as a factor in allocating resources. Developing the capacity and capability of Members a nd Officers to be effective 40. The Council aims to ensure that Members and Officers have the skills, knowledge and capacity

required to discharge their responsibilities. The Council recognises the value of well trained, competent people in effective service delivery. All new staff and Members attend an induction programme to introduce them to the Council and its values, objectives, policies and procedures.

41. The Council provides a Member development programme which includes both mandatory (Code

of Conduct, Planning) and discretionary (scrutiny, decision making, chairing skills) elements. 42. Local Government elections were held in May 2012, briefings and training were provided for

elected Members. 43. The Council operates a Personal Performance and Development scheme through which each

member of staff has regular structured opportunities to discuss their objectives, performance against those objectives, and their development needs and aspirations.

44. The Council provides targeted management development programmes including the

Sustainable Leader’s Programme, and is developing its approach to talent management. 45. The Cardiff Council Academy demonstrates a clear commitment to investing in staff as we make

significant changes across the organisation. Supported by the Trade Unions, plans are in place

THE ANNUAL GOVERNANCE STATEMENT

169

for a programme of learning and development courses that will provide staff at all levels with opportunities to strengthen their existing skills and develop new skills.

46. The system of financial management is based on a framework of regular management

information, Financial Procedure Rules, Contract Standing Orders and Procurement Rules which have to be complied with in relation to all procurement and contracting matters. The rules underpin the Council’s Constitution and a system of delegation and accountability.

47. In some areas compliance with Council rules has been identified as an issue and training has

been arranged and offered to Managers in those areas. 48. Development and maintenance of the system is undertaken by managers within the Council. In

particular, the system of financial management includes:

• Forecasting and monitoring budgets on a periodic basis with regular financial reports which indicate actual and projected expenditure against the budget,

• Setting targets to measure financial and other performance, • Clearly defined capital expenditure guidelines, • Formal project and programme management disciplines, • Managers are required to consult with Internal Audit in relation to any system changes or

developments where the internal control environment may be affected. Engaging with local people and other stakeholders t o ensure robust public accountability 49. The Council’s planning, decision making and scrutiny processes facilitate public involvement

providing opportunities for the views of local people to inform decisions. Full Council meetings include a facility for public questions, and the Council’s Scrutiny Committees invite stakeholder contributions to their scrutiny programme, both through research and consultation exercises and through direct access to address Committees.

50. Arrangements for consultation and for gauging the views of local people include the Citizen’s

Panel, the Ask Cardiff Survey, service specific consultations, and processes to receive and respond to petitions and community referenda. Consultations undertaken by service areas are in accordance with the Council’s Corporate Consultation Strategy. The Council has an Accessible Communications Officer in post.

51. All reports, minutes and decision registers are published in a timely manner and are open for

inspection. All meetings are held in public, subject to the consideration of exempt information as defined by the Local Government Act 1972.

52. Elected Members offer surgeries to their constituents and the Council is actively developing

Neighbourhood Management to facilitate the engagement of local people in the identification of local priorities and solutions.

53. The Council publishes a newsletter Capital Times which is distributed to every home in Cardiff

providing up to date information on the Council’s vision and priorities. 54. Performance against the Council’s targets and objectives is reported publicly on a quarterly and

annual basis. 55. Institutional stakeholders, to whom the authority is accountable to include the Welsh

Government and Wales Audit Office. Regular meetings are held with representatives from both organisations to ensure effective working relationships are in place.

56. To ensure staff are consulted and involved in decision making, various channels of

communication are used including the Chief Executive’s Weekly Update, Core Brief, ‘Our News’ newsletter and ‘Your Inbox’ circulars.

57. The Authority regularly engages in consultation with the Trade Unions.

THE ANNUAL GOVERNANCE STATEMENT

170

Review of Effectiveness 58. Regulation 4 of the Accounts and Audit (Wales) Regulations 2005 requires authorities to carry

out an annual review of the effectiveness of the system of internal control. 59. The review of the effectiveness of the system of internal control is informed by:-

• The senior managers within the Authority who have responsibility for the development and maintenance of the internal control environment;

• The work of Internal Audit; • Comment by the Council’s Audit Panel; • The outcome of any Scrutiny reviews; • Views or comments from the Standards & Ethics Committee; • Views or comments from any Committee, Executive or Full Council; • Comments made by the public in the form of complaints or ombudsman matters; • The external auditors and other review agencies and inspectorates.

An Internal Control Self Assessment 60. Annually, senior management complete an Assurance Statement on internal control

arrangements within their Service Area. They are responsible for monitoring and reviewing internal controls as an integral part of the risk management process. Due to the Council going through a period of transformational change all Chief Officers were asked to complete a Senior Management Assurance Statement at the mid point of the year, any issues identified were reviewed at the year end position.

61. Building on the previous work of last year’s Annual Governance Statement, Internal Audit

facilitated an update of the ‘Significant Governance Issues’. Chief Officers were asked to consider any outstanding significant issues in the 2010/11 statement and either close these, where action had been taken, or update them where the issues are ongoing. Any new issues were captured on their Senior Management Assurance Statement. Issues identified for 2011/12, which also feature on the CRR, will not be listed in the issues log but instead managed through the CRR review process so to avoid duplication in the review process.

External Audit and Inspection 62. The Annual Audit Letter reports on audit and inspection work, including the arrangements for

corporate management, performance management, financial management, financial standing, financial statements and legal matters. This was reviewed by the Audit Panel and presented to Scrutiny Committee and the Executive.

63. It is considered there are no matters of significance arising from the Annual Audit Letter issued

in respect of the Statement of Accounts for 2010-11 to merit inclusion in the Statement. Internal Audit 64. The Council operates an independent internal audit function whose role is to review internal

control arrangements. This function operates under the requirements of the CIPFA Code of Practice for Internal Audit in Local Government in the UK.

65. The Audit & Risk Manager is responsible for providing an independent opinion on the adequacy

and effectiveness of the systems of internal control. The Audit and Risk Manager post is undertaken on a job share basis. They are responsible to the Chief Corporate Services and Section 151 but have the authority, as appropriate, to report in their own name and have direct access to all Council Officers and Members.

66. Based on the audit work undertaken throughout the financial year, investigations carried out and

work in preparing the Annual Governance Statement, it is considered that overall the financial

THE ANNUAL GOVERNANCE STATEMENT

171

control within the Council is considered to be satisfactory. The Council has good governance arrangements in place, as demonstrated in updating the CIPFA/SOLACE Local Governance Framework, with sound Rules and Regulations and Codes of Practice for managers to follow and there appears to be much greater awareness and understanding around managing risks both at a strategic and service area level.

67. Most audits have provided assurance in terms of managing risks and reported satisfactory

internal controls in place, but some have identified weaknesses and raised concerns. As a result of audits and investigations undertaken into suspected fraud, non compliance with Council rules has been identified as an issue in some areas. As a response training workshops have been arranged and appropriate officers required to attend. In January 2012 new Financial Procedure Rules were produced for Schools and these have been circulated to each school and an intense training programme is underway.

68. Throughout 2011/12 the Council has continued with its portfolio of transformational change and the extent and pace of this change presents an increased risk to the Council. This has been recognised in a revised risk on the Corporate Risk Register. Internal Audit has been proactive in working with those engaged with service redesign and development of new systems and processes to ensure due consideration of the control environment and management of risks. Internal Audit resources are such that priorities have had to be set to target key areas and to supplement this Internal Audit management have regularly reminded Senior Management of the need for vigilance through this time of change.

69. The Annual Internal Audit report for 2011/12 has been prepared and presented to the Chief

Corporate Services and Section 151 Officer and is to be presented to the Audit Panel at their next meeting in 2012/13. This outlines internal control issues highlighted over the past 12 months. Each audit assignment provides management with assurance on controls and / or identifies areas where there is scope to improve the internal control environment.

70. Despite the challenges brought about by the transformation and examples of non compliance

the overall opinion from internal audit work during 2011/12 is that fundamental controls are sound and risks generally well managed. Reports to senior management will have highlighted concerns where it is considered improvements are required to enhance internal control, however, it is considered there are no matters of significance which are not already referred to in the CRR or the significant governance issues as set out below.

Other Sources of Assurance 71. Discussions with the Operational Manager, Scrutiny, were undertaken to identify if any matters

had arisen from Scrutiny meetings which would be considered as significant governance issues. Any significant issues would be incorporated into the Significant Governance Issues Log.

Significant Governance Issues 72. The following table highlights the significant issues arising from the review of internal control and

details the action being taken to deal with them. As previously mentioned, issues identified which also feature on the CRR are not listed below as they are managed through the CRR review process.

Issues raised in 2011/12

Issue Action Responsible Officer

HSE Improvement Notices within City Services HSE Improvement Notices have been issued that have triggered

Action plan agreed with HSE including Route Risk Assessments, Corporate Policy and Service Area Policy changes.

Chief Officer City Services

THE ANNUAL GOVERNANCE STATEMENT

172

improvements required both corporately to the policy and directly to service area operations. Improvement to risk assessments required. The Local Government Measure (Wales) 2011 will require the Council to consider a range of issues relating to governance and scrutiny, including Member Training and Development, the mandation of new Audit and Democratic Services Committees, greater public involvement in Scrutiny, potential co-option onto Committees, scrutiny by the Council of designated external bodies, and the development of potential new joint scrutiny panels.

Brief the new Administration on these issues and draft reports as necessary for Member consideration and decision.

Chief Corporate Services & Section

151 Officer

supported by Chief Officer Legal

and Democratic Services

& Head of Scrutiny, Performance and

Improvement

Significant deficit budgets in a number of secondary schools (Identified at mid year position 2011/12)

Regular monitoring by both Education and Financial Services, and regular reporting to Budget Forum. Some are SOP-related and eventual closure will limit the timescale of these.

Chief Officer Education

Issues raised in 2010/11

Issues and Actions Responsible Officer

Transformation Portfolio The Council is facing severe pressure to maintain customer facing services while reducing net cost of service delivery. Action - year end position 2010/11 By 2014, Cardiff Council wants to be recognised as a high-performing provider of value for money services for its citizens and customers by transforming ways of working to make better use of skills, knowledge and assets. Therefore a 3 year Transformation Portfolio was established in 2010/11 to ensure the change is governed and implemented. There are 9 Programmes within the Portfolio, and each deliver a range of projects within their Programme remit. The Programmes are: � Citizen Focused � Commissioning & Procurement � Enabling Technology & Transformation � Land & Buildings � People & Leadership � Service Redesign - Improving Cardiff Environment � Service Redesign - People � Service Redesign - Place Services � Shared Services

The Transformation Portfolio is providing appropriate resources to deliver programmes and projects, and is establishing effective governance and financial management processes to maximise return on investment, service improvement and cost savings. There is a strong focus on benefit management throughout the portfolio delivery timescale and after its cessation, which will ensure the Council maintains the savings profiles identified. To support this further and maintain

Portfolio Management Board

THE ANNUAL GOVERNANCE STATEMENT

173

momentum it is developing its staff skills in project and change management. Action – year end position 2011/12 Portfolio Management Board meets fortnightly and reviews key risks, issues and benefits across the delivery of Programmes and Projects. All Programmes and Projects comply with the Council’s Project Quality Assurance (PQA) processes and there are robust review processes in place at Programme and Project Board level. Three Programme Accountants were identified to support the financial management and controls across the Portfolio. These Accountants work closely with the Portfolio Accountant within the Transformation Management Office. Standard processes have been established to monitor financial savings and costs, which continue to be controlled and co-ordinated by the Portfolio Accountant. All Programmes have undertaken benefit mapping, profiling and planning, with Business Change Managers and Benefit Owners identified within Service Areas. Benefits (financial and non-financial) are reviewed on a monthly basis by the Benefits Delivery Board, which reports to the Portfolio Management Board. Legal Action – Drainage Board A legal action taken by a private landowner against the Environment Agency (EA) involves the Caldicott and Wentlooge Internal Drainage Board (IDB) which is funded through a Special Levy from 3 Local Authorities, including Cardiff. The landowner has issued proceedings in the High Court against the EA in relation to the improvement of the sea wall between Cardiff and Chepstow. The EA has said that the duty rests with the Caldicott and Wentlooge IDB, which has been joined in the litigation as Second Defendant. If the Drainage Board is found liable for the maintenance of the sea wall, Cardiff could end up paying some of the cost of the work through the Special Levy. The current cost of work allegedly required to the sea wall is estimated at £35 - 45 million. In connection with this the nominated Cardiff Councillor representative on the Board has brought concerns raised with him about the way the Board is run to the attention of the appropriate authorities. Action - year end position 2010/11 The three Councils, Cardiff, Newport, and Monmouthshire have jointly appointed Counsel. The Councils continue as Defendants to this Court action, with no active participation, in accordance with Counsel's Advice. The need for direct involvement by the Councils would only arise at a later date when this case is concluded, and would be by way of a separate action. In relation to the way the IDB is run, a complaint brought to the attention of Members from Cardiff, Newport and Monmouthshire by a third party has been submitted to the Welsh Assembly Government, and this is currently being investigated. Action – year end position 2011/12 Chief Officer now attending Drainage Board Meetings with Members. The High Court concluded that the responsibility for the maintenance of the sea wall lies with the IDB. The word maintain carries its ordinary meaning of keeping the sea wall in good repair, and does not include a duty to improve the sea wall by raising its height. The IDB had prudently budgeted for any costs it might have been expected to pay.

Chief Officer City Services

THE ANNUAL GOVERNANCE STATEMENT

174

The complaint submitted to Welsh Government is still ongoing. The Wales Audit Office is currently investigating the allegations. IDB membership is updated to include City Service’s Chief officer. The Chief Executive of the Board resigned and a case remains under investigation. An interim manager is in post and is dealing with other structural and disciplinary matters and delivering transparency to the Board. The Welsh Government is revising the role of IDBs in the context of a Single Environmental Body for Wales, the outcomes are expected shortly. Llanishen Reservoir planning application could result in the re opening of an Inquiry in July/August 2011. Action - year end position 2010/11 The Council will engage with any enquiry that is called to strongly defend the Council position, but if unsuccessful then costs of an enquiry could be awarded against the Council. Action – year end position 2011/12 The planning Inquiry closed in January 2012 and the Planning Inspectorate has reported his findings to the Welsh Minister. A decision is expected in early summer 2012.

Chief Officer City Development

Bridges & Structures – the Council does not have in place a full 6 year rolling programme of Principal Inspections of its various highway bridges and structures, but rather a limited risk based inspection programme. This represents an un-quantified risk to the Council. Action - year end position 2010/11 Partial programme in place, but new risk assessment and political discussion regarding risk appetite in relation to this issue is required. Action – year end position 2011/12 Raising political profile through seeking approval of new Highways Policy, restructuring to enable single officer accountability for all highway assets. A new Highway Asset Management Plan is drafted that will include bridge management strategy. New Policy and Asset plan approved. A six year Rolling Inspection Programme is in place for Principal Inspections and a budget set to support the annual cost. The inspections will inform the Life Cycle Plans for the bridges which are being updated in 2012/13. Final quantum of cost is not yet known until all principal inspections are completed.

Chief Officer City Services

73. In light of the senior management restructure which took place in May 2011 the significant

governance issues listed in the 2010/11 statement were reviewed at the half year point to ensure ownership of the issues was correctly assigned which then followed a year end review.

Monitoring 74. We propose over the coming year to take steps to address the above matters to further enhance

our governance arrangements. We are satisfied that these steps will address the need for improvements that were identified in our review of effectiveness and will monitor their implementation and operation as part of our next annual review.

THE ANNUAL GOVERNANCE STATEMENT

175

Certification by Leader of the Council and the Chie f Executive 75. The Council’s Section 151 and Monitoring Officers are content that the process followed has

been robust and has ensured the engagement of the Council’s Senior Leadership Team. 76. We have been advised, by the Council’s Section 151 and Monitoring Officers, on the implications

of the result of the review of effectiveness of the systems of internal control. There are plans to provide improvements in review processes and address weaknesses to ensure continuous improvement of the system of internal control.

77. On the basis of this process, the legal and financial advice of the statutory officers, the Council’s

Policies and working arrangements we certify that we approve the Annual Governance Statement 2011/12.

Jon House Chief Executive Date: 27 September 2012 Heather Joyce Leader of the Council Date: 27 September 2012

GLOSSARY OF LOCAL GOVERNMENT ACCOUNTANCY TERMS

176

Knowledge of basic accountancy terminology is assumed. However, there are certain specialist terms related to local government finance and other specialist areas, which are described below: Agency Services The provision of services or functions, which are the responsibility of one authority or public body, by another. The policy and financial resources are set by the principal authority and implemented by the agent authority. Asset Under Construction An Asset Under Construction represents an asset that is not yet complete. Capital Expenditure Capital expenditure pays for improvements to existing and new assets used in the delivery of Council services as well as other items determined by Regulation. Capital resources are scarce, costly and also have long term revenue implications over many years and even generations where capital expenditure is funded by borrowing. Hence the requirement of the Prudential Code to ensure what is charged as Capital Expenditure is Prudent, Sustainable and Affordable. The statutory definition of capital expenditure is given in the Local Government Act 2003, the Local Authorities (Capital Finance) Regulations 2003 and 2004 amended. Statute relies on the accounting measurement of cost in IAS 16 to determine whether expenditure is eligible to be capitalised or whether it should be treated as revenue expenditure. Key to what is eligible as capital spend are the following words in IAS 16 - ‘Costs directly attributable to bringing the specific asset into working condition for its intended use’ Capital Financing Requirement An authority’s underlying need to borrow for a capital purpose. It measures capital expenditure incurred but not yet financed by the receipt of grants, contributions and charges to the revenue account Capital Receipts Income from the sale of capital assets that can be used to fund new capital expenditure schemes, or reduce the underlying need to borrow. Capital receipts cannot be used to fund revenue expenditure, unless they relate to the costs of securing disposal. Chartered Institute of Public Finance & Accountancy (CIPFA) CIPFA is the professional body for people in public finance. As the world’s only specialised public services body, they provide information, guidance, and determine accounting standards and reporting standards to be followed by Local Government. Civil Parking Enforcement A responsibility granted by Welsh Government designating Cardiff as a “Civil Enforcement Area”. This gives the Council direct control over the deployment of enforcement staff across the highway network, allowing enforcement to be targeted more effectively to local needs and transportation strategies. Credit Rating A credit rating assesses the credit worthiness of an individual, corporation or country. Credit ratings are calculated from financial history and current assets and liabilities. Typically, a credit rating tells a lender or investor the probability of the subject being able to pay back a loan. Depreciation/Impairment/Amortisation A charge made to the Comprehensive Income Expenditure Statement to reflect an estimate of the use or consumption of non current assets in the year in the provision of Council services. Direct Revenue Financing The amount of revenue funding used to pay for capital expenditure incurred.

GLOSSARY OF LOCAL GOVERNMENT ACCOUNTANCY TERMS

177

Earmarked Reserves Amount set aside from the General Balance to fund a future specific purpose or requirement. This is done in accordance with CIPFA guidance (LAAP 77). General Fund Balance The General Fund Balance represents the cumulative retained surpluses on the Council’s revenue budget. It provides a working balance which can be used to cushion the Council against unexpected events or emergencies. It is reviewed annually to ensure it remains at an appropriate level. Fair Value The amount for which an asset could be exchanged or a liability settled, assuming that the transaction was negotiated between parties knowledgeable about the market in which they are dealing and willing to buy/sell at an appropriate price, with no other motive in their negotiations than to secure a fair price. Financial Guarantee The promise to make specified payments to the holder of a debt if the debtor fails to make payment in accordance with the terms of a contract. Financial Instrument Any contract that gives rise to a financial asset of one entity and a financial liability of another. Typical financial liabilities are borrowing and financial guarantees. Typical financial assets include bank deposits, amounts owed by customers, loans provided and investments. Housing Revenue Account (HRA) The HRA is an account of expenditure and income that every local authority housing department must keep in accordance with the Local Government & Housing Act 1989. The account is kept separate or ring fenced from other Council activities. Income is primarily generated by the rents and service charges paid by tenants, while expenditure is on the management and maintenance of the housing stock, and capital financing charges on the HRA’s Capital Financing Requirement. Lender Option Borrower Option (LOBO) A loan instrument that permits the lender to change the rate of interest at pre-determined dates and lets the borrower decide whether to pay the rate or repay the loan. Non-domestic rates (NDR) A levy on businesses collected by billing authorities, on behalf of the Welsh Government, and paid into an All Wales Pool. The Pool is then redistributed amongst all Welsh authorities on the basis of population. Pension Fund A fund built up from deductions from employees’ pay, contributions from employers and investment income from which pension benefits are paid. Precept A demand levied by one public authority, which is collected on its behalf by another authority. Provisions & Reserves Amounts set aside in a year to cover expenditure in the future. Provisions are amounts set aside in respect of liabilities or losses which are likely or certain to be incurred, but in relation to which the exact amount and date of settlement may be uncertain. Reserves are also amounts set aside for future use but fall outside the definition of provisions. Reserves may be for a specific purpose in which case they are referred to as ‘earmarked reserves’ or they may be general reserves (or balances) which every authority must maintain as a matter of prudence.

GLOSSARY OF LOCAL GOVERNMENT ACCOUNTANCY TERMS

178

Prudent Revenue Provision (PRP) An amount set aside as a provision each year to repay loans taken out to pay for capital. This has the effect of reducing the Capital Financing Requirement (CFR). Public Works Loan Board (PWLB) The Public Works Loan Board is a statutory body operating within the United Kingdom Debt Management Office, an Executive Agency of HM Treasury. PWLB’s function is to lend money from the National Loans Fund to local authorities and other prescribed bodies, and to collect the repayments. Recharge An internal charge for services rendered by one Council service area or section to another. Revenue Expenditure funded from Capital Under Statu te (REFCUS) Represents expenditure that may properly be capitalised under statutory provisions but which creates no tangible asset for the authority e.g. house renovation grants to private individuals or revenue expenditure which would normally be charged to the revenue account, but which can be charged to capital following approval by the Welsh Government. Revenue Support Grant General government grant in support of local authority services. It seeks to even out the effects on the council taxpayer of differences in needs between authorities. Soft Loans A loan given at rates below prevailing market rates. Such loans might be made for strategic policy reasons if the authority considers that the benefits will be seen by all Cardiff residents Trust Funds Funds held in trust which are administered by the Council. Welsh Housing Quality Standard (WHQS) The Welsh Housing Quality Standard exists to ensure that tenants in public housing in Wales have the opportunity to live in a good quality home within a safe and secure community. To help achieve this, the physical standard and condition of existing housing must be maintained and improved. The current requirement is for the standard to be achieved in 2012.

179

STATEMENT OF ACCOUNTS

2011/12

of

CARDIFF PORT HEALTH AUTHORITY

CARDIFF PORT HEALTH AUTHORITY

180

FOREWORD The Cardiff Port Health Authority's accounts for the year 2011/12 are set out on page 181. They comprise an Income and Expenditure Statement and Balance Sheet. Port Health authorities are constituted with the primary objective of preventing the spread of infectious diseases without creating unnecessary interference to world shipping. The Cardiff Port Health Authority was constituted by a Provisional Order of 1882 and its authority covers the area, from low water mark, three miles seaward, between Sully Island and the River Rhymney, including all water, docks, harbours and vessels. The authority, through the officers of the Communities Service of Cardiff Council, inspects ships entering the area to ensure compliance with health regulations. To meet the expenditure incurred in these activities, the authority raises a levy on Cardiff Council and the Vale of Glamorgan Council. Its other main revenue source is income arising from the granting of Ship Sanitation Control Exemption Certificates/Ship Sanitation Control Certificates (SSCEC/SSCC). ACCOUNTING POLICIES 1. General The accounting statements that follow have been prepared in accordance with proper practices as required by the Accounts and Audit (Wales) Regulations 2005 (as amended). 2. Debtors and Creditors The transactions of the Port Health Authority are recorded on an accruals basis. Where there is insufficient information available to provide actual figures, estimates are used although this element is not significant. 3. Support Services Costs Cardiff Council makes recharges in respect of the cost of support services to the services that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Accounting Practice 2011/12 (SERCOP). This applies to support service recharges from Cardiff Council service areas to the Port Health Authority.

CARDIFF PORT HEALTH AUTHORITY

181

INCOME & EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31 MARCH 2012

2010/11 2011/12 £ £

Expenditure 88,152 Employees 129,081

0 Premises 0 4,854 Transport 3,710 5,583 Supplies 3,910

28,219 Support Costs 15,201 126,808 151,902

Income (1,500) Fees and Charges (2,655)

(133,242) Levies : Cardiff Council (133,240) (15,014) The Vale of Glamorgan Council (15,010)

(149,756) (150,905)

(22,948) (Surplus)/Deficit for the year 997 (41,471) Revenue Balance brought forward (64,419)

(64,419) Revenue Balance carried forward (63,422)

BALANCE SHEET AS AT 31 MARCH 2012 31 March

2011 31 March 2012

£ £ Current Assets

67,183 Cash in Hand 63,524 895 Debtors 0

68,078

(3,659) 64,419

Current Liabilities Creditors Total Assets Less Current Liabilities

63,524

102 63,422

Funded by:

64,419 Income and Expenditure Reserve 63,422

CARDIFF PORT HEALTH AUTHORITY

182

Certificate of the Chief Finance Officer I certify that the Statement of Accounts summarised on page 181 presents fairly the financial position of the Cardiff Port Health Authority at 31 March 2012 and its Income and Expenditure for the year ended 31 March 2012. Christine Salter Chief Corporate Services & Section 151 Officer Date 27 September 2012 Independent auditor’s report to the Cardiff Port He alth Authority I have audited the accounting statements and related notes of the Cardiff Port Health Authority for the year ended 31 March 2012 under the Public Audit (Wales) Act 2004. The accounting statements comprise the Income and Expenditure Statement and the Balance Sheet. The accounting statements have been prepared under the accounting policies set out in the Statement of Accounts. This report is made solely to the Cardiff Port Health Authority in accordance with Part 2 of the Public Audit (Wales) Act 2004 and for no other purpose as set out in the Statement of the Responsibilities prepared by the Auditor General for Wales. Respective responsibilities of the responsible fina ncial officer and the independent auditor The Chief Corporate Services and Section 151 Officer is responsible for preparing the statement of accounts, in accordance with relevant legal and regulatory requirements and proper practices. My responsibility is to audit the accounting statements and related notes in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require me to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the accounting statements An audit involves obtaining evidence about the amounts and disclosures in the accounting statements and related notes sufficient to give reasonable assurance that the accounting statements and related notes are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Cardiff Port Health Authority’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the responsible financial officer and the overall presentation of the accounting statements and related notes. In addition, I read all the financial and non-financial information in the Foreword to identify material inconsistencies with the audited accounting statements and related notes. If I become aware of any apparent material misstatements or inconsistencies, I consider the implications for my report. Opinion on the accounting statements of the Cardiff Port Health Authority In my opinion the accounting statements and related notes:

• presents fairly the financial position of the Cardiff Port Health Authority as at 31 March 2012 and of its income and expenditure for the year then ended; and

• have been properly prepared in accordance with generally accepted practices. Opinion on other matters In my opinion, the information contained in the Foreword for the financial year for which the accounting statements and related notes are prepared is consistent with the accounting statements and related notes.

CARDIFF PORT HEALTH AUTHORITY

183

Certificate of completion of audit I certify that I have carried out the audit of the accounts of the Cardiff Port Health Authority in accordance with the requirements of the Public Audit (Wales) Act 2004 and the Code of Audit Practice issued by the Auditor General for Wales. Anthony Barrett Appointed Auditor Wales Audit Office 24 Cathedral Road CARDIFF CF11 9LJ Date 28 September 2012

Electronic Publication of financial statements

The maintenance and integrity of the County Council of the City and County of Cardiff web site is the responsibility of the Council; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the statement of accounts since it was initially presented on the web site.