2011/2012 audited annual accounts - Falkirk Council

FALKIRK COUNCIL
NOTES TO THE CORE FINANCIAL STATEMENTS
20. Contingent Assets and Liabilities
Contingent Assets
(i) In terms of a contract for the sale of land, a clawback provision was included in relation to the treatment of any
savings on the assumed remediation costs for the land in question. Following a dispute the matter was assessed
through third party determination at £0.930m. To date, some £0.326m has been received. Following an application
by the purchaser for judicial review of the third party determination, the outcome of the determination was
subsequently upheld by the Court, however this decision is subject to appeal by the purchaser. There accordingly
remains the potential for the Council to receive further sums in the event of the dispute being determined in favour
of the Council.
Contingent Liabilities
(ii) Falkirk Schools Project – Falkirk Council has entered into a Public Private Partnership with Class 98 Ltd to provide
five schools. In terms of the Project Agreement, the Council is liable for outstanding senior debt following
termination of a Class 98 Ltd event of default. At 31 March 2012, this totalled £50m (£54m as at March 2011).
(iii) Note 25 includes provision of £5.216m in respect of potential expenditure arising from outstanding equal pay
claims. A recent legal judgement (Bainbridge) on pay protection means the Council could be at risk in respect of
further potential equal pay obligations. However, this is dependent on case law development and cannot be
quantified at this time.
(iv) Prior to local government reorganisation in 1996 the extant councils, Central Regional Council and Falkirk District
Council, entered into a solvent run-off arrangement with their insurer, MMI, with aim of having sufficient assets to
meet outstanding insurance claims. This essentially means that liabilities, as they arise, can be met from available
resources. The outcome of current litigation may create a financial liability for Falkirk Council as successor
Council. A robust estimate of this potential liability will result once the litigation has completed due process.
(v) Falkirk Community Trust is a member of the Falkirk Pension Fund, a Local Government Pension Scheme, which is
a defined benefit scheme and provides benefits based on final pensionable pay. As part of the Admission
Agreement to the Scheme both Falkirk Community Trust and Falkirk Council agreed that assets of the Pension Fund
in respect of Trust employees and former employees shall, at all times, be notionally allocated to Falkirk Council
and the liabilities of the Pension Fund shall, at all times, be the responsibility of Falkirk Council and not Falkirk
Community Trust. At this stage, it has not been possible to quantify this potential liability as no separate valuation
was undertaken.
21. Net Assets
An analysis of Net Assets shown in the Balance Sheet is given below:
2010/11 2011/12
£’000 £’000
174,703 General Fund 149,735
30,706 Housing Revenue Account 19,840
205,409 169,575
22. Long-Term Investments in Associates and Joint Ventures
In March 2003, the Council in conjunction with Falkirk Football and Athletic Club Ltd (FFAC), established a joint venture
called Falkirk Community Stadium Limited (FCSL) to develop and operate a stadium facility at Westfield, Falkirk. The
Council and FFAC invested £3.110m and £2.868m respectively from the proceeds of property disposals at Brockville and
Hope Street, Falkirk. These sums were used to purchase Interest Free Secured Loan Stock 2178. The Council held 25% of
the ordinary shares in the company, although this holding equated to 49% of the economic value. In addition, the Council
advanced the Company loans of £2.000m on 31 March 2003, £2.795m on 22 December 2004 and £0.300m on 31 August
2005, which were repayable over 25 years for the provision of community leisure facilities within the new Community
Stadium.
FCSL was reconstructed on 28 th May 2009 through a solvent liquidation pursuant to Section 110 of The Insolvency Act
1986. In effect, the assets and liabilities of the company have been split between FFAC and the Council. The loans
advanced by the Council and the Long Term Investment have been replaced by Property, Plant & Equipment of £3.850m
and a Long Term Investment of £9.340m. The newly acquired assets comprise Ground Leases of £0.250m and
Development Sites of £3.600m.
This heading includes an advance of £5.846m to Central Scotland Joint Fire & Rescue Board to finance the Board’s debt
(2010/11 £6.200m).
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