Statement of Accounts 2011/2012 - Blackburn with Darwen Borough ...

NOTES TO THE FINANCIAL STATEMENTS
• Blackburn with Darwen and Bolton Local Education Partnership (LEP) – the Council has a 5%
shareholding in this joint venture, which was formed in order to deliver the capital investment elements of
the Building Schools for the Future programme. The Council has also invested in a number of special
purpose companies established solely to deliver the new high schools at Pleckgate, Witton Park and
Blackburn Central under the Private Finance Initiative (see also Notes 36 and 39). The companies do not
own any assets, and there is no “profit” to consolidate with the Council’s operating results.
c) The Council is deemed to control the services provided under its PFI schemes, and as ownership of the
property, plant and equipment will pass to the Council at the end of the contract, for no additional charge, the
Council has recognised the operational assets used under the contract in its Balance Sheet, as part of Property,
Plant and Equipment.
d) The Council has considered the accounting treatment of schools land and buildings used by the different
categories of maintained schools. It has considered the circumstances of each of the categories of maintained
schools, such as ownership and access to economic benefits and service potential, and as a result the only
schools included within Property, Plant and Equipment in the Council’s Balance Sheet are community schools.
Schools which are classified as Voluntary Controlled, Voluntary Aided, Foundation or Academies are not included
in the Council’s Balance Sheet.
e) The Council has also considered the accounting treatment of the lease agreement in respect of the new
Blackburn Market within The Mall shopping centre. It has concluded that the terms of the lease does not transfer
substantially all the risks and rewards incidental to ownership of the property, plant and equipment. The lease
has, therefore, been treated as an operating lease and rentals paid under the terms of the lease are charged to
the Comprehensive Income and Expenditure Statement
4 Assumptions made about the future and other major sources of estimation uncertainty
The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about
the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current
trends and other relevant factors. However, because balances cannot be determined with certainty, actual results
could be materially different from the assumptions and estimates.
The items in the Council’s Balance Sheet at 31 March 2012 for which there is a significant risk of material
adjustment in the forthcoming financial year are as follows:
Item Assumptions / estimations made Degree of uncertainty
General
Accounts
Payable/
Accounts
Receivable
Accruals
Activity is accounted for in the year it takes place,
not simply when cash payments are made or
received. Detailed guidance is provided to budget
holders and finance staff to assist in the estimation
of accruals i.e. where revenue and expenditure has
been recognised, but cash has not been received
or paid.
The Council processes “old year”
payments via the Accounts Payable
system during the first two weeks of
April, in order to minimise the need to
process journals in respect of “manual”
creditors. Most accruals are otherwise
based on order or contract values, so
the underlying data is relatively reliable
and the scope to use judgement and
change assumptions is also relatively
limited. In addition, during the year an
integrated ordering system (P2P)
which generates commitments has
been rolled out to most Council
departments. It has been possible,
therefore, to generate system reports
to assist with the identification of
goods/ services ordered by not yet
paid at 31 March.
As such, the degree of estimation
uncertainty is considered to be very
Compensated
Absences
Accrual
The Council is required to accrue for any annual or
flexi leave earned but not taken at 31 March each
year. The Council’s Human Resources system
does not produce information which would enable
an actual figure to be calculated, therefore, a
sample of non-teaching employees has been taken
across all departments and grades. Teaching staff
have been treated separately for this purpose due
to leave being accrued on a term by term basis.
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low.
As it is not possible to determine the
actual amount of accrued leave, the
only way to review the reasonableness
of the estimate is to compare the
average days accrued against the
Council’s rules around how much
leave can be carried forward at year
end for non-teaching staff. The
maximum number of leave days
allowed to be carried forward is 4 days,
and the accrual for 2011/12 is based