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

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The provision made against estimated credit risk is shown in the table below: Value as at 31 March 2011 Provision Against Estimated Credit Risk NOTES TO THE FINANCIAL STATEMENTS Value as at 31 March 2012 Provision Against Estimated Credit Risk £000 £000 £000 £000 929 0 Long Term Investments 929 0 19,950 0 Investments with banks and financial institutions 22,397 0 (including cash equivalent balances) 10,400 2,118 Customers (Debtors) 9,782 1,525 31,279 2,118 TOTAL 33,108 1,525 Included in the customer debt above were debts past their due date for payment, broken down by age as follows: 31 March 2011 31 March 2012 £000 £000 380 Less than three months 1,325 723 Three to twelve months 940 446 One to two years 494 1,510 Over two years 614 3,059 3,373 Liquidity risk Working within the “Prudential Code” (a mandatory regime which ensures that local authorities manage their capital investment and associated borrowing decisions within affordable limits) and having ready access to borrowings from the Public Works Loans Board, there is no significant risk that the Council will not be able to raise borrowing to meet its long term financial commitments. The main longer term risk is that the Council may find itself having to replenish a significant part of its borrowings at a time of unfavourable interest rates. This risk is managed by limiting the proportion of debt coming to maturity at any one time. The maturity structure of the Council’s borrowings is set out below: 31 March 2011 31 March 2012 £000 £000 14,262 Short Term (under 1 year) 17,945 7 Maturing in 1-2 years 892 13,379 Maturing in 3-5 years 22,189 6,159 Maturing in 6-10 years 4,086 79,806 Maturing in more than 10 years 81,706 113,613 126,818 The Council’s day to day cash flows are monitored closely and projections continually updated. The Council’s Investment Strategy - whilst prioritising the security of Council investments, and seeking to optimise net interest earned - recognises the need to maintain sufficient liquidity to minimise the risk of difficulty of making payments at any point in the year. A significant element of monies invested is placed on call, or for relatively short durations. The good standing of all local authorities as credit risks, and the prudent management of the Council’s budget as a whole, ensures that the Council is in a position to borrow short term to meet day to day expenses, when and if necessary. Market risk The main market risk facing the Council is of adverse movement in interest rates. The impact of changes in interest rates on the Council is complex. - - 76 - -
For example, an increase in interest rates would have the following effects: NOTES TO THE FINANCIAL STATEMENTS • Borrowing at variable rates – increased interest expense would be charged to the Surplus or Deficit on the Provision of Services • Borrowing at fixed rates – the fair value of borrowing liabilities would fall • Investment at variable rates – increase interest income would be credited to the Surplus or Deficit on the Provision of Services • Investment at fixed rates – the fair value of investment assets would rise (though this still may not be material) Over recent years, relatively low interest rates have meant that the Council has been able to take borrowing at very competitive fixed rates, and has reduced its exposure to the risk of interest rate increases on borrowing (but increasing its exposure to a risk of not benefiting from any future interest rate reductions). In 2011/12, if interest rates had been 1% higher with all other variables held constant, interest earned on investments would have increased by around £320,000. A 1% interest rate increase would have increased the cost of borrowing by £53,000, with respect to the new borrowing undertaken during the year, as all debt carried at the start of the year was at fixed rates. Such changes would have impacted on the Income and Expenditure Account. Conversely, the impact of a 1% fall in interest rates on borrowing costs would have saved as much as the cost of an increase, noted above. Such a fall in rates would have also eliminated interest earned on investments, costing around £240,000 in the year. A 1% change in interest rates would also impact on the fair value of fixed rate investments and borrowings, which can be considered by varying the discount rates used in their estimation. In the case of the fair values of investments, this would remain relatively immaterial. It would be more significant for the fair value of borrowings, where a 1% increase in rates would decrease the fair value by over £5 million and a 1% decrease in rates would increase the fair value by approaching £7 million. This would not impact on either Surplus or Deficit on the Provision of Services, or the Movement in Reserves Statement, but only on the values recognised in Note 44. The Council has a number of strategies to manage interest rate risk, for example limiting the total level of net borrowing (borrowing less investment) which is at variable rates, and setting an upper limit for net borrowing at fixed interest rates. It also employs treasury advisors to assist with taking investment and borrowing decisions, including such matters as debt restructuring (repaying debt early and taking out replacement debt on current terms - depending on interest rates available at various borrowing durations). The impact of potential changes in interest rates is considered in the setting of the annual budget, and is monitored across the year, to allow any adverse changes to be accommodated. - - 77 - -
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Statement of Accounts 2011/2012
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INDEPENDENT AUDITORS’ REPORT TO T
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FINANCIAL REPORT 2011/2012 1.0 Over
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FINANCIAL REPORT 2011/2012 it will
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FINANCIAL REPORT 2011/2012 Schools
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STATEMENT OF RESPONSIBILITIES 1.0 T
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COMPREHENSIVE INCOME AND EXPENDITUR
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CASH FLOW STATEMENT The Cash Flow S
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NOTES TO THE FINANCIAL STATEMENTS M
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NOTES TO THE FINANCIAL STATEMENTS F
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NOTES TO THE FINANCIAL STATEMENTS t
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Page 30 and 31: Depreciation is calculated on the f
Page 32 and 33: NOTES TO THE FINANCIAL STATEMENTS C
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Page 38 and 39: NOTES TO THE FINANCIAL STATEMENTS A
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Page 44 and 45: 12 Property, Plant and Equipment -
Page 46 and 47: Reconciliation of the carrying valu
Page 52 and 53: NOTES TO THE FINANCIAL STATEMENTS C
Page 58 and 59: NOTES TO THE FINANCIAL STATEMENTS R
Page 68 and 69: 31 March 2011 NOTES TO THE FINANCIA
Page 70 and 71: - other departure costs (i.e. pay i
Page 72 and 73: Assets and liabilities in relation
Page 74 and 75: NOTES TO THE FINANCIAL STATEMENTS M
Page 76 and 77: NOTES TO THE FINANCIAL STATEMENTS I
Page 80 and 81: COLLECTION FUND INCOME AND EXPENDIT
Page 82 and 83: ANNUAL GOVERNANCE STATEMENT Forewor
Page 84 and 85: ANNUAL GOVERNANCE STATEMENT Equalit
Page 86 and 87: ANNUAL GOVERNANCE STATEMENT Officer
Page 88 and 89: ANNUAL GOVERNANCE STATEMENT A healt
Page 90 and 91: GLOSSARY OF TERMS Accounting polici
Page 92 and 93: GLOSSARY OF TERMS Financial liabili
Page 94: GLOSSARY OF TERMS Remuneration - Al
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Statement of Accounts 2011/2012 - Blackburn with Darwen Borough ...

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