MPA - statement of accounts

46Notes to the Financial StatementsMarket riskInterest rate riskThe Authority is exposed to risk in terms of itsexposure to interest rate movements on its borrowingsand investments. Movements in interest rates have acomplex effect on the Authority. For instance, a rise ininterest rates would have the following effects:• borrowings at fixed rates – the fair value of theliabilities will fall.• investments at variable rates - the interest incomecredited to the Income and Expenditure Accountwill rise.• investments at fixed rates - the fair value of theassets will fall.Borrowings are not carried at fair value, so nominalgains and losses on fixed rate borrowings would notimpact on the Income and Expenditure Account orSTRGL. However, changes in interest receivable onvariable rate investments will be posted to the Incomeand Expenditure Account and affect the General FundBalance pound for pound.If the MPA had made fixed rate investments for morethan 12 months, movements in their fair value wouldbe reflected in the STRGL.The Authority has set, for the net position ofborrowings and investments, upper limits on fixedinterest rate and variable interest rate exposures givingranges that will limit exposure to interest ratemovement. Fixed interest rate exposure is managedwithin a 70% to 95% range and variable interest rateexposures within a 5% to 30% range. Furthermore,upper limits for variable rate exposure are set for grossborrowings at 15% and for investments at 40%.Price riskThe Authority does not invest in equity shares or othersimilar financial instruments, and therefore has noexposure to losses arising from movements in theprice of shares.Foreign exchange riskThe Authority has no financial assets or liabilitiesdenominated in foreign currencies and therefore hasno exposure to loss arising from movements inexchange rates.Notes to the Cash Flow StatementS. Reconciliation of Surplus to revenue cash flow2006-07 Note 2007-08£’000’s£’000’s(10,060) (Surplus) N (7,882)Non-cash Transactions(18,290) net transfer from reserves (113,146)(1,701) net transfer from provisions (4,899)Items on an Accruals Basis(11,717) (increase) / decrease in revenue creditors (21,824)252 increase / (decrease) in stocks (23)13,126 increase / (decrease) in debtors 22,046Items shown later in the cash flow statement14,617 investment income 15,039(3,452) interest paid (2,420)(17,225) Net cash flow from revenue activities (113,109)T. Analysis of cash balancesCash balances include not only corporate and local bank balances but also imprest balances held acrossthe organisation.Balance 31 Balance 31 Movement inMarch 2007 March 2008 year£’000’s £’000’s £’000’sCash and bank 1,571 (4,847) (6,418)