1. Accounts

The Borough Council’s Accounts for 2006/07 are set out in the following pages. The layout complies with the current Statement of Recommended Practice published in 2006. The main statements included are briefly described as follows;

Ø Income and Expenditure Account – this account has been prepared in line with the 2006 Statement of Recommended Practice (SORP) and follows the standard service analysis set out in the Best Value Accounting Code of Practice so that comparisons can be more easily made with other authorities. A memorandum account is included to show how this expenditure is charged to each committee’s accounts. The account summarises the resources that have been generated and consumed in providing services and managing the council during the year. It includes all day-to-day expenses and related income on an accruals basis, as well as transactions measuring the value of fixed assets actually consumed and the real projected value of retirement benefits earned by employees in the year. As well as showing General Fund services, the costs and income relating to the provision of council housing are consolidated into the Income and Expenditure Account, thereby showing all the Council’s income and expenditure in a single financial statement.

Ø Statement of Movement on the General Fund Balance – although the surplus / deficit on the income and expenditure (I & E) account is the best measure of the Council’s financial result for the year, the treatment of certain items of income and expenditure differs between it and the General Fund. The statement of movement and notes to the statement show those items required by statute and non-statutory proper practice, to be credited or charged to the General Fund in order to determine the Council’s budget requirement and in turn our Council Tax demand.

Ø Statement of Total Recognised Gains and Losses – this statement brings together all the gains and losses of the council for the year and shows the aggregate increase in its net worth i.e. surplus on income and expenditure account; surplus arising on revaluation of fixed assets & actuarial (gains) / losses on pension fund assets and liabilities.

Ø The Balance Sheet – This sets out the overall financial position of the Council as at 31^st March 2007, showing our balances and reserves and our long term indebtedness, and fixed and net current assets employed in our operations, together with summarised information on fixed assets held.

Ø Cash Flow Statement – The layout of this account is prescribed in the Code of Practice. It complements the income and expenditure accounts and the balance sheet by disclosing the inflows and outflows of cash to and from the Council in the course of the year.

Ø Housing Revenue Account (HRA) – The account reflects the statutory requirement to separately account for local authority housing provisions. The account is self-financing as the cost of maintaining and financing council houses is met by council house rents. The HRA statement has two parts; (1) an HRA Income and Expenditure account which records the details of income and expenditure on HRA services included in the Income and Expenditure Account for the authority as a whole and (2) a statement of movement on the HRA balance which removes or includes those items required by statute and non-statutory proper practices from the Income and Expenditure Account, in order to ensure the HRA Balance is calculated in accordance with Part 6 of the Local Government and Housing Act 1989.

Ø Collection Fund – This shows the receipts from council tax and business rates together with the payments made to the precepting authorities.

Ø Group Accounts – The authority does not have any interest in subsidiaries, associates and joint ventures and has therefore not prepared any Group accounts.

These Accounts are supported by the Statement of Accounting Principles and notes to the various accounts. The statements and accounts which are subject to external audit are referred to in the report which is reproduced on pages 10 to 13.

2. Statement of Responsibilities for the Statement of Accounts

The Responsibility of the Authority is

The Authority is required:

Ø to make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs. In this Authority, that officer is the Head of Finance (Accountancy and Audit);

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

Ø to approve the Statement of Accounts.

These accounts were approved at a meeting of the Full Council on 27^th September 2007

Leader of the Council: Cllr. I Hunter

Date: 27^th September 2007

The Responsibilities of the Head of Finance (Accountancy and Audit)

The Head of Finance (Accountancy and Audit) is responsible for the preparation of the Authority’s Statement of Accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (The SORP). In preparing this Statement of Accounts, the Head of Finance (Accountancy and Audit) has:

Ø selected suitable accounting policies and then applied them consistently;

Ø made judgements, and estimates that were reasonable and prudent;

Ø complied with the Code of Practice;

Ø kept proper and up-to-date accounting records; and

Ø taken reasonable steps for the prevention and detection of fraud and other irregularities.

I certify that the Statement of Accounts has been prepared in accordance with proper practices and presents fairly the financial position of the Council and its income and expenditure for the year ended 31^st March 2007.

Head of Finance (Accountancy & Audit): Charles Oakley

Signed:

Date: 27^th September 2007

3. Comparison between Original Estimated Expenditure 2006/2007 and Actual Expenditure 2006/2007

The summary shown at Table 1 on page 6 compares the original estimates for 2006/2007 with the actual expenditure for the year. The major variances are the removal of the capital financing charges (i.e. notional interest) which were built into the original estimates i.e. charged against service accounts, but which were removed in line with the Statement of Recommended Practice (SORP).

Policy (Environment) Committee under spent by £128,385, this is mainly due to the removal of the capital charges as detailed above, being partially off set by the accounting treatment of Renovation Grants as per previous years.

Policy (Corporate Services & Regeneration) under spent by £1,162,979, this is due to a number of variances, the main ones being the removal of capital charges as detailed above, the removal of the three year job evaluation provision (1/4/03 – 31/3/06) and under spends within Planning, Building Regulations and National Non Domestic Rates, however these are partially off set by accounting adjustments in respect of Financial Reporting Standard on pensions, and treatment of IT software costs.

The Housing Revenue Account under spent by £604,341, which is due to a number of variances. The main ones being that the revenue contribution to capital which amounted to £375,000 was not required and the removal of the job evaluation provision, this has resulted in £549,681 being added to balances.

Level of Balances - The general fund balance reduced from £1,713,995 as at 31^st March 2006 to £1,595,973 as at 31^st March 2007.

Current Borrowing Facilities and Capital Borrowing – An overdraft of £0.5million is arranged but not used. There is external borrowing of £1million to meet capital expenditure.

Pension Balance – The pension fund reserve reduced from £7.23m to £7.18m. This has no direct impact on council tax.

Table 1:

Comparison between Original Estimate 2006/2007 and Actual Expenditure 2006/2007

CRJ Oakley, F.C.M.A

Head of Finance (Accountancy and Audit)

General Statistics

* Note – The rate for small businesses was 42.6

Independent auditor’s/auditors’ report to the Members of Berwick-upon-Tweed Borough Council

Opinion on the financial statements

We have audited the financial statements of Berwick upon Tweed Borough Council for the year ended 31 March 2007 under the Audit Commission Act 1998, which comprise the Income and Expenditure Account, Statement of the Movement on the General Fund Balance, the Balance Sheet, the Statement of Total Recognised Gains and Losses, the Cash Flow Statement, the Housing Revenue Account, the Collection Fund, the Group Accounts and the related notes. These financial statements have been prepared under the accounting policies set out within them.

This report is made solely to Berwick upon Tweed Borough Council in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 36 of the Statement of Responsibilities of Auditors and of Audited Bodies prepared by the Audit Commission.

Respective responsibilities of the Chief Finance Officer and auditors

The Chief Finance Officer’s responsibilities for preparing the financial statements in accordance with applicable laws and regulations and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2006 are set out in the Statement of Responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements present fairly the financial position of the Authority in accordance with applicable laws and regulations and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2006.

We review whether the statement on internal control reflects compliance with CIPFA’s guidance. The statement on internal control in local government: meeting the requirements of the Accounts and Audit Regulations 2003’ issued in April 2004. We report if it does not comply with proper practices specified by CIPFA or if the statement is misleading or inconsistent with other information we are aware of from our audit of the financial statements. We are not required to consider, nor have we considered, whether the statement on internal control covers all risks and controls. We are also not required to form an opinion on the effectiveness of the Authority’s corporate governance procedures or its risk and control procedures

We read other information published with the financial statements, and consider whether it is consistent with the audited financial statements. This other information comprises only the Explanatory Foreword. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinion

We conducted our audit in accordance with the Audit Commission Act 1998, the Code of Audit Practice issued by the Audit Commission and International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Authority in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Authority’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion the financial statements present fairly, in accordance with applicable laws and regulations and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2006, the financial position of the Authority as at 31 March 2007 and its income and expenditure for the year then ended.

Conclusion on arrangements for securing economy, efficiency and effectiveness in the use of resources

Authority’s Responsibilities

The authority is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to regularly review the adequacy and effectiveness of these arrangements.

Under the Local Government Act 1999, the authority is required to prepare and publish a best value performance plan summarising the authority’s assessment of its performance and position in relation to its statutory duty to make arrangements to ensure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.

Auditor’s Responsibilities

We are required by the Audit Commission Act 1998 to be satisfied that proper arrangements have been made by the authority for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires us to report to you our conclusion in relation to proper arrangements, having regard to relevant criteria specified by the Audit Commission for principal local authorities. We report if significant matters have come to our attention which prevent us from concluding that the authority has made such proper arrangements. We are not required to consider, nor have we considered, whether all aspects of the authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively.

We are required by section 7 of the Local Government Act 1999 to carry out an audit of the authority’s best value performance plan and issue a report:

• certifying that we have done so;

• stating whether we believe that the plan has been prepared and published in accordance with statutory requirements set out in section 6 of the Local Government Act 1999 and statutory guidance; and

• where relevant, making any recommendations under section 7 of the Local Government Act 1999.

Conclusion

• We have undertaken our audit in accordance with the Code of Audit Practice and having regard to the criteria for principal local authorities specified by the Audit Commission and published in December 2006, we are satisfied that, in all significant respects, Berwick upon Tweed Borough Council made proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2007 except for arrangements to ensure that its spending matches its available resources and arrangements to manage and improve value for money.

Best Value Performance Plan

We issued our statutory report on the audit of the authority’s best value performance plan for the financial year 2006/07 on 21 December 2006. We did not identify any matters to be reported to the authority and did not make any recommendations on procedures in relation to the plan.

Certificate

We certify that I/we have completed the audit of the accounts in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission.

Deloitte and Touche LLP

Newcastle upon Tyne

27 September 2007

An audit does not provide assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular on whether any changes may have occurred to the financial statements since first published. These matters are the responsibility of the Council but no control procedures can provide absolute assurance in this area.

1. General Principles – The general principals adopted in compiling these accounts are those recommended by the Chartered Institute of Public Finance and Accountancy. The Statement of Accounts has been prepared in accordance with the latest Code of Practice on Local Authority Accounting in the UK – A Statement of Recommended Practice (the SORP). It provides a summary of the council’s transactions for the 2006/07 financial year and its position at the year-end of 31 March 2007.

It is a fundamental principal of Local Authority accounting that, where specific legislative requirements and accounting principles conflict, legislative requirements shall apply. The accounts have been prepared on a going concern basis i.e. on the assumption that the Authority will continue for the foreseeable future.

2. Accruals of Income and Expenditure (Basis of debtors/creditors included in the accounts)

Activity is accounted for in the year it takes place, not simply when cash payments are made or received. In particular:

Ø Income and Expenditure are credited and debited to the relevant service revenue account, unless they properly represent capital receipts or capital expenditure.

Ø All fees, charges and rents due from customers are recorded at the time they are due, the debtors appearing in the balance sheet represent sums still due to the Council, which have not been received by the year end. Where it is doubtful that debts will be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected i.e. bad debt provision.

Ø Creditors represent expenditure incurred but not paid for at the balance sheet date, other than interest charges which are accounted for on a payment basis. No significant variations would arise if such charges were treated on an accruals basis.

3. Provisions have been established to meet liabilities which are expected to arise in future years but are of uncertain timing or amounts. Details of our provisions are shown in note 16 to the balance sheet. Provisions for any legal liabilities are shown separately. Provisions are charged to the appropriate service revenue account in the year that the Council becomes aware of the obligation, based on the best estimate of the likely settlement. Payments when eventually made are charged directly to the provision set up in the balance sheet. Provisions are reviewed at the year end, where it becomes more likely than not that a transfer of economic benefits will not now be required, or a lower settlement than anticipated is required, the provision is reversed and credited back to the relevant service revenue account. In contrast to reserves, all movements to and from provisions are included in the net cost of services within the Income and Expenditure Account.

4. Reserves - in accordance with standard accounting practice for local authorities two non cash backed capital reserves and one cash backed reserve exist as part of the system of capital accounting, they are set out below:

Ø The Fixed Assets Restatement Account: - which represents the movement arising on the revaluation of fixed assets.

Ø The Capital Financing Account - which represents amounts set aside from revenue resources, and capital receipts to finance expenditure on fixed assets or for the repayment of external loans and certain other capital financing transactions.

Ø The Useable Capital Receipts Reserve is used for the future funding of the General Fund Capital Programme and the Housing Investment Programme.

5. Government Grants and Contributions whether paid on account, by instalments or in arrears, grants are utilised as relevant expenditure is incurred and in accordance with grant conditions. Revenue grants are matched in service revenue accounts with the service expenditure to which they relate. Grants to cover general expenditure (e.g. Revenue Support Grant) are credited to the foot of the Income and Expenditure Account after Net Operating Expenditure.

6. Accounting for defined benefit pension schemes - The requirements of Financial Reporting Standard 17 under UK GAAP have been fully incorporated into the accounts from 2003/4. The CIPFA/LASAAC Joint Committee has adapted the requirements where statutory accounting requirements prevent adoption. This is to allow for the implementation not impacting on the amounts funded through Government grants or local taxpayers.

The pension costs which are charged to the Council’s account in respect of their employees have been replaced by the actuarially determined service cost for the year. There is recognition in the balance sheet of the net asset/liability and a pensions reserve. Entries have been included in the Income and Expenditure Account and Statement of Movement on the General Fund Balance for movements in the asset/liability and the movement in the pension reserve. Any movement in the pension liability arising from a change to commutation benefits will be treated as an actuarial gain or loss and taken directly to reserves. This does not impact directly on the General Fund Balance but will be borne in mind when considering the amount of reserves held.

7. VAT – Income and expenditure excludes any amounts related to VAT, as all VAT collected is payable to HMRC and all VAT is recoverable from them.

8. Central Administrative Expenses and Overheads - Central administrative expenses are allocated to the respective departments in proportion to their estimated usage of central administration facilities. In allocating overheads the Authority follows the costing principles of the CIPFA Best Value Accounting Code of Practice 2006 to determine the total cost of each service.

9. Tangible Fixed Assets are assets that have a physical substance and are held for use in the provision of services or for administrative purposes on a continuing basis.

Recognition: From the 1^st April 1994 all expenditure on the acquisition, creation or enhancement of fixed assets is capitalised on an accrual basis provided that these assets yield benefits to the Council and the services it provides, for a period of more than one year.

Measurement: Tangible fixed assets are classified into the groupings required by the latest Code of Practice on Local Authority Accounting. The groupings and the basis of valuation of the various categories of assets are as follows:

Ø Operational land and properties used by the Council in the direct delivery of services are included in the balance sheet at open market value for existing use less depreciation, or where because of the specialised nature this could not be assessed (there being no market value for such an asset), at depreciated replacement cost.

Ø Non-operational assets are included in the balance sheet at open market value less depreciation.

Ø Infrastructure assets and community assets are included in the balance sheet at their depreciated historical cost. Community assets are assets that the Council is likely to keep in perpetuity for the benefit of local people e.g. parks & open spaces, recreation grounds, museum exhibits.

Ø Plant and machinery valuation is based on depreciated historical cost and is included in the valuation of the buildings.

Ø Vehicle valuation is based on depreciated historical cost for all assets with an original cost in excess of £5,000 (valuations are included within land, buildings and development)

The revaluation of Council houses was carried out as at 31^st March 2007, garages 31^st March 2006 and all other assets as at 31^st March 2004. The increases arising on the valuations of fixed assets have been matched by credits to the Fixed Asset Restatement Account, to recognise unrealised gains. Subsequent revaluations are planned at five yearly intervals, although material changes to asset valuations will be adjusted in the interim period, as they occur.

The cost of expenditure which enhances existing assets is initially included within the fixed assets.  The difference between this cost and the enhancement in value it creates is treated as a negative revaluation, and included in the Fixed Asset Restatement Account.

Impairment: As part of the annual review of asset values, any impairment is identified and where attributable to the clear consumption of economic benefits – the loss will be charged to the relevant service revenue account, otherwise the loss will be written off against the Fixed Asset Restatement Reserve.

Disposals: When an asset is disposed of or decommissioned, the value of the asset in the balance sheet is written off to the Income and Expenditure Account as part of the gain and loss on disposal. Capital Receipts from disposals are credited to the Income and Expenditure Account 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).

A proportion of receipts relating to housing disposals (75% for dwellings, 50% land and other assets) is payable to the Government. The balance of capital receipts is required to be credited to the Useable Capital Receipts Reserve, and can then only be used to enhance the Council’s programme of capital expenditure or set aside to reduce the council’s underlying need to borrow (the capital financing requirement). Capital receipts so used are transferred to the Capital Financing Account.

The written off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided under separate arrangements for capital financing. Amounts are set aside to the Capital Financing Account from the Statement of Movement on the General Fund Balance.

Depreciation: Under the 2006 Code of Practice provision for depreciation is required for all assets with a finite useful life by allocating the value of the asset in the balance sheet over the periods expected to benefit from their use.

For 2006/07 all assets have been depreciated on a straight line basis in accordance with FRS 15. The estimates of remaining useful life for non-housing assets are set out in the 31^st March 2004 valuation. The percentages used are 2%, 2.86% and 5% which equates to a remaining useful life of 50 years (Golf Course), 35 years (Various) and 20 years (Various). For Housing, the Major Repairs Allowance amount is used, which management believe to be a fair estimate of the depreciation charge.

Grants & Contributions: where grants and contributions are received that are matched to fixed assets with a finite useful life, the amounts are capitalised and credited to the Government Grants Deferred Account. The balance is written down to offset depreciation charges made for the related assets in the relevant service revenue account.

10. Charges to Revenue for fixed assets - In order to record the real cost of holding fixed assets used in the provision of services, general fund service revenue accounts, central support services and trading accounts are charged with the following:

Ø Depreciation attributable to the assets used by the relevant service;

Ø Impairment loss i.e. where an asset suffers an impairment representing the clear consumption of economic benefits (e.g. storm damage) then an impairment loss will be charged to the service that uses the asset;

Ø Amortisation of intangible fixed assets attributable to the service.

These amounts do not effect the requirement to raise Council Tax, although an annual provision from revenue to contribute towards the reduction in our overall borrowing requirement is required.

The requirement to make a capital financing charge (i.e. notional interest) against service accounts has been removed by the 2006 SORP. The 2005/06 accounts have been restated and the capital financing charges made against the general fund service revenue accounts, central support and trading accounts have been removed from the net cost of services.

11. Deferred Charges - Deferred charges represent capital expenditure, where no tangible fixed asset is created. Deferred charges incurred during the year have been written off as expenditure to the relevant service account in the year. There has been no impact on the level of council tax as the charges are met from existing capital resources i.e. a transfer to the Capital Financing Account reverses out the amounts charged in the Statement of Movement on the General Fund Balance.

12. Leasing - The Council has acquired a variety of assets including vehicles and computer equipment by means of operating leases. These enable the Council to make use of the asset without the transfer of risks and rewards of ownership. Charges are made evenly throughout the period of the lease.

13. Appropriations - Amounts set aside from revenue for the repayment of external loans, to finance capital expenditure, or as transfers to other earmarked reserves are disclosed separately as part of the amounts required to determine the movement on the General Fund Balance for the year i.e. Statement of Movement on General Fund Balances. A credit for depreciation is shown against the provision for repayment of External loans so that depreciation has a neutral effect on the amounts to be raised from Council Taxpayers.

14. Basis of valuation of investments - Investments are valued at original cost.

15. Stocks and stores - Stocks and stores are valued at average cost.

16. Premium on early redemption of loans - From 2002/03, the premium payable on early redemption of loans has been set against the Capital Financing Account. In previous years this has been a charge to the General Fund balance. There has been no repayment of loans in 2006/07.

Statement of Movement on General Fund Balances

The Income and Expenditure Account shows the council’s actual financial performance for the year, measured in terms of the resources consumed and generated over the last twelve months. However, the authority is required to raise council tax on a different accounting basis, the main differences being:

• Capital investment is accounted for as it is financed, rather than when the fixed assets are consumed.

• The payment of a share of housing capital receipts to the Government scores as a loss in the Income and Expenditure Account, but is met from the usable capital receipts balance rather than council tax.

• Retirement benefits are charged as amounts become payable to pension funds and pensioners, rather than as future benefits are earned.

The General Fund Balance compares the council’s spending against the council tax that it raised for the year, taking into account the use of services built up in the past and contributions to reserves earmarked for future expenditure.

This reconciliation statement summarises the differences between the outturn on the Income and Expenditure Account and the General Fund Balance.

1. In line with the 2006 statement of recommended practice, changes have been made to the single entity statement of accounts, comprising of the replacement of the consolidated revenue account and statement of total movement on reserves with an income and expenditure account, a statement of movement on the general fund balances and a statement of total recognised gains and losses. In the 2006/07 Statement of Accounts, the council has adopted three significant new accounting policies that impact on the comparative figures for 2005/06 in the Income and Expenditure Account:

Ø Capital financing charges for the use of fixed assets are no longer made to service revenue accounts, support services and trading accounts

Ø Credits for government grants deferred are now posted to service revenue accounts, support services and trading accounts rather than credited as a corporate income item

Ø Gains and losses on the disposal of fixed assets are recognised in the Income and Expenditure Account

These changes have had the following impact on the comparative figures for 2005/06 compared with those published in the 2005/06 Statement of Accounts.

2. The analysis of net expenditure conforms with the latest Accounting Code of Practice issued during the year by the Chartered Institute of Public Finance and Accountancy.

3. Council Tax – The Council Tax levied for 2006/07 was set at £1,339.46 Per Band D property. The build up of this amount was as follows.

* Note: This includes £15,000 special expenses for Town Committee.

4. Local Government Pension Scheme

Ø As part of the terms and conditions of employment of the Council’s officers, the authority offers retirement benefits. The disclosures below relate to the Northumberland County Council Pension Scheme (the Fund) which is part of the Local Government Pension Scheme. Berwick-upon-Tweed Borough Council participates in the Fund which provides defined benefits, based on members’ final pensionable salary. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments that needs to be disclosed at the time that employees earn their future entitlement.

Ø In 2006/07 the Council paid employers contributions of £511,129 (05/06 £531,954) representing 18.9% of employees pensionable pay (05/06 18.9%) into Northumberland County Council’s Pension Fund, which provides members with defined benefits related to pay and service. In addition the Council is responsible for all pension payments relating to added year benefits it has awarded, together with related increases. In 2006/07 these amounted to £74,616 (05/06 £72,713).

Ø The net cost of services has been adjusted as deduced contributions of £580,000 (05/06 - £610,000) have been replaced with the current service cost of £530,000 (05/06 - £500,000). It has not been necessary to make any adjustment for past service costs or for any curtailments or settlements. The amount credited to other finance income is analysed below:

Ø The net change resulting from implementing FRS 17 is reversed within the Statement of Movement on General Fund Reserve as a movement on the pensions reserve. This means there is no effect on the amount to be met from Government grants and local taxpayers.

Ø In accordance with Financial reporting Standard No 17 – Retirement Benefits (FRS 17) the Council is required to disclose certain information concerning assets, liabilities and expenditure related to pension schemes for its employees.

Ø Liabilities are valued on an actuarial basis using the projected unit method which assesses the future liabilities discounted to their present value. The most recent valuation was carried out on 31 March 2004, and has been updated by independent actuaries (Hewitt Bacon & Woodrow Ltd) to the Northumberland Council Pension Scheme to take account of the requirements of FRS 17 in order to assess the liabilities of the Fund as at 31 March 2007.

Ø Costs have been determined on the basis of contribution rates that are set to meet 315% (2005/06 315%) of the liabilities of the Superannuation Fund in accordance with relevant Government regulations. The contribution rates certified for Berwick-Upon-Tweed Borough Council at the 31 March 2004 valuation are as follows:

These figures include the past service element of the contribution rate.

The main financial assumptions used for the purposes of FRS 17 are as follows:

The market value of the assets of the NCC Pension Fund at 31^st March 2007 was £668.74m. Assets are valued at fair value, principally market value for investments. The proportions of total assets held in each asset type by the Fund as a whole at 31st March 2007, 2006 & 2005 are shown below:

The following amounts, needed for reconciliation with the balance sheet, were measured in accordance with the requirements of FRS17:

31 March 2007 31 March 2006 (£m) (£m)

Share of assets in the Fund 14.40 13.29

Estimated funded liabilities 20.46 19.41

Estimated unfunded liabilities 1.12 1.11

Berwick-Upon-Tweed Borough

Council’s Surplus / (Deficit) (7.18) (7.23)

The surplus or deficiency revealed above should be borne in mind when considering the amount of overall reserves held.

The movement in net surplus for the year to 31 March is as follows:-

The actuarial gain/loss can be further analysed as follows:

Ø The percentage of the scheme liabilities is shown above except the line marked with an asterisk which is the percentage of scheme assets. The surplus or deficiency revealed above does not impact directly on the income and expenditure account but will be borne in mind when considering the amount of overall reserves held.

Ø Changes to the local Government Pension scheme permit employees retiring after 6 April 2006 to take an increase in their lump sum payment on retirement in exchange for a reduction in their future pension. On the advice of our actuaries it has been assumed that 50% of members will commute the maximum amount of pension permitted by the Inland Revenue (i.e. so that their total lump sum is 25% of the value of their benefits) and the rest will not commute any pension. This has partially off set the increase in the current service cost figure, as has the moving of the allowance for administration expenses from the current service cost to the expected return on assets in line with the treatment of expenses under FRS17.

Ø The rule of 85 age retirement provisions do not apply to new entrants after 1^st October 2006 but, as the number of new entrants will be relatively small no allowance has been made for this in the FRS17 projections on the grounds of materiality.

Ø The Council has not adopted the changes to the retirement benefits disclosures introduced by the Amendment to FRS17 for this accounting date.

Ø The demographic assumptions have been taken to be the same apart from changes in relation to future life expectancy improvements.

Ø Further information can be found in Northumberland County Council’s Pension Fund Annual Report which is available upon request from: The County Treasurer, Northumberland County Council, County Hall, Morpeth. NE61 2EF.

5. Pooling of Housing Capital Receipts

From 2004/05 all Authorities are required to pool 75% of Council house receipts and 50% of Housing land. In prior years these amounts were set aside for the repayment of loans.

6. Provision for repayment of external loans

Regulations issued under the Local Government Act 2003 require the provision for the repayment of loans to be calculated as the Minimum Revenue Provision (nil for 06/07 - see below), less General Fund depreciation of £626,936 in 2006/07 (£620,781 2005/06). The depreciation figure within the Statement of Movement on General Fund Balances of £641,336 includes garage depreciation of £14,700. Depreciation is charged to the service revenue accounts within the Income and Expenditure Account and reversed out within the Statement of Movement on the General Fund Balance. There is no Minimum Revenue Provision required on Housing as its Capital Financing Requirement is negative.

7. Building Regulation Fees

The Building (Local Authority Charges) Regulations 1998 require the disclosure of information regarding the setting of charges for the administration of the building control function. In accordance with The Building Act 1984 the Authority maintains a Building Regulations Charging Account. This Account is shown in summary within Development Committee.

Regulation 5 (1) & 5 of the Building (Local Authority Charges) Regulations 1998 requires authorities to ensure that the income received from their charges fully recovers the cost of carrying out their building control functions over a rolling three year period. For the period 2004/05 to 2006/07 the Authority achieved a surplus of £65,536 from its chargeable work. This compares with a surplus of £45,020 for the period 2003/04 to 2005/06.

8. Government Grants

Besides receiving the Revenue Support Grant shown in the Income and Expenditure Account, the Authority receives a number of other government grants to support revenue expenditure as follows:

Disabled Facility Grants, National Non Domestic Rates and Housing Benefit Subsidy were awarded by The Department for Communities and Local Government. Rent Allowances, Benefit Administration and Council Tax Benefit were awarded by The Department of Work and Pensions. Rent rebates moved to the General Fund in 2004/05 although the Housing Revenue Account continued to meet a proportion above Government limits.

9. Government Grants Deferred.

The following sets out expenditure funded by grant during 2006/07 and the release of funding to the service revenue accounts over the life of the relevant asset to match charges for depreciation.

10. Movement of Fixed Asset

Berwick-upon-Tweed Borough Council is following CIPFA guidelines on Council House valuations. A revaluation of Council houses has been carried out as at 31^st March 2007.

Council dwellings include 561 garages valued at £735,000. These were depreciated for the first time in 2002/03 and a charge of £14,700 is included above, in respect of 2006/07. (2005/06, £23,304)

Operational & Non-Operational Assets

Operational assets (i.e. Council Dwellings £89,143,045; Land and Buildings and Equipment £12,552,910) and non-operational assets for Housing Land, Buildings and Equipment are split below:

11. Information on Assets

12. Fixed Asset Valuation: Fixed assets have been valued on the basis recommended by the SORP & in accordance with the Statements of Asset Valuation Principles and Guidance Notes issued by the Royal Institute of Chartered Surveyors (RICS) as at 31^st March 2004.

The freehold and leasehold properties which comprise the Authority’s non housing property portfolio were valued by an external independent valuer – DD Penman, MRICS, on behalf of David Adamson Property Consultants and revaluations are shown in the balance sheet for 2003/04. The housing portfolio, excluding garages, was valued by the Valuation Office at 31^st March, 2007. This revaluation provided a comparison of movement in house prices between 1^st April 2006 and 31^st March 2007 based on the Land Registry Archive Property Price up to 31^st December 2006; the current House Price Index customer report for Northumberland; other house price comparison data bases and the Valuation Office Agency’s own Property Market Report and transaction database.

The basis for valuation is set out in the statement of accounting policies shown at note 9.

Financial Reporting Standards requires a revaluation of assets at least every five years which has been adhered too.

The following statement shows the progress of the council’s rolling programme for the revaluation of fixed assets.

The basis used for depreciation is set out in the statement of accounting policies at note 9.

Asset lives are reviewed as part of the valuation of non housing assets. Some estimated assets lives have been shortened with a resulting increase in depreciation charge.

It is not possible to give a historic cost of most assets as they were first brought into the balance sheet in 1991 at valuation following changes in accounting requirements.

13. Movement on Reserves: The Council keeps a number of reserves in the Balance Sheet. Some are required to be held for statutory reasons, some are needed to

comply with proper accounting practice, and others have been set up voluntarily to earmark resources for future spending plans.

a. Fixed Asset Restatement Account

13. Movement on Reserves (Continued): Capital accounting requires the establishment of a Fixed Asset Restatement Account. The balance represents the difference between the valuation of assets under the previous system of capital accounting and the revaluation as at 1^st April 1994.

The account has been written down by the net book value of assets as they are disposed of and debited or credited with the deficits or surpluses arising from the revaluation of assets. The value of Council Houses is included, net of average discount.

The revaluation of Council houses as at 31^st March 2007 resulted in the gross book value of the houses increasing by £6,641,327. This figure is shown above, net of the 2006/07 capital expenditure (£1,125,915) which did not increase the value of the Council’s assets. The depreciation written back relates to the revaluation (£1,073,820) and a prior year adjustment for the garages (£46,608).

b. Capital Financing Account

The Capital Financing Account (CFA) contains the amount of capital expenditure financed from revenue and capital receipts. It also contains the difference between the amounts provided for depreciation and that required to be charged to revenue to repay the principal element of external loans.

13. Movement on Reserves (Continued)

c. Useable Capital Receipts Reserve

The useable Capital Receipts Reserve represents the capital receipts available to finance capital expenditure in future years, after setting aside the statutory amounts for the repayment of external loans. From 2004/05 the set aside amount is transferred to the Department of Communities and Local Government and is shown as part of the Net Operating Expenditure within the Income and Expenditure Account. The set aside amount is then reversed out through the Statement of Movement on the General Fund Balances.

d. Other Reserves – this reserve is made up of the asset maintenance reserve (£215,547) i.e. resources that have been set aside for the maintenance of the Council’s assets and the collection fund residual balance attributable to the Council.

14. Analysis of Debtors

The Maltings received a new loan over 6.5 years, in 2000/01. £55,000 was repaid by 31 March 2007. The remaining loan will be repaid at £10,000 per annum from 2007/08. The Tweedmouth Bowling Club loan will be repaid by 20 instalments of £3,500 which commenced on 1^st October 2002 and will be half yearly thereafter, (except one payment deferred October 2005) under terms of the agreement.

15. Analysis of Creditors & Deferred Income

16. Provisions

The job evaluation scheme was agreed in principle on 30^th August 2006 by full Council. The provision allowed for backdating to 1^st April 2003, however at full Council on 27^th February 2007 it was agreed the scheme would only be backdated to 1^st April 2006. The provision for the period from 1^st April 2003 to 31^st March 2006 has been removed through the Income and Expenditure Account.

17. Analysis of Investments

18. Stocks

This relates to fuel and oils, tourism stock, plastic sacks and wheeled bins.

19. Analysis of Long Term Borrowing

20. Analysis of Debt Maturing

21. Insurances

The council does not administer any form of self-insurance over any of its assets. There is no known area of unfunded risk.

22. Contingent Liabilities

There are none.

23. Post Balance Sheet Events

The Government has announced that, subject to the local government and public involvement in the Health Bill being enacted, the structure of Local Government within Northumberland will change from the current two tier system i.e. County and District Councils to one Council providing the full range of County and District services. It is proposed the change will take effect from 1^st April 2009 with a shadow authority being set up in May 2008.

24. Capital Expenditure

Capital expenditure is defined as expenditure on the acquisition or construction of an asset which has a life span of some years and because the benefits from such expenditure last for many years, it is reasonable to spread the cost and avoid too heavy a charge on the Council Taxpayers at the time the expenditure is incurred.

Capital Allocations

An element of borrowing money to meet the cost of capital schemes is subject to support by the Department of Communities and Local Government which issues expenditure allocations each year under five main service blocks.

The two blocks that affect this Authority are:

Housing

Allocation 2006/07 £100,000

Specified Grants £36,521 (Disabled Facility Grants)

Other Services

SCE Specific £ 0

In addition to Loan Finance, the Authority uses several other sources of finance to fund the Capital Programme, including:

a) Capital Receipts – money from the sale of assets

b) Revenue Contributions – directly financed from revenue thereby saving interest and administration charges (usually on small schemes only)

c) Capital Grants – specific grants to meet a portion of capital expenditure.

25. The surplus on the Collection Fund (£79,917) has been disaggregated with the monies due to the precepting authorities (Northumberland County Council and Northumbria Police) shown in the top half of the balance sheet i.e. under current liabilities and the residual balance attributable to the authority shown in the bottom half of the balance sheet.

General Notes

26. Audit Fees

In 2006/07 the Council incurred the following fees relating to external audit and inspection :

27. Section 137 Expenditure: Section 137 of the Local Government Act 1972, as amended, empowers local authorities to make contributions to certain charitable funds, not-for-profit bodies providing a public service in the United Kingdom and mayoral appeals. The expenditure is limited to £1.90 per head of population. The council was permitted to spend £49,410 under this power in 2006/07 (£49,410 in 2005/06) and its actual expenditure was £46,570 on grants to voluntary bodies working in the local area (£46,600 in 2005/06).

28. The refuse contract was let to an external contractor on 4^th September 2005 and expenditure for 2006/07 is included within Policy Environment Committee.

29. Agency Service – The Council carried out certain work on an agency basis for which it was partly reimbursed. The principal area of work was as agents of Northumberland County Council; works on highways functions amounting to £145,393 were carried out in 2006/07 (2005/06 £219,411).

30. Finance and Operating Leases – The Council uses leased cars, general vehicles, computers and wheeled bins, financed under the terms of an operating lease. The amount paid under these arrangements in 2006/07 was £335,988, (2005/06 £320,019). The Accounting Code of Practice requires charges to be made evenly throughout the period of the lease. The future cash payments required under these leases are:

The Council does not have any finance leases. Included in the cash payments are refuse and recycling vehicles which were sub let to Veolia following the Environmental contract transfer in September 2005.

The £225,969 lease payments required in 2007/08 are due to end as follows:

31. Publicity Expenditure – Set out below under the requirement of section 5(1) of The Local Government Act 1986, is the Council’s spending on publicity:

32. Officers’ Emoluments

The number of employees whose remuneration, excluding pension contributions but including an allowance for the value of leased cars, was £50,000 or more in bands of £10,000 were:

33.