2005-06 statement of accounts 1 - conwy county...

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Statement of Accounts For The

Financial Year 2005/06

K W Finch CPFA IRRV

Corporate Director of Finance and Resources

STATEMENT OF ACCOUNTS 2005/06

TABLE OF CONTENTS

PAGE

EXPLANATORY FOREWORD

1 – 5

STATEMENT OF RESPONSIBILITIES

6 – 7

CERTIFICATE OF CORPORATE DIRECTOR OF FINANCE AND RESOURCES

7

STATEMENT ON INTERNAL CONTROL

9 – 18

STATEMENT OF ACCOUNTING PRINCIPLES AND POLICIES

19 – 24

CONSOLIDATED REVENUE ACCOUNT

25 – 38

HOUSING REVENUE ACCOUNT

39 – 44

CONSOLIDATED BALANCE SHEET

45 – 66

STATEMENT OF TOTAL MOVEMENT IN RESERVES

67 – 70

CASH FLOW STATEMENT

71 – 72

WELSH CHURCH ACT FUND

73 – 75

AUDIT CERTIFICATE

77 – 78

1

EXPLANATORY FOREWORD 1. The Council's Statement of Accounts is intended to provide clear information about

the financial impact of the Council's activities during the period covered, in a format which is easily understood.

The Accounts have been prepared in accordance with the Code of Practice on

Local Authority Accounting 2005 (SORP), which provides guidelines on the minimum levels of information to be provided, and the Best Value Accounting Code of Practice (BVACOP).

2. The Statement of Accounts comprises a series of accounts and statements, each

having a particular purpose, as follows: - (i) Statement of Accounting Principles and Policies This sets out the principles and policies to provide the bases upon which the

Council's Accounts have been prepared. (ii) Consolidated Revenue Account This Account reports the Income and Expenditure of all services of the Council in

the conduct of its day-to-day operation. Also reported are the sources of finance for the net operating expenditure of services.

(iii) Housing Revenue Account This Account reports the Income and Expenditure incurred on the provision of

Council housing. (iv) Consolidated Balance Sheet The Consolidated Balance Sheet shows the financial position of the Council at 31

March 2006. (v) The Statement of Total Movement in Reserves This statement brings together all of the recognised gains and losses of the Council

and identifies those that have and have not been recognised in the Consolidated Revenue Account.

(vi) The Cash Flow Statement This statement summarises the inflows and outflows of cash arising from

transactions with third parties for Revenue and Capital purposes.

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3. Review of the Year - Revenue Expenditure

The actual expenditure and income compared to the original budget for 2005/06 can be summarised as follows: -

Original Budget

£'000

Actual

Outturn

£'000

Variance

£'000 Amount to be met from Government Grants and Local Tax Payers

153,869 154,813 944

Government Grants and Local Tax Received

(152,869) (153,813) (944)

Contribution from Balances

1,000 1,000 0

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The main variances between the original budget and the actual outturn are: -

£'000

Highways Overspend on Home to School Transport and Provision of Bus Supervisors in Secondary School transport services. 267

General Fund Housing Additional expenditure on Homelessness accommodation 158 Corporate Costs & Income Corporate Costs – Prudent contributions to reserves for Revenue Budget 2006/07, retirement, PFI costs and audit fees. Offset by: Corporate Income – Net Treasury Management activities and MRP saving

528

Council Tax – Increased Collection (989) RSG – reduction re 2003/04 Amending Report 45 RSG – reduction re 2005/06 Amending Report 173 Other Directorates General net underspends (182) 0

The Consolidated Revenue Account reflects the actual position and shows that gross revenue expenditure of the Council for 2005/06 was £279.4m. Of this amount £18.5m related to the Housing Revenue Account, with the remaining £260.9m being spent on Council Fund Services.

The net result of the movement during the year is a contribution from Council Fund Balances of £1m, resulting in General Balances at the year end being £3.505m.

4

Pension Liability

The pension liability shown as part of the FRS 17 calculation is a potential net liability. It consists of the assets available to the pension fund to pay for the accrued pensions of all the staff currently employed by Conwy CBC less the accrued pension entitlement of the staff. As it is a net liability it shows that the pensions owed to the staff are greater than the assets. The potential net liability could only become due and payable if all staff were to retire on 31 March 2006.

Capital Expenditure

In 2005/06 the Authority spent £32.593m on capital projects. Of this amount £5m was on the maintenance and improvement of council houses and £3.13m on private sector house improvements and grants.

Other major projects undertaken during 2005/06 were Refurbishment of Office Accommodation, Redevelopment of the North Wales Theatre and Conference Centre, The Redevelopment of Tir Llwyd Industrial Estate, Hiraethog Access and Conservation Projects, Conwy Estuary Strategic Route, The North Wales Regional Pool, The Dingle Slipway in Colwyn Bay, Conwy Safe Routes scheme and Llanrwst Rural Development Centre. Expenditure on schools was £4.60m. Financing for capital expenditure was from borrowing £6.998m, grants and contributions £21.545m, capital receipts £2.214m and reserves £1.836m. The Council’s loan debt at 31 March 2006 was £138.2m, an increase of £3.876m over the year. The increase in external borrowing was used to finance capital expenditure during the year. The Limits to Borrowing Activity in 2005/06, set in accordance with the Prudential Framework for local authority capital investment introduced through the Local Government Act 2003 (the Prudential Code) were as follows:-

£ Authorised Limit for External Debt 169.5m

Operational Boundary for External Debt 159.5m

6

STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS

THE AUTHORITY'S RESPONSIBILITIES The Council is required to: - - Make arrangements for the proper administration of its financial affairs and to

secure that one of its officers has the responsibility for the administration of those affairs. At Conwy County Borough Council, that officer is the Corporate Director of Finance and Resources.

- Manage its affairs to secure economic, efficient, and effective use of resources and

safeguard its assets.

THE DIRECTOR'S RESPONSIBILITIES As Chief Finance Officer, the Director is responsible for the preparation of the Council's Statement of Accounts which, in terms of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in Great Britain ("The Code"), is required to present fairly the financial position of the Council at the accounting date and its income and expenditure for the year ended 31 March 2006. In preparing this statement of accounts, the Director has: - - Selected suitable accounting policies and applied them consistently; - Made judgements and estimates that were reasonable and prudent; - Complied with the Code of Practice; - Kept proper accounting records which are up-to-date;

- Taken reasonable steps for the prevention and detection of fraud and other

irregularities.

AUTHORITY'S CERTIFICATE

The Statement of Accounts of Conwy County Borough Council at 31 March 2006 was approved by the Audit Committee on 30 October 2006. SIGNED: ...................................................................... R. Meirion Hughes Chairman of Audit Committee DATED: 30 October 2006

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DIRECTOR'S CERTIFICATE

I certify that the Statement of Accounts presents fairly the financial position of Conwy County Borough Council at 31 March 2006 and its income and expenditure for the year then ended. SIGNED: ...................................................................... K W Finch CPFA IRRV Corporate Director of Finance and Resources DATED: 30 October 2006

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STATEMENT ON INTERNAL CONTROL 2005/06

1. SCOPE OF RESPONSIBILITY

Conwy County Borough Council (‘’the Authority’’) is responsible for ensuring that its business is conducted in accordance with the law and proper standards, that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. The Wales Programme for Improvement (WPI) circular 18/2002, was introduced in Wales in April 2002. It required all Local Authorities to modernise their services, to fulfill the duties placed on them under the Local Government Act 1999, and to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. In discharging this overall responsibility, the Authority is also responsible for ensuring that there is a sound system of internal control which facilitates the effective exercise of its functions and which includes arrangements for the management of risk.

2. THE PURPOSE OF THE SYSTEM OF INTERNAL CONTROL

The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the Authority’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. This Statement reflects the position for the Authority for the year ended 31 March 2006.

3. THE INTERNAL CONTROL ENVIRONMENT

The Authority has a sound control environment of which the key elements are shown below. A file of supporting evidence has been collated and reviewed by the Statement on Internal Control (SIC) Group, this group was established in November 2005 to develop the SIC for the Authority.

3.1 The Key Elements of the Control Environment.

• The Council has adopted a Constitution that sets out the Council's Policy Framework and how the Authority operates, how decisions are made, and the procedures which are followed to ensure that these are efficient, transparent and accountable to local people.

• The Constitution encompasses Standing Orders, Financial Regulations and

the Scheme of Delegated Powers, together with Codes of Conduct for both Members and employees. The Constitution is regularly reviewed and updated, and is available in hard copy form, and is on the Council Website and Intranet.

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• The key elements of a Local Code of Corporate Governance, reflecting the framework produced by CIPFA/SOLACE are in place. The Council’s Standards Committee is active in its role of promoting and ensuring the highest standards of probity by Members. The Authority has an Anti-Fraud and Corruption Strategy which identifies the responsibilities of both Members and Staff in promoting a culture of honesty and integrity. Also identified are the measures for prevention, detection, and investigation of allegations of fraud and corruption, information sharing with other agencies, and the use of Disciplinary agencies as and when appropriate.

• Well-established procedures are in place for setting and monitoring the

Authority's objectives, and the Authority has an appropriate policy and decision-making process. Priorities and longer-term aims are thoroughly re-examined each year by Cabinet and senior officers at a strategic planning meeting set up to review the actions which support the delivery of the Corporate Plan. In preparation for identifying the 2006/07 key strategic deliverables, the process also included representatives from key partner agencies.

• The Community Strategy has identified five themes that are supported by the

key strategic deliverables identified within the Corporate Plan. The Authority operates a priority-led budgeting process that aims to direct revenue and capital resources towards strategic priorities. A Strategic Capital Group (formerly the Capital Core Group) oversees the development of this process in respect of capital resources.

• Statutory obligations, priorities, and service priorities are encapsulated into the

rolling three-year Service Business Plans and are supported by the Operational Plans produced on an annual basis by each service.

• The Authority’s themes, priorities and key strategic deliverables are

communicated throughout the community and the authority via the web site, press releases, team briefs, and the publication of the Annual Improvement Plan.

• Progress towards the achievement of the objectives is monitored at service

performance reviews operating within Directorates.

3.2 The Facilitation of Policy and Decision Making.

• The Council met approximately every 12 weeks during 2005/06, and the Cabinet met every 3 weeks to fulfill its policy and decision making role. In addition the Authority has three regulatory committees. The Planning Committee met monthly, the Audit Committee met quarterly, and Licensing and Regulation met every six weeks. A Schools Forum operates in accordance with Guidance from WAG, this also met during 2005/06.

• The Cabinet carries out functions that are not the responsibility of any other part of the Authority. Members of the Cabinet are assigned specific portfolio areas that assists the Cabinet in monitoring the activities of the authority.

• As set out above, the formal decision making process is underpinned by a

Scheme of Delegated Powers and Codes of Conduct. • The Authority also operates five Scrutiny Committees that mirror the themes of

the Community Strategy, and a Principal Scrutiny Committee. They are charged with policy development, and review and the scrutiny of decisions taken by the Cabinet. The Committees each have a structured work programme.

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• To facilitate corporate governance, the Authority has a Standards Committee

and an Audit Committee, the former of which includes a majority of members who are independent of the Authority.

• Meetings are generally open to the public with items exceptionally dealt with in

private as permitted or required by the law.

• Agendas, reports, minutes and the Forward Plans are publicly available on the web-site.

3.3 Ensuring Compliance with Established Policies, Procedures, Laws and Regulations.

• The Authority’s Head of Legal Services is designated as "Monitoring Officer". It is the function of the Monitoring Officer to ensure compliance with established policies, procedures, laws and regulations.

• The financial management of the Authority is conducted in accordance with the

Financial Regulations set out in the Constitution • The Director of Corporate Finance and Resources, as the Council's ‘’Chief

Finance Officer’’, has responsibility for the legality of the Council's financial transactions

• The Authority has an Internal Audit function that operates to the standards set

out in the CIPFA guidance for Internal Audit in Local Government. The Head of Audit and Procurement Services reports impartially and in his own name on the adequacy and effectiveness of the internal control environment. The scope of Internal Audit covers all business activities of the authority, and Internal Audit has unrestricted access to all internal personnel, records, and assets, in order to conduct its business.

• The Authority has a well-established Audit Committee which monitors and

evaluates internal control arrangements, and members of the committee are provided with copies of all external audit reports. Copies of all internal audit reports are provided to Members of the Committee (and to other senior Members and officers) and the Committee has the opportunity to question the Head of Audit and Procurement Services and other officers on any matters raised in reports and service responses.

• The Authority is subject to external audit by the Wales Audit Office (WAO) and

is subject to further external inspection and review by a number of agencies. The Authority has an active and constructive approach to the reports and recommendations made by external agencies with regular monthly meetings being held between the WAO Project Manager and the senior officers of the Council. The WAO Project Manager has an open invitation to attend the Audit Committee.

• The Authority has various corporate strategies and policies in place to support

compliance with our agreed procedures. These strategies include the Corporate People Strategy, Procurement, Health and Safety, and Complaints.

• The Authority complies with the requirements of equalities law in all its

business. • Compliance with established policies, procedures, laws and regulations is

carefully monitored. Every report produced has a section that considers a range of implications, including financial, human rights, environmental, community safety, and personnel.

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3.4 Identifying, Assessing, and Managing the Risks to the Authority’s Objectives.

• The Authority approved and adopted a detailed Risk Management Strategy and Policy in October 2005, which incorporated the framework for managing risks throughout the Council, and the roles and responsibilities for risk management.

• The Cabinet and Scrutiny Committees are mindful that risk is considered as a

key element of their decision-making. The Chief Executive is the Risk Management Champion within the Authority, and is supported by a Risk Management Group of senior officers who have driven the process to date.

• Each Head of Service is the responsible officer for risk management within

respective services.

• The Authority has been supported by Zurich Municipal (ZM) throughout 2005/06. Initially ZM facilitated risk management workshops to help formulate the Strategy, and then worked with the Corporate Management Team (CMT) to set up the Corporate Risk register. All senior officers within the Council have attended a series of externally facilitated training sessions to equip officers with the necessary background relating to risk management.

• The Authority has established a Corporate Risk Register through CMT.

Corporate risks are considered during the Business Planning Framework process that supports the authority’s resource allocation process.

• Service risk registers were compiled and reviewed during 2005/06 to identify

and consider the key risks affecting the delivery of services. Through the Joint Risk Assessment process, the WAO coordinated their response to the self-assessment of risks undertaken by our services. The agreed conclusions form the Summary Risk Assessment Template.

• The Authority does not have a comprehensive Business Continuity Plan in

place across the whole of the authority. It does plan for major emergencies such as flooding.

3.5 Ensuring Best Value and Continuous Improvement.

• This is achieved in a number of ways including reviews and inspections by the external auditor, external agencies, Internal Audit, Scrutiny Committees and internal project boards.

• The Authority constantly seeks ways of ensuring the economical, effective and

efficient use of resources and for ensuring continuous improvement in the way its functions are exercised

• All reports and developments with financial consequences are assessed by the

Corporate Director of Finance and Resources.

• The Authority is actively involved in joint working with partners such as the Police, the Local Health Board and Probation.

• The Authority also contributes to a number of benchmarking clubs, across a

range of services, that allow comparison of performance, costs and best practice.

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• The Authority has taken a pro-active approach to the e-government agenda. The authority is also investing in state-of-the-art business systems such as Human Relations/Payroll, and a Social Care System. The Authority is using the e-government agenda to drive forward improvements in transactional efficiencies.

• The Authority is committed to modernising its procurement processes. It has

undergone a procurement health-check and is developing links with both the Welsh Assembly Government, through its Value Wales Team, and neighbouring Public Sector bodies in order to secure procurement efficiencies through collaboration.

• The Authority is committed to ensuring services are delivered by individuals

with the capacity and skills to enable continuous improvement. Conwy was recently awarded corporate Investors in People, and is committed to developing and training its workforce.

• The Authority has responded positively to the 'Gershon' agenda and has

prepared an efficiency statement for 2005/06 demonstrating that the Authority has identified efficiency savings which includes both cash and non cash releasing savings.

• A corporate Asset Management Plan (AMP) is in the process of being

prepared. Service based AMPs are at various stages of development, and will form the basis of the corporate AMP for the Authority.

3.6 The Financial Management of the Authority and the Reporting of Financial

Management.

• The Authority has designated the Corporate Director of Finance and Resources as Chief Finance Officer in accordance with Section 151 of the Local Government Act 1972.

• The financial management of the Authority is conducted in accordance with the

Financial Regulations set out in the Constitution.

• Sound procedures are in place covering the financial management of the Authority and the reporting of financial management information. This is now incorporated into the Business Planning Framework. The Authority has a set of Guiding Financial Principles to support its medium term Financial Strategy, and is developing budget forecasts beyond the forthcoming financial year.

• The Authority operates a scheme of delegated budgets supported by central

and devolved finance units. These are underpinned by professional protocols setting out the responsibilities and lines of reporting for devolved finance staff.

• Regular Council Fund revenue, and Housing Revenue Account (HRA) budget

monitoring, indicating full year forecasts, is undertaken and reported to Cabinet on a monthly basis. These reports identify reasons for variances and set out any corrective action that is proposed. Detailed monitoring reports are also prepared monthly for service managers and Heads of Service.

• A number Project Boards have been established to monitor the progress and

estimated spend on key capital projects.

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• Treasury Management is conducted in accordance with a Treasury

Management Annual Strategy and Plan, and borrowing is in accordance with the Prudential Code. The Authority has responded pro-actively to the Prudential Code, and prudential indicators are reported to Members. The authority has developed a policy setting out the conditions under which prudential borrowing can be utilised.

3.7 The Performance Management of the Authority and the Reporting of

Performance Management.

• The Authority has an established corporate Performance and Policy Unit directed by the Chief Executive and Corporate Directors that supports the reporting of performance consistently across all services.

• Our Annual Improvement Plan is a strategic document that outlines how we

will secure continuous improvement in the way in which we exercise our functions.

• The Principal Scrutiny Committee monitors the performance of services

through reviewing performance measurement data, including all performance indicators, and Policy Agreements.

• Statutory and local performance targets and measures are reported to Scrutiny

Committees on a quarterly basis.

• Service Performance Reviews are held at least three times a year within the larger service directorates.

• The Authority has established an internal Performance and Policy Network to

enable business and performance officers within different services to share notable practice.

• Biannual reviews of our progress against targeted outcomes are reported to

CMT, Cabinet and Scrutiny Committees.

• Biannual reviews of our progress and improvements made in responding to external regulator recommendations are reported to CMT, Cabinet, Scrutiny, and the Audit Committee.

4. REVIEW OF EFFECTIVENESS

Conwy CBC undertook a comprehensive and inclusive Corporate Assessment and Improvement (CAI) review during 2005/06. The review followed a disappointing report from the WAO that recommended a Section 10 Corporate Governance Inspection. The review started in April 2005 and the final report was presented to and accepted by the Authority in November 2005.

The internal assessment focused on the governance aspects covered by an external assessment, and robustly challenged the key governance areas for the Authority. To a large extent, the outcome of the CAI project has informed the SIC with regard to the effectiveness of the organisation’s internal control environment.

In addition, this review is informed by the work of Internal Audit and the officers within the Authority who have responsibility for the development and maintenance of the internal control environment, and also by comments made by our external auditors and other review agencies and inspectorates.

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A large number of CAI projects have been commissioned within a project management structure to address a number of key actions falling out of the CAI report. The themes being reviewed are aimed at delivering short, medium and long term benefits to the Authority in all aspects of corporate governance and address many of the internal control aspects contained within the SIC.

• The Authority’s Constitution has been in place since 2000, and has been amended from time to time since then. Whilst the Constitution is generally fit for purpose it is prudent to undertake a thorough review to check that it continues to meet the Authority’s changing needs. The review needs to include the schemes of delegation to ensure that decisions are being made at appropriate levels within the Authority. It has also been recognised that the Contract Standing Orders and Financial Regulations within the Constitution should be amended to reflect changes in the Council’s working practices and the external environment. There is confusion within the Authority’s arrangements as to which of its Committees, the Cabinet or the Audit Committee, is the committee charged with governance, with the consequence that there is a lack of clarity as to which committee has lead responsibility for such matters and which committee accepts the WAO annual letter ‘To Those Charged With Governance’.

• Whilst it is evident that key elements of a Local Code of Corporate Governance

(in accordance with the CIPFA/SOLACE framework) are in place. The Authority has not adopted and applied that optional framework. The adoption of the framework to support the production of the SIC, together with appropriate awareness raising and the seeking of formal assurances from key officers would assist in embedding appropriate governance arrangements within the Authority. In this regard, the Authority is also mindful of the need to put processes in place to produce the SIC in future years and consideration will need to be given to the close linking of its Corporate Health Performance Review and the need for the Chief Executive and Leader to sign a SIC as part of the Annual Accounts.

• There is a well-established Scrutiny function that has been revised and updated in the light of experience. Scrutiny Committees each have forward work programmes to focus their work throughout the year. The Authority also has a Principal Scrutiny Committee that oversees and coordinates the work of the other Scrutiny Committees. Whilst there is evidence that the Scrutiny function has improved in some respects in recent years, there remains confusion amongst officers and Members of the role of scrutiny and in particular its place in policy development. There is also concern that the Scrutiny call in process is not working appropriately and in the best interests of the Authority.

• The Monitoring Officer carries out a continuous review of all legal and ethical

matters, receiving copies of all agendas, minutes, reports and associated papers, commenting when necessary, or taking appropriate action, should it be required.

• The Standards Committee is responsible for standards and probity, and receives regular reports from the Monitoring Officer.

• The Audit Committee carries out an overview of the activities of the Council's internal and external audit functions. Members are provided with copies of all reports produced by Internal Audit and by the Wales Audit Office. They approve the annual plans for each, and receive regular progress reports throughout the year. The Head of Audit and Procurement submits to them an Internal Audit Annual Statement of Assurance, and the external auditor (Wales Audit Office) submits an Opinion Audit and Report to those Charged with Governance, and a Relationship Manager’s Annual Letter.

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• The Internal Audit service is a directly employed in-house service, providing a continuous review in accordance with the Authority obligations under the Code of Practice for Internal Audit in Local Government in the UK. Revised Accounts and Audit regulations came into force from the 1 April 2005 in respect of all Welsh Local Authorities. The Regulations require each authority to conduct a review at least once a year of the effectiveness of its system of internal control and to include a statement on internal control prepared in accordance with proper practice in its annual accounts.

• The 2005/06 Statement of Assurance was received by the Audit Committee in May 2006, this covered assurances on Internal Control, Corporate Governance, and Risk Management. The audit opinion concluded that ‘Conwy has adequate and effective processes’ to manage Internal Control and Corporate Governance. In the case of Risk Management however the processes were not seen as adequate to manage achievement of the authority’s objectives for the 12-month period to 31 March 2006.

• The Council's external auditors (the Wales Audit Office) review the activities of the Council and approve the annual accounts. Conclusions and significant issues arising are reported in their key reports identified above.

• Risk Management within the Authority has been developed significantly during 2005/06. The Risk Management Strategy was not in operation throughout 2005/06, but its approval in October 2005 consolidated formally the processes that were previously carried out inconsistently within the Authority. A Corporate Risk Register has been developed, and it is anticipated that it will be accepted by Members by July 2006.

• The Authority has a recent history of managing its spending plans within the approved budget, the latest draft Relationship Managers Annual Letter (December 2005) produced through the WAO considers the overall control environment to be generally sound, with robust systems of internal financial control contained within the Constitution.

• The Authority has adopted a Business Planning Framework and carries out bi-annual monitoring and review of progress against agreed outcomes as detailed within the services’ Annual Operational Plans. Monitoring of our Annual Improvement Plan is also conducted at midyear and reported to CMT, Cabinet, and Principal Scrutiny. Strategic Planning workshops are held with the Cabinet and senior officers to identify and agree Key Strategic Deliverables as identified within our Corporate Plan. Quarterly monitoring enables us to review our progress against targets set within statutory and local performance measures. We report progress and planned improvement activity in our annual Improvement Plan.

• Performance Management is carried out within the Authority, and has developed during 2005/06. There is an inconsistency of approach within the Authority and a significant amount of work has been undertaken to develop a corporate approach for 2006/07 that sees performance management being applied within a consistent framework to the themes of the Community Strategy.

• An Elected Members Group has been meeting regularly during 2005/06 to review the implementation of the Asset Management Strategy 2004 to 2009. The challenging deadlines set by the WAG have forced the Authority to focus on progressing actions in pursuance of the Land and Buildings Management Plan. An AMP has been prepared for the Housing service, and this will be approved in July 2006 when the Authority has developed a strategy to address the challenges of the Welsh Housing Quality Standards.

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5. SIGNIFICANT INTERNAL CONTROL ISSUES

The review of effectiveness set out in section 4 above demonstrates that the control environment described in section 3 is effective. Further evidence to support this conclusion comes from:

• The Internal Audit Annual Statement of Assurance for 2005/06, this stated that the Authority ‘has satisfactory internal control and corporate governance processes to manage the achievement of the organisations objectives’.

• The latest draft WAO report, the Relationship Manager’s Annual Letter to the Council, identifies that ‘overall the framework in place for maintaining standards of financial conduct and for the prevention and detection of fraud and corruption is generally sound’ in addition the Council ‘overall has a well established framework for dealing with any legality issues that may arise through the course of its business’.

• The latest Opinion Audit and Report to Those Charged with Governance (January 2006) reports that ‘overall the Council’s core financial processes provide a sound basis for the preparation of financial statements, and that budgetary and other high level controls which have been established should detect any material errors or misstatements which may arise’.

No significant internal control issues have been identified, and based on the various assurances given, satisfactory corporate governance arrangements are deemed to be in place and working effectively.

However, it is recognised that improvements can be made to the internal control environment within Conwy, and weaknesses in the Risk Management processes have been identified within the SIC. The projects referred to falling out of the CAI review will improve our governance arrangements, and provide the capacity and focus to develop the priority areas identified below.

In order to ensure continuous improvement of the control environment the following actions are deemed to be the authority's immediate priorities:

• Take the development of the Risk Management function to the next stage, including the approval and further review of the Corporate Risk Register, and embedding a consistently applied risk management culture within Conwy supported by appropriate training.

• Complete Business Continuity Plans and put in place arrangements to allow the authority to respond pro actively to the Civil Contingencies Act.

• Review and improve the Constitution, specifically reviewing the Scheme of Delegation, Financial Regulations, Contract Standing Orders, and the operation of the Scrutiny function to ensure they become more service enabling.

• Introduce a Performance Management Framework around the themes of the Community Strategy to ensure that consistent and more performance management operates throughout the Authority.

• Focus the leadership of the Council on strategic issues facing the Council by aligning the agendas of all key decision-making meetings conducted within the Council.

• Develop a more inclusive and enabling process to ensure the SIC fits in to every day governance related issues.

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• Develop a Financial Strategy that looks ahead and identifies financial issues beyond the forthcoming financial year.

• To continue with the development of the Asset Management Plan for the Authority, with particular emphasis on the Highways Asset Management Plan.

Detailed action plans have been prepared to support each of these issues, and these feature within the project management approach being applied to the CAI projects. Progress will be both internally and externally monitored during 2006/07.

The SIC itself, and progress on the actions set out above, will also be reviewed and monitored by those charged with governance within Conwy. The 2005/06 SIC will be presented to the Audit Committee, and the review of the Constitution will determine which Committee is to be charged with governance in the future.

Signed Chief Executive Date 31 July 2006 Council Leader Date 31 July 2006

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STATEMENT OF ACCOUNTING PRINCIPLES AND POLICIES

1. General

The Accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in Great Britain 2005, issued by the Chartered Institute of Public Finance and Accountancy (CIPFA), and the guidance notes issued by CIPFA relating to the application of Accounting Standards (SSAPs and FRSs). The Consolidated Revenue Account has been prepared in accordance with the Best Value Accounting Code of Practice (BVACOP) issued by CIPFA, incorporating the concept of reporting total cost services.

2. Fixed Assets The Council’s Fixed Assets have been valued on bases appropriate to their classification and in accordance with Statement of Asset Valuation Principles and Guidance Notes issued by the Royal Institution of Chartered Surveyors. Operational assets are included at the lower of Net Current Replacement Cost and Net Realisable Value in Existing Use. Vehicles and Equipment are shown at depreciated historical cost as a proxy for current cost. Infrastructure and community assets are shown at depreciated historical costs. Non-operational land and buildings and other non-operational assets are included at the lower of net current replacement cost and realisable value. Assets in the course of construction are included at historical cost until such time as they are completed when they are valued in accordance with the accounting policies and transferred to the appropriate category of assets. Because of its importance to the accounts, all of the Council’s Housing Stock has been valued. This valuation is based on Existing Use Value for Social Housing. In the absence of guidance from the Welsh Assembly, the HRA asset valuation was based on the methodology issued by ODPM. The discount factor used was 47%. The percentage discount reflects the ratio of Local Authority rents received against those in the open market and the resultant difference in yields that the market would apply in each sector. A programme of Asset Valuation is planned to ensure that all fixed assets are revalued at least every five years, and assets were revalued during the latter part of the financial year 2004/05 by the Council’s Property Services Department, with an effective date of Valuation of 31 March 2005. A programme is in place to review annually impairment of the value of assets held. Assets, which have been acquired under Operating Lease arrangements, are not included in the Balance Sheet (as the ownership is not vested in the Council) but are disclosed in the Notes. Annual rentals for leases are charged to service revenue accounts.

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3. Capital Receipts

Usable Capital Receipts are held in the Capital Receipts Unapplied account until used to finance capital expenditure. In 2004/05 the set aside of 75% of Housing Right to Buy sales to redeem debt became at the discretion of the Local Authority. Conwy County Borough Council has elected not to set aside Housing Right to Buy Capital Receipts.

4. Charges to Revenue for Fixed Assets

In accordance with guidance given by CIPFA, the Council operates an Asset Register and charges services for the use of the assets contained therein. The capital charge comprises two elements, one being depreciation which is detailed below, the other being a notional interest charge which uses rates specified by Central Government each year for all Local Authorities. For 2005/06 the rate was 3.5% for operational assets, non-operational assets, vehicles, plant & equipment, and 4.95% for infrastructure & community assets. For the purposes of notional interest, Work in Progress has not received a charge. The capital charges made to services are credited to the Asset Management Revenue Account which is then charged with the true external interest payable and depreciation with any resultant balance being returned to the Housing Revenue Account and Consolidated Revenue Account. The difference between depreciation recognised in the Asset Management Revenue Account and the provision for repayment of debt required by statute is subsequently appropriated to the Housing Revenue Account and Consolidated Revenue Account from the Capital Financing Account. The surplus or deficit on the Housing Revenue Account and Consolidated Revenue Account therefore recognises the charges required by statute rather than the capital charges included in service costs.

5. Depreciation

Assets other than Land are depreciated over their useful lives. Depreciation is calculated on a “Straight-line” basis using the following estimated lives. Years Council Dwellings 29 Buildings 1 – 95 Vehicles, Plant, Furniture and Equipment 1 – 10 Infrastructure Assets 1 – 39

6. Deferred Charges Deferred Charges are payments of a Capital nature for which no fixed asset is created. All deferred charges have been charged to revenue in one year, the net revenue expenditure of the Authority has been offset by grants and contributions crediting revenue, with the net amount being offset by a contribution via the Appropriations Section of the Consolidated Revenue Account.

21

7. Intangible Assets

Intangible Assets are payments of a Capital nature which do not result in a tangible asset. Examples are Software Licences, Trademarks and Patents. The Council’s Intangible Assets for the financial year 2005/06 included expenditure on an e-mail system and an integrated management system. Intangible assets will be charged to revenue over the economic life of the asset, usually three years.

8. Basis for Provision for the Redemption of Debt

The Council maintains a debt portfolio containing fixed and variable rate loans covering a variety of periods from a mixture of financial institutions as analysed in the notes to the Consolidated Balance Sheet. In accordance with the requirements of the Local Authorities (Capital Finance and Accounting)(Wales) Regulations 2003, the Authority is required to set aside a Minimum Revenue Provision (MRP) for the repayment of debt, an analysis of the amounts concerned is shown in the notes to the Consolidated Revenue Account. The MRP is set off against depreciation with the balance reflecting a transfer to the Consolidated Revenue Account, MRP adjustment account, from the Capital Financing Account.

9. Reserves and Provisions The Council maintains reserves and provisions for future expenses, which are likely or certain to be incurred. The purpose of these funds is indicated in their titles and is described in greater detail in the Notes to the Consolidated Balance Sheet.

10. Stocks and Work-in-Progress Stocks and Work-in-Progress included in the Balance Sheet are valued at the lower of historical cost or net realisable value, in accordance with the provisions of the Code and SSAP 9.

11. Debtors and Creditors

The Accounts of the Council are maintained on an accruals basis in accordance with the Code and SSAP 2; that is all sums due to or from the Council during the year are included whether or not the payment or receipt has been made in the year.

12. Pension Costs FRS 17 prescribes the disclosure of long-term commitments entered into relating to pension costs. These accounting policies represent a change to those applied prior to 2003/04. Previous policy was to recognise liabilities in relation to retirement benefits only when employer’s contributions became payable to the pension fund or payments fell due to the pensioners for which we were directly responsible. The new policies better reflect our commitment in the long-term to increase contributions to make up any shortfall in attributable net assets in the pension fund.

22

The change has had the following effects on the results of the prior and current periods:

• the overall amount to be met by Government grants and local taxation has remained unchanged, but the costs disclosed for individual services are 1.58% lower after the replacement of employer’s contributions by current service costs, and Net Operating Expenditure is 0.21% lower than it would otherwise have been

• the requirement to recognise the net pensions liability in the balance

sheet has reduced the reported net worth of the authority by 21.12%.

• For the 2005/06 Statement of Accounts a rate based on the current rate of return on a high quality corporate bond of equivalent currency and term to schemes liabilities has been used.

• No account has been taken of the effect of Members electing to

exchange part of the pension to additional tax free cash at retirement as permitted for April 2006, as the actuaries consider that there is insufficiently reliable evidence to assume a level of take up of the change in the scheme.

13. Allocation of Central Administrative Charges/Support Services

The cost of the major Central Support Services i.e. Finance, Information Technology, Legal Services, Personnel and Property Services, have been fully allocated to Service Department Accounts and to the Accounts relating to the Corporate and Democratic Core, in accordance with the Best Value Accounting Code of Practice. The bases of distribution of these costs vary according to the nature of the charge being made: -

Support Services Basis of Recharge

Finance - Accountancy Time

- Payroll Payslips produced

- Creditor Payments Number of invoices paid

- Audit Audit Days

- Debtors Number of invoices raised

- Cashiers Number of transactions receipted

- Administration Time

- Management Time

Legal Time

Personnel Time and staff employed

Information Technology Allocation, Time and equipment in use

Property Services Fee basis (Capital Schemes) and Floor Area

23

14. Investment The day to day Treasury Management operations involve the short-term investment of any surplus funds which the Council may hold on any particular day. These funds are invested for periods ranging from overnight up to 364 days. Longer term investments (greater than one year from inception to repayment) are used only when the Council’s liquidity requirements are safeguarded and when the opportunity arises to lock in to a good value investment with a secure return. Investments are shown in the Consolidated Balance Sheet at cost. Further details are given in Note 4 to the Balance Sheet.

15. Internal Interest

Interest earned on the short-term investment of surplus funds as described above, has been credited to the Housing Revenue Account, Delegated School Balances, PFI Reserve and other minor funds, based on the average balance throughout the year. The remaining interest is credited to the Council Fund.

16. Value Added Tax

With the exception of VAT incurred for certain vehicle acquisitions and hospitality, the Council is able to reclaim VAT incurred. The Accounts have, therefore, been prepared exclusive of this tax except where it is irrecoverable.

17. Government Grants

Revenue Grants are credited to income in the Consolidated Revenue Account to match relevant expenditure. Government Grants and Contributions relating to fixed assets are credited to a Government Grants Deferred Account, and released to the Asset Management Revenue Account in line with depreciation charged.

18. Comparative Figures Comparative figures are shown where appropriate in financial statements, in accordance with the Code.

19. Subsidiary Undertakings

The Authority has 100% interest in Conwy Enterprise Agency, a subsidiary company, formerly Coastal Enterprise Agency. The Policy is not to consolidate the accounts of the subsidiary company on the grounds that it ceased to be an entity on 30 June 2006. Further details of the assets and liabilities of this company are given in the Notes to the Consolidated Balance Sheet.

20. Capital Expenditure Relating to the HRA

As is required by law, revenue contribution to capital expenditure relating to the Housing Revenue Account has been debited to the Housing Revenue Account.

25

THE CONSOLIDATED REVENUE ACCOUNT

Note

Gross

Expenditure2005/06

£'000

Gross

Income 2005/06

£'000

Net

Expenditure 2005/06

£'000

Net

Expenditure2004/05

£'000

Central Services to the Public 11,277 13,728 (2,451) 403Cultural, Environmental and Planning Services 36,395 10,768 25,627 23,913Education Services 94,072 24,443 69,629 66,042Highways, Roads and Transport Services 25,460 14,922 10,538 10,181Housing Services 3 30,059 28,409 1,650 2,901Social Services 57,234 19,777 37,457 33,119Corporate and Democratic Core 5,597 550 5,047 4,815Non Distributed Costs 808 1,289 (481) 241Housing Revenue Account 18,529 9,994 8,535 630Net Cost of Services 279,431 123,880 155,551 142,245 Precepts and Levies 6 6,106 0 6,106 7,470Net Deficit on Trading Undertakings 4 5,937 4,167 1,770 1,061Asset Management Revenue Account (AMRA) – GF 7 0 4,491 (4,491) (1,682)

Asset Management Revenue Account (AMRA) – HRA 7 0 4,145 (4,145) 237

Interest and Investment Income - GF 0 1,857 (1,857) (2,065)Interest and Investment Income - HRA 0 73 (73) (74)Pension Interest Costs 10 13,451 0 13,451 10,464Return on Pension Assets 10 0 11,286 (11,286) (9,790)Losses/(Gains) on the Repurchase or Early Settlement of Borrowing - GF 33 0 33 8

Losses/(Gains) on the Repurchase or Early Settlement of Borrowing - HRA 83 0 83 68

Net Operating Expenditure 305,041 149,899 155,142 147,942 HRA Contribution to Capital Expenditure 695 564Contribution to Earmarked Reserves (excluding Schools) 9,507 7,488

Contribution from Earmarked Reserves (excluding Schools) (4,407) (4,189)

Appropriations from Capital Financing Account re Government Grants credited to AMRA 2,509 2,119

MRP Adjustment Account - GF 9 (4,086) (3,232)MRP Adjustment Account - HRA 9 (5,166) (1,500)Deferred Charges Account (356) (1,587)Movement on Pension Reserve 10 (10,858) (8,652)Movement on Pension Reserve – HRA Adjustment 39 58

HRA Contribution to Pension Liability 10 (39) (58)Transfer of Pension Cash Payment 10 11,188 10,211Amount to be met from Government Grants and Local Taxation 154,168 149,164

Revenue Support Grant (98,197) (96,739)Non Domestic Rates Redistribution 14 (23,342) (23,416)Council Tax 13 (32,274) (28,473)Net in year Council Deficit 355 536

26

2005/06

£’000

2004/05

£’000

Net in year Council Deficit/(Surplus) 355 536 Balance brought forward – Council Fund – Schools – HRA

(4,505) (4,328) (1,422) (10,255)

(6,304) (3,082) (1,405) (10,791)

Deficit/(Surplus) – Council Fund – Schools – HRA

1,000 (613)

(32) 355

1,799 (1,246)

(17) 536Balance carried forward – Council Fund – Schools – HRA

(3,505) (4,941) (1,454) (9,900)

(4,505) (4,328) (1,422) (10,255)

27

NOTES TO THE CONSOLIDATED REVENUE ACCOUNT

1. Publicity Expenditure

Section 5 of the Local Government Act 1986 requires the Council to disclose the expenditure on publicity and advertising directed at either the public at large or at particular sections of the public. The Consolidated Revenue Account includes the following amounts relating to: -

2. Section 137 Local Government Act 1972 (As amended by Section 33 Local

Government and Housing Act 1989)

This enables a Local Authority to spend up to a product of £5.30 per head of relevant population (111,775 for 2005/06) on Charitable Bodies for the benefit of people in their area on activities or projects where statutory powers are not available. The Section 137 limit was £592,408, whilst actual expenditure on Charitable Bodies during the year was calculated to be £346,761.

3. Rent Rebates Expenditure

With effect from 1 April 2004 expenditure relating to the cost of rebates granted to Council tenants was transferred from the Housing Revenue Account to the Council Fund.

2005/06

£’000

2004/05

£’000

Recruitment 398 432Tourism and Leisure 232 198Service Publicity 61 56Other Advertising 274 262Total 965 948

28

4. Trading Operations The Council operated four major trading operations, details are shown below:-

2005/06

£'000

2004/05

£'000

The Council owns and operates the Great Orme Tramway generating income from ticket sales. The objective is to maximise the operating surplus to provide an ongoing maintenance programme.

Turnover Expenditure Deficit/(Surplus) Deficit/(Surplus) (after FRS17 adjustment)

(581)

547

(34)

(31)

(521)

565

44

42

The Council owns and operates three major theatre/conference centre venues, generating income from lettings and ticket sales. The trading objective is to break even on the costs of performances and conferences and to make a contribution towards the maintenance of the fabric of the building. The summary below shows all associated expenditure and income. North Wales Theatre


(2,833)

4,049

1,216

1,204

(2,969)

3,560

591

580

Theatr Colwyn


(181)

306

125

123

(149)

296

147

144

North Wales Conference Centre


(573)

1,054

481

474

(569)

871

302

295

TOTAL

Deficit/(Surplus) Deficit/(Surplus) (after FRS17 adjustment)

1,788

1,770

1,084

1,061

29

5. Building Control Trading Account

The statement below shows the total cost of operating the Building Control Unit divided between the chargeable (C) and non-chargeable (NC) activities.

Key: C – Chargeable, NC – Non-Chargeable

2005/06 2004/05

Building Regulations

Charging Account

C

£'000

NC

£'000

TOTAL

£'000

C

£'000

NC

£'000

TOTAL

£'000

Expenditure Employee Expenses 212 52 264 179 50 229Transport 20 5 25 15 5 20Supplies and Services 10 3 13 38 7 45Central and Support Service Costs 69 26 95 62 28 90

Contribution re Shared Service Costs 0 0 0 1 0 1

Total Expenditure 311 86 397 295 90 385

Income Building Regulation Fees (326) 0 (326) (288) 0 (288)Land Search Fees 0 (5) (5) 0 (6) (6)Other Income (3) (1) (4) 0 0 0Net Deficit / (Surplus) for Year (18) 80 62 7 84 91

Transfer to/(from) trading account reserve 18 0 18 (7) 0 (7)

Total Cost to the Authority 0 80 80 0 84 84

30

6. Precepts and Levies

The precepts and levies paid during the year are as follows: -

2005/06

£'000

2004/05

£'000

Precepts Community Councils 1,094 1,139 Levies North Wales Fire Authority 4,621 4,440 Environment Agency 0 1,337 National Park Authority 322 310 North Wales Magistrates Courts 0 184 North West and North Wales Sea Fisheries Committee 50 42 Local Drainage Boards 19 18 Total 6,106 7,470

7. Asset Management Revenue Account

The Asset Management Revenue Account matches the credit for the reversal of capital charges with the debit for depreciation and external interest. It thus converts the charges for fixed assets made to the net cost of services into those that should score against net operating expenditure.

2005/06

£'000

2004/05

£'000

Expenditure Provision for Depreciation/Impairment

- General Fund - HRA

7,9085,714 13,622

7,029 2,070 9,099

External Interest Charges

- General Fund - HRA

6,3231,574 7,897

6,324 1,667 7,991

21,519 17,090Income Capital Charges to Revenue Accounts:

Housing Revenue Account (11,433) (3,500) Council Fund Revenue Account (16,213) (12,916) Release of Government Grants (2,509) (2,119) (30,155) (18,535)(Surplus)/Deficit for the year (8,636) (1,445)

31

8. Agency Services

The Council has entered into agreements under which it carries out tasks on behalf of another organisation for which it is fully reimbursed. One agreement relates to Trunk Road Maintenance and Improvement Works on behalf of the Welsh Assembly Government, and a second agreement relates to payments to Homes for Nursing Care on behalf of Local Health Boards. Expenditure on these activities was as follows : -

2005/06

£’000

2004/05

£’000

Trunk Roads 8,312 6,144Nursing Care 1,552 1,474Total 9,864 7,618

9. Minimum Revenue Provision

The Local Government and Housing Act 1989, requires that a Minimum Revenue Provision be set aside for the repayment of external loans. In 2005/06, the MRP has been calculated as follows: -

Housing

£'000

Council

Fund

£'000

Section 40 (6)

£'000

Other

£'000

Total

£'000 Capital Financing Requirement at 1 April 2005 27,411 102,737 6 257 130,411

MRP 2% 548 0 0 0 548MRP 4% 0 4,103 0 0 4,103Section 40 (6) 0 0 6 0 6Commutation Adjustments 0 (287) 0 0 (287)Total Minimum Revenue Provision 548 3,816 6 0 4,370

Less Depreciation/Impairment (13,622)MRP Adjustment Account 9,252

10. Pensions

a) Please also see the notes to the Consolidated Balance Sheet, the note to the

Statement of Total Movement in Reserves and the item in the Statement of Accounting Principles and Policies.

32

b) Nature of the Schemes

The Council operates a funded defined benefits scheme for its staff (excluding teachers) under the Superannuation Act 1972, and is subject to the Local Government Superannuation Regulations 1995. Gwynedd Council manages the scheme on behalf of the Council. Employees of the former constituent authorities who retired at Local Government Reorganisation belong to the respective pension schemes for those councils. The Department of Education and Skills (DfES) administers the national teachers pension scheme; details are included in a separate section. This scheme is a defined contributions scheme.

c) Analysis of attributable movements in the fund for 2005/06

The table includes both Clwyd and Gwynedd Funds as they relate to Conwy

Movements on Pension Reserve

2005/06

£’000

2004/05

£’000

Employers Contributions 11,188 10,211 Current Service Cost (8,617) (7,501) Past Service Cost (38) (256) Settlement /Curtailments (38) (221) Interest Cost (13,451) (10,464) Expected Return on Assets 11,286 9,790 Actuarial Gains/Losses (7,894) (37,063) Prior Year Adjustment re Gwynedd Closed Fund 0 297

Adjusted Total (7,564) (35,207) The Council recognises the cost of retirement benefits in the Net Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge we are required to make against Council Tax is based on the cash payable in the year, so the real cost of retirement benefits is reversed out of the Consolidated Revenue Account after Net Operating Expenditure. The above transactions have been made in the Consolidated Revenue Account during the year.

2005/06

£’000

2004/05

£’000

Contributions for current employees 9,824 8,984 Contribution Rate for current employees 19.6% 19.3% Contributions for former employees: Gwynedd Fund 800 674 Clwyd Fund 564 553 11,188 10,211

33

11. Officers’ Emoluments

The number of employees whose remuneration, excluding pension contributions, was £60,000 or more is as follows: -

Band

2005/06 Number

2004/05 Number

£60,000 - £69,999 4 5£70,000 - £79,999 4 5£80,000 - £89,999 1 2£90,000 - £99,999 0 2£100,000 - £109,999 1 0

12. Members’ Allowances During 2005/06 the sum of £938,878 was paid to Members in the form of Members’ Allowances. The equivalent sum in 2004/05 was £906,742 and the year on year increase was £32,136 due to Allowances in the scheme being increased in line with appropriate indexation at the beginning of the year.

13. Council Tax Council Tax income derives from charges raised according to the value of residential properties, which have been classified into ten valuation bands with estimated 1 April 2003 values for this specific purpose. Charges are calculated by taking the amount of income required for Conwy County Borough Council and the North Wales Police Authority for the forthcoming year and dividing this amount by the Council Tax Base. The Council Tax Base is the total of properties in each band adjusted by a proportion to convert the number to a Band D equivalent and adjusted for discounts. The Council Tax Base for 2005/06 was calculated as follows: -

Band

Equivalent Number of Dwellings after

Discount

Band D

Adjustment

Band D

Equivalent

A* 6.75 5/9 3.75 A 3,413.25 6/9 2,275.50 B 6,142.25 7/9 4,777.31 C 12,841.25 8/9 11,414.44 D 9,834.50 1 9,834.50 E 7,859.75 11/9 9,606.36 F 4,449.75 13/9 6,427.42 G 1,710.25 15/9 2,850.42 H 415.50 18/9 831.00 I 116.50 21/9 271.83 48,292.53

Council Tax Base after allowing for losses on collection 46,845.69

34

The amount raised by the Council Tax is as follows: -

2005/06

£'000

2004/05

£'000

Council Tax raised 39,720 35,241 Less sum due to N W Police Authority (7,446) (6,768) Total 32,274 28,473

14. National Non-Domestic Rates (NNDR)

The National Non-Domestic Rate is set by the Welsh Assembly Government for Wales but collected locally before being paid into a central pool administered by the National Assembly for Wales. The amount distributed to local authorities is then determined on a population basis.

For 2005/06 the rate set by the Welsh Assembly Government for Wales was 0.421p per £1 of rateable value of the non-domestic properties. At 31 March 2006 there were 4,789 properties on the local valuation list in Conwy, representing a rateable value of £60,710,223. The net income accruing to the Council from the NNDR is as follows:-

2005/06

£'000

2004/05

£'000

National Non-Domestic Rate raised 22,042 19,055 Less Cost of Collection Allowance (240) (230) Less sum paid to the National Pool (21,802) (18,825) 0 0

Receipts from the National Pool 23,342 23,416 Net Income from the National Non-Domestic Rates (23,342) (23,416)

15. Leases The Prudential Code for Capital Finance in Local Authorities dictates that the

Council make a comparison between the cost of borrowing and leasing as a method of funding expenditure on vehicles, plant and certain other items of equipment. In the financial year 2005/06 the comparison exercise indicated that, in the case of all items, borrowing was the preferred choice.

The total operating lease payments charged to the financial year 2005/06 were

£1,319,709 and the total obligations in relation to operating leases outstanding at 31 March 2006 amounted to £2,026,086.

16. Housing Revenue Account (HRA)

A summary of the Revenue Account for the HRA together with supporting information is shown on pages 39 to 44.

35

17. Transactions with Related Parties In accordance with FRS 8, the Council has a duty to disclose any material

transactions with a ‘related party’. This is to ensure that financial statements contain disclosures necessary to draw attention to the possibility that the reported financial position and results may have been affected by the existence of related parties and by material transactions with them.

Central Government Detailed information on Revenue Grants, Capital Grants, Revenue Support Grant

and NNDR pool transactions during the year is disclosed elsewhere in the statement.

Precepts and Levies Details of precepts collected on behalf of other organisations are provided in the

Consolidated Revenue Account. The Council appoints Members to certain bodies who levy on the Council’s budget. Details of these levies are given in Note 6 to the Consolidated Revenue Account.

The Corporate Director of Finance and Resources acts as the Treasurer to the North Wales Fire Service; the levy to the North Wales Fire Service paid during the year was £4,621,142.

Charitable and Voluntary Organisations

The Council appoints Members, Corporate Directors, Heads of Service, and other Officers to certain charitable and voluntary bodies. Other Officers are not included in the disclosure of transactions with related parties as it is not considered that these Officers are in a position to exert the same level of influence within the Council as Members, Corporate Directors and Heads of Service. During 2005/06 a total of £867,020 was paid to these bodies by way of grants and the purchasing of services. Members declared interests in other charitable and voluntary organisations to which the Authority paid £48,343 in total, which includes all grants and services rendered.

Local Government Association (LGA)/Welsh Local Government Association (WLGA)

The Council is a member of the LGA/WLGA, to which subscriptions of £93,074 were paid in 2005/06.

The two former district councils of Aberconwy and Colwyn purchased a debenture of £70,000 to help fund LGA offices in London.

Corporate Directors and Heads of Service

Heads of Service and Corporate Directors were sent a declaration of interest with related parties return for the year 2005/06. A Corporate Director is the treasurer of Craig y Don Playschool, to which the Authority paid £1,333.

36

A Head of Service is related to a Trustee of Cartrefi Cymru to whom the Authority paid £545,921.

Another Head of Service is related to a Director of a company to which the Council has paid the sum of £2,303 for professional services.

Members

Members were sent a declaration of interest with related parties return for the year 2005/06. A total of £210,389 was paid by the Council in 2005/06 under such dealings.

One Member applied for planning permission, it was resolved that the Planning Committee were minded to refuse the application unless certain changes were made to the proposal. One Member’s relative applied for planning permission, the application was granted, and the Member declared an interest and withdrew from the meeting. One Member’s relative applied for planning permission, the application was granted by Officer delegation. Other Apart from normal transactions such as the payments of Council Tax, non-domestic rates and housing rents, there are no other material transactions with related parties.

Subsidiary Companies Conwy Enterprise Agency’s Turnover is £309,194 of which £71,961 came from

payments by Conwy County Borough Council. Conwy Enterprise Agency paid £9,392 in rent to Conwy County Borough Council. A loan of £30,000 to Conwy Enterprise Agency to assist small businesses, was

converted to a grant.

37

18. Local Authorities Goods and Services Act 1970

The Council is empowered by this Act to provide goods and services to other public bodies. During 2005/06 the Council undertook the following work under the provisions of this Act :- Category of Supply

Client

2005/06

£

2004/05

£

Provision of Administrative, Professional or Technical Services

North Wales Fire Service National Probation Service

100,409 7,971

92,75540,973

Total 108,380 133,728

19. Disclosure of Fees Payable to the Wales Audit Office (WAO)

2005/06

£

2004/05

£

External audit services

290,955 285,299

National Fraud Initiative

0 1,350

Statutory Inspection

93,234 91,408

Grant claims and returns related to previous financial year

143,305 130,934

527,494 508,991

The estimated fee for certification of grant claims and returns related to 2005/06 is

£140,000, and is not included above.

38

20. Three Schools PFI Project

The project comprised of a new school building on a new site for Ysgol John Bright, Llandudno; the refurbishment and extension of Ysgol Aberconwy, Conwy; and new build accommodation and refurbishment at Ysgol Dyffryn Conwy, Llanrwst together with its rationalisation on to one site.

Contracts were signed on 12 March 2003, and construction started at the end of March 2003. The Unitary Charges (the monthly payment made by the Council to the private sector for the 3 fully serviced schools) were payable from 1 August 2004 for a contract period of 25 years. The Unitary Charge in the financial year 2005-2006 was £5.800m (net of £29k availability and performance deductions) for the period April 2005 to March 2006 inclusive. The full year charge in 2006/07 is estimated to be approximately £6.1m at a price base of 1 April 2006 (assuming RPIX of 2.5%).

The project provides the Council with 3 fully serviced schools including facilities

management services, cleaning, caretaking, grounds maintenance, NNDR, utilities, etc. The outstanding discharged obligation arising from the PFI transaction is approximately £167.798m, which represents the total of the estimated Unitary Charges payable for the remainder of the 25 year contract period.

In August 2004, the Council paid an advance payment of Unitary Charge of £9m.

This has resulted in the creation of a long term debtor which will be written down to revenue over the 25 year life of the PFI Contract.

At the start of the PFI Contract, Ysgol Aberconwy and Ysgol Dyffryn Conwy’s

existing assets were transferred to the private sector at nil consideration. A long term debtor of £7.626m has been created which is equal to the value of the transferred assets in the Council’s Balance Sheet at 31 March 2005 prior to their exclusion from the Balance Sheet. This will be written down to revenue over 25 years.

It is estimated that the value of PFI schools will be approximately £50m at the end

of the 25 years. A long term debtor and a PFI acquisition reserve (see Note 5 to the Statement of Total Movement in Reserves) have been established, equal to the estimated residual interest in the assets divided by the 25 years, to represent the accrual of the Council’s residual interest in the asset which may revert to the Council after 25 years.

39

HOUSING REVENUE ACCOUNT

2005/06

£'000

2004/05

£'000

Income Dwelling Rents 9,750 9,176Non-dwelling Rents 212 176Charges for Services and Facilities 32 24Total Service Income 9,994 9,376 Expenditure Management and Maintenance (inc. repairs) 4,941 4,563

Rents, Rates Taxes and other charges 424 322Housing Revenue Account Subsidy Payable 1,624 1,553

Increase in provision for bad and doubtful debts 68 39

Capital Financing Charges (Depreciation and Notional Interest) 1 11,433 3,500

Debt Management Charges 39 29Total Service Expenditure 18,529 10,006 Net Cost of HRA Services 8,535 630 Movement on the Asset Management Revenue Account (AMRA) 4 (4,145) 237

Gains and losses on the repurchase or early settlement of borrowing 83 68

Interest Receivable and Investment Income (73) (74)

Net Operating Expenditure 4,400 861 Contribution to or from the Pensions Reserve 5 39 58

Revenue Contribution to Capital expenditure 6 252 413

Contribution to Capital Reserve 443 151Transfer to/from Capital Financing Account relating to HRA minimum revenue provision

7 (5,166) (1,500)

Total (Surplus) for the year (32) (17) Balance brought forward (1,422) (1,405) Balance carried forward (1,454) (1,422)

40

NOTES TO THE HOUSING REVENUE ACCOUNT 1. New HRA Accounting Format

The HRA has been prepared on a resource accounting basis for the first time in 2005/06. As a result, capital charges have been made to revenue for the fixed assets belonging to the HRA. These charges have been undertaken in line with the Authority’s Statement of Accounting Principles and Policies (see pages 19–23) and are accordingly reversed out of revenue through the use of the Asset Management Revenue Account (AMRA). This is described in more detail in note 4 below. The resulting format parallels that used for the Consolidated Revenue Account and now presents the net cost of services, net operating expenditure and surplus/deficit of the HRA for the year.

2. Prior Year Adjustment

The comparative figures for 2004/05 have been restated in the new Accounting Format.

3. Asset Revaluation

HRA assets were re-valued during 2004/05 by £112.412m, their value at 31 March 2005 was £163.238m. This higher valuation has led to a significant variation in the capital charges between the two financial years on the Statement.

41

4. Asset Management Revenue Account (AMRA) The Asset Management Revenue Account matches the credit for the reversal of the capital charges with the debit for depreciation and external interest. It thus converts the charges for fixed assets made to the net cost of services into those that should score against net operating expenditure.

For the HRA, the external interest charge is determined in accordance with Regulations set by the Welsh Assembly Government.

HRA – Asset Management Revenue Account

2005/06

£'000

2004/05

£'000

Expenditure Provision for Depreciation/Impairment 5,714 2,070

External Interest Charges 1,574 1,667 7,288 3,737 Income Capital Financing Charges to Housing Revenue Account:

Depreciation (5,714) (2,070) Notional Interest (5,719) (1,430) (11,433) (3,500) (Surplus)/Deficit for the year (4,145) 237

5. HRA Contribution to Pension Reserve

The Net Cost of HRA Services includes the current service costs for pensions payable on behalf of existing HRA employees. A contribution is made by the HRA to the Pensions Reserve when a further additional amount is appropriated to pay for past service costs, settlements and curtailments. Further details about how the Council accounts for its Pension Liabilities can be found in note 20 on page 64. Further information about the movements on the Pension Reserve itself can be found in note 6 on page 70.

6. Revenue Contribution to Capital Expenditure

The Housing Revenue Account made a contribution to Capital Expenditure of £695k in 2005/06 (£564k in 2004/05). Not all schemes to which funding had been committed within the housing capital programme had been completed within the year. A housing capital reserve has therefore been created to allow these commitments to be fulfilled in subsequent years. To date, the balance on this reserve totals £903k (£460k in 2004/05). Details are shown within the statement of total movement in reserves on page 67.

42

7. Minimum Revenue Provision (MRP)

The Local Government and Housing Act 1989, requires that a Minimum Revenue Provision be set aside for the repayment of external loans. In 2005/06, the MRP has been calculated as follows: -

HRA

2005/06

£'000

HRA

2004/05

£'000 Capital Financing Requirement at 1 April 27,411 27,970 MRP 2% 548 560 Prior Year Adjustment 0 10 Total Minimum Revenue Provision 548 570 Less Depreciation/Impairment (5,714) (2,070) MRP Adjustment Account (see Note 9 CRA) (5,166) (1,500)

8. Capital Expenditure 2005/06

Capital Expenditure on Housing Revenue Account Assets in 2005/06 totalled £5.093m. The following table gives an analysis of how it was financed.

SUMMARY OF HOUSING REVENUE ACCOUNT CAPITAL EXPENDITURE AND FINANCING

2005/06

£’000

2004/05

£’000

Total Capital Expenditure 5,093 4,405 FINANCED BY:- Grants 2,525 2,518Capital Receipts 1,886 1,325Revenue Contribution Applied 252 414Unsupported Borrowing 154 0Private Sector Insulation Initiative 276 148Total 5,093 4,405

43

9. Capital Receipts

Usable Capital Receipts are held in the Capital Receipts Unapplied account until used to finance capital expenditure. In 2004/05 the set aside of 75% of Housing Right to Buy sales to redeem debt became at the discretion of the Local Authority. Conwy County Borough Council has elected not to set aside Housing Right to Buy Capital Receipts in either 2004/05 or 2005/06.

An analysis of usable capital receipts is shown below:-

Usable Capital Receipts

HRA

2005/06

£'000

HRA

2004/05

£'000 Balance at 1 April 4,554 3,139 Usable Receipts in year 2,117 2,771 Receipts Applied in year (1,981) (1,356) Balance at 31 March 4,690 4,554

10. Housing Stock

The Council was responsible for the management of 3,880 dwellings within the HRA as at 31 March 2006. The stock was made up as follows: -

31 March 2006

31 March

2005

Houses and Bungalows: 2,289 2,316 Flats: 1,531 1,538 Short term leasehold properties: 60 43 Total 3,880 3,897

34 houses, bungalows and flats were sold during the year under the Right to Buy Scheme.

11. The Welsh Housing Quality Standard (WHQS)

The Welsh Assembly Government has determined that all Council dwellings in Wales should achieve the Welsh Housing Quality Standard (WHQS) by 2012. In 2005/06, an updated stock condition survey was undertaken. It was estimated that it would cost the Council £64.9m up to 2012/13 and a total of £195 million over 30 years. This figure equates to £50,617 per dwelling (at 2005/06 prices). The total planned HRA housing capital programme for 2005/06 was £6m and for 2006/07 is £4.4m.

44

12. Rent Income

Rent Income represents the total rent income due for the year after allowance is made for voids etc. During 2005/06, 1.48% of income was lost due to properties being vacant with the average weekly rent resulting being £48.17 per week. Other Rents include Garage Rents and Rent of commercial premises on housing estates net of voids.

13. Housing Benefits Tenants in receipt of a low income qualify for assistance under the Housing Benefit Scheme. During 2005/06 approximately 70% of the Council’s tenants received some assistance with their housing costs (2004/05 approximately 67%). The cost of rebates granted to the Council tenants was transferred to the Council Fund from 1 April 2004.

14. Rent Arrears and Housing Benefits Overpayments

At 31 March 2006 rent arrears as a proportion of gross rent income due were at a level of 5.83% amounting to £577,488. This compares to an amount of £515,329 (5.53%) at the year ended 31 March 2005. Rent arrears were previously stated excluding the Housing Benefit overpayments made to tenants. For 2005/06, the overpayments outstanding totalled £233,167 and for 2004/05, £227,514. Excluding these would give rent arrears as a percentage of gross rent income due of 3.48% and 3.09% respectively. At 31 March 2006 a total of £4,690 was in arrears on garage rents (£4,867 for 2004/05.)

The total bad debt provision for the HRA is £254,855. 15. The Building Maintenance Unit

The Building Maintenance Unit is involved in the repair, maintenance and improvement of the Authority’s Council Stock within the Housing Revenue Account. During 2005/06 the Unit made a notional ‘surplus’ of £61k on a turnover of £3.476m (£54k ‘surplus’ on a turnover of £3.193m in 2004/05). This ‘surplus’ has been credited to the HRA in 2005/06.

45

CONSOLIDATED BALANCE SHEET

Note

31 March 2006

£' 000

31 March 2005

£' 000

Tangible Assets

1

Operational Assets Council Dwellings 156,151 163,238 Other Land and Buildings 175,141 175,900Vehicles, Plant, Furniture & Equipment 5,475 4,298Infrastructure 29,723 30,378Community Assets 3,034 369,524 2,849Non-Operational Assets Surplus Assets 991 1,001Investment Properties 4,492 4,500Work in Progress (WIP) 22,385 27,868 10,904Intangible Assets 1 332 178Total Tangible and Intangible Assets 397,724 393,246Long-Term Investments 5 3,071 71Long-Term Debtors 6 20,224 19,009Total Long-Term Assets 421,019 412,326 Current Assets Stocks and Works-in-Progress 7 805 892Debtors 8 25,297 26,111Investments 5 33,003 33,410Payments in Advance 1,073 1,634Cash in Hand 1,185 61,363 921 Current Liabilities Creditors 9 13,891 15,094Borrowing Repayable Within 1 Year 10 0 149Receipts in Advance 3,840 3,769Bank Overdraft 6,271 24,002 7,015Net Current Assets/(Current Liabilities) 37,361 36,941 Total Assets Less Current Liabilities 458,380 449,267 Long-Term Borrowing 10 138,204 134,179Provisions 12 2,731 2,259Pensions Liabilities 96,788 89,224Deferred Debit 14 (1,459) (1,586)Deferred Credit 15 514 236,778 614Total Assets Less Liabilities 221,602 224,577 Government Grants Deferred 11 50,614 40,527Capital Grants Unapplied 1,658 2,520Deferred Capital Receipts 13 89 128Usable Capital Receipts Reserve 7,023 6,743Capital Financing Account 18,962 18,217Fixed Asset Restatement Account 212,906 222,220Capital Reserve 2,992 3,176Pensions Reserve (96,788) 197,456 (89,224)Revenue Balances: Council Fund 3,505 4,505Housing Revenue Account 1,454 1,422Reserves 19,187 24,146 14,343Total Equity 221,602 224,577

46

NOTES TO THE CONSOLIDATED BALANCE SHEET

1. Fixed Assets

Details of the values of assets held at 31 March 2006, together with details of acquisitions and disposals are shown overleaf. Methods of calculating Depreciation are outlined in Note 5 of the Statement of Accounting Principles and Policies. Reconciliation to Capital Expenditure 2005/06

£’000

Additions (as Page 47) 27,462Deferred Charges 4,682Total 32,144

Valuations All capital expenditure considered to extend the life of assets is treated as enhancement and is shown as additions to fixed assets in the Statement of Movements in Net Value, whilst added value in excess of the capital expenditure is shown as Revaluations. All capital expenditure considered not to extend the life of assets is written off directly to the Fixed Asset Restatement Account. The Council’s land and buildings were valued as at 31 March 2005 under the management of the County Valuer.

47

Tangible & Intangible Assets Statement of Movement in Net Value

Operational Assets

Non-Operational Assets

Council

Dwellings

£’000

Other Land

and Buildings

£’000

Vehicles

Plant Furniture

& Equipment

£’000

Infrastructure

Assets

£’000

Community

Assets

£’000

Surplus Assets

£’000

Investment Properties

£’000

Work

in Progress

(WIP)

£’000

Intangible

Assets

£’000

Total

£’000 Gross Book Value 01/04/05 163,238 175,900 13,179 41,544 3,141 1,001 4,500 10,904 178 413,585 Additions 4,938 3,835 2,707 1,708 335 0 0 13,766 173 27,462 Disposals (1,428) 0 0 0 0 0 0 0 0 (1,428) No Added Value (4,938) (1,483) 0 0 0 0 0 0 0 (6,421) Revaluation 0 0 0 0 0 0 0 0 0 0 Transfer from Work In Progress 0 151 58 529 34 0 0 (2,285) 0 (1,513)

Gross Book Value 31/03/06 161,810 178,403 15,944 43,781 3,510 1,001 4,500 22,385 351 431,685 Cumulative Depreciation to 01/04/05 0 0 (8,881) (11,166) (292) 0 0 0 0 (20,339) Depreciation/Impairment In Year (5,659) (3,262) (1,588) (2,892) (184) (10) (8) 0 (19) (13,622)

Cumulative Depreciation/ Impairment to 31/03/06

(5,659) (3,262) (10,469) (14,058) (476) (10) (8) 0 (19) (33,961)

Net Book Value 01/04/05 163,238 175,900 4,298 30,378 2,849 1,001 4,500 10,904 178 393,246 Additions 4,938 3,835 2,707 1,708 335 0 0 13,766 173 27,462 Depreciation/ Impairment In Year (5,659) (3,262) (1,588) (2,892) (184) (10) (8) 0 (19) (13,622)

Disposals (1,428) 0 0 0 0 0 0 0 0 (1,428) No Added Value (4,938) (1,483) 0 0 0 0 0 0 0 (6,421) Revaluation 0 0 0 0 0 0 0 0 0 0 Transfers from Work In Progress 0 151 58 529 34 0 0 (2,285) 0 (1,513)

Net Book Value 31/03/06 156,151 175,141 5,475 29,723 3,034 991 4,492 22,385 332 397,724

48

Major capital commitments entered into at 31 March 2006 were £20m, split between Non-Housing of £18m and Housing £2m. Capital Commitments 2006/07 Onwards Scheme

Contracted Future Cost

£’000

Council Fund Capital Programme

Theatre / Conference Centre Development 5,272 Conwy Estuary Strategic Route 3,130 Hiraethog Conservation & Landscape Project 300 Penmaenmawr Townscape Heritage Initiative 1,090 Tir Llwyd Industrial Estate 884 Llanrwst Rural Development Centre 1,186 Paris Social Care System 598 3 Schools PFI 234 School Building Secondary Schools Project 500 North Wales Regional Swimming Pool 4,629 Group Repair Schemes: Penmaenmawr Renewal Area 295 East Penmaenmawr Renewal Area 80 Sub Total 18,198

HRA Capital Programme Kitchen Refurbishment 373 Heating & Insulation 53 Window Replacement 410 Door Replacement 17 Upgrade Fire Protection 439 Electrical Inspection/Rewire 140 Planned Maintenance 84 Sub Total 1,516 TOTAL 19,714

49

2. Capital Expenditure 2005/06

Capital Expenditure in 2005/06 amounted to £32.144m, including net accruals of -£449k. The following table gives an analysis of this expenditure and how it was financed. SUMMARY OF CAPITAL EXPENDITURE AND FINANCING (In year Spend Net of Accruals)

2005/06

£'000

Property Services 622 Economic Development 2,977 Planning Services 517 Education 4,597 Finance 123 Great Orme Tramway 210 IT 241 Theatres 5,820 Leisure 918 Public Protection 146 Private Sector Property Renovation 3,130 Highways and Transportation 1,564 Environmental and Technical Services 5,144 Housing Revenue Account 5,093 Other 1,042 Net Capital Accruals 449 32,593 FINANCED BY:- Borrowing Requirement (Supported & Unsupported) 6,998 Grants and Contributions (Received and Accrued) 21,545 Capital Receipts 2,214 Revenue and Other Reserves 1,836 32,593

50

Capital Expenditure and Financing

2005/06 Actual £’000

2004/05 Actual £’000

Total Capital Expenditure 32,144 34,766 Resourced by: Capital Receipts (2,037) (11,337) Capital Grants (21,665) (16,920) Capital Reserves (1,496) (544) Revenue (252) (413) Supported/Unsupported Borrowing 6,694 5,552

Capital Financing Requirement

2005/06

£’000

2004/05

£’000

Opening balance 1 April 130,412 129,233 Plus Supported/Unsupported Borrowing 6,694 5,552 Less MRP/Voluntary Revenue Provision (VRP)/Other adjustments (4,669) (4,373)

Balance at 31 March 132,437 130,412

51

The principal assets held by Conwy County Borough Council at 31 March 2006 were as follows:

2005/06

2004/05

Operational Assets

Council Dwellings Houses and Flats 3,820 3,854 Other Land and Buildings Administrative Buildings 31 31

Depots and Workshops 9 9 Schools 68 68 Residential Centres 10 10 Day Centres 2 2

Leisure, Sports and Recreation Centres and Swimming Pools 7 7

Community/Youth Centres and Halls 23 23

Car Parks 41 40 Farms 13 13 Theatres 2 2 Conference Centres 1 1 Libraries 12 12 Crematorium 1 1 Cemeteries 11 11 Public Conveniences 70 67 Other 24 22 Non Operational Assets Surplus Property for disposal 13 13

Countryside Services 1 1 Non County Occupied 23 23 Bare Land 27 27 Leisure Services 37 37 Economic Development 14 14 Community Assets Public Gardens and Parks 101 99 Playing Fields 67 67 Open Spaces 112 112 MUGA 20 14

52

Analysis of Net Assets Employed

31 March 2006

£’000

31 March

2005

£’000 Council Fund 92,659 89,432Housing Revenue Account 128,943 135,145 221,602 224,577

3. Deferred Charges

Deferred charges represent expenditure which has been properly capitalised, but does not result in tangible fixed assets. The deferred charges are written down over an appropriate period. This write off is charged to revenue with a compensating credit to revenue from the Capital Financing Account. The movement for the year is as follows: -

‘Other’ deferred charges relate to Fund Grants, Business Development Grants, Business Start Up Grants, Penmaenmawr Townscape Heritage Initiative project, Biodiversity and Landscape Grant, Commercial Improvement Areas, Listed Buildings/ Conservation Area Grants, Spend on PFI Schools, Deganwy Play and Learn, Contaminated Land Remedial Work, Conwy Local Biodiversity Action Plan Implementation Scheme, together with other smaller schemes.

Renovation Grants

and Renewals Areas

Other

Total

2005/06

£'000

2004/05

£'000

2005/06

£'000

2004/05

£'000

2005/06

£'000

2004/05

£'000

Balance at 31 March 2005

0 0 0 0 0 0

Transfer from Debtors

0 0 0 369 0 369

Expenditure in year

3,330 6,000 1,386 10,343 4,716 16,343

Grants, Capital Receipts & Capital Reserve

(3,330) (4,630) (1,029) (10,495) (4,359) (15,125)

Written off to Revenue

0 (1,370) (357) (217) (357) (1,587)

Balance at 31 March 2006

0 0 0 0 0 0

53

4. Leases

The authority was committed at 31 March 2006 to making payments of £916,000 under operating leases in 2006/07, comprising the following elements:

Other Land and

Buildings

£'000

Vehicles, Plant and

Equipment

£'000 Leases expiring in 2006/07 0 197 Leases expiring between 2007/08 and 2010/11 0 714

Leases expiring after 2010/11 0 5 Total 0 916

5. Investments

All the investments below, apart from the debenture, are approved investments under the Local Government Act 2003 and comply with the Welsh Assembly Government Investment Guidance issued on 1 April 2004. The investments consist of the following institutions: -

31 March 2006

£'000

31 March

2005

£'000 Long-term ADC Debenture 70 70 3½% War Stock 1 1 HSBC 2,000 0 Barclays Bank 1,000 0 Sub Total 3,071 71 Short-term Other Financial Institutions 33,003 33,410 Total 36,074 33,481

54

6. Long-Term Debtors

These represent the value of long-term debts due to the Council and are analysed as follows: -

31 March 2006

£’000

31 March

2005

£’000 PFI Project (see below) 19,294 17,959 Mortgages 98 138 North East Wales Institute 0 257 Private Street Works 136 142 Car Loans Repayable After 12 Months 459 409 Other 237 239 Gross Long Term Debtors 20,224 19,144 Less Bad Debt Provision 0 (135) Net Long Term Debtors 20,224 19,009

As a result of the 3 schools PFI project a Long Term Debtor has been created in respect of the advanced payment of Unitary Charge, the transferred assets and the residual interest in the PFI assets created. The Long Term Debtor in respect of the Unitary Charge and transferred assets will be written down to revenue over the 25 year life of the Contract, whilst the value of the residual interest will accrue over the life of the Contract.

Long Term Debtors – PFI

£’000

Net Book Value 31 March 2005 17,959Written down: Advanced Payment of Unitary Charge (360)Transferred Assets (305)Additions: Residual Interest 2,000Net Book Value 31 March 2006 19,294

55

7. Stocks and Work-in-Progress

Stocks and Work-in-Progress are analysed as follows: -

31 March 2006

£’000

31 March

2005

£’000 Work-in-Progress 138 227 Main Store 189 177 Nursery Stock 65 65 Rock Salt 44 44 Other Stocks 367 377 Foundation Schools 2 2

Total 805 892

8. Debtors

The analysis below shows the gross amount owed to the Council and identifies a Bad Debt provision for sums that may not be recovered.

Analysis of Debtors

31 March

2006

£’000

31 March

2005

£’000 Government Departments and Other Public Bodies 16,194 15,732Other Local Authorities 1,511 2,057Council Taxpayers 1,506 1,378National Non-Domestic Rates 249 268Council Tenants 582 520Car Loans Repayable within One Year 245 240Other Debtors 6,147 7,055Gross Debtors 26,434 27,250Less Bad Debt Provision (1,137) (1,139)Net Debtors 25,297 26,111

9. Creditors

This represents monies owed by the Council. An analysis of the creditors is as follows: -

Analysis of Creditors

31 March

2006

£'000

31 March

2005

£'000 Government Departments and Other Public Bodies 2,193 3,179Other Local Authorities 1,803 2,059Other Creditors 9,895 9,856Total 13,891 15,094

56

10. Long and Short Term Borrowing

Balance Outstanding

Source of Loan

2005/06 Interest

Rate Range

%

31 March

2006

£'000

31 March

2005

£'000 Public Works Loan Board 3.70 - 10.87 107,204 103,226 European Investment Bank 0 102 Bayerische Landesbank 0 10,000 DEPFA Bank Plc 2.95 – 3.25 5,000 5,000 Bank of Scotland 3.80 - 4.32 16,000 16,000 Barclays Bank 4.05 - 4.35 10,000 0 Total 138,204 134,328

Maturity Profile

31 March 2006

£’000

Within 1 year 0Between 1 – 2 years 0Between 2 – 5 years 0Between 5 – 10 years 11,500Over 10 years 126,704 138,204Total 138,204

11. Deferred Government Grants and Contributions

The balance on this account represents the value of capital grants and contributions which have been applied to finance the acquisition or enhancement of fixed assets held in the asset register, which are subject to depreciation. The balance on this account will be released to revenue in line with depreciation.

£'000

Balance at 31 March 2005 40,527 Grants and Contributions Applied during 2005/06 12,596 Written to Asset Management Revenue Account (2,509) Balance at 31 March 2006 50,614

57

12. Provisions

The Council has a number of specific provisions with balances available for activities as outlined below.

Provisions

Balance at 31 March

2005

£'000

Expenditure

£'000

Income

£'000

Balance at 31 March

2006

£'000 Insurance Excesses

944 139 372 1,177

Wirral and North Wales Purchasing Organisation

344 0 0 344

Social Services Provisions

657 421 146 382

Environmental Services

1 0 110 111

General Fund Housing

88 30 135 193

Other

225 36 335 524

Total

2,259 626 1,098 2,731

58

Provision Amount

£

Anticipated

Year of Expenditure

Housing Revenue Account Provision

Building Maintenance Lease

Future lease payments to vehicles 34,308

2009/10

Building Maintenance Review Authority committed to multi-task training and compensation for loss payments.

39,264

2006/07

Council Fund Housing Provision

De-pooled Support from HRA Warden service being provided without means test, with cost implications until change in tenancy.

89,485

2006/07 and onwards for life of new tenancies

Redundancy/Repayment of Grant Due/ Homelessness

Non-receipt of monies due to the Authority from recipients.

104,217

2006/07 and

onwards

Environmental Services Provisions

Early Retirement Provision This provision was created to finance a payment made in April 2006 in respect of early retirement. The provision will also fund quarterly payments to be made during 2006/07. There are no uncertainties regarding timing or any uncertainty regarding the future payments. There are no grants or other sources of finance available to reimburse the provision.

109,980

2006/07

59

Provision Amount

£

Anticipated

Year of Expenditure

Legal Services Provisions

Land Registration Fees Provision The Land Registration Fees Provision covers the cost (fees and staff cost) of registration of Council land and properties. We have assumed that this will be the timetable given the amount of individual deed packets we need to register and the time it takes to deal with each batch. Some uncertainty lies in the fact that some are more complex than others and therefore can be dealt with either quicker or more slowly than the average.

106,608

The project is estimated to take about 5

years to complete.

Social Services Provisions

Miscellaneous Provision The provision is for the continued costs relating to homelessness.

30,000

2006/07

Compensation Claim The provision is for the likely refund of fees charged to Mental Health client under Section 117 of the Mental Health Act 1983. This covers a refund for the fees and interest on the fees since they were paid up until now. The provision is in respect of named and known clients.

352,768

2006/07

60

Provision Amount

£

Anticipated Year of Expenditure

Finance Provisions

Pension Provision Miscellaneous early retirement costs in respect of former employees.

95,680

2006/07 to

2011/12

Cadwyn Leader Funds held on behalf of Cadwyn Leader II.

31,767

2006/07 onwards

RSG 2006/07 Underpayment of RSG in 2006/07 due to an Amending Report relating to 2005/06.

172,446

2006/07

Insurance Provision The insurance provision relates to excesses on third party claims.

1,176,138

2006/07 onwards

Wirral and North Wales Purchasing Organisation

This provision relates to an estimate of the Authority’s obligation towards the trading deficits of the organisation.

344,000 Dependent

upon settlement agreement

2006/07 onwards.

61

In addition to the balances on the previous page the Council maintains bad debt provisions which adequately cover debts which may be required to be written off. Details are as follows: -

Bad Debt

Provisions

Balance at 31 March

2005

£'000

Used in the Year

£'000

In Year

Provision

£'000

Balance at 31 March

2006

£'000 Council Tax

334 472 487 349

NNDR

194 152 85 127

Housing Revenue

228 41 68 255

General Debtors

383 7 30 406

Total

1,139 672 670 1,137

Long Term Debtors

135 135 0 0

13. Deferred Capital Receipts

Deferred Capital Receipts are amounts derived from sales of assets which will be received in instalments over agreed periods of time. They arise principally from mortgages on sales of council houses, which form part of mortgages under the heading of Long-Term Debtors.

14. Deferred Debit This balance relates to premiums paid as a consequence of the Authority’s treasury management activities. During 2005/06 loans were rescheduled in the sum of £10.792m with the PWLB at a more favourable rate of interest. The premiums incurred will be written off to Council Fund Revenue over the lives of the new loans, and to the Housing Revenue Account in accordance with regulations.

15. Deferred Credit This balance relates to the Housing element of discounts earned as a consequence of the Authority’s treasury management activities. The discounts earned will be written to the Housing Revenue Account in accordance with Regulations.

62

16. Subsidiary Companies

The Council has a 100% interest in the following subsidiary Company: Conwy Enterprise Agency Ltd The company encourages small businesses and assists their development via training and a small loan scheme. The company had a turnover of £309,194 in 2005/06 (£312,977 in 2004/05) and a loss of £34,468 (£73,444 loss in 2004/05). The net assets of the company were £15,141 at 31 March 2006 (£49,609 at 31 March 2005). The Council appoints a majority of the Board of Directors who are limited by guarantee. Copies of the accounts of the Conwy Enterprise Agency Ltd are available on application to the Chief Executive, Conwy Enterprise Agency Ltd, Conwy Business Centre, Junction Way, Llandudno Junction, Conwy, LL31 9XX.

17. Contingent Liabilities

The Former Clwyd County Council and Gwynedd County Council Agreement has been reached with the other successor authorities to the former Clwyd County Council and Gwynedd County Council on the distribution of the various assets and liabilities in their balance sheets which is reflected in the Consolidated Balance Sheet. A number of matters relating to certain debtors and creditors of the old authorities remain uncertain. Provision believed to be adequate has been made for these by Flintshire County Council and Gwynedd Council, with agreement that any surplus or deficit on eventual resolution will be settled with all successors.

The Former Clwyd County Council and Gwynedd County Council - Insurance

As part of the above arrangements, Flintshire County Council and Gwynedd Council have assumed responsibility for administering outstanding insurance matters of the former County Councils and, to the extent that matters were self insured, have also taken on the provision for such costs. There is agreement that any surplus or deficit on eventual resolution will be settled with all successors. An external assessment of the adequacy of this provision has been commissioned and found to be adequate. Job Evaluation The Authority potentially faces pay claims in relation to the current exercise on Job Evaluation, which is due to be concluded in 2007/08, and the results could involve commitments in respect of 2005/06 and earlier years of which the amounts are uncertain both in terms of back pay and future continuing costs.

63

18. Forward Commitments Investments

The Authority has arranged to invest £11m in future transactions as follows: Institution

Amount

£m

Singer & Friedlander Bank 4Barclays 4Northern Rock 1Norwich & Peterborough Building Society 1Dunfermeline Building Society 1TOTAL 11

The Barclays investment has been arranged to provide cover on the interest due to the PFI fund and the other transactions have been arranged to take advantage of the higher interest rates offered on forward deals.

19. Trust Funds

1. The Council currently administers 24 Education Trust Funds. The funds are

not assets of the Council and are not, therefore, included within the Consolidated Balance Sheet.

The Trust Funds operate for a variety of causes from school prize funds to maintaining children's play areas. Each one consists of a relatively small sum of money received largely from individuals and invested in order to provide an annual income.

The Fund balances at 31 March 2006 amounted to £69,481 and the income for the year was £7,038.

2. In addition, the Council is also responsible for the Welsh Church Act Fund.

This scheme provides income which is to be applied to charitable, educational, recreational and social purposes at the discretion of the Council. The Fund is not an asset of the Council and is not therefore, included within the Consolidated Balance Sheet.

A copy of the Fund's income and expenditure account and balance sheet

appear on page 74.

20. The Euro

The Authority is monitoring the situation as regards the introduction of the Euro, but to date has not entered into any commitments or incurred any costs on its introduction.

64

21. Pension Costs a) Please also see the notes to the Consolidated Revenue Account, the note to the

Statement of Total Movement in Reserves and the item in the Statement of Accounting Principles and Policies.

b) Actuarial Valuations

The scheme provides pensions and other retirement benefits for employees based upon final salaries. The annual funding cost of these pensions is based on triennial actuarial valuations. The cost is financed by contributions from both the Council and its staff. The Council’s employer’s contribution rate for 2005/06 was 327% of employees’ contribution rate, i.e. 19.6%. The latest full valuation of the scheme was carried out at 31 March 2004. The Council’s employer’s contribution rate for 2006/07 will be 332% of employees’ contribution rate, i.e. 19.9%. The minimum rate for 2007/08 is 338%, i.e. 20.3%. The Gwynedd Pension scheme and the Clwyd Pension scheme are both defined benefit schemes, while the Teachers’ scheme is a defined contributions scheme.

The Council also contributes to the cost of running the North Wales Magistrates Courts. The Department of Constitutional Affairs contributes 80% of the cost, with the 6 Councils in North Wales sharing the remainder on a population basis. As each Council is not able to clearly identify its share of the underlying assets and liabilities, the pension scheme is being treated as a defined contribution scheme and FRS 17 adjustments are not made.

c) Main Financial Assumptions

The transitional arrangement for the new accounting standard FRS 17 requires the disclosure of assets and liabilities at the balance sheet date. The assets and liabilities of the scheme have been taken at market value and the liabilities have been calculated using the following actuarial assumptions.

2005/06

2004/05

Price Increases 3.1% 2.9% Salary Increases 4.6% 4.4% Pension Increases 3.1% 2.9% Proportion of employees opting to take a commuted lump sum 0 N/A

Discount Rate 4.9% 5.4%

Changes to the Local Government Pension Scheme permit employees retiring on or after 6 April 2006 to take an increase in their lump sum payment on retirement in exchange for a reduction in their future annual pension. On the advice of our actuaries we have taken the view that there is insufficiently reliable evidence to assume a level of take-up of the change in the pension scheme. Consequently the valuation of the Council’s retirement benefit liabilities as at 31 March 2006 does not include any allowance for this change to the pension scheme.

65

d) Value of Assets

The assets of the scheme are split as follows:

e) Assets and Liabilities of the Fund The assets and liabilities of the scheme are as follows:

2005/06 2004/05 Assets

£’000

Liabilities

£’000

Surplus/(Deficit)

£’000

Assets

£’000

Liabilities

£’000

Surplus/(Deficit)

£’000 202,590 299,378 (96,788) 157,010 246,234 (89,224)

Of the total liabilities, £21.9m (£20.34m in 2004/05) is unfunded and £277.4m (£225.89m in 2004/05) is funded.

f) Payments into the Fund

The discretionary pensions for which the Council pays are included in the total liabilities of the pension funds. Contributions to cover the unfunded liabilities are detailed within the Consolidated Revenue Account.

g) Participation in other schemes

Conwy County Borough Council is responsible for the added years costs of some former employees of two of the predecessor authorities to Conwy County Borough Council who are members of the Clwyd County Council pension scheme. These benefits are not funded, therefore there are no assets attributable to Conwy County Borough Council. The liabilities are included in the total liabilities attributable to the pension fund. Based on the assumptions listed above, the present value of the liabilities at 31 March 2006 is £7.8m (£7.6m at 31 March 2005).

h) Teaching Staff

The Department of Education and Skills (DfES) administers the teachers pension scheme on a notional basis. Under FRS 17 it is classified as a quasi-contribution scheme and there are no disclosures required regarding assets and liabilities, as the current cost is still equivalent to contributions payable for the year. Employer’s contributions for 2005/06 were £4.6m representing 13.5% of pensionable pay (£3.3m in 2004/05 representing 13.5% of pay).

i) Copies of the accounts of the Gwynedd Pension Fund are available on application

to the Treasurer, Gwynedd Council, Shirehall, Caernarfon, LL55 1SH.

2005/06 2004/05 Equities

£’000

Bonds

£’000

Property

£’000

Cash

£’000

Total

£’000

Equities

£’000

Bonds

£’000

Property

£’000

Cash

£’000

Total

£’000 151,232 26,876 17,791 6,691 202,590 117,436 20,451 11,836 7,287 157,010

Rate of Return Rate of Return

7.4% 4.6% 5.5% 4.6% 7.7% 4.8% 5.7% 4.8%

67

STATEMENT OF TOTAL MOVEMENT IN RESERVES

Balance at31 March

2005

£'000

Contribution

to Reserves

£'000

Contribution

from Reserves

£'000

Surplus/

(Deficit) forthe year

£'000

Proceeds

of Disposal

£'000

Financing

Fixed Assets

£'000

Value of Assets Sold/

Transferred

£'000

Balance at31 March

2006

£'000 CAPITAL RESERVES Fixed Asset Restatement Account Note 1 222,220 (7,885) (1,429) 212,906

Capital Financing Account Note 2 18,217 745 18,962

Capital Receipts Unapplied Note 3 6,743 2,317 (2,037) 7,023

Capital Reserve - Council Fund Note 4 2,716 1,270 (400) (1,497) 2,089

Capital Reserve - Housing Note 4 460 695 (252) 903

250,356 1,965 (400) 745 2,317 (11,671) (1,429) 241,883 REVENUE RESERVES Specific Reserves Note 5 14,343 9,202 (4,358) 19,187Housing Revenue Account 1,422 32 1,454

Council Fund Balances 4,505 (1,000) 3,505 20,270 9,202 (4,358) (968) 0 0 0 24,146Total 270,626 11,167 (4,758) (223) 2,317 (11,671) (1,429) 266,029 PENSIONS RESERVE Note 5 (89,224) (7,564) (96,788)

68

NOTES TO THE STATEMENT OF TOTAL MOVEMENT IN

RESERVES

1. Fixed Asset Restatement Account

This account represents the difference between the historic cost of fixed assets and their revaluation in the Asset Register. The Account will be written down by the net book value of assets as they are disposed of and debited or credited with the deficits or surpluses arising on future revaluations.

2. Capital Financing Account

The Capital Financing Account (CFA) contains a number of entries concerning capital accounting. These include the excess of depreciation over revenue provisions for potential debt redemption, deferred charges written off, and part of the financing of the 2005/06 capital programme.

The following shows the movement on the Capital Financing Account during 2005/06: -

£’000

Balance brought forward 1 April 2005 18,217 Capital Receipts Set Aside 274 Capital Financing Capital Receipts 2,037 Capital Reserve 1,749 Net Grants and Contributions Applied 6,915 Provision for repayment of External Debt (9,209) Transferred Assets written down (665) Deferred Charges written off (356) Balance carried forward 31 March 2006 18,962

69

3. Capital Receipts Unapplied

These are capital receipts which have not yet been used to incur additional capital expenditure. The 1989 Act stipulates the proportion of total capital receipts which are usable for this purpose. An analysis is shown below: -

Housing

£'000

Other

Services

£'000

Total

£'000 Balance at 31 March 2005 4,554 2,189 6,743Usable Receipts 2005/06 2,117 200 2,317Receipts Applied 2005/06 (1,981) (56) (2,037)Balance at 31 March 2006 4,690 2,333 7,023

4. Capital Reserves

These reserves represent funding for capital schemes to be undertaken.

5. Specific Reserves

Foundation School Balances represent the budgets delegated to foundation schools which have not yet been spent.

School Balances represent the budgets delegated to schools which have not yet been spent. Retirement Reserve is required to smooth the financial effects of early retirements. Llandudno Junction Regeneration Reserve derives from funding inherited from the former Aberconwy Borough Council whereby a contribution from the private sector was made to fund a sports facility and to make environmental improvements in the area. Corporate Insurance Reserve provides cover for the Council on the areas where "all risk" is not covered with the Council's external insurer. 3 Schools PFI Reserve represents funding from the Welsh Assembly towards future Unitary Charges on the PFI project.

PFI Acquisition Reserve represents the apportioned value of the residual interest in the 3 schools which may revert to the Authority at the end of the Contract. This is not a cash backed reserve. Other Reserves are held for a variety of future occurrences. Specific Reserves represents a mixture of resources brought forward from 2004/05 together with funding for initiatives and activities committed for 2005/06 to be spent beyond 2005/06.

70

Specific Reserves

Balance

at 31 March

2005

£ '000

Contribution

to Reserve

£ '000

Use of

Reserve

£ '000

Balance

at 31 March

2006

£ '000 School Balances 3,440 802 (330) 3,912Foundation School Balances 887 163 (21) 1,029

Retirement 166 155 0 321Llandudno Junction Regeneration 428 19 (21) 426

Corporate Insurance 49 166 (56) 1593 Schools PFI Reserve 1,459 2,060 (96) 3,423PFI Acquisition Reserve 1,333 2,000 0 3,333Other Reserves 597 69 (40) 626Other Specific Reserves:

Repair and Maintenance 824 684 (420) 1,088Trading /Overhead Accounts 495 152 (220) 427

Revenue Reserves 4,665 2,932 (3,154) 4,443Total 14,343 9,202 (4,358) 19,187

6. Pensions Reserve

a) Please also see the notes to the Consolidated Revenue Account, the note to the Consolidated Balance Sheet and the item in the Statement of Accounting Principles and Policies.

b) The actuarial gains and losses identified as movements on the Pension Reserve in 2005/06 can be analysed into the following categories.

CATEGORY 2005/06 2004/05 2003/04

£’000

Asset/

Liability %

£’000

Asset/ Liability

% £’000

Asset/

Liability %

Difference between expected and actual return on Assets

27,401 13.5 5,179 3.3 13,913 10.3

Difference between actuarial assumptions about liabilities and actual experience

(977) 0.33 (215) 0.09 (667) (0.36)

Changes in the demographic and financial assumptions used to estimate liabilities

(34,318) 0 (42,027) 0 0 0

Totals (7,894) (37,063) 13,246

71

CASH FLOW STATEMENT

2005/06

£' 000

2004/05

£' 000

REVENUE ACTIVITIES Cash Outflows Cash Paid to and on behalf of Employees 121,222 113,159 Housing Benefits Paid Out 19,555 18,215 Other Operating Cash Payments 81,890 80,194 NNDR Paid to National Pool 21,461 18,067 Precepts Paid 8,540 7,907

252,668 237,542Cash Inflows Council Tax Received (Net of Refunds) (34,037) (30,310) NNDR Received (Net of Refunds) (21,998) (18,979) Revenue Support Grant (98,197) (96,739) Other Grants (51,153) (44,001) Cash Received for Goods and Services (15,578) (14,494) Rent (Gross) (9,835) (9,357) Other Operating Cash Received (12,229) (11,745) NNDR from National Pool (23,342) (23,416)

(266,369) (249,041)(13,701) (11,499)

SERVICING OF FINANCE Cash Outflows Interest Paid 7,925 7,882Cash Inflows Interest Received (2,598) (1,871)CAPITAL ACTIVITIES Cash Outflows Purchase of Fixed Assets 27,911 17,248 Deferred Charges 4,682 16,343

32,593 33,591Cash Inflows Sale of Fixed Assets (2,317) (12,706) Capital Grants and Contribution Received (21,718) (12,350)

(24,035) (25,056)

MANAGEMENT OF LIQUID RESOURCES Increase(Decrease) in Investments 2,591 (1,355)

Net Cash Outflow Before Financing 2,775 1,692

FINANCING Cash Outflows Repayment of Amounts Borrowed 41,916 3,340Cash Inflows New Loans Raised (45,703) (4,693)(Increase) in Cash and Cash Equivalents (1,012) 339

72

NOTES TO THE CASH FLOW STATEMENT

1. Reconciliation to Consolidated Revenue Account

2005/06

£’000

2004/05

£’000

Revenue Activities Net Cash Inflow (13,701) (11,499)

NON-CASH MOVEMENT ON REVENUE ACCOUNT

Decrease/(Increase) in Stock 87 (134) Decrease/ (Increase) in Debtors 814 (4,401) Decrease/(Increase) in Payments in Advance 561 99 Increase/(Decrease) in Creditors (1,203) 1,609 Increase/(Decrease) in Receipts in Advance 71 (606) Other 0 (132) Bad Debt Provision 2 75 Education PFI Entries (1,335) 0 Minimum Revenue Provision/Voluntary Revenue Provision 4,412 4,366

Discounts/Premiums 116 0 Reserves to fund Capital Expenditure 1,749 0 Transfers to/from Reserves and Provisions 3,676 3,461 Adjustment for non-revenue items (221) 2,950

ITEMS CLASSIFIED SEPARATELY ON CASHFLOW STATEMENT

Interest Paid 7,925 7,882 Interest Received (2,598) (1,871)

DEFICIT/(SURPLUS) ON REVENUE ACCOUNT 355 1,799

2. Reconciliation of Movements in Cash and Cash Equivalents

Balance

at 31 March

2006

£'000

Balance

at 31 March

2005

£'000

Movement

During Year

£'000 Bank Overdraft and Cash in Hand (4,905) (5,917) 1,012

Increase in Cash and Cash Equivalents (4,905) (5,917) 1,012

73

WELSH CHURCH ACT FUND

STATEMENT OF ACCOUNTS 2005/06 Explanatory foreword

The Council holds the Welsh Church Act Fund by virtue of section 50 of the Local Government (Wales) Act 1994 and the Welsh Church Act Funds (Designation and Specification Order 1996(b)). The Council is the corporate trustee of the Welsh Church Act Funds in the area of Conwy County Borough. It holds some funds and a parcel of land disaggregated from the Clwyd fund at reorganisation in 1996. It also has a share of the Gwynedd fund, which has not yet been disaggregated. Gwynedd acts as lead authority for the Welsh Church Act and prepares accounts for submission to the Charities Commission. When the Gwynedd Fund is disaggregated, Conwy will be required to register its Fund as a charity and prepare accounts in accordance with the Charity Commission Statement of Recommended Practice. Accounting Policies The Accounting policies followed are those outlined on pages 19 to 23, which are applicable to the items in the Welsh Church Act Accounts. The accounts also follow the Charity Commission Statement of Recommended Practice. The main accounting principle applicable to these accounts is the accruals principle, which requires the inclusion of debtors and creditors in the accounts. The land owned by the Conwy part of the Fund is valued at the lower of net current replacement cost and realisable value.

74

INCOME AND EXPENDITURE ACCOUNT

Notes 2005/06 £

2004/05

£ RESOURCES ARISING Rent of Land 1 762 844Investment Interest 2 12,793 12,177Tax Adjustment 0 0Less Fund Managers Fees (118) (141) 13,437 12,880 USE OF RESOURCES Allocations 3 (10,580) (5,830)Change in Resources Before Investment Gains 2,857 7,050Realised Gains (Losses) on Investment Disposals 1,403 1,667Unrealised Gains (Losses) on Investment Values (692) (148)Resources Retained (Shortfall) for Future Use 3,568 8,569 Resources Brought Forward 282,827 274,258Resources Carried Forward 286,395 282,827Movement In Year 3,568 8,569

BALANCE SHEET AT 31 MARCH 2006

Notes

2005/06 £

2004/05

£ FIXED ASSETS Land 1 15,333 15,333Investments 2 89,808 98,922 105,141 114,255 CURRENT ASSETS Debtors (2005/06 distribution due from Gwynedd Council) 3 9,813 9,366

Cash 2 59,591 57,181Current Assets (held by Gwynedd Council) 2 122,401 112,009 191,805 178,556CURRENT LIABILITIES Creditors 3 (10,551) (9,984)Net Assets 286,395 282,827FUND BALANCE 286,395 282,827

75

NOTES TO THE ACCOUNTS

Income and Expenditure Account Note 1 Rent from land administered by Conwy amounted to £623. Conwy is entitled to 17.810244% of the rent from the land administered by Gwynedd council, for 2005-06 this amounted to £139. Note 2 The main source of income is investment income from assets administered by Gwynedd on behalf of the fund this amounted to £9,791. The income on the main fund is apportioned on a percentage basis and Conwy is entitled to 17.810244%. Conwy holds cash on behalf of the fund and pays interest on the balance to the fund which amounted to £3,002, the interest rate used in the calculation is the average of the 7 day libor rate for the months April to March. Note 3 Under the provisions of the Welsh Church Act Conwy allocates grants to various organisations. The amount available for distribution in 2005-06 was £17,800 and the actual amount distributed was £10,580. The balance of the funds available for distribution in 2005-06 has been carried forward for distribution in 2006-07. Balance Sheet Note 1 The land held on behalf of the fund by Conwy is valued at £10,676 and Conwy’s share of the land held by the main fund is £4,657. Note 2 The investments held by the main fund are mainly in UK Equities, £504,249, of which Conwy is allocated 17.810244%. The balance of the main fund is held as cash deposits on which interest accrues in 2005-06 this amounted to £658,053 this is included in the current assets figure along with Debtors which amounted to £29,201 of the total Conwy is allocated 17.810244%. The cash amount held by Conwy in 2005-06 amounted to £59,591. Note 3 The amount to be distributed by Gwynedd for 2005-06 is shown as a debtor on the balance sheet. The creditor amount shown on the balance sheet is Conwy’s share of the creditors to the main fund.

77

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

CONWY COUNTY BOROUGH COUNCIL I have audited the accounting statements of Conwy County Borough Council for the year ended 31 March 2006 under the Public Audit (Wales) Act 2004. The accounting statements comprise the Consolidated Revenue Account, the Housing Revenue Account, the Consolidated Balance Sheet, the Statement of Total Movements in Reserves, the Cash Flow Statement and the related notes. The accounting statements have been prepared under the accounting policies set out in the statement of accounts. This report is made solely to Conwy County Borough Council in accordance with Part 2 of the Public Audit (Wales) Act 2004 and for no other purpose, as set out in paragraph 42 of the Statement of Responsibilities of Appointed Auditors, and Inspectors, and of Audited and Inspected Bodies (2005) prepared by the Auditor General for Wales.

Respective responsibilities of the Chief Finance Officer and auditors The Chief Finance Officer’s responsibilities for preparing the Statement of Accounts in accordance with relevant legal and regulatory requirements and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2005 are set out in the Statement of Responsibilities for the Statement of Accounts. My responsibility is to audit the accounting statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). I report to you my opinion as to whether the accounting statements present fairly the financial position of the Council in accordance with relevant legal and regulatory requirements and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2005. I 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. I report if it does not comply with proper practices specified by CIPFA or if the statement is misleading or inconsistent with other information I am aware of from my audit of the accounts. I am not required to consider, nor have I considered, whether the statement on internal control covers all risks and controls. Neither am I required to form an opinion on the effectiveness of the Council’s corporate governance procedures or its risk and control procedures. I read other information published with the accounting statements, and consider whether it is consistent with the audited accounting statements. This other information comprises the Explanatory Foreword and the statement of accounts for the Welsh Church Act Fund. I consider the implications for my report if I become aware of any apparent misstatements or material inconsistencies with the accounting statements. My responsibilities do not extend to any other information.

Basis of audit opinion I conducted my audit in accordance with the Public Audit (Wales) Act 2004 , the Code of Audit and Inspection Practice issued by the Auditor General for Wales, 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 accounting statements. It also includes an assessment of the significant estimates and judgments made by the Council in the preparation of the accounting statements, and of whether the accounting policies are appropriate to the Council’s circumstances, consistently applied and adequately disclosed.

78

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

Opinion

In my opinion the accounting statements present fairly, in accordance with relevant legal and regulatory requirements and the Statement of Recommended Practice on Local Authority Accounting in the United Kingdom 2005, the financial position of the Conwy County Borough Council as at 31 March 2006 and its income and expenditure for the year then ended.

Certificate I certify that I have completed the audit of the accounts in accordance with the requirements of the Public Audit (Wales) Act 2004 and the Code of Audit and Inspection Practice issued by the Auditor General for Wales. My conclusion on Conwy County Borough Council’s arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2006 will be reported separately in the Relationship Manager Audit Letter.

Anthony Barrett Address: Wales Audit Office Appointed Auditor Unit 4 Date 31 October 2006 Evolution

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