notice of meeting · 9/14/2015 · accepted, from bis, the revenue funding for the scr skills bank...

Sheffield City Region Combined AuthorityRegistered Address: 18 Regent Street, Barnsley, S70 2HG

14 September 2015

To: Members of the Sheffield City Region Combined AuthorityAppropriate Officers

NOTICE OF MEETING

You are hereby summoned to a meeting of the Sheffield City Region Combined Authority to be held at THE AMP TECHNOLOGY CENTRE, WAVERLEY, ROTHERHAM, S60 5WG at 4.00 pm on Monday 14 September 2015 for the purpose of transacting the business set out in the agenda.

Diana TerrisClerk to the Combined Authority

This matter is being dealt with by:Craig Tyler [email protected] 01226 772824

Gill Richards [email protected] 01226 772806

Member Distribution

Councillors: S Houghton (Chair), J Burrows (Vice-Chair), A Syrett, G Baxter, C Read, J Dore, S Greaves, Mayor R Jones, A Rhodes, L Roberts, L Rose, J White and A Western

Contact Details

For further information or assistance please contact

Craig TylerSCR Combined Authority18 Regent StreetBarnsleySouth YorkshireS70 2HG

Tel: 01226 [email protected]

Gill RichardsSCR Combined Authority18 Regent StreetBarnsleySouth YorkshireS70 2HG

Tel: 01226 [email protected]

mailto:[email protected]


4.00 PM, 14 SEPTEMBER 2015

The Technology CentreAdvanced Manufacturing ParkWaverleyRotherhamS60 5WG

AGENDA

Item Page

1 Apologies

2 Announcements

3 Urgent Items

To determine whether there are any additional items of business which by reason of special circumstances the Chair is of the opinion should be considered at the meeting; the reason(s) for such urgency to be stated.

4 Items to be Considered in the Absence of the Public and Press

To identify where resolutions may be moved to exclude the public and press. (For items marked * the public and press may be excluded from the meeting.)

5 Voting Rights for Non-Constituent Members

To identify whether there are any items of business that apply only to the South Yorkshire Members of the Combined Authority i.e. where it would not be appropriate for non-SY Members to have voting rights.

6 Declarations of Interest by individual Members in relation to any item of business on the agenda

7 Reports from and Questions by Members

8 Receipt of Petitions and Public Questions

9 Minutes of the meeting held on 3rd August 2015 1 - 6

10 SCR Combined Authority Statement of Accounts 2014/15 and Annual Governance Statement 7 - 152

Item Page

11 SCR Combined Authority ISA260 (KPMG) 153 - 180

12 South Yorkshire Passenger Transport Pension Fund ISA260 (KPMG)

Addressed at agenda item 11

13 SCC Letter of Representation

Addressed at agenda item 10

14 Treasury Outturn Report 2014/15 181 - 198

15 2016/17 Budget setting: SCR Budget and Business Plan Process 199 - 204

16 SCR Q1 Revenue Budget & Capital Programme 205 - 218

17 ESIF - Sustainable Urban Development Plan 219 - 224

18 SCR Executive Team Accommodation 225 - 236

19 SCR Devolution Update Verbal Report

20 SCR Audit Committee - Changes to Terms of Reference 237 - 240

21 IEB Business Case Recommendations 241 - 250

22 Minutes of the SCR CA Transport Committee - 1st September 2015 251 - 260

SHEFFIELD CITY REGION COMBINED AUTHORITY

THE AMP TECHNOLOGY CENTRE, WAVERLEY, ROTHERHAM, S60 5WG

MINUTES OF THE MEETING HELD ON 3 AUGUST 2015

PRESENT:

Councillor Sir Steve Houghton CBE, Barnsley MBC (Chair)Councillor John Burrows, Chesterfield BC (Vice Chair)

Councillor Graham Baxter MBE, North East Derbyshire DCCouncillor Julie Dore, Sheffield CCCouncillor Simon Greaves, Bassetlaw DCMayor Ros Jones, Doncaster MBCCouncillor Chris Read, Rotherham MBCCouncillor Lewis Rose OBE, Derbyshire Dales DCCouncillor Ann Syrett, Bolsover DCCouncillor Jo White, Bassetlaw District Council

Ruth Adams, SCR Executive TeamDavid Armiger, Bassetlaw District CouncilFiona Boden, SCR Executive TeamAndrew Frosdick, Monitoring OfficerDavid Hewitt, SCR LEPJulie Hurley, SCR Executive TeamJames Newman, SCR Local Enterprise PartnershipJulie Kenny CBE, Rotherham MBCWes Lumley, Bolsover DC / NE Derbyshire DCStella Manzie CBE, Rotherham MBCJohn Mothersole, Sheffield CCAndrew Shirt, South Yorkshire Joint AuthoritiesBen Still, SCR Executive TeamGareth Sutton, Sheffield CC / SCRDiana Terris, Clerk / Barnsley MBC

Apologies for absence were received from Councillor A Rhodes, J Miller, N Taylor, C Tyler and E Walker

SCR Combined Authority3/08/15

1 VOTING RIGHTS FOR NON-CONSTITUENT MEMBERS

It was agreed that no agenda items require voting rights to be confirmed on non-constituent Members.

2 APOLOGIES

Members’ apologies were noted as above.

3 ANNOUNCEMENTS

No announcements were noted.

4 URGENT ITEMS

No urgent agenda items were requested.

5 ITEMS TO BE CONSIDERED IN THE ABSENCE OF THE PUBLIC AND PRESS

None.

6 DECLARATIONS OF INTEREST BY INDIVIDUAL MEMBERS IN RELATION TO ANY ITEM OF BUSINESS ON THE AGENDA

No declarations of interest were noted.

7 REPORTS FROM AND QUESTIONS BY MEMBERS

No reports of questions from Members were raised.

8 RECEIPT OF PETITIONS/PUBLIC QUESTIONS

No petitions were received.

The Chair informed Members that a list of questions had been received from Mr Nigel Slack, Sheffield for Democracy, regarding the new ‘Cities and Local Government Devolution Bill’. Mr Slack asked the Combined Authority:

1) Who is leading the negotiation?

The negotiations will be led by the Sheffield City Region Executive Team, supported by the SCR Chief Executives. Combined Authority Members’ will help shape negotiations.

2) Will they accept a directly elected Mayor?

There is a general view that the Authority would prefer to operate the Combined Authority Model, without a City Region Mayor. However, this will be subject to Government Ministers’ approval, and Ministers have been clear that they expect devolution will be in return for a directly elected Metro Mayor.


3) Will the public be consulted and their opinion sought?

Yes, there will be public and business consultation, if the Combined Authority did agree to a City Region Mayor.

4) Will the individual Councils and most importantly, their Councillors be consulted, and their opinion sought?

Yes, the individual Councils’ and Councillors’ would be consulted and their opinion sought.

5) Will the SCRCA resist a deal that is inappropriate for the make-up of the City Region, with its cross county ties, or will it compromise its principals through fear of falling behind an imagined brighter future gifted to Manchester, through their wholesale capitulation?

The preferred option for Devolution will need to be agreed and satisfy all nine SCR Local Authorities. The CA will submit its ‘Asks’ to Government to see if a deal can be made.

9 MINUTES OF THE MEETING OF THE SCR COMBINED AUTHORITY HELD ON 22 JUNE 2015

RESOLVED – That the minutes of the meeting of the Combined Authority held on 22 June 2015 be agreed as an accurate record of the meeting.

10 DEVOLUTION UPDATE

Members were advised that as part of the Summer Budget 2015, the Chancellor had announced a commitment to further devolution deals with the Sheffield City Region, Liverpool City Region, Leeds, West Yorkshire and partner authorities, to be agreed in parallel with the Spending Review in September 2015.

It was noted that the City Regions would need to submit formal, fiscally neutral proposals and an agreed geography to the Treasury by 4 September 2015.

Significant devolution deals would need to be signed-off ahead of the November 2015 spending review. The conclusions of the spending review would be announced on 25 November 2015.

If agreement can be reached, the SCR CA and LEP would submit a proposal, building on its Strategic Economic Plan.

The Joint Authorities Governance Unit would be arranging Informal briefings with SCR Leaders over the coming weeks regarding the SCR’s proposals to Treasury.

RESOLVED – That the update be noted.


11 EXECUTIVE BOARD UPDATES AND DECISIONS

Members received an update regarding the inaugural meetings of the SCR Executive Boards, as set out below:

i) Skills, Employment and Education Executive Board

The Skills, Employment and Education Executive Board had met on 17 July 2015, where they had:

Approved the North Notts LGF scheme for skills capital investment – Total scheme value £933,500 total grant value £380,055 (33%);

Approved funding to support project management costs associated with progressing the LGF skills capital funding for the Glass Academy, subject to a number of agreed caveats; and

Accepted, from BIS, the revenue funding for the SCR Skills Bank in the financial year 2015-2016, for the SCR Executive to directly commission.

ii) Infrastructure Board

The SCR Infrastructure Plan was progressing well; a workshop would be held shortly to agree the review of evidence and challenges for growth, which would form the baseline for the infrastructure needs to support growth.

The SCRIF continued to progress a number of business cases and funding agreements, noting that the Board would be reviewing programme delivery to ensure spend for 2015/16.

The Board continued to make progress in relation to the SCR IIP, developing the approach to housing, financial options, spatial modelling, evidence and needs for infrastructure.

The Board had considered the Central Independent Appraisal Team’s Business Case in relation to Superfast Broadband for South Yorkshire, which they had recommended be approved by the CA. (Please see Minute 12, which sets out the Combined Authority’s approval).

iii) Housing Board

The Board had considered the draft Housing Business Plan and agreed to expand this over a four year period.

A large amount of work had been undertaken by the SCR Heads of Planning Group and fed through to the Board.

The first meeting of the Joint Assets Board had been held; a Chair and Vice-Chair had been appointed. The Terms of Reference were being reviewed to determine the scope of work.


It had been agreed that a paper would be developed and presented to the CA setting out an update on the Duty to Cooperate and Spatial Planning.

iv) Transport Board

The inaugural meeting of the Transport Board had been held to consider its role and its inter-dependences with the Combined Authority’s Transport Committee/Boards and links to the Infrastructure Board.

v) Business Growth Board

At the Board meeting held on 8 July, Members considered a revised Inward Investment Strategy for the SCR and received updates on each of the five Growth Hub Spokes (Access to Finance, Exports, Innovations, Skills Bank and new Businesses).

It was noted that the second Board meeting would be held on Tuesday 4 August 2015.

RESOLVED – That Combined Authority Members note the updates and endorse the decisions taken by all the SCR Executive Boards.

12 RECOMMENDATION FROM THE INFRASTRUCTURE ADVISORY BOARD FOR SUPERFAST BROADBAND BUSINESS CASE

A paper was presented asking the CA to formally agree the recommendations of the Infrastructure Executive Board for accelerated and enhanced Superfast Broadband connectivity to South Yorkshire’s Enterprise Zones and strategic Business Parks.

Members noted that the South Yorkshire Superfast Broadband programme was aimed at raising access to superfast broadband to 98% of premises across South Yorkshire by 2017. The Broadband Delivery UK (BDUK) Extension Programme launched in 2013 required a local match funding commitment. The four South Yorkshire Authorities were seeking £10.6m SCRIF funding for the local match funding.

The initial economic case presented estimated the economic outputs of public sector investment in South Yorkshire superfast broadband as a GVA uplift of £416m and 1,054 net additional FTE jobs between 2021 and 2031.

The scheme promotor had satisfied the Infrastructure Executive Board that the scheme was likely to provide value for money, and that the scheme had a strong strategic case and was deliverable.

RESOLVED – That the SCR Combined Authority:-

i) Supports the recommendation of the Infrastructure Advisory Board (IAB) to progress the roll out of enhanced Superfast Broadband connectivity to South Yorkshire’s Enterprise Zones and strategic Business Parks; and


ii) Agreed to provide full approval for the scheme from local match funding from the SCRIF of up to £10.6m.

13 MINUTES OF THE SCR CA TRANSPORT COMMITTEE HELD ON 20 JULY 2015

RESOLVED – That the minutes of the SCR Transport Committee held on 20 July 2015 be noted.

14 MINUTES OF THE SCR PASSENGER TRANSPORT PENSION FUND COMMITTEE MEETING HELD ON 8TH JUNE 2015

RESOLVED – That the minutes of the SCR Passenger Transport Pension Fund Committee meeting held on 8 June 2015 be noted.

CHAIR

Summary

Like other authorities the CA is required to prepare an Annual Statement of Accounts that show the authority’s financial position as at the 31st March

The accounts for the financial year 2014/15 are the first prepared for the CA

The accounts presented show the financial results for the CA as a:o Single entity (before group organisations are added); and,o Financial Group where the CA’s direct results are combined with

those of: South Yorkshire Passenger Transport Executive; and, SY ITA Properties Ltd.

The accounts presented also include those of the South Yorkshire Passenger Transport Pension Fund as an addendum

1. Issue 1. The purpose of the following report is to communicate any relevant matters

arising from the external audit of the 2014/15 Statement of Accounts and, in acknowledging these findings, request that approval is given for the Chair of the meeting to conclude the audit by signing the Statement of Accounts and the Letter of Management Representations.

2. Recommendations That:

That Leaders accept the Report to those Charged with Governance (ISA 260) 2014/15.

That following the above acceptance the Chair of the Leaders’ Meeting provides signature to the Letter of Management Representations attached at Annex B in order to conclude the audit;

That the Leaders approve the attached Statement of Accounts for 2014/15 and the Chair of the meeting provides signature to the Statement of Accounts.

SHEFFIELD CITY REGION COMBINED AUTHORITY14th September

COMBINED AUTHORITY STATEMENT OF ACCOUNTS

Background Information

2.1.The Combined Authority’s 2014/15 Statement of Accounts were authorised by the Director of Finance (Section 151 Officer) on the 29 June 2015. At this time the accounts were still subject to External Audit by KPMG. This audit is now complete and the External Auditor’s findings have been received.

2.2.The revised, audited Statement of Accounts is attached at Annex A to this report. The Statement of Accounts needs to be approved by those present at this meeting.

2.3.As the Statement of Accounts is a technical document some explanatory notes are attached at Appendix 1 to this report to aid understanding. These notes explain the purpose of each statement and the peculiarities of Local Authority accounting.

2.4.External Auditors are required to undertake their work in accordance with International Auditing Standards. Specifically, they are required to communicate any relevant matters relating to the audit to those charged with governance.

Key accounting and reporting issues for 2014/15

Opening Balances

3. The Combined Authority was constituted on the 1 April 2015. The opening balances of the new authority have been derived from the former South Yorkshire Integrated Transport Authority (SYITA) accounts and working papers, together with subsidiaries South Yorkshire Passenger Transport Executive (SYPTE), South Yorkshire ITA Properties Limited and the Local Enterprise Partnership. The South Yorkshire Passenger Transport Pension Fund accounts are also attached as a memorandum item. These balances have been audited and accepted as the opening position of the new authority.

4. Comparator figures and information for 2013/14 have been limited to the balance sheet and its supporting notes, as it was not considered helpful for the reader to include other balances that pre-date the new authority and may not have been prepared consistently with the new group reporting structure.

Capital Grant

5. The most significant transaction during 2014/15 implemented the Authority’s decision to award a capital grant of £72.9m to its operating subsidiary SYPTE. This

transaction, to resource past capital expenditure incurred by SYPTE, moved the liability from SYPTE to the Combined Authority and is now consistent with the arrangements of other ITAs / Combined Authorities.

Findings from the External Audit of the 2014/15 Statement of Accounts

6. The findings from the external audit review are set out in detail in KPMG’s Report to those Charged with Governance (ISA 260) 2014/15, which is a separate report, and the meeting is asked to note the contents.

7. As a result of on-going work on the draft accounts produced in June, some minor misstatements and presentational errors have been identified by officers and others have been identified as a result of the external audits of all members of the Group. Where material, the necessary amendments have been made to the Statement of Accounts.

8. In overall terms the Authority has the necessary controls in place to provide assurance over the financial statements and it is intended that an unqualified Audit opinion will be given on the accounts (i.e. that the financial statements present a true and fair view of the financial position of the Combined Authority as at 31 March 2015 and its income and expenditure for the year).

9. The External Auditors are also required to report on value for money, specifically on the Group’s arrangements for securing economy, efficiency and effectiveness in its use of resources. The Report to those Charged with Governance (ISA 260) 2013/14 reports a qualified conclusion in respect of the issues related to the governance arrangements for the new authority.

10. In order to complete their audit and satisfy their auditing standards, the Auditors are requesting written management representation from those charged with governance. Appropriate enquiries have been made with responsible officers within the Authority in order to confirm the representations included. Therefore, attached at Annex B is a letter of management representations in the format prescribed by the External Auditors to be signed by the Chair of the meeting.

11.The Auditors are also required to ask those charged with governance to confirm that there are no material uncertainties that cast significant doubt about the ability of the Combined Authority to continue as a going concern. Appropriate enquiries have been made within the group and for other parties in which the Authority has an interest and no material uncertainties have been identified.

Publication of the 2014/15 Statement of Accounts

12.As part of their work to complete the audit, the Auditors issue an opinion on the Statement of Accounts and a Certificate of Completion of the Audit. It is intended that an unqualified opinion will be given on the Statement of Accounts and a certificate issued to close the Audit.

13.The 2014/15 Statement of Accounts will be published on the Combined Authority’s website and on the websites of each of the member Councils. Once the Certificate of Completion is received an advert will be placed in the local press to inform that the audit has been concluded and the accounts have been published.

Implications

i. Financial

This report summarises the CA’s Statement of Accounts for financial year 2014/15.

These Accounts are the first prepared for the CA.

The financial performance of the CA over financial year 2014/15 is materially affected by the CA’s award of a £72.9m grant to its subsidiary body, South Yorkshire Passenger Transport Authority.

ii. Legal

None

iii. Diversity

None

iv. Equality

None

Gareth SuttonFinance Manager

Officer responsible: Eugene Walker, Section 151 [email protected]

APPENDIX 1

Explanatory Note: Statement of Accounts

1. The purpose of this document is to provide guidance on the interpretation of the Combined Authority’s Statement of Accounts. The accounts comprise several key statements:

Movement in Reserves Comprehensive Income and Expenditure Account Balance Sheet Cash Flow Statement Key Notes to the Core Financial Statements

Peculiarities of Local Authority Accounting

2. The presentation of Local Authority accounts differs greatly to that of the private sector. Many of these differences occur due to legislative requirements for Local Authority accounts. For example, in the Combined Authority’s accounts income is shown as a negative figure in brackets and expenditure is shown as a positive figure.

3. There are also significant differences in the way the Authority accounts for Capital and Pension Contributions.

Capital

4. Local Authorities account for capital in line with International Financial Reporting Standards (IFRS) on the face of the income and expenditure account. However, the impact of any charges are “reversed” out in an adjustment between accounting basis and funding basis under regulation, so that they do not impact on the amount collected in local taxation / levies.

Pensions

5. Local Authorities are required to comply with International Accounting Standards (IAS) 19 on accounting for post-employment benefits, which means accounting for

pension liabilities when they are committed to giving them, not when they are actually paid out. In the Combined Authority group SYPTE complies with IAS 19 and recognises their share of the net liability of South Yorkshire Pension Scheme in the balance sheet. Within the Comprehensive Income and Expenditure account the cost of service figures have been adjusted so they represent the true costs of pensions earned. IAS 19 does not have any effect on local taxation / levies as they are reversed out as an adjustment between accounting basis and funding basis under regulation. These transactions are consolidated into the Combined Authority’s group accounts.

Movement in Reserves

6. This Statement shows the movement in the year on the different reserves held by the Authority, analysed into 'usable reserves' (i.e. those that can be applied to fund expenditure or reduce local taxation/levies) and other unusable reserves.

7. The Surplus or (Deficit) on the provision of services line shows the true economic cost of providing the Authority's services, more details of which are shown in the Comprehensive Income and Expenditure Statement.

Comprehensive Income and Expenditure Account

8. This Statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation / levies.

9. Authorities raise taxation / levies to cover expenditure in accordance with regulations; this may be different from the accounting cost.

10.The presentation of the cost of services is presented using the Service Reporting Code of Practice (SeRCOP) classification, a statutory requirement. This is so comparisons between different Authorities can be made.

Balance Sheet

11.The Balance Sheet shows the value as at the Balance Sheet date of the asset and liabilities recognised by the Authority. The net assets of the Authority (assets less liabilities) are matched by the reserves held by the Authority.

12.Reserves are reported in two categories:

Usable reserves - those reserves that the Authority may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use.

Unusable reserves - those that the Authority is not able to use to provide services. This category of reserves includes reserves that hold timing differences shown in the Movement in Reserves Statement line “Adjustments between accounting basis and funding basis under regulations”.

Cash Flow Statement

13.The Cash Flow statement shows the changes in cash and cash equivalents of the Authority during the reporting period. The statement shows how the Authority generates and uses cash and cash equivalents.

14.The amount of net cash flows arising from operating activities is a key indicator of

the extent to which the operations of the Authority are funded by way of taxation and grant income or from the recipients of services provided by the Authority.

Key Notes to the Financial Statements

15.The notes to the accounts contain information in addition to that presented in the main statements. They provide narrative descriptions, disaggregation of items presented in the statements and further information about items in the statements.

16.The outturn position at the end of the 2014/15 financial year reported that there was an overall underspend of approximately £38.2m before movement on reserves and the award of the SYPTE capital grant. The Statement of Accounts is in line with the outturn report but sets out the more detailed financial position for the Authority in a format required by legislation. The summary position is shown on page12 of the Foreword, with the following two notes showing the detailed reconciliation between the outturn position and the statement of accounts, in both the single entity and group accounts:

Adjustments between accounting basis and funding basis under regulations – this note details the adjustments that are made to the total comprehensive income and expenditure account in accordance with accounting practice to the resources that are specified by statutory provision as being available.

Amounts reported for resource allocation decisions – this note reconciles the income and expenditure shown in the comprehensive income and expenditure account to the budget outturn report produced by the Authority.


STATEMENT OF ACCOUNTS2014/15

(Audited)

For the period1 April 2014 to 31 March 2015

Sheffield City Region Combined Authority – Statement of Accounts 2014/15

2

Contents

Contents ......................................................................................................................2

Foreword by the Director of Finance ...........................................................................4

Annual Governance Statement .................................................................................14

Statement of Accounts ..............................................................................................23

Statement of Responsibilities.................................................................................23The Core Financial Statements .............................................................................24

Movement in Reserves Statement .......................................................................24Comprehensive Income and Expenditure Statement...........................................26Balance Sheet......................................................................................................27Cash Flow Statement...........................................................................................28

Notes to the Core Financial Statements ................................................................291. Accounting Policies ..................................................................................292. Accounting Standards that have been issued but have not yet been adopted373. Critical Judgements in Applying Accounting Policies ...............................374. Assumptions made about the future and other major sources of estimation uncertainty..............................................................................................................385. Material Items of Income and Expense ....................................................386. Adjustments Between Accounting Basis and Funding Basis Under Regulations ............................................................................................................397. Transfers (to) / from Earmarked Reserves ...............................................398. Financing and Investment Income and Expenditure ................................409. Taxation and Non Specific Grant Income.................................................4010. Financial Instruments ...............................................................................4011. Nature and Extent of Risks Arising from Financial Instruments ...............4312. Long Term Debtors...................................................................................4913. Long Term Investments ............................................................................4914. Short Term Debtors ..................................................................................4915. Cash and Cash Equivalents .....................................................................5016. Short Term Borrowing ..............................................................................5017. Short Term Creditors ................................................................................5018. Other Long Term Liabilities ......................................................................5019. Usable Reserves ......................................................................................5120. Unusable Reserves ..................................................................................5221. Cash Flow Statement – Operating Activities ............................................5322. Cash Flow Statement – Investing Activities..............................................5423. Cash Flow Statement – Financing Activities ............................................5424. Amounts Reported for Resource Allocation Decisions.............................5425. Members Allowances ...............................................................................5726. Officer Remuneration ...............................................................................5727. External Audit Fees ..................................................................................5728. Grant Income............................................................................................5829. Related Party Disclosures ........................................................................5830. Capital Expenditure and Capital Financing and Capital Commitments ....60Group Accounts .....................................................................................................62

Group Movement in Reserves Statement ............................................................64


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Group Consolidated Comprehensive Income and Expenditure Statement..........66Group Consolidated Balance Sheet.....................................................................67Group Consolidated Cash Flow Statement..........................................................68Notes to the Group Core Financial Statements ...................................................69

31. Group Accounting Policies .......................................................................6932. Group Adjustments Between Accounting Basis and Funding Under Regulation..............................................................................................................7833. Group Transfers (to) / from Earmarked Reserves ....................................7934. Group Financing and Investment Income and Expenditure .....................7935. Group Taxation and Non-Specific Grant Income......................................8036. Group Intangible Assets ...........................................................................8037. Group Property Plant and Equipment.......................................................8138. Group Investment Properties....................................................................8239. Group Financial Instruments ....................................................................8240. Group Short Term Debtors .......................................................................8441. Group Cash & Cash Equivalents ..............................................................8442. Group Short Term Creditors .....................................................................8443. Group Provisions ......................................................................................8544. Group Usable Reserves ...........................................................................8545. Group Unusable Reserves .......................................................................8646. Group Cash Flow Statement – Operating Activities .................................8647. Group Cash Flow Statement – Investing Activities...................................8748. Group Cash Flow Statement – Financing Activities .................................8749. Group Amounts Reported for Resource Allocation Decisions..................8750. Group Officers’ Remuneration..................................................................9051. Group Termination Benefits......................................................................9152. Group External Audit Fees .......................................................................9153. Group Grant Income.................................................................................9254. Group Related Party Transactions ...........................................................9255. Group Leases ...........................................................................................9456. Group Private Finance Initiative (PFI) ......................................................9557. Group Post-Employment Benefits ............................................................9658. Glossary..................................................................................................10059. South Yorkshire Passenger Transport Pension Fund ............................106Independent Auditors Report ...............................................................................130


4

Foreword by the Director of Finance

1. Introduction

Purpose of the Foreword

The Sheffield City Region Combined Authority is a diverse and complex organisation. This foreword aims to provide an overview of the organisational structure of the Combined Authority, its objectives, and its financial performance in its first year of operation.

The Statement of Accounts contains all the financial statements and disclosure notes required by statute. They have been prepared in accordance with the 2014/15 Code of Practice on Local Authority Accounting (the Code) together with guidance notes as published by the Chartered Institute of Public Finance and Accountancy (CIPFA).

Transitioning from the Integrated Transport Authority to the City Region Combined Authority

Constituted on the 1st April 2014, the Sheffield City Region Combined Authority is a new and innovative means of providing public services. The legal title of the Authority, as set up by the Statutory Order is Barnsley, Doncaster, Rotherham and Sheffield Combined Authority, however the trading name of Sheffield City Region Combined Authority has been adopted by the Authority to better reflect the role of the wider region, which also includes North Derbyshire and North Nottinghamshire. This name will be used throughout the Statement of Accounts.

Building on the role of its predecessor (the South Yorkshire Integrated Transport Authority (SYITA)) the Combined Authority benefits from wide-ranging competencies in relation to the provision of transport matters.

However, the enabling legislation that constituted the Combined Authority also conferred upon it the additional wider powers enjoyed by English local authorities, which allows it to conduct expansive economic development activity.

Accordingly, the Combined Authority enjoys broader powers than its predecessor that allow it to carry out activities that were outside the scope of the SYITA.

These powers conferred upon the Combined Authority are complementary to those enjoyed by the nine individual districts that constitute the city region. In creating the Combined Authority, government did not revoke any powers from the individual districts.

Again, however, the Combined Authority can be differentiated from its predecessor by the geography of its constituent districts. Whilst the SYITA was solely a South Yorkshire body, the Combined Authority has a wider area of operations spreading into North Nottinghamshire and North Derbyshire.


5

This broader constituency of districts reflects the economic realities of our communities, where populations live and work across more traditional, local authority boundaries. Aligning our resources and aspirations to these realities is essential to delivering on economic growth goals.

These aspirations and goals, along with the Combined Authority’s plan for delivering them, are laid down in the Strategic Economic Plan (SEP). The SEP details our plans to deliver:


6

To deliver on the SEP, the Combined Authority’s activity and governance has been shaped over the course of the year into five thematic work streams. Governance arrangements for the thematic work streams can be represented accordingly:

Funding and decision making is also affected by the nature of the activity.

South Yorkshire transport activity is seen as complementary to the wider SEP, but is differentiated from pan-regional transport and economic development activity by its source of funding.

South Yorkshire transport activity is principally funded through a levy by the Combined Authority on the individual South Yorkshire districts. The use of this funding is then, per statute, used only to support South Yorkshire expenditure.

Other Combined Authority activity is funded from subscriptions from the nine Combined Authority districts, and retained business rates from the region’s Enterprise Zone. The Combined Authority also benefits from government through support for programme activity, and some general revenue support.

Capital activity is funded through the award of grants from government and Europe, and where necessary borrowing. Currently, the Combined Authority’s borrowing powers only extend to South Yorkshire transport activity.

During financial year 2014/15 all capital activity fell on South Yorkshire transport schemes, with no wider regional economic development activity. This principally reflects that there was, during the year, no funding awarded from government for economic development schemes.

This situation will, however, be addressed in 2015/16 and through the region’s Local Growth Fund (LGF) settlement with government. This settlement saw the region awarded £313m of capital funding over a ten year period to pursue our SEP goals. The region’s award was one of the largest in the country, and reflects our strong aspirations and assurances to government that we are better placed locally to make investment decisions, and deliver on them, than Whitehall departments.


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Delivering on the SEP agenda, whilst managing resource pressures, will be the key challenge for the Combined Authority over the coming financial years.

2. Group Structure

The Combined Authority’s core activity can be broadly split between two distinct but complementary themes:

South Yorkshire transport activity in support of the South Yorkshire Transport Plan; and,

Economic development activity in support of the Strategic Economic Plan (SEP).

South Yorkshire transport activity is principally carried out through the Combined Authority’s operating subsidiary: South Yorkshire Passenger Transport Executive (SYPTE).

SYPTE is primarily funded through a revenue grant awarded from the Combined Authority. The Authority funds this grant through a levy on the four South Yorkshire districts. This levy is negotiated each year as part of the budget setting process.

Operational activity in pursuit of the SEP is primarily carried out directly through the Sheffield City Region Executive; the Combined Authority’s officer team. This team is led by the Combined Authority’s Executive Director (Head of Paid Service). Economic development activity is carried out in collaboration with the SCR Local Enterprise Partnership (LEP) who provide strategic leadership.

Alongside its core activities of delivering on the South Yorkshire Transport Plan and economic development activity in pursuit of the SEP, the Combined Authority also holds responsibilities in respect of the South Yorkshire Passenger Transport Pension Fund (SYPTPF) for which the Authority holds administering body status.

This fund relates to a restricted number of employees and former employees of First South Yorkshire Ltd who participate in the local government pension scheme. The Combined Authority does not contribute any funding towards the costs of the fund which is managed on an agency basis for the Combined Authority by South Yorkshire Pensions Authority (SYPA).

The SYPTPF’s accounts are included as an addendum to this document, but are not consolidated into the group position.

The Combined Authority also owns, by way of a majority shareholding, a company principally concerned with the management of a number of assets. This company, SYITA Properties Ltd, provides a management function for several properties currently leased to third parties. The company’s major asset, an office facility in Sheffield, is leased directly to SYPTE.


8

The following image identifies the core areas of activity, along with strategic plans, delivery agents, and operational activity:

The accounts contained in this document show the financial results for the Combined Authority as a single entity, and financial results for the Combined Authority as a group.

As a single entity the Combined Authority accounts for its work in support of the SEP, and the transactions it enters into as the parent body for SYPTE, SYITA Properties Ltd, and the administering body for SYPTPF.

As a group, the Combined Authority consolidates the full financial results of SYPTE and SYITA Properties Ltd into its own to create an overall group financial position.

3. Financial Year 2014/15 Overview

Financial year 2014/15 was a year of consolidation, policy development, and preparation for the Combined Authority.

Much work has been done to embed responsive governance processes through the Authority Assurance Framework that will provide a suitable decision making structure to ensure we deliver on the SEP and the promises we made to government in it.

The successful Local Growth Fund award is seen as testament to the strength of the Combined Authority goals, and the infrastructure put in place to deliver upon it.

Work has also been undertaken, and continues, to ensure the Combined Authority’s activities are conducted on a sustainable financial basis. This has meant a fundamental review of some of the operations, including the efficacy of operating a property portfolio through SYITA Properties Ltd.

A review of the relationship between the Combined Authority and SYPTE, within the context of capital financing, has also raised inefficiencies in the resourcing of legacy


9

capital expenditure. The award of a capital grant, to the value of £72.9m, seeks to redress this situation.

Though the award of this grant increases the Combined Authority’s capital financing requirement, in aligning debt provision charges to the period over which the assets created by the expenditure provide economic benefit, the Combined Authority is able to alleviate undue pressure on the South Yorkshire transport levy. This grant is discussed in more detail in the following section.

Work has also been undertaken to formalise and codify the means by which retained business rates from the region’s Enterprise Zones are passed to the Combined Authority. This income stream is of particular importance to Combined Authority as it is one of the few non-programme revenue funding streams available to the Combined Authority to support economic development activity.

Capital Grant Award

The material changes to the Combined Authority’s financial position over the course of the year principally relate to the award by the Combined Authority of a capital grant worth £72.9m to its operating subsidiary, SYPTE.

This grant was awarded to resource past capital expenditure that could have been funded by the Combined Authority / SYITA at the time.

The award of the grant moves capital financing liabilities from SYPTE to the Combined Authority. This is in common with how other Combined Authorities / ITA’s transact within their group structures.

Moving the liability allows the Combined Authority to properly align the costs associated with the financing decisions to the period over which the assets created provide economic benefit to the region.

In so aligning costs to benefits, the Combined Authority is able to create a more prudent provision for the repayment of debt and avoid placing undue pressure on the transport levy.

Upon the award of the grant no cash changed hands between the Combined Authority and SYPTE. This reflects the role the Combined Authority plays in providing cash management services to SYPTE and only releasing cash to its subsidiary as it is required.

The award of the grant increases the Combined Authority’s indebtedness by £72.9m. This indebtedness will eventually be fully provided for through debt provisions.

The Group has commissioned external surveyors to determine useful economic lives for the assets funded by this grant award, and minimum revenue provision (MRP) profiles have been created on the basis of these assessments.

Following the award of the grant, the Combined Authority and SYPTE agreed to reduce the revenue grant award payable to SYPTE during the year by £39.7m. This reduction meant the accrual of a surplus on operating activity of £39.7m that was taken to reserves.


10

This contribution to reserves will support the Combined Authority and SYPTE in addressing budget challenges as the levied districts come under increasing revenue pressure.The residual £33.2m of the grant award will be retained at SYPTE as a grant unapplied, and will be released to offset depreciation charges that would otherwise fall upon the transport levy.

Headlines

The following bullet points summarise the main headlines from this year’s single-entity (non-group) accounts:

Decrease in net worth by £47.2m:

o This is principally due to the £72.9m grant award to SYPTE which increases indebtedness

o This is improved by the reduction of the in-year revenue grant from the Combined Authority to SYPTE by £39.7m which created an in-year surplus

Increase in useable reserves of £23.6m:

o This is a net increase principally due to:

The £37.6m in-year surplus on transport activity; and, The application of capital and revenue grants to the value of

£14m

Decrease in short-term creditors of £33.7m:

o Principally due to the increase in cash due to SYPTE as a result of the award of the capital grant; offset by,

o The transfer of £11m cash to SYPTE for the repayment of loans falling due.

Revenue Budgets

Two revenue budgets were separately approved to form the Combined Authority’s 2014/15 budget.

The South Yorkshire Transport budget was approved by the former SY ITA Board in March 2014, whilst the Chief Executives of the nine Combined Authority districts approved a revenue budget to support economic development activity.


11

This consolidated budget can be broadly shown as follows:

SY Transport Economic Development

Total Budget

£000 £000 £000ExpenditureSalaries 0 920 920Supplies & Services 440 661 1,101Debt Charges 2,032 0 2,032Grants to 3rd Parties 78,679 0 78,679

81,151 1,581 82,732Income Grants 0 (639) (639)Local authority contributions (75,982) (204) (76,186)Retained business rates 0 (734) (734)Investment income (1,562) 0 (1,562)

(77,544) (1,577) (79,121)

Net Budget 3,607 4 3,611Use of Reserves (3,607) (4) (3,611)

The Combined Authority’s outturn position was largely affected by one-off interventions, not in the original budget, but were designed to support longer-term budget sustainability across both of the South Yorkshire transport and Combined Authority / LEP economic development work streams.

On the Combined Authority’s South Yorkshire transport side this was reflected in the award of the capital grant (£72.9m) previously described, which allowed the Combined Authority to reduce the revenue grant it paid to SYPTE during the year by £39.7m. This transaction was coupled with a small (£62k) underspend on in-year activity.

Allowing for the planned use of reserves factored into the budget (as above) the balance of this underspend was transferred to reserves, and will be used to facilitate sustainable South Yorkshire levy reductions in support of the Combined Authority’s South Yorkshire district partners’ budget challenges and wider transport policy aspirations.

On the Combined Authority / LEP economic development side, a one-off intervention was required to manage revenue deficits and provide a stable base budget for financial year 2015/16. This was achieved by districts opting to either impair revenue loans previously advanced to the Combined Authority / LEP, or award in-year grants, and secured additional resource of £558k. These transactions, coupled with a general underspend of £59k, are taken to reserves to support the 2015/16 budget and provide a prudent level of contingency reserves to underpin Combined Authority / LEP activity.

The following table shows how we go from the revenue budget outturn position to the deficit on the Consolidated Income and Expenditure Statement (CIES).

Differences between these figures relate to accounting rules, particularly around the accounting for capital expenditure that does not result in the creation of assets for the


12

Combined Authority. Such transactions are often called deferred charges and normally relate to situations where the Authority advances capital grants to partners in support their capital activity. Statute requires these charges to be treated differently in the financial statements than how we show charges in the budget.

£000South Yorkshire Transport (surplus) (37,560)CA/LEP Economic Development (surplus) (613)CA Revenue Budget (surplus) 2014/15 (38,173)

Use of LSTF Reserves 4,870Removal of Debt Charges per Statute (1,993)

Revenue Expenditure Funded by Capital Under Statute (REFCUS):Capital Grant Award to SYPTE 72,900Other Deferred Charges 9,648

82,548

Deficit on Total Comprehensive Income & Expenditure Account 47,252

The large deficit on the CIES principally relates to the capital grant award to SYPTE. This is a capital transaction, and for budgeting purposes falls outside the revenue budget. However, for accounting purposes we are required to show it as a charge to the revenue statement.

This charge is, though, reversed out of the Statement of Movement on General Fund Balance to avoid it being an in-year charge to the General Fund and taxpayer. Instead, the transaction is transferred to the Capital Adjustment Account to reflect capital expenditure (by way of grant) that is yet to be resourced. The Authority is committed to resourcing the grant through minimum revenue provisions (MRP) that will result in a charge to the General Fund.

Capital Programme

The Combined Authority’s capital programme in 2014/15 was limited to its South Yorkshire transport activity.

This principally reflects that the Combined Authority / LEP received no capital funding during the year, and does not currently have the vires to borrow for its economic development activity.

During the year capital activity for the single entity was recorded on the following activity:

Programme Expenditure Income Net£000 £000 £000

Local Transport Plan (LTP) 15,560 (15,560) 0Local Sustainable Transport Fund (LSTF) 8,626 (8,626) 0Highways Capital Maintenance 9,139 (9,139) 0Capital Grant Award 72,900 0 72,900Total 106,225 (33,325) 72,900


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Usable Reserves

The Combined Authority holds a prudent level of reserves to support its activity, guard against fiscal shock and allow for flexibility.

As with the revenue budget, these reserves can be split between those that are held to support South Yorkshire transport activity, and those that are held to support Combined Authority / LEP economic development activity.

During the year, the South Yorkshire transport element of the Combined Authority General Fund significantly increased as a result of the reduced revenue grant paid to SYPTE. This reduction (£39.7m) was made possible due to the award of the capital grant by the Combined Authority to SYPTE (£72.9m).

The impairment of loans previously advanced, together with a small surplus in year, provides the Combined Authority / LEP activity with a revenue reserve to underpin activity in 2015/16.

Financial Outlook

The Combined Authority’s financial outlook is heavily tied to the fortunes of national government and its local authority partners.

The Authority’s transport activities are predominantly funded by the South Yorkshire districts, and future budgets and levies will be negotiated within the context of the budget challenges those partners face and their aspirations for the transport activity.

Similarly, Combined Authority / LEP economic development activity is heavily reliant upon central government for future capital resource and revenue contributions to support core activity. Much successful work has been undertaken to achieve notional future capital funding allocations, but actual awards will be predicated on government’s ability to resource them. Combined Authority / LEP revenue resource remains low in the context of the proposed SEP capital programme. Much of the revenue resource will flow from retained business rates collected from the region’s Enterprise Zone. The region will therefore work to stimulate activity on the sites within the Enterprise Zone. Uncertainty remains around government’s willingness to continue to provide revenue support to Combined Authority / LEP activity. Should this funding fall away, the region will be required to consider additional partner support or review the scope of activity.


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Annual Governance Statement

Sheffield City Region Combined Authority

Annual Governance Statement 2014/15

1. Scope of Responsibility

1.1 The Sheffield City Region (SCR) Combined Authority (‘the Authority’) is responsible for ensuring that its business is conducted in accordance with statute and proper standards of governance are employed; that public money is safeguarded and properly accounted for and used economically, efficiently and effectively. The Authority has a duty under the Local Government Act 1999 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 responsible for establishing proper arrangements for the governance of its affairs, facilitating the effective exercise of its functions and the management of any associated risks.

1.2 The Authority’s corporate governance arrangements have not been fully in place during 2014/15 and are still being developed in line with its programme of work. The governance arrangements being developed will comply with the principles of the Chartered Institute of Public Finance and Accountancy (CIPFA) / Society of Local Authority Chief Executives (SOLACE) Framework Delivering Good Governance in Local Government. A copy of the Authority’s Constitution is available on its website at www.southyorks.gov.uk.

1.3 The Authority acknowledges that good governance arrangements are the basis upon which it is able to establish policies and ultimately the efficient delivery of its services and programme of work to communities within the city region. For good governance to be truly effective it must be robust yet permissive and be able to be adapted swiftly to changing circumstances. Public bodies such as the Combined Authority must be responsive to developments in services, public expectations and the actions of other stakeholders. The Annual Governance Statement offers reassurance in part and highlights where improvements are being made, so that a comprehensive and effective governance framework is in place.

2. The Purpose of the Governance Framework

2.1 The governance framework evidences the systems, processes, culture and values, by which the Authority directs and controls the activities it is accountable for in order to provide an effective service to the Sheffield City Region.

2.2 The system of internal control is a significant part of the Framework and throughout the first year’s operation of the Combined Authority it has developed such that any risks have been managed efficiently and effectively, acknowledging that a Risk Management Strategy and Framework is still to be developed for the Combined

http://www.southyorks.gov.uk/


15

Authority but taking account of systems and processes in place of those partner authorities charged with governance responsibilities. Whilst it is not possible to eliminate all risk when delivering the Authority’s policies, aims and objectives, it is intended to provide reasonable assurance of the effectiveness of the arrangements in place. The system of internal control is based on an evolving process designed to identify and prioritise the risks to the achievement of the Authority’s policies, aims and objectives and to evaluate the likelihood of those risks being realised and any likely impact. Once identified, the Authority will seek to manage them transparently, effectively and economically.

2.3 The new Combined Authority met for the first time on 22 April 2014 at which time a new Constitution was presented and formally agreed. It was acknowledged at that time that the Combined Authority’s Corporate Governance Framework would be ‘work in progress’ as its key delivery objectives evolved.

3. THE GOVERNANCE FRAMEWORK

Context

3.1 The key elements of the governance framework, its systems and processes, are outlined below.

3.2 The period 2014-15 was the first year’s operation of the Sheffield City Region Combined Authority and understandably has focused on establishing a framework which is fit for purpose, acknowledging it needs to improve further as work programmes develop. The Sheffield City Region Combined Authority comprises the areas of nine local authorities:

Constituent Authorities

Barnsley Metropolitan Borough Council;

Doncaster Metropolitan Borough Council;

Rotherham Metropolitan Borough Council;

Sheffield City Council;

Non-Constituent Authorities

Bassetlaw District Council;

Bolsover District Council;

Chesterfield Borough Council;

North East Derbyshire District Council;

Derbyshire Dales District Council

3.3 The Combined Authority is a new local government body established to coordinate and drive forward economic regeneration and transport initiatives for the benefit of citizens and the business community within its boundaries. The transport functions


16

were previously the responsibility of the former South Yorkshire Integrated Transport Authority.

3.4 There has been a long standing approach to collaborative working amongst the partner authorities; a reflection of the natural and economic geography of the region. This was formalised firstly through the Sheffield City Region Forum, which subsequently became the SCR Local Enterprise Partnership and in turn aligned with the SCR Leaders Group.

3.5 The functions and powers of the Combined Authority provide for a stable and effective governance function in support of key strategic policy areas; economic development, regeneration and transport. The Authority’s objective, working in tandem with central Government, is to see greater devolution of funding, resources and functions to the city region. As this approach evolves it will be necessary that the Authority’s governance framework also develops and becomes embedded so as to maintain confidence in this arrangement.

Structure

3.6 The Sheffield City Region Combined Authority comprises the Leaders and Elected Mayor (Doncaster) of each of the nine councils which constitute the body. It meets every six weeks and is aligned to a number of supporting committees and boards which provide the expected degree of scrutiny and challenge in formulating policy and driving key strategic decision-making.

3.7 The Authority’s Constitution and operating arrangements have been approved by all nine member bodies and include terms of reference for the SCR Transport Committee and the authority it has both delegated and referred to it. The Constitution sets out the powers and functions of the Combined Authority, including financial procedures, Member and officer Codes of Conduct, the scheme of delegation to officers and arrangements for the operation of a scrutiny and audit committee function.

3.8 The Scheme of Delegation provides for the day to day management and oversight of services provided by the Authority. These include the responsibilities of the Head of Paid Service, Clerk, Finance Director and Monitoring Officer. This will expand further as the Authority formalises key work streams and their operation. In further strengthening its governance structure the Authority has agreed to implement a Leader and Executive model for programme management which will maintain robust accountability whilst ensuring decisions are taken in an efficient and timely manner.

SCR Transport Committee

3.9 The SCR Transport Committee is a joint committee of the Combined Authority comprising all nine districts, (four constituent and five non-constituent authorities). The Transport Committee has oversight of a broad programme of work which is carried out by the South Yorkshire Passenger Transport Executive (its executive body), which includes scrutinising the performance of a wide range of public transport operators, monitoring the delivery of a significant capital programme, its revenue spend and overseeing the delivery of a transformational transport policy programme.


17

The Committee has both referred and delegated responsibilities. In respect of the former, which includes approving the revenue budget for transport and its capital programme, the Committee advises the Combined Authority by way of recommendation for approval or otherwise.

3.10 In addition to its transport functions, the Committee is responsible for oversight of the South Yorkshire Passenger Transport Pension Fund in accordance with statutory regulations. It appoints an external manager and an external advisor to administer the Fund on its behalf. It is required to publish a Funding Strategy and Statement of Investing Principles. The external manager has experienced some difficulties in normal service provision as a result of the introduction of new pensions’ administration software. The has not resulted in significant problems for those in receipt of pensions but given the issue it will be incorporated in the Governance Improvement Plan for the forthcoming year and progress on its resolution reported to the Authority

3.11 The CA has appointed a Pension Fund Committee whose membership is drawn from the former Passenger Transport Pension Fund Committee of the former Integrated Transport Authority and who are now members of the Transport Committee of the Combined Authority. A review of the arrangements for the management of the South Yorkshire Passenger Transport Pension Fund is to be undertaken to consider how the Authority should most appropriately discharge its functions as Administering Authority for the Fund, having regard to Members fiduciary obligations. This is acknowledged in the Governance Improvement Plan appended to this document. The Authority has in accordance with The Public Service Pensions Act 2013 established a Pensions Board. It is expected, (awaiting confirmation from the Secretary of State for Communities and Local Government before the end of July 2015) that for administrative efficiency this will be a joint arrangement with the Local Government Pension Scheme Board in South Yorkshire, given the day to day management of the Fund is undertaken by the same body, South Yorkshire Pensions Authority.

South Yorkshire ITA Properties Limited

3.12 SY ITA Properties Limited is wholly owned subsidiary company of the Combined Authority. The Company’s main activity is property management and disposal of the former Integrated Transport Authority’s property holdings. In acknowledging the clear requirement to evidence due-diligence, officers have sought to examine the relationship between the Combined Authority and SY ITA Ltd and its efficiency as a means of supporting the Combined Authority. The Authority’s Section 151 Officer has commissioned an external review in order to inform the Authority on future options, acknowledging the legal and financial implications of the company’s operation. An internal audit of the company’s governance arrangements has been undertaken which has highlighted a number of governance deficiencies when comparing the company against public sector standards of governance and accountability. . In view of these concerns, the Authority acknowledges the current operating arrangements as a control weakness and as such this features in the Governance Improvement Plan appended to this document.


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Overview and Scrutiny

3.13 The Authority has established an Overview and Scrutiny Committee comprising 14 Members drawn from each of the nine constituent and non-constituent Member councils, reflective of political balance within the South Yorkshire City Region.

3.14 Meetings are convened on a quarterly basis and provide scope for the work programme and performance of the Combined Authority to be effectively challenged. The Audit Committee was not formally constituted during 2014/15 and therefore has yet to meet.

Internal Audit

3.15 Barnsley MBC provides the internal audit service to the Combined Authority. The Head of Internal Audit has liaised with the relevant statutory officers during the year to assist in the development of governance arrangements and on the adequacy and effectiveness of the Authority’s existing systems of internal control. Arrangements for internal audit during 2014/15 have been difficult in the context of the Authority developing its governance and control arrangements. As a consequence, Internal Audit support has been largely limited to advising statutory officers, assistance in developing the control, risk and governance framework, the audit of South Yorkshire ITA Properties Limited and work undertaken on the financial systems utilised by the Authority. A full programme of internal audit coverage has been discussed and planned for 2015/16.

3.16 The Head of Internal Audit’s annual assurance opinion is reproduced below from his annual report to the Overview and Scrutiny Committee.

Although the context of 2014/15 is of being a year of development and transition, the absence of a comprehensive framework of governance is a fundamental weakness. As such it is not possible to give a positive assurance opinion. As stated previously, it is acknowledged by management and reflected in the draft Annual Governance Statement that significant work is required to correct this position.

Audit Committee Arrangements

3.17 The Authority agreed that the distinct roles of the Overview and Scrutiny and Audit Committees will be maintained and acknowledged that in terms of efficiency, Audit Committee meetings will be convened at the rising of the Scrutiny Committee, in effect utilising the same Membership. The two Committees will have distinct and separate programmes of work. As stated above, the audit committee has not met in 2014/15.

Sheffield City Region Local Enterprise Partnership

3.18 The Sheffield City Region Local Enterprise Partnership is a voluntary partnership between the constituent and non-constituent local authorities and the business community, playing a key role in determining local economic priorities and growth. The Partnership is a key interface with central Government and the City Region and

http://en.wikipedia.org/wiki/Local_government_in_England


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offers policy advice and strategic direction aligned with the objectives set out above. The Combined Authority works closely with the LEP; the four local authority leaders and the Mayor of Doncaster being members of both bodies.

Decision-making

3.19 All agendas and reports produced for meetings of the Combined Authority and its associated Committees are issued to members and published online, www.southyorks.gov.uk in accordance with statutory access to information requirements. All meetings are held in public and meetings of the Transport Committee are streamed (webcast) live over the internet.

Financial Management

3.20 A key responsibility of the Combined Authority is determining, agreeing and monitoring appropriate budgets in order for it to be able to fulfill strategic objective setting in the areas of economic development, regeneration and the transport levy on constituent councils.

3.21 The Section 151 function is undertaken by the Director of Finance, Sheffield City Council on behalf of constituent and non-constituent authorities. A framework for financial monitoring and an agreed reporting process has been established. Internal control is based on Sheffield City Council’s financial systems, which are well established and any identified risks managed in accordance with City Council policies and procedures. So as to ensure absolute transparency, the Combined Authority’s funds and any financial systems employed in administering them remain distinct from that of the City Council. The Director of Finance has acknowledged that as the Combined Authority’s operating budgets increase, financial systems will require further consideration so as to ensure they remain fit for purpose and proportionate in ensuring robust financial monitoring.

3.22 Quarterly update reports incorporating all areas of corporate operation from both a revenue and capital perspective are presented to the Authority for challenge and scrutiny. The transport element of Authority spend is further considered by the Transport Committee and appropriate recommendations made to the Authority. The Section 151 officer has in addition made presentations to the Scrutiny Committee to ensure an effective understanding of the process is established and an appropriate degree of challenge takes place moving forward.

3.23 The Head of Internal Audit has provided commentary in relation to the operation of the Authority’s core financial systems.

Risk Management

3.24 The Combined Authority’s Audit Committee will be responsible for overseeing the Authority’s approach to risk management and the establishment and maintenance of its risk register. Statutory officers have ensured that corporate risk has been managed appropriately in the first year of the Authority’s operation aligned to their own ‘home’ authorities systems and processes. It is acknowledged that this is an area of weakness and as such will require further work so as to provide the

http://www.southyorks.gov.uk/


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necessary degree of assurance moving forward. This point is emphasised in the Governance Improvement Plan for the forthcoming year, appended to this document.

3.25 The Transport Committee, through the Passenger Transport Executive has a well-established risk management strategy in place to provide corporate oversight of its remit.

Managing Performance

3.26 The Strategic Economic Plan and Growth Deal set out how the Combined Authority and Local Enterprise Partnership (LEP) will help transform the City Region economy, deliver growth and jobs and in so doing drive up UK exports, expertise and productivity.

3.27 Given the level of investment the City Region will be responsible for, it is vital that robust programme management processes are further developed. Integral to their success will be a clearly defined and communicated performance management process, which acknowledges the work taking place across distinct themes and provides scope for collective consideration of outputs and outcomes.

3.28 Each of the themed portfolio areas for delivery will develop their own business plans which will set out objectives, targets, milestones and their investment plan for the year ahead. Appropriate performance measures will be devised in order that progress against these objectives can be measured.

4. Review of Effectiveness

4.1 The Authority has responsibility for conducting an annual review of the effectiveness of its governance framework. This includes consideration of systems of internal control and arrangements for internal audit and assurance statement from key officers. The review of effectiveness is informed by the work of its senior officers with responsibility for the development and maintenance of governance, its structures and processes. The process is further supported through the production of the Head of Internal Audit’s Annual Report and input from the External Audit Team.

5 Significant Governance Issues 2014/15

5.1 The first year’s operation of the Sheffield City Region Combined Authority has seen strides made in developing a corporate governance framework that is fit for purpose and acknowledges the principles of good governance.

5.2 The framework continues to develop in line with the exacting programme of work the Authority is establishing in meeting its key operational objectives. This transitional period has placed significant demands on partner bodies to ensure the Authority’s work programme is delivered with due diligence and in accordance with statute and proper standards.

5.3 In establishing a Governance Improvement Plan for the forthcoming year, the Authority acknowledges further work is required to establish a more robust corporate governance framework, most notably the management of risk and performance reporting.


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5.4 The Section 151 Officer has indicated he has instigated a review of South Yorkshire ITA Properties Ltd which is also included in the Authority’s Governance Improvement Plan.

…………………………………………………………………………………….Councillor Sir Stephen Houghton CBEChairman, Sheffield City Region Combined Authority

……………………………………………………………………………………Dr Ben StillExecutive Director, Sheffield City Region Combined Authority/Local Enterprise Partnership


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APPENDIX

The Sheffield City Region Combined AuthorityGovernance Improvement Plan 2015/16

Issue Action Required Responsible Officer Date for Completion

Code of Corporate

Governance

Establish a Code of Corporate Governance in line with acknowledge the principles of the Chartered Institute of Public Finance and Accountancy (CIPFA) / Society of Local Authority Chief Executives (SOLACE) Framework Delivering Good Governance in Local Government.

Clerk to the Authority November 2015

Risk Management

Establishing a robust Risk Management process that is both proportionate and provides transparency in terms of how risk is managed, monitored and reported amongst all key stakeholders.


Performance Management

Establish a Performance Management framework that provides scope for the necessary degree of challenge and scrutiny amongst all key stakeholders


South Yorkshire ITA Properties

Limited

Commission work to consider the appropriateness of the current operation of the Company and following consideration of all options, establish a code of corporate governance that is both proportionate and provides the necessary degree of assurance

Section 151/Monitoring Officer

November 2015

South Yorkshire Passenger Transport

Pension Fund – Administration

Software

Recovery of performance as a result of the introduction of the software.

Clerk to the Authority March 2016


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Statement of Accounts

Statement of Responsibilities

The Combined Authority’s Responsibilities

The Combined Authority is required to:

Make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs. That officer is the Director of Finance.

Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets.

Approve the Statement of Accounts.

The Responsibilities of the Director of Finance

The Director of Finance is responsible for the preparation of the Combined Authority’s Statement of Accounts in accordance with proper practices as set out in the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom (the Code).

In preparing this Statement of Accounts, the Director of Finance has:

selected suitable accounting policies and then applied them consistently,

made judgements and estimates that were reasonable and prudent, and

complied with the Local Authority Code.

The Director of Finance has also:

kept proper accounting records, which were up to date, and

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

I hereby certify that the Statement of Accounts on pages 24 - 129 gives a true and fair view of the financial position of Barnsley, Doncaster, Rotherham, and Sheffield Combined Authority at 31 March 2015 and of its income and expenditure for the year ended 31 March 2015.

Eugene WalkerDirector of Finance (Section 151 Officer)14 September 2015


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The Core Financial Statements

Movement in Reserves Statement

This statement shows the movement in the year on the different reserves held by the Authority, analysed into usable reserves (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves.

The (Surplus) / Deficit on the Provision of Services line shows the true economic cost of providing the Authority’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. This is different from the statutory amounts required to be charged to the General Fund Balance. The net (increase) / decrease before transfers to earmarked reserves line shows the statutory General Fund Balance before any discretionary transfers (to) or from earmarked reserves undertaken by the Authority.


25

Movement in Reserves Statement2014/15

Gen

eral

Fun

d B

alan

ce£0

00

Cap

ital R

ecei

pts

Res

erve

£000

Cap

ital G

rant

s U

napp

lied

£000

Earm

arke

d R

even

ue R

eser

ves

£000

Tota

l Usa

ble

Res

erve

s£0

00

Unu

sabl

e R

eser

ves

£000

Tota

l Aut

horit

y R

eser

ves

£000

Note 19 19 19 19 20

Balances transferred in at 1 April 2014 (7,580) (5,343) (9,648) (11,028) (33,599) 39,826 6,227

Movement in reserves during 2014/15:(Surplus) / deficit on provision of services CI&ES 47,252 0 0 0 47,252 0 47,252Total Comprehensive (Income) and Expenditure

47,252 0 0 0 47,252 0 47,252

Adjustments between accounting basis and funding basis under regulations

6 (80,555) 0 9,648 0 (70,907) 70,907 0

Net (increase) / decrease before transfers to earmarked reserves

(33,303) 0 9,648 0 (23,655) 70,907 47,252

Transfers (to) / from earmarked reserves 7 (4,960) 0 0 4,960 0 0 0

(Increase) / decrease in year (38,263) 0 9,648 4,960 (23,655) 70,907 47,252

Balance at 31 March 2015 (45,843) (5,343) 0 (6,068) (57,254) 110,733 53,479

Comprehensive Income and Expenditure Statement

The Comprehensive Income and Expenditure Statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices.

2014/15

Not

es

Gro

ss

Expe

nditu

re£0

00

Gro

ssIn

com

e£0

00 Net

Expe

nditu

re£0

00

Transport Planning Policy and Strategy 38,260 (23,677) 14,583Public Transport Coordination 39,904 (79,842) (39,938)Material Item – Grant to the PTE 5 72,900 0 72,900Highways and Transport Services 151,064 (103,519) 47,545

Corporate and Democratic Core 335 (6) 329Planning Services Economic Development 1,436 (1,602) (166)(Surplus) / Deficit on Provision of Services 152,835 (105,127) 47,708

Interest Payable 8 1,387Interest Receivable 8 (1,326)Taxation and Non-Specific Grant Income 9 (517)(Surplus) / Deficit on Financing and Investment Income and Expenditure

47,252

Total Comprehensive (Income) and Expenditure 47,252


27

Balance Sheet

The Balance Sheet shows the value, as at the Balance Sheet date, of the assets and liabilities recognised by the Authority. The net assets of the Authority (assets less liabilities) are matched by the reserves held by the Authority. The Authority is a new entity and came into existence on 1 April 2014 under a statutory instrument by transferring the assets and liabilities of the former SYITA. The opening balance sheet is reported at 1 April 2014, rather than the closing position of the previous entities at 31 March 2014.

As at 1 April 2014

As at31 March 2015

£000 Notes £000

6,051 Long Term Debtors 12 6,18622,117 Long Term Investments 13 6,94228,168 Long Term Assets 13,128

103,047 Short Term Investments 10 114,000630 Short Term Debtors 14 2,747

87,497 Cash and Cash Equivalents 15 74,814191,174 Current Assets 191,561

0 Short Term Borrowing 16 (684)(60,353) Short Term Creditors 17 (37,955)

0 Capital Grants RIA 28 (2,510)(60,354) Current Liabilities (41,149)

(26,125) Long Term Borrowing 10 (25,000)(139,091) Other Long Term Liabilities 18 (192,019)(165,216) Long Term Liabilities (217,019)

(6,227) Net Assets / (Liabilities) (53,479)

(33,599) Usable Reserves 19 (57,254)39,826 Unusable Reserves 20 110,733

6,227 Total Reserves 53,479

The Statement of Accounts for the Barnsley, Doncaster, Rotherham and Sheffield Combined Authority (known as Sheffield City Region Combined Authority) was approved and authorised for issue by the Director of Finance and the Combined Authority Leaders, in accordance with the Accounts and Audit (England) Regulations 2011, on 14 September 2015.

These financial statements replace the unaudited financial statements authorised by the Director of Finance on the 29 June 2015.

Eugene Walker Sir Stephen Houghton OBEDirector of Finance (Section 151 Officer) Combined Authority Chairman 14 September 2015 14 September 2015


28

Cash Flow Statement

The Cash Flow statement shows the changes in cash and cash equivalents of the Authority during the reporting period. The statement shows how the Authority generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Authority are funded by way of taxation and grant income or from the recipients of services provided by the Authority. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Authority’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Authority.

2014/15Notes £000

Net surplus or (deficit) on the provision of services (47,252)

- Adjustment to surplus or (deficit) on the provision of services for non-cash movements 21 (24,745)- Adjustment for items included in the net surplus or (deficit) on the provision of services that are investing and financing activities

21 (23,677)

Net cash flow from operating activities (95,674)

Investing activities 22 30,064Financing activities 23 52,927Net increase / (decrease) in cash and cash equivalents (12,683)

Cash and cash equivalents at 1 April 87,497Cash and cash equivalents at 31 March 74,814


29

Notes to the Core Financial Statements

The following notes contain further information to that presented in the main statements. They provide narrative descriptions, disaggregation of items presented in the statements and information about items that do not qualify for recognition in the statements.

1. Accounting Policies

I. General Policies

The statements summarise the transactions of the Combined Authority, for 2014/15 financial year and its position at the year end of 31 March 2015. The Combined Authority is required to prepare an annual Statement of Accounts in accordance with the Accounts and Audit Regulations 2011. These regulations require the accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the CIPFA Code of practice on Local Authority accounting in the United Kingdom 2014/15 supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 7 of the 2011 regulations.

The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. The accounts are prepared on the basis that the Combined Authority is a going concern.

II. Accruals of Income and Expenditure

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

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership transfers to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Authority.

Revenue from the provision of services is recognised when the percentage of completion of the transaction can be reliably measured and it is probable that economic benefits or service potential associated with the transaction will flow to the Authority.

Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet.

Expenses in relation to services received are recorded as expenditure when the services are received, rather than when payments are made.

Interest payable on borrowings and receivables on investments is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract.

Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet.


30

Where there is evidence that debts are unlikely to be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.

Materiality levels were set to determine the accruals to be taken at the end of the financial year for certain low value revenue transactions. In these instances, the change from year to year is recurring in nature and the sums involved have been deemed not to be material compared with total income and expenditure.

III. Acquisitions and Discontinued Operations

Acquired Operations

All operations acquired in year will be treated in line with the Authority’s accounting policies and disclosed separately on the face of the Comprehensive Income and Expenditure Statement.

Discontinued Operations

Any discontinued operations are disclosed separately on the face of the Comprehensive Income and Expenditure Statement.

IV. Cash and Cash Equivalents

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. All deposits placed within instant access call accounts, money market funds should be classified in the accounts as cash equivalents due to these being highly liquid investments which offer instant access to the funds and are therefore deposited to meet short term cash requirements. All fixed term investments are not classified as cash equivalents as at the point of making the deposit the Authority is unable to convert these to cash until the maturity date of the investment.

In the Group Statement of cash flows, cash and cash equivalents are shown net of bank overdrafts.

V. Exceptional Items (Material Items of Income or Expense)

When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts. Where they are disclosed is dependent on how significant the items are to an understanding of the Authority’s financial performance.

VI. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment.

Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effects of transactions,


31

other events and conditions on the Authority’s financial position or financial performance. Where a change is made it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.

Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period.

VII. Events After the Reporting Period

Events after the reporting period are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of event can be identified:

those that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts are adjusted to reflect such events.

those that are indicative of conditions that arose after the reporting period – the financial statements are not adjusted to reflect such events, but where a category of events would have a material effect disclosure is made in the notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation for issue are not reflected in the financial statements.

VIII. Financial Instruments

Financial assets

Financial assets are classified into two types:

loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market; and

available for sale assets – assets that have a quoted market price and / or do not have fixed or determinable payments.

Loans and Receivables

Loans and receivables are recognised on the Balance Sheet when the Authority becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument.

The Authority has transacted with its subsidiary property holding company SY ITA Properties Ltd in a manner that gives rise to soft loan accounting. This ‘loan’ arose as a result of a £6.3m dividend awarded by the company to its parent without cash flowing at the award date. Instead, the cash associated with this dividend will be paid over to the Combined Authority within 16 years of the award date.


32

When soft loans are made, a loss is recorded in the Comprehensive Income and Expenditure Statement (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument. This results in a lower amortised cost than the outstanding principal. Interest is credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement at a marginally higher effective rate of interest than the rate receivable from the voluntary organisations, with the difference serving to increase the amortised cost of the loan on the Balance Sheet. Statutory provisions require that the impact of soft loans on the General Fund Balance is the interest receivable for the financial year. The reconciliation of amounts debited and credited to the Comprehensive Income and Expenditure Statement to the net gain required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate.

Any gains and losses that arise on the de-recognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

Available for Sale Assets

Available for sale assets are recognised on the Balance Sheet when the Authority becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Where the asset has fixed or determinable payments, annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the Authority.

Financial assets are classified at recognition as loans, deposits or debtors in accordance with IAS 39, and recognised at cost.

Financial liabilities

Financial liabilities are recognised on the Balance Sheet when the Authority becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life on the instrument to the amount at which it was originally recognised.


33

For most of the borrowings, this means that the amount present in the Balance sheet is the outstanding principal repayable; and interest charged to the Comprehensive Income and Expenditure statement is the amount payable for the year according to the loan agreement.

Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of re-purchase / settlement. However, where re-purchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate.

Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Authority has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account (an unusable reserve), in the Movement in Reserves Statement.

IX. Foreign Currency Translation

Where the Authority has entered into a transaction denominated in a foreign currency, the transaction is converted into sterling at the exchange rate applicable on the date the transaction was effective. Where amounts in foreign currency are outstanding at the year end, they are reconverted at the spot exchange rate as at 31 March. Resulting gains or losses are recognised in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

X. Government Grants and Other Contributions

Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Authority when there is reasonable assurance that:

the Authority will comply with the conditions attached to the payments, and

the grants or contributions will be received.

Amounts recognised as due to the Authority are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor.

Monies advanced as grants and contributions for which conditions have not been satisfied are carried on the Balance Sheet as liabilities. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants and


34

contributions) or Taxation and Non-Specific Grant Income (non-ring fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement.

XI. Inventories and Long Term Contracts

When capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied reserve. When it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied reserve are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure.

XII. Leases

Leases are classified as finance leases, where the terms of the lease substantially transfer all risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification.

Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.

Operating Leases

The Authority as Lessee

Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefiting from use of the leased property, plant or equipment. Charges are made on a straight line basis over the life of the lease even if this does not match the pattern of payments (e.g. there is a rent free period at the commencement of the lease).

The Authority as Lessor

Where the Authority grants an operating lease over a property or an item of plant or equipment, the asset is retained on the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income

XIII. Overheads and Support Services

All costs of management and administration have been fully allocated to services. The basis of allocation for the main costs of management and administration are outlined below:


35

Cost Basis of Allocation

Combined Authority Actual time spent by staffDemocratic Processes Actual costs

XIV. Provisions, Contingent Liabilities and Contingent Assets

Provisions

Provisions are made where an event has taken place that gives the Authority a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation.

Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Group becomes aware of the obligation, and measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the Comprehensive Income and Expenditure Statement.

Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the obligation is settled.

Contingent Liabilities

A contingent liability arises where an event has taken place that gives a probable obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events that are not wholly within the control of the Group. Contingent Liabilities also arise in circumstances where a provision would otherwise be made but either it is not possible that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.

Contingent Assets

A contingent asset arises where an event has taken place that provides a probable asset, whose existence will only be confirmed by the occurrence or otherwise of uncertain events not wholly within the control of the Group,

Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential.


36

XV. Redemption of Debt

The Authority is required to set aside from revenue each year a minimum amount for the redemption of debt. This sum is referred to as the Minimum Revenue Provision (MRP).

It is the policy of the Combined Authority to provide for all capital expenditure incurred after 2007 using the asset-life approach, aligning provisions for the repayment of debt to the period over which economic benefit is provided by the assets created/improved.

All expenditure incurred pre-2007 will be provided for under the regulatory method at 4% of the outstanding balance of the CFR.

XVI. Reserves

Specific amounts are set aside as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund Reserve in the Movement in Reserves Statement. When the expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against the Surplus / Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement.

Certain reserves are kept to manage the accounting processes for non-current assets and retirement benefits and do not represent usable resources for the Group. These reserves are explained in the relevant policies.

.XVII. Revenue Expenditure Funded from Capital under Statute

Expenditure incurred during the year that may be capitalised under statutory provisions but that does not result in the creation of a non-current asset that has been charged as expenditure to the relevant service in the Comprehensive Income and Expenditure Statement in the year. Where the Authority has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the levy charged.

XVIII. Value Added Tax (VAT)

The Combined Authority is a Section 33 VAT body and recovers all of its input VAT where possible. VAT is excluded from both income and expenditure where it can be recovered.


37

2. Accounting Standards that have been issued but have not yet been adopted

The Code of Practice on Local Authority Accounting in the United Kingdom 2015/16 (the Code) has introduced several changes in accounting policy as a result of amendments to the following Accounting Standards. These standards have been issued but have not yet been adopted by the Authority. If these had been adopted for the financial year 2014/15 there would be no material change, as detailed below:

IFRS 13 Fair Value Measurement (May 2011)

Under IFRS 13 the Authority will be required to measure its assets and liabilities and provide disclosures where another section of the Code requires or permits fair value measurement.

The adoption of this standard will not have a material impact on the accounts.

Annual Improvements to IFRSs (2011 – 2013 Cycle)

The issues included in the Annual Improvements to IFRSs 2011- 2013 cycle are as follows and it is anticipated that they will not have a material impact on the financial statements:

IFRS 1 – Meaning of effective IFRSs IFRS 3 – Scope of exceptions for joint ventures IFRS 13 – Scope of portfolio exception IAS 40 – Clarification of investment property

IFRIC 21 Levies

This standard provides guidance on levies imposed by Government in the financial statements of entities paying the levy. The IFRIC relates to when to recognise a liability to pay a levy that is accounted for in accordance with IAS 37.

The Combined Authority does not currently pay out any levies to Government and as a result the above standard would not alter the figures currently reported in the financial statements.

3. Critical Judgements in Applying Accounting Policies

In applying the accounting policies set out in Note 1, the Combined Authority has had to make certain judgements about complex transactions or those involving uncertainty about future events.

On 1 April 2014, by order of Parliament, the Combined Authority was established. The powers, functions, competencies, assets and liabilities of the former South Yorkshire Integrated Transport Authority (SYITA) were transferred, together with further responsibilities for the Local Enterprise Partnership.


38

Opening balances for the new Combined Authority have been drawn from the records of SYITA, South Yorkshire Joint Secretariat, SYPTE and Barnsley MDC. The Combined Authority has placed reliance on the audited accounts and working papers from each of these bodies to report in this Statement of Accounts.

The opening balance sheet shows the position at 1 April 2014 on the creation of the new Authority, rather than the closing position of the previous entities for the preceding year.

4. Assumptions made about the future and other major sources of estimation uncertainty

The Statement of Accounts contains estimated figures that are based on assumptions made by the Combined Authority about the future that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. The items in the Combined Authority’s Balance Sheet at 31 March 2015 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:

As with all public sector bodies, the Combined Authority faces significant uncertainty about the future levels of Government funding. These challenges are being managed, by establishing across the Group, coordinated business planning processes and robust monthly budget monitoring and reporting, to ensure assets and liabilities are managed to produce the best outcomes for the Group.

In the Group accounts, assets and liabilities measured by fair value (e.g. non-current assets, pension assets and liabilities, financial instruments) are revalued by engaging suitable experts. Estimation techniques and assumptions about the future, such as inflation forecasts and future market conditions, are made in arriving at valuations and could be subject to change, for which there is a risk of adjustment in the following financial year.

5. Material Items of Income and Expense

2014/2015

South Yorkshire Passenger Transport Executive (SYPTE)

During financial year 2014/15 the Combined Authority awarded a capital grant to its operating subsidiary - South Yorkshire Passenger Transport Executive (SYPTE) - to the value of £72.9m.

This grant resourced past capital expenditure incurred by SYPTE (principally in relation to the Sheffield Supertram development) that could otherwise have been funded directly, and at the time of defrayal, by the Combined Authority and its predecessor the Integrated Transport Authority.

The capital liability the award of this grant creates at the Combined Authority will be recovered through Minimum Revenue Provision (MRP) charges, made in line with the useful economic lives of the assets created by the initial expenditure. Reviews of these asset-lives have been commissioned from external surveyors.


39

In awarding the grant the Combined Authority and SYPTE better align provisions for repayment of capital liabilities to the period over which the assets provide economic benefit to the region.

6. Adjustments Between Accounting Basis and Funding Basis Under Regulations

This note details the adjustments, shown in the Movement in Reserves Statement, that are made to the total Comprehensive Income and Expenditure recognised by the Combined Authority in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Combined Authority to meet future capital and revenue expenditure.

Gen

eral

Fun

d B

alan

ce£0

00

Cap

ital G

rant

s U

napp

lied

£000

Tota

l Usa

ble

Res

erve

s£0

00

Unu

sabl

e R

eser

ves

£000

Tota

l Aut

horit

y R

eser

ves

£000

Reversal of items debited or credited to the CI&ES:Capital grants and contributions credited to the CI&ES

23,677 0 23,677 (23,677) 0

Application of grants and contributions to capital financing from the Capital Grants Unapplied Reserve

0 9,648 9,648 (9,648) 0

Revenue expenditure funded from capital under statute

(106,225) 0 (106,225) 106,225 0

Insertion of items not debited or credited to the CI&ES:Statutory provision for repayment of debt (MRP) 1,993 0 1,993 (1,993) 0Total (80,555) 9,648 (70,907) 70,907 0

7. Transfers (to) / from Earmarked Reserves

This note sets out the amounts set aside from the General Fund balance in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund expenditure in 2014/15.

Not

e

1 A

pril

2014

£000

Tran

sfer

Out

20

14/1

5£0

00

Tran

sfer

In

2014

/15

£000

Tota

l M

ovem

ents

£0

00

31 M

arch

20

15£0

00

General Fund:Revenue Grants and Contributions:- LSTF Revenue Reserve 19 (4,870) 4,870 0 4,870 0

Other Earmarked Revenue Reserves:- PFI Revenue Reserve 19 (6,158) 1,500 (1,410) 90 (6,068)

Total (11,028) 6,370 (1,410) 4,960 (6,068)


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8. Financing and Investment Income and Expenditure

The following table provides a breakdown of Financing and Investment Income and Expenditure:

31 March 2015£000

Interest Payable and similar charges 1,387Pensions interest cost and expected return on pension’s assetsInterest receivable and similar income

0(1,326)

Total 61

9. Taxation and Non Specific Grant Income

The following table provides a breakdown of Taxation and Non Specific Grant Income:

31 March2015£000

LEP Core Funding from DCLG (517)Total (517)

This funding was awarded to the Combined Authority / LEP to assist with the development of the region’s Strategic Economic Plan (SEP) and support core operations for economic development activity.

10. Financial Instruments

The borrowings and investments disclosed in the Balance Sheet are made up of the following categories of financial instruments:

Current31 March 2015

Long Term31 March 2015

£000 £000Financial liabilities at amortised cost 0 25,000Total other long term liabilities 0 25,000

Loans and receivables 114,000 0Cash and Cash Equivalents 74,814 0Total investments 188,814 0

Soft Loans Provided 6,186

Under accounting requirements the carrying value of the financial instrument value is shown in the Balance Sheet, which includes the principal amount borrowed or lent and further adjustments for breakage costs or stepped interest loans (measured by an effective interest rate calculation) including accrued interest. Accrued interest is shown separately in current assets / liabilities where the payments / receipts are due within one year. The effective interest rate is effectively accrued interest receivable under the instrument, adjusted for the amortisation of any premiums or discounts reflected in the purchase price.


41

The Combined Authority is owed £6.7m in a dividend receivable from SYITA properties Limited a subsidiary company. The dividend was declared in 2008 and is outstanding at 31st March 2015.The outstanding Dividend is treated as a soft loan to a subsidiary.

The present value of the loan is calculated as the present value of all future cash receipts discounted using the prevailing market rate of interest at which the authority could borrow for a loan with similar terms. The appropriate PWLB Interest rate is 3.92% which has been used to calculate the present value of the loan. The detailed soft loan information is shown in the table below:

31 March 2015£000

Opening Balance 6,700Less Discounted Amount (514)Balance Carried Forward 6,186

Nominal Value 6,186

Financial Instrument Gain / Losses

The Financial Instrument gains and losses recognised in the Comprehensive Income and Expenditure Statement are:

2014/15Financial

LiabilitiesFinancial

AssetsLoans and receivable

Total

£000 £000 £000Interest expense (1,387) 0 (1,387)Interest on PFI scheme liabilities 0 0 0Interest payable and similar charges (1,388) 0 (1,388)

Interest income 0 1,326 1,326Interest and investment income 0 1,326 1,326

Net gain / (loss) for the year (1,387) 1,326 (61)

Fair Value of Assets and Liabilities Carried at Amortised Cost

The borrowings and investments disclosed in the Balance Sheet are shown at amortised cost. Their fair value can be assessed by calculating the net present value (NPV) of the cash flows that take place over the remaining life of the instruments which provides an estimate of the value of payments in the future in today’s terms. The calculations have been made using the following assumptions:

The discount rate used were the market rates as at 31 March (using bid prices where applicable) for instruments with the same duration (i.e. equal to the outstanding period from valuation date to maturity), loan structure and terms as that of the comparable instrument.

As the purpose of the fair value disclosure is to provide a comparison with the carrying value in the Balance Sheet, accrued interest has been included in the fair


42

valuation calculation as this is also reflected in the carrying amount. The accrued interest figure is calculated up to and including the valuation date.

To calculate the PWLB fair value the new borrowing rate has been used, as opposed to the premature repayment rate, as the discount factor for all PWLB borrowing. This is because the premature repayment rate includes a margin which represents the lender’s profit as a result of rescheduling the loan, which is not included in the fair value calculation since any motivation other than securing a fair price should be ignored.

Interest is calculated using the most common market convention ACT/365 (366 days in a leap year with the exception of PWLB which are charged on a 365 day basis regardless of leap years).

Where interest is paid / received every 6 months on a daily basis, the value of interest is rounded to 2 equal instalments.

For fixed term deposits it is assumed that interest is received on maturity, or annually if duration is > 1 year.

The interest value and date has not been adjusted where a relevant date occurs on a non-working day.

The fair values calculated are:

31 March 2015 31 March 2015Carrying Amount Fair Value

£000 £000PWLB debt (25,000) (32,628)Non-PWLB debt 0 0Total Financial Liabilities (25,000) (32,628)

The table above reflected the aggregate position of Combined Authority’s loan portfolio as at the Balance Sheet date. The fair value is greater than the carrying amount because the Combined Authority’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the rates applicable to similar loans in the market at the Balance Sheet date. This commitment to pay interest above current market rate increases the amount that the Combined Authority would have to pay (in terms of premiums etc.) if the lender requested or agreed to early repayment of the loans.

31 March 2015 31 March 2015Carrying Amount Fair Value

£000 £000Total Loans and Receivables 114,000 114,290Total 114,000 114,290

The Combined Authority held three fixed term investments with Lloyds Bank of £5m each, £15m in total, as at 31 March 2015 with maturity dates of the 16th & 27th April and the 5th October 2015 respectively. The Combined Authority also has a number of fixed term investments with Local Authorities totalling £84m. There was also a £15m deposit with Santander on a 95 day call which has been classified as fixed. Other deposits were held in


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instant access deposit accounts and Money Market Funds (MMFs) and are classed as Cash or Cash Equivalents.

11. Nature and Extent of Risks Arising from Financial Instruments

Key Risks

The Combined Authority’s activities expose it to a variety of financial risks, the key risks are:

Credit Risk The possibility that other parties might fail to pay amounts due to the Combined Authority.

Liquidity Risk The possibility that the Combined Authority might not have funds available to meet its commitments to make payments.

Re-financing Risk The possibility that the Combined Authority might be required to renew a financial instrument on maturity at disadvantageous interest or terms.

Market Risk The possibility that financial loss might arise for the Combined Authority as a result of changes in such measures as interest rates and stock market movements.

Overall Procedures for Managing Risk

The Combined Authority’s overall risk management procedures focus on the unpredictability of financial markets and implementing restrictions to minimise these risks. The procedures for risk management are set out through a legal framework set out in the Local Government Act 2003 and the associated regulations. These require the Combined Authority to comply with the CIPFA Prudential Code, the CIPFA Code of Practice on Treasury Management in the Public Services and investment guidance issued through the Act. Overall these procedures require the Combined Authority to manage risk in the following ways:

By formally adopting the requirements of the CIPFA Code of Practice on Treasury Management.

By the adoption of a Treasury Policy Statement and treasury management clauses within the Combined Authority’s Financial Regulations / Standing Orders / Constitution.

By approving annually in advance prudential indicators for the following three years limiting:

The Combined Authority’s overall borrowing. The maximum and minimum exposures to fixed and variable rates. The maximum and minimum exposure in regard to the maturity structure of debt. The maximum annual exposures to investments maturing beyond a year.


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By approving an investment strategy for the forthcoming year setting out the criteria for both investing and selecting investment counterparties in compliance with the Government Guidance.

The prudential indicators are reported and approved as part of the Combined Authority’s annual budget setting process. These items are reported with the annual treasury management strategy which outlines the detailed approach to managing risk in relation to the Combined Authority’s financial instrument exposure actual performance is also reported six monthly and annually to Members.

The Combined Authority maintains written principles / policies (the Treasury Management Practices or TMPs) for overall risk management, covering specific areas, such as interest rate risk, credit risk and the investment of surplus cash. These TMPs are a requirement of the Code of Practice which are updated and implemented by the Treasury Management and Banking team.

Credit Risk

Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Combined Authority’s customers. Deposits are not made with banks and financial institutions unless they meet the minimum requirements of the Combined Authority’s investment criteria.

The Combined Authority adopts a counterparty list based on a model provided by Capita Asset Services using credit ratings from all three rating agencies (Fitch, Moodys and Standard and Poors) and also using the following information:

Credit updates and credit outlooks from credit rating agencies.

Credit Default Swap spreads to give early warning of likely changes in credit ratings (a CDS is the market perception of credit risk for financial institutions).

Sovereign ratings to enable the Combined Authority to only select counterparties from the most creditworthy countries.

This modelling approach combined credit ratings, credit updates, credit outlooks and CDS spreads in a weighted scoring system which indicated the relative creditworthiness of counterparties. From this the Combined Authority was able to determine the maximum amounts and durations to invest with institutions. This approach ensured that the Combined Authority only invested with the very highest rated institutions, from countries with a strong creditworthiness.

The credit rating of counterparties is monitored regularly. The Combined Authority is alerted to changes to ratings by all three agencies through its use of the Capita Asset Service’s creditworthiness service. On occasions ratings were downgraded when an investment had already been made. The criteria used are such that minor downgrades are extremely unlikely to affect the full receipt of the principal and / or interest.

If a downgrade resulted in the counterparty / investment scheme no longer meeting the Combined Authority’s minimum criteria, it was immediately removed from the list. New counterparties which met the criteria were also added to the list.


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In addition to the use of Credit Ratings the Combined Authority is advised of information in movements in Credit Default Swaps (CDS) against a defined benchmark range (the iTraxx benchmark) and other market data on a weekly basis. Changes in the CDS outside of the benchmark would potentially result in the downgrade of an institution or removal from the Combined Authority’s lending list.

Sole reliance was not placed on the use of this model. In addition the Combined Authority also used market data and market information, information on government support for banks and the credit ratings of the government that supports them to inform decisions on which institutions to invest with.

The following analysis summarises the Combined Authority’s potential maximum exposure to credit risk as at 31 March 2015, based on experience of default assessed by the rating agencies and the Combined Authority’s past experience, adjusted to reflect current market conditions.

Amount at 31 March

2015£000

Historical Experience of

Default

Adjustment for conditions at

31 March 2015

Estimated Maximum

Exposure to Default

£000Deposits with £000AAA rated counterparties 68,829 0% 0.000% 0AA+ rated counterparties 84,000 0% 0.003% 3A rated counterparties 35,985 0% 0.020% 7

188,814 10

* As per the Code guidance the percentage for financial instruments in terms of both historical default are calculated by looking at the Combined Authority’s actual experience of default rather than the general position in the market. In the case of the Combined Authority there has been no past experience of default and the Combined Authority no longer has exposure to Iceland so the percentage used is 0%. As at 31 March 2015 the Combined Authority held £15m as fixed term deposits with Lloyds Bank who were rated A at this time and £15m in a 95 day call account with Santander who were rated A at this time. The adjustment for conditions at 31 March 2015 reflects the risk on this deposit at that date as determined by Credit Rating Agencies.

As at 31 March 2015 the Combined Authority held £15m in fixed term deposits with Lloyds Bank (a Part Nationalised Bank), with maturity dates of 16th & 27th April and the 5th October 2015 respectively. A small default risk was attached to this deposit of 0.026% at 31 March 2015. The Combined Authority also had £15m in a 95 day call account as at 1 April 2014 which had a default risk of 0.23% as at 31 March 2015. Other funds held at the year-end (£74.81m) were deposited with AAA Money Market Funds (MMFs) and an instant access account. As these funds offer instant access these deposits have been classified as Cash and Cash Equivalents in the accounts.

The table below shows that the Combined Authority’s outstanding investment balance (excluding investments classified as cash and cash equivalents) as at 31 March 2015 was £114m, and there was £118m investment at 1 April 2014 (including £15m in Long Term investments.

31 March 2015Financial Institution Rating of

CounterpartyCountry Amount

£000Local Authorities UK 84,000Lloyds Bank plc A UK 15,000Santander UK plc A UK 15,000


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01 April 2014 – Comparative InformationFinancial Institution Rating of

CounterpartyCountry Amount

£000Local Authorities A UK 31,800Royal Bank of Scotland plc A UK 15,000Barclays Bank plc A UK 15,000Ulster Bank UK 10,000Bank of Scotland plc UK 6,157

As a result of the Combined Authority being established by Statutory Instrument at the end of 2013/14, there was a period when investments had to be transacted through Sheffield City Council (SCC). This caused an unavoidable and planned temporary breach of the Combined Authority’s counterparty criteria during April 2014/15 as investment balances held with SCC were at a higher level than permitted by the Combined Authority’s counterparty policy. This breach was reported to the Section 151 officer and the Combined Authority immediately.

During the reporting period the Combined Authority held no collateral as security.

The Combined Authority had no impairment on its investment portfolio during the year.

Liquidity Risk

The Combined Authority has ready access to borrowings from the Money Markets to cover any day to day cash flow needs and whilst the PWLB provides access to longer term funds, it also acts as a lender of last resort to the Combined Authority (although it will not provide funding to a Combined Authority whose actions are unlawful). The Combined Authority is also required to provide a balanced budget through the Local Government Finance Act 1992, which ensures sufficient monies are raised to cover annual expenditure. There is therefore no significant risk that the Combined Authority will be unable to raise finance to meet its commitments under financial instruments.

The Combined Authority manages its liquidity position through the risk management procedures above (the setting and approval of prudential indicators and the approval of the treasury and investment strategy reports), as well as through cash flow management procedures required by the Code of Practice. This ensures that cash is available when needed.

All sums owing to the Combined Authority from funds deposited in MMFs and instant access accounts is £74.8m as at 31 March 2015 offer instant repayment.

Refinancing and Maturity Risk

The Combined Authority maintains a significant debt and investment portfolio. Whilst the cash flow procedures above are considered against the refinancing risk procedures, longer term risk to the Combined Authority relates to managing the exposure to replacing financial instruments as they mature. This risk relates to both the maturing of longer term financial liabilities and longer term financial assets.

The approved prudential indicator limits for the maturity structure of debt and the limits placed on investments placed for greater than one year in duration are the key parameters used to address this risk. The Combined Authority approved treasury and investment strategies address the main risks and the Treasury Management and Banking team address the operational risks within the approved parameters. This includes:


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Monitoring the maturity profile of financial liabilities and amending the profile through either new borrowing or the rescheduling of the existing debt.

Monitoring the maturity profile of investments to ensure sufficient liquidity is available for the Combined Authority’s day to day cash flow needs and the spread of longer term investments provide stability of maturities and returns in relation to the longer term cash flow needs.

The maturity analysis of financial liabilities is:

2014/15Principal Accrued

InterestPrincipal plus

Interest

£000 £000 £000Between one and two years 0 0 0Between two and five years 0 0 0Between five and ten years 8,000 0 8,000More than ten years 17,000 0 17,000

Total 25,000 0 25,000

The maturity analysis of financial assets is:

2014/15Principal Accrued

InterestPrincipal plus

Interest

£000 £000 £000Less than one year 114,000 237 114,237Between 1 & 2 years 0 0 0Total 114,000 237 114,237

Cash and Cash Equivalents are not shown in the above table.

All trade debtors and other payables are due to be paid in less than one year and are not shown in the above table.

Market Risk

Interest Rate Risk

The Combined Authority is exposed to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the Combined Authority, depending on how variable and fixed interest rates move across differing financial instrument periods, e.g. a rise in variable and fixed interest rates would have the following effects:

Borrowing at variable rates

The interest expense charged to the Comprehensive Income and Expenditure Statement will rise.

Borrowing at fixed rates

The fair value of the borrowing liability will fall (no impact on revenue balances).

Investments at variable rates

The interest income credited to the Comprehensive Income and Expenditure Statement will rise.


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Investments at fixed rates

The fair value of the assets will fall (no impact on revenue balances).

Borrowings are not carried at fair value on the Balance Sheet, so nominal gains and losses on fixed rate borrowings would not impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund Balance.

The Combined Authority has a number of strategies for managing interest rate risk. The Annual Treasury Management Strategy draws together the Combined Authority’s prudential indicators and its expected treasury operations, including an expectation of interest rate movements. Within the strategy a prudential indicator is set which provides maximum and minimum limits for fixed and variable interest rate exposures. The Treasury Management and Banking team will monitor market and forecast interest rates within the year to adjust exposures appropriately, e.g. during periods of falling interest rates and where economic circumstances make it favourable, fixed rate investments may be taken for longer periods to secure better long term returns and the drawing of longer term fixed rate borrowing would be postponed when rates rise.

In order to minimise the Combined Authority’s exposure to loan interest functions the Combined Authority will only have a maximum of 10% variable rate debt as a percentage of total debt. At the 31 March 2015, variable rate debt as a proportion of total debt was nil.

If interest rates had been 1% higher (with all other variables held constant) the financial effect would be:

£000Increase in interest payable on variable rate borrowings * 0Increase in interest receivable on variable rate investments ** 2,011Increase in government grant receivable for financing costs 0Impact on Surplus or Deficit on the Provision of Services 2,011

Decrease in fair value of fixed rate investment assets**** 76Impact on Other Comprehensive Income and Expenditure ***** 0

Decrease in fair value of fixed rate borrowings liabilities (no impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure) 3,256

Notes:*All borrowing raised from the PWLB were at fixed rates in 2014/15 and as a result a change in interest rates would have no effect on the interest payable on these loans, the amount of government grant received and on the Comprehensive Income and Expenditure Statement. ** Based on a 1% increase on the weighted average interest rate and investment balance for 2014/15.**** There were a number of fixed term investments totalling £84m held with various Local Authorities at the year end. There was also £15m held in a Santander 95 day call account which was classified as fixed. Other investments held by the Combined Authority at the year-end were deposited with Money Market Funds (MMFs) and a Deposit Account which offer instant access to funds and therefore classified as Cash or Cash Equivalents on the Balance Sheet. ***** All of the Combined Authority assets are classed as loans and receivables and therefore this figure is zero as there is no impact on the Comprehensive Income and Expenditure Statement.

The approximate impact of a 1% fall in interest rates would be as above but with the movements being reversed. These assumptions are based on the same methodology as used in the note – Fair Value of Assets and Liabilities carried at Amortised Cost.


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Foreign Exchange Risk

The Combined Authority has no financial assets or liabilities denominated in foreign currencies and therefore no exposure to loss arising from movements in exchange rates.

12. Long Term Debtors

The following is an analysis of Long Term Debtors:

The long term debtor of £6.2m relates to a £6.7m dividend receivable from SYITA Properties Limited which is intended to be paid over the next 9 years. The balance of the dividend receivable of £0.5m is treated as an investment in the company.

13.Long Term Investments

The following is an analysis of Long Term Investments:

01 April 2014 31 March 2015

£000 £00015,000 Bank Deposits due after one year 0

7,117 Investment in Subsidiary 6,94222,117 Total 6,942

The Combined Authority owns the share capital of SYITA Properties Limited, a company set up in accordance with the provisions of the Transport Act 1985. The principal activity is the rental of property for business use. The cost of the shares has been impaired to reflect the net worth of the company.

14. Short Term Debtors

The following is an analysis of short term Debtors:

1 April 2014 31 March 2015£000 £000

63 Central Government Bodies 1,264 557 Other Local Authorities 1,119

10 Other Entities and Individuals 364 630 Total 2,747

01 April 2014£000

31 March 2015£000

06,051

Trade DebtorsOther Receivables and payables

06,186

6,051 Total 6,186


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15. Cash and Cash Equivalents

The following is an analysis of Cash and Cash Equivalents shown on the Balance Sheet:

01 April 2014 31 March 2015£000 £000

455 Cash at Bank 0 87,042 Short Term Investments 74,814 87,497 Total 74,814

16.Short Term Borrowing

The balance of Short Term Borrowing relates to a number of loans from other local authorities for the Combined Authority / LEP.

01 April 2014 31 March 2015£000 £000

0 Other Local Authorities (684) 0 Total (684)

17. Short Term Creditors

The following is an analysis of Creditors:

Amounts due to other local authorities includes £25.8m cash held on behalf of SYPTE until required for liquidity purposes, and expected to be drawn down within 12 months. The remaining balance is due to other South Yorkshire local authorities for capital grants in respect of the LTP and LSTF capital programmes.

18. Other Long Term Liabilities

The Authority manages cash on behalf of SYPTE. The full value of Other Long Term Liabilities relates to the balance held for SYPTE, expected to be drawn down after more than one year.

01 April 2014 31 March 2015£000 £000(83) Central Government Bodies (69)

(60,232) Other Local Authorities (37,500) (38) Other Entities and Individuals (386)

(60,353) Total Creditors (37,955)

1 April 2014Fair Value

31 March 2015Fair Value

£000 £000(139,091) Other Local Authorities (192,019)

(139,091) Total (192,019)


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19. Usable Reserves

Movements in the Authority’s usable reserves are detailed in the Movement in Reserves Statement.

General Fund Balance

The General Fund is the statutory fund into which all the receipts of an Authority are required to be paid and out of which all liabilities of the Authority are to be met, except to the extent that statutory rules might provide otherwise. These rules can also specify the financial year in which liabilities and payments should impact on the General Fund Balance, which is not necessarily in accordance with proper accounting practice. The General Fund Balance therefore summarises the resources that the Authority is statutorily empowered to spend on its services or on capital investment (or the deficit of resources that the Authority is required to recover) at the end of the financial year.

The table below shows the balance of the General Fund available balance:

31 March 2015 £000

General Balances Available (45,843)Total (45,843)

This balance has risen materially on the prior year (£7.6m) due to the reduction (£39.7m) in the 2014/15 revenue grant payable by the Combined Authority to the SYPTE.

This reduction was achieved as a result of the award of a capital grant (£72.9m) by the CA to SYPTE during the year principally to resource past capital expenditure recognised in SYPTE’s accounts as deferred charges.

Earmarked General Fund Reserves

The table below provides a breakdown of the earmarked reserves balance:

31 March 2015 £000

Revenue Grants and Contributions: (0)Other Earmarked Reserves:

- PFI Revenue Reserve (6,068)Total (6,068)

Earmarked reserves are set aside to meet known or predicted liabilities, but ones that are not certain enough to create an exact provision in the accounts. The liabilities are, however, likely enough to say that the earmarked reserves are not normally available to fund the budget or other measures.

Earmarked reserves are available to fund capital or revenue expenditure. Expenditure is charged to the revenue or capital account when it is incurred and is financed by an appropriation from the reserve through the Movement in Reserves Statement.

A list of earmarked reserves, their purpose and proposed use are set out below.


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Revenue Grants and Contributions: Where a revenue grant or contribution (or part thereof) has been recognised as income in the Comprehensive Income and Expenditure Statement, but the expenditure to be financed from that grant or contribution has not been incurred at the Balance Sheet date, the grant or contribution has been transferred to the Revenue Grants and Contributions reserve to support future spend.

PFI Revenue Reserve: The PFI reserve is for Doncaster Interchange and exists due to Government funding being received in advance to pay future years’ liabilities. This income is set aside in a reserve until needed to ensure sufficient funds are available to cover the cost of the contract in future years.

Capital Receipts Reserve

The Capital Receipts Reserve holds the proceeds from the disposal of land or other assets, which are restricted by statute from being used other than to fund new capital expenditure or to be set aside to finance historical capital expenditure. The balance on the reserve shows the resources that have yet to be applied for these purposes at the year- end.

The table below shows the balance of the Capital Receipts Reserve:

31 March

2015 £000

Capital Receipts Reserve (5,343)Total (5,343)

No draw was made upon the capital receipts reserve during the year.

Capital Grants Unapplied Reserve

The Capital Grants Unapplied Reserve holds the grants and contributions received towards capital projects for which the Authority has met the conditions that would otherwise require repayment of the monies but which have yet to be applied to meet expenditure. The balance is restricted by grant terms as to the capital expenditure against which it can be applied and / or the financial year in which this can take place.

As at 31 March 2015 the balance on the Capital Grants Unapplied Reserve was nil.

20. Unusable Reserves

Capital Adjustment Account

The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Authority as finance for the costs of acquisition, construction and enhancement.


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2014/15

£000 £000

Balance at 1 April 39,826

Reversal of items relating to capital expenditure debited or credited to the CI&ES: Revenue expenditure funded from capital under statute 106,225

106,225

Net written out amount of the cost of non-current assets consumed in the year

146,051

Capital financing applied in the year:Capital grants and contributions credited to the CI&ES (23,677)Application of grants and contributions from the Capital Grants Unapplied Reserve (9,648)Statutory provision for the repayment of debt (1,993)

(35,318)

Balance at 31 March 110,733

21. Cash Flow Statement – Operating Activities

The cash flows for operating activities include the following items:

2014/15 £000

Interest Received 1,535Interest Paid (1,829)Total (294)

The surplus or (deficit) on the provision of services has been adjusted for the following non-cash movements:

2014/15 £000

Increase / (decrease) in creditors (22,398)Increase / (decrease) in debtors (1,906)Other non-cash items charged to the net surplus or deficit on the provision of services (441)Total (24,745)

The surplus or (deficit) on the provision of services has been adjusted for the following items that are investing and financing activities:

2014/15 £000

Any other items for which the cash effects are investing or financing cash flows (23,677)Total (23,677)


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22. Cash Flow Statement – Investing Activities

The cash flows for investing activities include the following items:

2014/15 £000

Purchase of short-term and long-term investments (297,400)Proceeds from short-term and long term investments 301,277Other receipts from investment activities 26,187Total 30,064

23. Cash Flow Statement – Financing Activities

The cash flows for financing activities include the following items:

2014/15 £000

Repayments of short and long-term borrowing 52,927Total 52,927

24. Amounts Reported for Resource Allocation Decisions

The Combined Authority is organised into two service areas, the services are:

Transport Authority, Economic Regeneration.

The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the CIPFA Service Reporting Code of Practice (SeRCOP). However, decisions about resource allocation are taken by the Authority’s Board on the basis of budget reports analysed across the services. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular:

No charges are made in relation to capital expenditure

Expenditure on some support services is budgeted for centrally and not charged to services.

The following tables show how the figures reported in the Authority’s outturn report reconcile to the figures in the Comprehensive Income and Expenditure Statement. A simplified version of this disclosure can be found within the Foreword.


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The income and expenditure of the Authority as recorded in the budget reports for the year ended 31 March 2015 is as follows:

2014/15 Service Income and Expenditure

Transport Authority

£000

Economic Regeneration

£000

Total

£000

Grants (8,729) (665) (9,394)Other reimbursements and contributions

(75,982) (768) (76,750)

Other Income (1,333) (687) (2,020)Total Income (86,044) (2,120) (88,164)

Employees 0 754 754Premises 0 64 64Transport 1 19 20Supplies and services 48,205 566 48,771Support Services 279 104 383Total Expenditure 48,485 1,507 49,992

Net Expenditure (budget outturn)

(37,559) (613) (38,172)

Reconciliation to Service Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement:

This reconciliation shows how the figures in the analysis of service income and expenditure relate to the amounts included in the Comprehensive Income and Expenditure Statement.

2014/15£000

Net Expenditure in the Service Analysis (budget outturn) (38,172)

Amounts not included in the analysis but included in the CI&ES 80,554Amounts included in the analysis but not included in the CI&ES 5,326

Cost of Services in the CI&ES 47,708

Reconciliation to Subjective Analysis:

This reconciliation shows how the figures in the analysis of services income and expenditure relate to a subjective analysis of the (Surplus) or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

2014/15Net Expenditure

in the Service Analysis (budget

outturn)

Amounts not included in the

analysis but included in the

CI&ES

Amounts included in the analysis but

not included in the CI&ES

Cost of Services in the CI&ES

Amounts reported below the net

expenditure of Continuing

Operation in the CI&ES

Total

£000 £000 £000 £000 £000 £000

Fees, charges and other service income

(694) 0 0 (694) 0 (694)

Interest and investment income

(1,326) 0 1,326 0 (1,326) (1,326)

Government grants and contributions

(86,144) (23,677) 5,387 (104,434) (517) (104,951)

Total Income (88,164) (23,677) 6,713 (105,128) (1,843) (106,971)

Employee expenses 754 0 0 754 0 754Other service expenses 47,851 104,231 0 152,082 0 152,082Interest payments 1,387 0 (1,387) 0 1,387 1,387Total Expenditure 49,992 104,231 (1,387) 152,836 1,387 154,223

(Surplus) or deficit on the provision of services

(38,172) 80,555 5,326 47,708 (456) 47,252

25. Members Allowances

The Authority paid the following amounts to Council Members who represent the local authorities that make up the Combined Authority during 2014/15:

2014/ 15

Basic AllowanceExpenses

£0000

14TOTAL 14

26. Officer Remuneration

The Combined Authority has no employees and therefore a nil disclosure for pension provision under IAS19. The Authority shared the costs of its Executive Director (Head of Paid Services) during the year with SYPTE and receives a recharge from Barnsley MBC and Sheffield City Council for work completed on Authority matters by officers. The Authority also recompensed the SCR LEP Company for the cost of officers contracted to that company who worked on behalf of the Combined Authority / LEP during the year.

2014/15 Salary Pension Contribution

Total

Executive Director£

84,693£

10,332£

95,025Director of Inward InvestmentDirector of Skills

80,00065,278

00

80,00065,278

TOTAL 229,971 10,332 240,303

There are no other officers, working exclusively for the Combined Authority, earning over £50k per annum. For the financial year 2014/15 Barnsley MBC have provided direct legal and HR support to the Combined Authority, whilst Sheffield City Council have provided the Section 151 officer and finance function.

27. External Audit Fees

The Authority has incurred the following costs in relation to the audit of the Statement of Accounts, provided by the external auditors:

2014/15 £000

Fees payable with regard to external audit services carried out by the appointed auditor 35Fees payable for the certification of grant claims and returns 0Total 35


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28. Grant Income

The Authority credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement:

2014/15£000

Credited to Services:Department for Business Innovation and Skills (145)Department for Communities and Local Government (0)Department for Transport (27,537)European Regional Development Fund (12)English Local Government (Note 1) (76,779)Total (104,473)

Credited to Taxation and Non Specific Grant Income:Non-ring fenced Government Grants:Department for Communities and Local Government (517)

(517)Capital Grants and Contributions 0

0Total

1. £76m SY Transport Levy, £0.2m CA / LEP Subscriptions, £0.6m Enterprise Zone Retained Business Rates.

(104,990)

The Authority has received a number of grants and contributions that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver. The balances at year end are as follows:

31 March 2015£000

Revenue Grants Receipts in Advance:0

Total 0

Capital Grants Receipts in Advance:Department for Transport (LTP Grant) (2,510)Total (2,510)

29. Related Party Disclosures

The Authority is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Combined Authority or to be controlled or influenced by the Combined Authority. Disclosure of these transactions allows readers to assess the extent to which the Authority might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Authority.

For the Combined Authority, the main categories of related party are the 9 constituent Local Authorities, whose Leaders make up the membership of the Combined Authority and have direct control through voting rights. The Authorities material related party transactions in year amounted to net payments of £51m with £120m accrued.


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MembersDuring 2014/15 no works or services were commissioned from companies in which any members had an interest.

OfficersThere have been no pecuniary interests involving the Head of Paid Service, the S151 Officer or the Monitoring Officer to the Authority.

Significant Transactions:

2014/15Notes Receipts Payments Net

PaymentsReceivables Payables Net

AssetsRelated Party £000 £000 £000 £000 £000 £000Barnsley Metropolitan Borough Council

1 (12,902) 3,930 (8,972) 820 (1,881) (1,061)

Doncaster Metropolitan Borough Council

2 (17,100) 4,789 (12,311) 0 (2,817) (2,817)

Rotherham Borough Council

3 (14,518) 5,572 (8,946) 228 (1,871) (1,643)

Sheffield City Council 4 (31,644) 2,734 (28,910) 16 (5,085) (5,069)Bolsover District Council

5 (27) 14 (13) 0 0 0

Bassetlaw District Council

6 (23) 0 (23) 4 0 4

North East Derbyshire District Council

7 (27) 0 (27) 0 0 0

Chesterfield Borough Council

8 (4) 10 6 23 0 23


9 (4) 0 (4) 0 0 0

South Yorkshire Passenger Transport Executive

10 0 8,076 8,076 0 (115,456) (115,456)

South Yorkshire ITA Properties LTD

11 0 0 0 6,186 0 6,186

1 Income (split across receipts and receivables) - £13.1m Transport Levy, £0.03m LEP Subs, £0.5m Enterprise zone, £0.09m Loan w/off. Expenditure (split across payments and payables) - £3m highways capital maintenance grant and £2.5m payment for Local transport Plan and local Sustainable transport Fund.2 Income - £17m Transport Levy, £0.04m LEP Subs, £0.09m Loan w/off. Expenditure (split across payments and payables) - £3.4m payment of highways capital maintenance grant and £4.1m payment for Local Transport Plan and Local Sustainable Transport Fund.3 Income - (split across receipts and receivables) - £14.5m Transport Levy, £0.04m LEP Subs, £0.13m Enterprise zone, £0.09m Loan w/off. Expenditure (split across payments and payables) - £2.7m payment of highways capital maintenance grant and £4.3m payment for Local Transport Plan / Local Sustainable Transport Fund.4 Income - £31.4m Transport Levy, £0.08m LEP Subs, £0.02m Enterprise zone, £0.19m Loan w/of. Expenditure (split across payments and payables) - £7.5m payments for Local Transport Plan / Local Sustainable Transport Fund.5 £0.004m LEP Subs income, £0.023m Loan write off.6 £0.027m Loan write off.7 £0.004m LEP Subs income, £0.023m Loan write off.8 £0.004m LEP Subs income, £0.023m Loan write off.9 £0.004m LEP Subs income.10 £110.35m Revenue and Capital Grant payments, £2.45m PFI, £10.6m Local Transport Plan / Local Sustainable Transport Fund and £0.1m Expenses.11 £6.186m Soft Loan.


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Group Subsidiaries


The balance owing to South Yorkshire Passenger Transport Executive as at 31 March is shown in the table below:

2014/15£’000

Amount held by the CA to repay SYPTE loans 120,917Grant monies owing to SYPTE 96,935Total owed to SYPTE by the CA 217,852

South Yorkshire ITA Properties Ltd

The Authority owns the share capital of SYITA Properties Ltd (formerly SYPTA Ltd), a company set up in accordance with the provisions of the Transport Act 1985. The principal activity is the rental of property for business use.

The net worth of the company as at 31 March 1985 was £9.496m.The Authority owns 17,608,900 of the 17,608,902 shares issued by the company, the other two being held by an employee of Barnsley MBC as the nominee of the Authority. The nominal value of the ordinary share capital was reduced from £1 to 55p per share following a capital restructuring exercise undertaken in 1993/94. The issued share capital is therefore £9,684,896 with a called up value of £7,805,632.

Transactions with Other Public Bodies

The UK government exerts significant influence over the Authority through legislation and grant funding. Grant funding received is detailed in the notes to the consolidated income and expenditure account. The following table shows transactions excluding grants:-



AssetsRelated Party £000 £000 £000 £000 £000 £000South Yorkshire Pensions Authority

1 0 41 41 0 (21) (21)

South Yorkshire Police and Crime Commissioner

2 0 56 56 0 0 0

Leeds City Council 3 0 0 0 0 (19) (19)

1 Fees.2 Payment for Local Transport Plan.3 Mipim UK property trade show costs.

30. Capital Expenditure and Capital Financing and Capital Commitments

The total amount of capital expenditure incurred in the year is shown in the table below, together with the resources that have been used to finance it. Where capital expenditure cannot be paid for immediately and is to be financed in future years by charges to revenue as the assets are used by the Authority, the expenditure results in an increase in the Capital


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Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Authority that has yet to be financed.

2014/15£000

Capital InvestmentRevenue Expenditure Funded from Capital Under Statute 106,225

Sources of Finance Government Grants and Other Contributions 33,325Borrowing 72,900

106,225Capital Financing RequirementsOpening Balance 39,826Borrowing in Year 72,900Statutory / Voluntary Provision for repayment of debt (MRP / VMRP) (1,993)Closing Balance 110,733

PWLB Borrowing (25,000)Other Borrowing (684)

(25,684)

Under borrowed 85,049


62

Group Accounts

The Group accounts, as at 31 March 2015, comprise the accounts of the Combined Authority, together with those of the South Yorkshire Passenger Transport Executive and SYITA Properties Limited.

All intra-group trading, balances and unrealised gains and losses, at the end of the financial year 2014/15, have been eliminated in full. The Group Accounts have been prepared on a going concern basis.


The accounts of the South Yorkshire Passenger Transport Executive (SYPTE) are prepared in accordance with the Accounts and Audit (England) Regulations 2011. These regulations require the accounts to be prepared in accordance with the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 (The Code) and the CIPFA Service Reporting Code of Practice 2014/15, supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 7 of the 2011 Regulations.

The accounting convention of the SYPTE accounts is principally historic cost, modified by the revaluation of certain categories of assets and liabilities and financial instruments.

SYPTE has one subsidiary, “Supertram Assets Limited”, which is non-trading and interest in a joint venture with West Yorkshire Combined Authority, “Yorcard Limited”. Neither are material in value and SYPTE has taken the decision not to consolidate in to SYPTE’s accounts in 2014/15.

Further information about SYPTE’s accounts is available from the following address:

The Finance DepartmentSouth Yorkshire Passenger Transport Executive11 Broad Street WestSheffield S1 2BQ

SYITA Properties Limited

The accounts of SYITA Properties Limited (formerly SYPTA Properties Limited) are prepared in accordance with UK Generally Accepted Accounting Practices and the Companies Act 2006.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain assets and in accordance with the Financial Reporting Standard for Smaller Entities (effective April 2008), which are then adjusted during consolidation into the Group accounts to be IFRS compliant.

Further information about SYITA Properties Limited accounts is available from the following address:


63

The DirectorsSYITA Properties Limited18 Regent StreetBarnsleyS70 2PQ

South Yorkshire Passenger Transport Pension Fund

The Combined Authority has responsibility as the accountable body for the South Yorkshire Passenger Transport Pension Fund accounts, which are included as a memorandum item to these accounts and not consolidated into the Group.

Further information about South Yorkshire Passenger Transport Pension Fund accounts is available from the following address:

South Yorkshire Pensions Authority18 Regent StreetBarnsleySouth YorkshireS70 2HG

Basis of Dominant Influence

The Combined Authority is made up of the nine Leaders of Barnsley Metropolitan Borough Council, Doncaster Metropolitan Borough Council, Rotherham Metropolitan Borough Council, Sheffield City Council, Bassetlaw District Council, Bolsover District Council, Chesterfield Borough Council, North East Derbyshire District Council, Derbyshire Dales Districts Council.

A copy of the Combined Authority constitution, which details the Authority’s functions, responsibilities, procedures and protocols can be found on the Combined Authority website Combined Authority Constitution.

http://meetings.southyorks.gov.uk/ecSDDisplay.aspx?NAME=SD876&ID=876&RPID=131417&sch=doc&cat=13045&path=13045&zTS=B

Group Movement in Reserves Statement

Group Movement in Reserves: Usable Reserves

Gen

eral

Fun

d B

alan

ce£0

00

Earm

arke

d G

ener

al

Fund

Res

erve

s£0

00

Cap

ital R

ecei

pts

Res

erve

£000

Cap

ital G

rant

s U

napp

lied

Res

erve

£0

00

Tota

l Usa

ble

Res

erve

s£0

00

Note

Balances transferred in at 1 April 2014 (5,957) (15,231) (7,091) (18,494) (46,773)

Movement in reserves during 2014/15:(Surplus) / deficit on provision of services CI&ES 6,972 0 0 0 6,972Other Comprehensive (Income) and Expenditure CI&ES 0 0 0 0 0Total Comprehensive (Income) and Expenditure 6,972 0 0 0 6,972


32 (45,701) 0 0 13,603 (32,098)

Net (increase) / decrease before transfers to earmarked reserves (38,729) 0 0 13,603 (25,126)

Transfers (to) / from earmarked reserves 33 (804) 1,955 88 (1,239) 0

(Increase) / decrease in year (39,533) 1,955 88 12,364 (25,126)

Balance at 31 March 2015 (45,490) (13,276) (7,003) (6,130) (71,899)


65

Group Movement in Reserves: Unusable Reserves and Total Group Reserves

Cap

ital A

djus

tmen

t A

ccou

nt£0

00

Def

erre

d C

apita

l G

rant

Res

erve

(P

TE)

£000

Rev

alua

tion

Res

erve

£000

Pens

ion

Res

erve

(P

TE)

£

000

Acc

umul

ated

A

bsen

ces

Res

erve

(P

TE)

£000

Unu

sabl

e R

eser

ves

£000

Tota

l Gro

up

Res

erve

s£0

00

Note

Balances transferred in at 1 April 2014

39,926 (35,053) (14,966) 36,643 102 26,652 (20,121)

Movement in reserves during 2014/15:(Surplus) / deficit on provision of services

CI&ES 0 0 0 0 0 0 6,972

Other Comprehensive (Income) and Expenditure

CI&ES 0 0 (2,637) 7,936 0 5,299 5,299

Total Comprehensive (Income) and Expenditure

0 0 (2,637) 7,936 0 5,299 12,271


32 70,807 (35,927) 41 (2,781) (42) 32,098 0

Net (increase) / decrease before transfers to earmarked reserves

70,807 (35,927) (2,596) 5,155 (42) 37,397 12,271

Transfers (to) / from earmarked reserves

33 0 0 0 0 0 0 0

(Increase) / decrease in year 70,807 (35,927) (2,596) 5,155 (42) 37,397 12,271

Balance at 31 March 2015 110,733 (70,980) (17,562) 41,798 60 64,049 (7,850)

Group Consolidated Comprehensive Income and Expenditure Statement

The Comprehensive Income and Expenditure Statements show the accounting cost in the year of providing services in accordance with generally accepted accounting practices.

2014/15

Not

es

Gro

ss

Expe

nditu

re£0

00

Gro

ssIn

com

e£0

00 Net

Expe

nditu

re£0

00

Transport Planning Policy and Strategy 27,646 (23,677) 3,969Public Transport – Support to Operator 0 (79,841) (79,841)Transport Services – PTE 115,503 (31,928) 83,575Income and Expenditure ITA Properties 978 (328) 650Highways and Transport Services 144,127 (135,774) 8,353

Planning Services – Economic Development 1,437 (1,602) (165)Corporate and Democratic Core 452 (6) 446(Surplus) / Deficit on Continuing Operations 146,016 (137,382) 8,634

Gains on disposal of non-current assets (60)Investment Property Change in Fair Value (65)Financing and Investment Income 34 16,526Financing and Investment Income – Pensions 34 1,518Taxation and Non-Specific Grant Income 35 (19,671)Corporation Tax Payable 35 90(Surplus) / Deficit on Provision of Service 6,972

(Surplus) / Deficit on revaluation of non-current assets (2,637)Actuarial gains / losses on pension assets / liabilities 57 7,936

Other Comprehensive (Income) and Expenditure 5,299

(Surplus) / deficit for the year 12,271

Combined Authority 47,252SYPTE (35,078)SYITA Properties Ltd 97

12,271


67

Group Consolidated Balance Sheet

As at 1 April 2014 As at 31 March 2015£000 Notes £000

5,517 Investment Property 38 5,608367 Intangible Assets 36 306

104,860 Property, Plant and Equipment 37 107,151110,744 Non-Current Assets 113,065

40 Long Term Debtors 0

15,000 Long Term Investments 015,040 Long Term Assets 0

125,784 Total Long Term Assets 113,065

103,124 Short Term Investments 39 114,001171 Inventories 258

12,964 Short Term Debtors 40 19,21897,815 Cash and Cash Equivalents 41 81,151

214,074 Current Assets 214,628

339,858 Total Assets 327,693

(15,555) Short Term Borrowing 39 (23,629)(25,911) Short Term Creditors 42 (28,178)

(139) Short Term Provisions 43 (284)(149) PFI / PPP Finance Lease Liability 56 (162)

0 Capital Grants RIA 53 (4,664)(183) Other Liabilities 0

(41,937) Current Liabilities (56,917)

297,921 Total Assets less Current Liabilities (270,776)

(228,660) Long Term Borrowing 39 (208,900)(513) Long Term Provisions 43 (406)

(11,984) PFI / PPP Finance Lease Liability 56 (11,822)(36,643) Net Pension Liability 57 (41,798)

(277,800) Long Term Liabilities (262,926)

20,121 Net Assets / (Liabilities) 7,850

(33,598) Combined Authority (57,254)(13,361) SYPTE (15,035)

186 SYITA Properties Ltd 390(46,773) Usable Reserves 44 (71,899)

39,926 Combined Authority 110,733(13,126) SYPTE (46,530)

(148) SYITA Properties Ltd (154)26,652 Unusable Reserves 45 64,049

(20,121) Total Reserves (7,850)


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Group Consolidated Cash Flow Statement

The Consolidated Cash Flow statement shows the changes in cash and cash equivalents of the Group during the reporting period. The statement shows how the Group generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Group are funded by way of taxation and grant income or from the recipients of services provided by the Group. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Group future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Group.

2014/15Notes £000

Net surplus or (deficit) on the provision of services (6,971)

- Adjustment to surplus or (deficit) on the provision of services for non-cash movements 46 24,726- Adjustment for items included in the net surplus or (deficit) on the provision of services that are investing and financing activities

46 (21,624)

Net cash flow from operating activities (3,869)

Investing activities 47 (1,521)Financing activities 48 (11,274)Net increase / (decrease) in cash and cash equivalents (16,664)

Cash and cash equivalents at 1 April 97,815Cash and cash equivalents at 31 March 81,151


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Notes to the Group Core Financial Statements

The following notes contain further information to that presented in the main statements. They provide narrative descriptions, disaggregation of items presented in the statements and information about items that do not qualify for recognition in the statements.

31. Group Accounting Policies

The accounting policies of the Combined Authority apply to the Group. Where the nature and type of transactions differ to those of the Combined Authority, the significant policies are summarised below.

XIX. Charges to Revenue for Non-Current Assets

Services, support services and trading accounts are debited with the following amounts to record the cost of holding fixed assets during the year:

Depreciation attributable to the assets used by the relevant service

Revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which losses can be written off; and

Amortisation of intangible assets attributable to the service.

XX. Employee Benefits

The Combined Authority has no employees and receives a recharge from Barnsley MBC and Sheffield City Council for work completed on Combined Authority matters by its Officers, and during the year, shared the costs of its Executive Director (Head of Paid Service) with the South Yorkshire Passenger Transport Executive (SYPTE). SYPTE applies the following policies for its paid employees.

Benefits Payable During Employment

Short-term employee benefits (those that fall due wholly within 12 months of the year-end), such as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits for current employees, and are recognised as an expense for services in the year in which employees render service to the Group.

An accrual is made for the cost of holiday entitlements (or any form of leave e.g. time off in lieu) earned by employees but not taken before the year end which employees can carry forward into the next financial year. The accrual is calculated using the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to ‘(Surplus)/ Deficit on the Provision of Services’ but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs.


70

Post-Employment Benefits

The requirements of IAS 19 “Employee Benefits” have been fully adopted in the financial statements of the Group. Detailed disclosures can be found in note 57 (Group) to the accounts and relate principally to SYPTE.

IAS 19, together with IFRIC 14 requires that the limit on a defined benefit asset, minimum funding requirements and their interaction sets out the extent to which a pension scheme surplus can be recognised as an asset of SYPTE and also considers how a pension balance sheet asset or liability could be affected by statutory or contractual minimum funding requirements.

SYPTE is an employing authority within the South Yorkshire Pension Fund which is a funded pension scheme. The majority of employees participate in this scheme which provides defined benefits payable to members on and after their employment. Contributions made to the fund for both current and past services are charged to the revenue account as they are paid. Contribution levels are determined by the Fund. The Fund is a statutory body and the benefits are paid under the provisions of the Local Government Pension Scheme Regulations 1997.

SYPTE has a continuing responsibility for any payments to the Fund in respect of service up to 25 October 1986 for all staff employed by SYPTE up to that date. The responsibility includes all staff that transferred to South Yorkshire Transport Limited as a consequence of the Transport Act 1985. For service from 26 October 1986 onwards SYPTE is only responsible to payments for the Fund in respect of its own directly employed staff. The annual cost of this responsibility is charged to the revenue account under Pension and Non-recurring costs.

The liabilities of the fund attributable to SYPTE are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on the assumption about mortality rates, employee turnover rates etc., and projections of projected earnings for current employees.

The assets of the South Yorkshire Pension Fund attributable to SYPTE are included in the Balance Sheet at their fair value:

quoted securities – current bid price

unquoted securities – professional estimate

unitised securities – current bid price

property – market value

The change in the net pension liability is analysed into the following components:

current service cost – the increase in liabilities as result of years of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked


71

past service cost – the increase in liabilities as a result of a scheme amendment or curtailment whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed costs

net interest cost – the change during the period in the net defined benefit liability (asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement- this is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability (asset) at the beginning of the period-taking into account any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payments.

return on plain assets – excluding amounts included in net interest on the net defined benefit liability (asset) – charged to the Pension Reserve as Other Comprehensive Income and Expenditure.

actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure.

contributions paid to the pension fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the Comprehensive Revenue Reserve balance to be charged with the amount payable by SYPTE to the pension fund, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact on the Comprehensive Revenue Reserve of being required to account for retirement benefits on the basis of cash flows rather than as benefits earned by employees.

XXI. Expenditure that does not result in the Creation of a Non-Current Asset

This is either capital expenditure that has contributed to a fixed asset not owned or preconstruction costs on existing assets which do not enhance the value of the asset. Examples are rail and highway infrastructure, and grants payable. The Group has no ownership / legal rights in respect of these assets and as a consequence the costs are charged directly to revenue.

In addition, any new borrowing requirements for SYPTE will be met by the Combined Authority. To facilitate this, the Combined Authority pays SYPTE a capital grant representing expenditure that may be capitalised under statutory provisions but does not result in the creation of tangible assets for the Combined Authority directly.


72

XXII. Investment Properties

Investment properties are those that are used solely to earn rentals and / or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or is held for sale.

Investment properties are initially recognised at cost, and subsequently at fair value based on the amount at which the asset could be exchanged between knowledgeable parties at arms-length. Properties are not depreciated but are revalued annually according to market conditions at the year end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal.

Rentals received in relation to investment properties are credited to the Comprehensive Income and Expenditure account.

XXIII. Intangible Assets

Expenditure on non-monetary assets that do not have physical substance but are controlled by Group members as a result of past events (e.g. software licences) are capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Group.

Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Group will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and restricted to that incurred during the development phase (research expenditure is not capitalised).

Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise goods and services.

Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Group can be determined to an active market. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line in the Comprehensive Statement of Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Administrative expenditure line in the Comprehensive Income and Expenditure Statement.

XXIV. Property, Plant and Equipment

Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment.


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Recognition

Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Group and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred.

Measurement

Assets are initially measured at cost, comprising:

the purchase price.

Any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The Group does not capitalise borrowing costs incurred whilst assets are under construction.

The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Group).

In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Group.

Assets are then carried on the Balance Sheet using the following measurement bases:

Property – depreciated replacement cost (following clarification of the CIPFA Code of Practice on Transport Infrastructure Assets, certain assets are now being reclassified from Infrastructure to Property).

infrastructure, community assets and assets under construction – depreciated historical cost.

all other assets – fair value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV).

Where there is no market based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value.

Where non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value.


74

Assets included on the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service.

Where decreases in value are identified, they are accounted for as follows:

where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains).

where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

Impairment

Assets are assessed at each year end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall.

Where impairment losses are identified, they are accounted for as follows:

where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains).

where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

Where an impairment loss is subsequently reversed, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised.

Depreciation

Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land) and assets that are not yet available for use (i.e. Assets Under Construction).

Depreciation is calculated on a straight line basis, over the useful life of the asset following the year of construction or acquisition, determined as follows:


75

buildings – straight-line allocation over the useful life of the property assessed as part of the rolling programme of revaluations.

vehicles, plant and equipment – a percentage of the value of each class of asset in the

Balance Sheet, as advised by a suitably qualified officer.

o Plant, machinery, fixtures and fittings – 10 years

o Vehicles – 5 years

o Computer equipment – 3 years

infrastructure – straight-line allocation:

o operational equipment – 10 years

o route equipment – 20 years

o trams – over the varying life of components – between 10 and 39 years

o track bed and system – 24 years

Park and Ride – 15 years

Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to the total costs of the item, the components are depreciated separately.

Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost.

XXV. Disposals and Non-Current Assets Held for Sale

When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previous losses recognised in the (Surplus) / Deficit on Provision of Services.

Depreciation is not charged on Assets Held for Sale.

If assets no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to non-current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as Held for Sale, and their recoverable amount at the date of the decision not to sell. Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale.


76

When an asset is disposed of or decommissioned, the carrying amount of the asset on the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal).

XXVI. Private Finance Initiative (PFI) Transactions

PFI contracts are agreements to receive services, where the responsibility for making available the non-current assets needed to provide the services passes to the PFI contractor. SYPTE is deemed to control the services that are provided under its PFI schemes and as ownership of the non-current assets will pass to SYPTE at the end of the contracts for no additional charge. SYPTE carries the non-current assets used under the contracts on the Balance Sheet. The Government Grant, which helps to finance the PFI scheme is held and managed by the Combined Authority and paid to SYPTE.

SYPTE’s PFI scheme is for the provision and operation of Doncaster Interchange. PFI transactions which meet the IFRIC 12 (Service Concession Arrangements) definition of a service concession, as interpreted in HM Treasury’s FReM, are accounted for as “on balance sheet” by SYPTE.

Non-current assets recognised on the Balance Sheet are revalued and depreciated in the same way as property, plant and equipment owned by SYPTE.

The original recognition of these assets was balanced by the recognition of a liability for the amounts due to the scheme operator to pay for the assets.

The amounts payable to the PFI operators each year are analysed as follows:

Fair value of the services received during the year – this is debited to the relevant service in the Comprehensive Income and Expenditure Statement.

Finance cost – an interest charge on the outstanding Balance Sheet liability is debited to Interest Payable and Similar Charges in the Comprehensive Income and Expenditure Statement.

Contingent rent – increases in the amount to be paid for the property arising during the contract are debited to Interest Payable and Similar Charges in the Comprehensive Income and Expenditure Statement.

Payment towards liability – applied to write down the Balance Sheet liability.

Lifecycle replacement costs – where these represent payments to maintain the asset rather than being a fixed asset addition they are charged to the relevant service in the Comprehensive Income and Expenditure Statement.


77

XXVII. Value Added Tax (VAT)

The Combined Authority is a Section 33 VAT body and recovers all of its input VAT where possible. VAT is excluded from both income and expenditure where it can be recovered.

For SYPTE, VAT payable is included as an expense only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income.

XXVIII. Corporation Tax

SYPTE is a public body and most of activities are not subject to Corporation Tax. SYITA Properties is a limited company and is liable for Corporation Tax, paid on profits for ordinary activities.

32. Group Adjustments Between Accounting Basis and Funding Under Regulation

Gen

eral

Fun

d B

alan

ce£0

00

Cap

ital G

rant

s U

napp

lied

£000

Tota

l Usa

ble

Res

erve

s£0

00

Unu

sabl

e R

eser

ves

£000

Tota

l Aut

horit

y R

eser

ves

£000

Reversal of items debited or credited to the CI&ES:Capital grants and contributions credited to the CI&ES 23,677 0 23,677 (23,677) 0Application of grants and contributions to capital financing from the Capital Grants Unapplied Reserve

0 9,648 9,648 (9,648) 0

Revenue expenditure funded from capital under statute (106,225) 0 (106,225) 106,225 0Other movements (PTE) (2,564) 0 (2,564) 2,564 0

Insertion of items not debited or credited to the CI&ES:Statutory provision for repayment of debt (MRP) 1,993 0 1,993 (1,993) 0Employers contribution to Pension Scheme 5,345 0 5,345 (5,345) 0

Other:Transfer to Accumulating Absences Account 42 0 42 (42) 0Grants received and receivable during the year 60,992 3,955 64,947 (64,947) 0Grants released to Operational Revenue Reserve (29,020) 0 (29,020) 29,020 0Release to Revaluation Reserve (41) 0 (41) 41 0Other Movements 102 0 102 (102) 0

Total (45,701) 13,603 (32,098) 32,098 0

33.Group Transfers (to) / from Earmarked Reserves

This note sets out the amounts set aside from the Group General Fund balances in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund expenditure in 2014/15.

1 A

pril

2014

£000

Tran

sfer

Out

20

14/1

5£0

00

Tran

sfer

In

2014

/15

£000

Tota

l M

ovem

ents

£0

00

31 M

arch

20

15£0

00

Combined Authority:

Revenue Grants and Contributions:- LSTF Revenue Reserve (1) (4,870) 4,870 0 4,870 0

Other Earmarked Revenue Reserves:- PFI Revenue Reserve (2) (6,158) 1,500 (1,410) 90 (6,068)

SYPTE:

Earmarked Revenue Reserve (3) (4,203) 0 (3,005) (3,005) (7,208)

Total (15,231) 6,370 (4,415) 1,955 (13,276)

(1) Transfers out – Local Sustainable Transport Fund grant drawn down to fund expenditure in 2014/15.

(2) Transfers in - PFI Credits from DCLG / Transfers out - paid to SYPTE for Doncaster Interchange PFI.

(3) Transfers in from SYPTE operational reserve to set aside funds for agreed future commitments (e.g. Embedded Rail replacement, Rotherham car park).

34. Group Financing and Investment Income and Expenditure

The following table provides a breakdown of Financing and Investment Income and Expenditure:

2014/15

Interest payable and similar charges£000

18,617Interest receivable and similar income (1,746)Reversal of impairment of short-term deposit (345)

16,526Pensions – Interest payable 1,518Total 18,044


80

35. Group Taxation and Non-Specific Grant Income

The following table provides an analysis of Non-Specific Grant Income:

2014/15

Non ring-fenced grants:£000

LEP Core Grant (DCLG) (517)Department for Transport (14,498)Better Bus Area (1,598)European Regional Development Fund / Other (3,058)Total (19,671)

The following table provides an analysis of Taxation Payable:

2014/15

SYITA Properties Ltd:£000

UK Corporation Tax 108Deferred Tax (18)Total 90

36. Group Intangible Assets

The following is an analysis of Intangible Assets:

2014/15 Cost or valuation:At 1 April 2014

£000367

Amortisation (remaining life is 6 years) (61)At 31 March 2015 306

Intangible assets represent £306k for software associated with the development of the Yorcard project which is being amortised over the remaining life of the licence agreement which is six years.

37. Group Property Plant and Equipment

Movements on Balances:

Land

and

Bui

ldin

gs£0

00

Infr

astr

uctu

re (

Ligh

t R

ailw

ay S

yste

m)

£000

PPE

Vehi

cles

, Pla

nt a

nd

Equi

pmen

t£0

00

PPE

Ass

ets

Und

er

Con

stru

ctio

n£0

00

Tota

l PPE

£000

PFI A

sset

s in

clud

ed in

La

nd &

Bui

ldin

gs£0

00

Cost or Valuation: At 1 April 2014 69,351 59,965 23,545 4,751 157,613 11,028Additions - programmed investment 68 0 799 3,631 4,498 0Revaluation increases / (decreases) recognised in the Revaluation Reserve 2,601 0 0 0 2,601 522Revaluation increases / (decreases) to Surplus / Deficit on the Provision of Services

(680) 0 0 0 (680) 0

De-recognition – disposals De-recognition - other

0(1,933)

0 (3,018) 0 (3,018)(1,933)

0(350)

At 31 March 2015

Accumulated Depreciation and Impairment:At 1 April 2014Depreciation ChargeDe-recognition – DisposalsDe-recognition - other At 31 March 2015

69,408

(1,152(1,933)

01,933

(1,152)

59,965

(30,534)(1,653)

00

(32,187)

21,326

(21,067)(542)3,018

0(18,591)

8,382

00000

159,081

(52,753)(4,128)

3,0181,933

(51,930)

11,200

0(350)

0350

0

Net Book ValueAs at 1 April 2014 68,200 29,431 2,478 4,751 104,860 11,028As at 31 March 2015 68,256 27,778 2,735 8,382 107,151 11,200

38.Group Investment Properties

The following is an analysis of Investment Properties:

2014/15 Cost or valuation:At 1 April 2014

£0005,517

Revaluation 101Disposals (10)At 31 March 2015 5,608

39. Group Financial Instruments

Categories of Financial Instruments

The following categories of financial instrument are carried in the Balance Sheet.

Long Term Current31 March

20151 April

201431 March

20151 April

2014£000 £000 £000 £000

InvestmentsLoans and receivables 0 15,000 114,001 103,124

DebtorsLoans and receivables 0 40 19,219 1,235

Cash and cash equivalentsLoans and receivables 0 0 81,151 97,814

BorrowingsFinancial liabilities at amortised cost 208,900 228,660 23,629 15,555

Other LiabilitiesFinancial liabilities at amortised cost (PFI) 11,822 11,984 303 362

Creditors and provisionsFinancial liabilities at amortised cost 406 513 30,379 26,033


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Financial Liabilities Financial Assets

Total

2014/15Income, Expense, Gains and Losses

Liabilities measured at

amortised cost£000

Investments and debtors

£000

£000

Interest expense – debt (17,559) 0 (17,559)Interest expense – PFI (1,059) 0 (1,059)Reductions in fair value 0 (3) (3)Impairment losses / (gains) 345 0 345Total expense in Surplus or Deficit on the Provision of Services (18,273) (3) (18,276)

Interest income 0 1,746 1,746Total income in Surplus or Deficit on the Provision of Services 0 1,746 1,746

Net gain / (loss) for the year (18,273) 1,743 (16,530)

Fair Value of Assets and Liabilities

Financial liabilities, financial assets represented by investments, debtors, cash, creditors and borrowing are carried in the Balance Sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that will take place over the remaining term of the instruments, using the following assumptions.

Interest is calculated using the most common market convention, ACT/365 (366 in a leap year with the exception of PWLB)

Interest is not paid/received on the start of the instrument but is paid/received on the maturity date

The interest value and date has not been adjusted where the relevant date occurs on a non-working day

With the exception of borrowing, all financial assets and liabilities are carried at cost as this is a fair approximation of their value.

The fair values are calculated as follows:

Borrowing 31 March 2015 1 April 2014Carrying

value£000

Fair value £000

Carrying value £000

Fair value£000

PWLB 206,375 279,181 217,375 284,654Non-PWLB 21,150 27,307 21,285 21,850Doncaster Interchange PFI 11,984 11,984 12,133 12,133Total Financial Liabilities 239,509 318,472 250,793 318,637

The fair value of the liabilities is higher than the carrying amount because the Authority’s portfolio of loans includes a number of fixed rate loans where the interest payable is higher than the prevailing rates at the Balance Sheet date. This shows the notional future loss arising from the commitment to pay interest to lenders above current market rates.


84

The maturity analysis of financial liabilities excluding PFI liabilities is as follows:

31 March 2015£000

Less than one year 18,625Between one and two years 15,063Between two and five years 75,475More than five years 118,362Total 227,525

40. Group Short Term Debtors

The following is an analysis of Debtors:

1 April 2014 31 March 2015£000 £000

6,778 Central Government Bodies 6,4432,869 Other Local Authorities 2,8643,317 Other Entities and Individuals 9,911

12,964 Total 19,218

41. Group Cash & Cash Equivalents

31 March 2015 1 April 2014 £’000 £’000Cash ITA - Company - 454 PTE - Company 2,177 6,587 Property - Company 4,160 3,731 GROUP 6,337 10,772

Cash Equivalents ITA - Company 74,814 87,042 PTE - Company - - Property - Company - - GROUP 74,814 87,042

Cash & Cash Equivalents ITA - Company 74,814 87,496 PTE - Company 2,177 6,587 Property - Company 4,160 3,732 GROUP 81,151 97,815

42.Group Short Term Creditors

The following table shows an analysis of Short Term Creditors:

1 April 2014 31 March 2015£000 £000

(4,238) Central Government Bodies (931)(5,821) Other Local Authorities (19,028)

(15,852) Other Entities and Individuals (8,219)(25,911) Total (28,178)


85

43. Group Provisions

The Combined Authority maintains the following Provisions:

31 March 2015£000

Opening Balance 1 April 2014 (652)Charge to Income and Expenditure Account during the year (38)Total (690)

Split by:SYPTE (284)Short Term (284)

SYPTE (204)SYITA Properties Ltd (202)Long Term (406)

44. Group Usable Reserves

The following table summarises the Usable Reserves balances. Movements in the Group’s usable reserves are shown in the Movement of Reserves Statement.

31 March 2015Combined Authority

SYPTE SYITA Properties

Ltd

Total

£000 £000 £000 £000General Fund (45,842) 0 0 (45,842)Earmarked Reserves (6,068) (7,208) 0 (13,276)Capital Receipts Reserve (5,343) (1,660) 0 (7,004)Capital Grants Unapplied 0 (6,130) 0 (6,130)Operational Revenue Reserve 0 (37) 0 (37)Profit & Loss Account 0 0 390 390Total (57,254) (15,035) 390 (71,899)

1 April 2014Combined Authority


Ltd

Total

£000 £000 £000 £000General Fund (7,579) 0 0 (7,579)Earmarked Reserves (11,028) (4,203) 0 (15,231)Capital Receipts Reserve (5,343) (1,748) 0 (7,091)Capital Grants Unapplied (9,648) (8,846) 0 (18,494)Operational Revenue Reserve 0 1,436 0 1,436Profit & Loss Account 0 0 186 186Total (33,598) (13,361) 186 (46,773)


86

45. Group Unusable Reserves

The following table summarises the Unusable Reserves balances. Movements in the Group’s unusable reserves are shown in the Movement of Reserves Statement:

31 March 2015Combined Authority


Ltd

Total

£000 £000 £000 £000Capital Adjustment Account 110,733 0 0 110,733Deferred Capital Grants and Contributions 0 (70,980) 0 (70,980)Pension Reserve 0 41,798 0 41,798Revaluation Reserve 0 (17,408) (154) (17,562)Accumulated Absence Reserve 0 60 0 60Total 110,733 (46,530) (154) 64,049

1 April 2014Combined Authority


Ltd

Total

£000 £000 £000 £000Capital Adjustment Account 39,926 0 0 39,926Deferred Capital Grants and Contributions 0 (35,053) 0 (35,053)Pension Reserve 0 36,643 0 36,643Revaluation Reserve 0 (14,818) (148) (14,966)Accumulated Absence Reserve 0 102 0 102Total 39,926 (13,126) (148) 26,652

46. Group Cash Flow Statement – Operating Activities

The cash flows for operating activities include the following items:

2014/15 £000

Interest Received 1,955Interest Paid (18,396)Total (16,441)

The surplus or (deficit) on the provision of services has been adjusted for the following non-cash movements:

2014/15 £000

Depreciation 4,359Amortisation 27,326Increase / (decrease) in creditors 2,122Increase / (decrease) in debtors (6,145)Increase / (decrease) in inventories (84)Movement in pension liability (2,781)Other non-cash items charged to the net surplus or deficit on the provision of services (71)Total 24,726


87

The surplus or (deficit) on the provision of services has been adjusted for the following items that are investing and financing activities:

2014/15 £000

Proceeds from short-term (not considered to be cash equivalents) and long-term investments (includes investments in associates, joint ventures and subsidiaries) (100)Any other items for which the cash effects are investing or financing cash flows (21,524)Total (21,624)

47.Group Cash Flow Statement – Investing Activities

The cash flows for investing activities include the following items:

2014/15 £000

Purchase of property, plant and equipment, investments property and intangible assets (31,761)Purchase of short-term and long-term investments (297,400)Proceeds from short-term and long term investments 301,453Other receipts from investment activities 26,187Total (1,521)

48. Group Cash Flow Statement – Financing Activities

The cash flows for financing activities include the following items:

2014/15 £000

Cash payments for the reduction of outstanding liabilities relating to finance leases and on-balance sheet PFI contracts

(149)

Repayments of short and long-term borrowing (11,125)Total (11,274)

49. Group Amounts Reported for Resource Allocation Decisions

The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the CIPFA Service Reporting Code of Practice (SeRCOP). However, decisions about resource allocation are taken by the Group members on the basis of budget reports analysed across the services. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular:

no charges are made in relation to capital expenditure (whereas depreciation, revaluation and impairment losses in excess of the balance on the Revaluation Reserve and amortisations are charged to services in the Comprehensive Income and Expenditure Statement).

the cost of retirement benefits is based on cash flows (payment of employer’s pension’s contributions) rather than current service cost of benefits accrued in the year.


88

expenditure on some support services is budgeted for centrally and not charged to services.

The following tables show how the figures reported in the Group outturn reports reconcile to the figures in the Comprehensive Income and Expenditure Statement.

The income and expenditure of the Group recorded in the budget reports for the year ended 31 March 2015 is as follows:

2014/15 Service Income and Expenditure

Transport Authority

£000

Economic Regeneration

£000

Total

£000

Grants (8,729) (665) (9,394)Other reimbursements and contributions

(75,982) (768) (76,750)

Other Income (1,333) (687) (2,020)Total Income (86,044) (2,120) (88,164)

Employees 0 754 754Premises 0 64 64Transport 1 19 20Supplies and services 48,205 566 48,771Support Services 279 104 383Total Expenditure 48,485 1,507 49,992

Net Expenditure (budget outturn)

(37,559) (613) (38,172)

Reconciliation to Service Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement:

This reconciliation shows how the figures in the analysis of service income and expenditure relate to the amounts included in the Comprehensive Income and Expenditure Statement.

2014/15£000

Net Expenditure in the Service Analysis (budget outturn) (38,172)

Additional subsidiaries not included in the analysis 76,103Amounts not reported to management (24,010)Amounts included in the analysis but not included in the CI&ES (5,288)

Cost of Services in the CI&ES 8,633

Reconciliation to Portfolio Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement:

This reconciliation shows how the figures in the analysis of income and expenditure relate to the amounts included in the Comprehensive Income and Expenditure Statement.

2014/15Net

Expenditure in the Service

Analysis (budget outturn)

Additional subsidiaries not included

in the analysis

Amounts not reported to

management

Amounts included in the

analysis but not included in the

CI&ES

Cost of Services in the CI&ES

Amounts reported below

the net expenditure of

Continuing Operations in the

CI&ES

Total

£000 £000 £000 £000 £000 £000 £000

Fees, charges and other service income

(694) (10,006) 0 0 (10,700) 0 (10,700)

Interest and investment income

(1,326) 0 0 1,326 0 (1,745) (1,745)

Government grants and contributions

(86,144) (1,884) (23,677) 5,387 (106,318) (19,671) (125,990)

Total Income (88,164) (11,890) (23,677) 6,713 (117,018) (21,416) (138,435)

Employee expenses 754 6,803 0 0 7,557 0 7,557Other service expenses

47,850 81,190 (333) (10,613) 118,093 (35) 118,058

Interest payments 1,388 0 0 (1,388) 0 19,791 19,791Total Expenditure 49,992 87,993 (333) (12,001) 125,650 19,756 145,406

(Surplus) or deficit on the provision of services

(38,172) 76,103 (24,010) (5,288) 8,634 (1,661) 6,972

50. Group Officers’ Remuneration

Under the Accounts and Audit Regulations 2011, Local Authorities are required to disclose information on their employees’ remuneration in two sections.

The first section must contain the details of those officers defined in the Regulations as senior employees whose salary is above £50,000 per annum. Senior employees are typically categorised as statutory chief officers or non-statutory chief officers. The latter category typically includes those officers who report directly to the Chief Executive (excluding those whose duties are solely secretarial). In addition, those senior officers whose salary is above £150,000 are required to be named in this section.

The second section must include a disclosure of the numbers of other staff whose total remuneration (i.e. salary plus overtime and allowances, etc.) is above £50,000.The remuneration paid to the Combined Authorities senior employees is shown in the table below:

2014/15Post Holder Information

Salary -including Fees and

Allowances

Expenses Allowances

Compensation for Loss of

Office

Pension Contributions

Total Remuneration

including Pension

Contributions£ £ £ £ £

Interim Director General PTE / Executive Director CA (Note 1)

119,832 606 0 14,091 134,529

Interim Deputy General / Director of Customer Experience Interim Director of Strategy

104,250

80,438

23

0

0

0

12,719

9,760

116,992

90,198

Head of Financial Services

12,059 0 0 1,471 13,530

Interim Head of Financial Services

15,698 0 0 1,806 17,504

Interim Head of Finance

23,434 0 11,810 2,865 38,109

Principal Solicitor and Secretary

75,636 387 0 8,775 84,798

Director of Inward Investment

80,000 0 0 0 80,000

Director of Skills 65,278 0 0 0 65,278

Total 576,625 1,016 11,810 51,487 640,938


91

Note 1: The post holder held two posts within the Combined Authority and PTE. The total cost was incurred by the PTE and the costs relating to the Executive Director CA were recharged to the Combined Authority during the year.

The Authority’s other employees receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) were paid the following amounts:

2014/15Remuneration Band Total£50,000 - 54,999 1£55,000 - 59,999 3£60,000 - 64,999 1£65,000 - 69,999 1£70,000 - 74,999 1£75,000 - 79,999 1£80,000 - 84,999 2£100,000 - 104,999 1£120,000 - 124,999 1Total 12

51. Group Termination Benefits

SYPTE terminated the contracts of 35 employees in 2014/15, incurring liabilities of £278k. The number of exit packages and total cost per band are set out in the table below:

2014/15Exit Package cost band(including special payments)

Total number of exit

packages by cost band

Total cost of exit packages in

each band

£000£0 - £20,000 34 256£20,001 - £40,000 1 22Total 35 278

52. Group External Audit Fees

The following fees were paid to the auditors of the Group members:

2014/15 £000

Combined Authority 35South Yorkshire Passenger Transport Executive 55SYITA Properties Limited 9Total 99


92

53. Group Grant Income

The Authority credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement:

2014/15£000

Credited to Services:Department for Business Innovation and Skills (145)Department for Transport (27,537)European Regional Development Fund (12)English Local Government (Note 1) (76,779)Total (104,473)

Credited to Taxation and Non Specific Grant Income:Non-ring fenced Government Grants:Department for Communities and Local GovernmentDepartment for TransportEuropean Regional Development Fund / Other

(517)(16,096)

(3,058)(19,671)

Capital Grants and Contributions 00

Total

1. £76m SY Transport Levy, £0.2m LEP Subscriptions, £0.6m Enterprise Zone Rates.

(124,144)

The Authority has received a number of grants and contributions that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver. The balances at year end are as follows:

31 March 2015£000

Revenue Grants Receipts in Advance: 0Total (0)

Capital Grants Receipts in Advance:Department for Transport (4,664)Total (4,664)

54. Group Related Party Transactions

The Group is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Group or to be controlled or influenced by the Group. Disclosure of these transactions allows readers to assess the extent to which the Group might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Group.

For the Combined Authority, the main categories of related party are the nine constituent Local Authorities whose Leaders make up the membership of the Combined Authority and


93

have direct control through voting rights. The material related party transactions in year amounted to net payments of £51m with £126m accrued.

Members

During 2014/15 no works or services were commissioned from companies in which any members had an interest.

Officers

There have been no pecuniary interests involving the Head of Paid Service, the S151 Officer or the Monitoring Officer to the Authority.

Significant Transactions:



AssetsRelated Party £000 £000 £000 £000 £000 £000Barnsley Metropolitan Borough Council

1 (12,902) 3,930 (8,972) 820 (1,881) (1,061)

Doncaster Metropolitan Borough Council

2 (17,100) 4,789 (12,311) 0 (2,817) (2,817)

Rotherham Borough Council

3 (14,518) 5,572 (8,946) 228 (1,871) (1,643)

Sheffield City Council 4 (31,644) 2,734 (28,910) 16 (5,085) (5,069)Bolsover District Council

5 (27) 14 (13) 0 0 0

Bassetlaw District Council

6 (23) 0 (23) 4 0 4

North East Derbyshire District Council

7 (27) 0 (27) 0 0 0

Chesterfield Borough Council

8 (4) 10 6 23 0 23


9 (4) 0 (4) 0 0 0

1 Income (split across receipts and receivables) - £13.1m Transport Levy, £0.03m LEP Subs, £0.5m Enterprise zone, £0.09m Loan w/off. Expenditure (split across payments and payables) - £3m highways capital maintenance grant and £2.5m payment for Local transport Plan and local Sustainable transport Fund.2 Income - £17m Transport Levy, £0.04m LEP Subs, £0.09m Loan w/off. Expenditure (split across payments and payables) - £3.4m payment of highways capital maintenance grant and £4.1m payment for Local Transport Plan and Local Sustainable Transport Fund.3 Income - (split across receipts and receivables) - £14.5m Transport Levy, £0.04m LEP Subs, £0.13m Enterprise zone, £0.09m Loan w/off. Expenditure (split across payments and payables) - £2.7m payment of highways capital maintenance grant and £4.3m payment for Local Transport Plan / Local Sustainable Transport Fund.4 Income - £31.4m Transport Levy, £0.08m LEP Subs, £0.02m Enterprise zone, £0.19m Loan w/of. Expenditure (split across payments and payables) - £7.5m payments for Local Transport Plan / Local Sustainable Transport Fund.5 £0.004m LEP Subs income, £0.023m Loan write off.6 £0.027m Loan write off.7 £0.004m LEP Subs income, £0.023m Loan write off.8 £0.004m LEP Subs income, £0.023m Loan write off.9 £0.004m LEP Subs income.


94

Transactions with Other Public Bodies

The UK government exerts significant influence over the Authority through legislation and grant funding. Grant funding received is detailed in the notes to the consolidated income and expenditure account. The following table shows transactions excluding grants:



AssetsRelated Party £000 £000 £000 £000 £000 £000South Yorkshire Pensions Authority

1 0 41 41 0 (21) (21)

South Yorkshire Police and Crime Commissioner

2 0 56 56 0 0 0

Leeds City Council 3 0 0 0 0 (19) (19)

1 Fees2 Payment for Local Transport Plan3 Mipim UK property trade show costs

SYPTE

SYPTE has one subsidiary, Supertram Assets Ltd which is non-trading. Certain SYPTE Directors and Officers are also Directors of Supertram Assets Limited, but do not receive any remuneration from the company.

At 31 March 2015 the Executive had a Joint Venture with Yorcard Ltd. This is a trading company which was incorporated in England on 2 March 2007. As the Joint Venture is not material to SYPTE it has not consolidated Yorcard Ltd into its accounts.

SYITA Properties Ltd

SYITA did not disclose any related party transactions.

55. Group Leases

SYPTE and SYITA as Lessee

Finance Leases

The Group has not classified any leases as Finance Leases other than the Private Finance Initiative (note 56).

Operating Leases

The future minimum lease payments due under non-cancellable leases in future years are:2014/15

£000Not later than one year 570Later than one year and not later than five years 2,736Later than five years 1,200Total 4,506


95

SYPTE and SYITA Properties Ltd as Lessor

Finance Leases

The Group has not classified any leases as Finance Leases.

Operating Leases

The future minimum lease payments due under non-cancellable leases in future years are:

2014/15£000

Not later than one year 441Later than one year and not later than five years 1,496Later than five years 1,680Total 3,617

SYPTE has seventeen property leases for the provision of transport infrastructure to support customer experience such as shops and bus depots.

56. Group Private Finance Initiative (PFI)

SYPTE’s PFI contract (Doncaster Interchange) was signed on 3 December 2003 with Teesland Property Company (Northern) Limited and involved construction of a new bus station, which became operational in June 2007. The contract runs until June 2039 and incorporates the future maintenance and upkeep of both the building and the fixtures and fittings. The net book value of the interchange at 31 March 2015 is £11.6m (£11.9m 1 April 2014). The project is a 32 year scheme and funds are provided by SYPTE to the PFI contractor by monthly unitary charge payments.

In 2014/15 unitary charge payments of £2.5m (£2.5m in 2013/14) were paid by SYPTE to the operator, Teesland Property Company. Unitary charge payments, over the life of the contract are expected to total £90.8m, of which SYPTE will contribute £18.2m and the remainder will be recovered in the form of PFI credits paid to SYPTE by the Combined Authority. The unitary charge can vary during the life of the contract, and is contractually subject to inflation rates and performance targets placed upon the operator.

The Combined Authority receives income (PFI credits) quarterly for Doncaster Interchange from the Department of Communities and Local Government (DCLG). This is granted to the SYPTE. Timing differences between income received and expenditure paid is managed by the Combined Authority in the PFI Earmarked Reserve (see note 7).

The Combined Authority received income of £3.9m in 2014/15. Total contributions towards the SYPTE unitary charge payments granted by the Combined Authority to SYPTE for 2014/15 were £2.5m. An additional £1.5m was drawn from the reserve to support general budget pressures.


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Further details of the scheme are shown in the table below:

Repayment of Liability

£000

Interest Charge

£000

Contingent/Rental

£000

Service Charge

£000

Lifecycle Costs£000

Total

£000Within 1 year 162 1,046 100 1,006 113 2,427Within 2 -5 years 803 4,031 100 4,388 494 9,816Within 6 - 10 years 1,466 4,576 - 6,406 721 13,169Within 11 - 15 years 2,228 3,814 - 7,609 856 14,507Within 16 - 20 years 3,387 2,656 - 9,037 1,016 16,096Within 21 – 25 years 3,938 896 (983) 8,436 949 13,236Total 11,984 17,019 (783) 36,882 4,149 69,251

2015Doncaster Interchange PFI

Asset£000


Asset£000

Net book value:As at 1 April 11,028 10,936Revaluations 522 92Depreciation (350) 0As at 31 March 11,200 11,028


Liability£’000


Liability £’000

As at 1 April 12,133 12,270Lease repayments (1,309) (1,309)Interest Charge 1,059 1,071Contingent rentals 101 101As at 31 March 11,984 12,133

57. Group Post-Employment Benefits

Post-Employment Benefits

As part of the terms and conditions of employment of its employees, SYPTE offers post-employment benefits in the form of a pension scheme under the Local Government Pension Regulations 1995 and administered by the South Yorkshire Pensions Authority. This provides members with defined benefits related to pay & service. Although these benefits will not actually be payable until employees retire, the Authority has a commitment to make the payments that need to be disclosed at the time that employees earn their future entitlement.

Local Government Pension Scheme

Transactions Relating to Post-Employment Benefits

SYPTE continues to be responsible for payments to the Fund in respect of services to 25 October 1986 for all staff employed by the SYPTE to that date, including all employees transferred to First South Yorkshire Limited (formerly Mainline Group Limited), under the provisions of the Transport Act 1985.


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For service from 26 October 1986 SYPTE contributes to the Fund in respect only of its own employees who are also members of the Scheme.

Contributions made to the Fund in respect of current and past service are charged to the Comprehensive Income and Expenditure Statement.

2014/15 £000

Comprehensive Income and Expenditure Statement

Current Service Cost 1,046

Financing Investment Income and Expenditure 1,518

Re-measurements in other Comprehensive Income and Expenditure 7,936

Total Post-Employment Benefits Charged to the Comprehensive Income and Expenditure Statement

10,500

2014/15 £000

Movement in Reserves StatementReversal of net charges made to the (Surplus) / Deficit for the Provision of Services for post-employment benefits in accordance with the Code (2,564)

Actual amount charged against the General Fund Balance for pensions in the year:

Employers contributions payable to scheme 5,345

Assets & Liabilities in Relation to Post-Employment Benefits

Reconciliation of present value of the scheme liabilities:

2014/15 £000

Opening Balance at 1 April (94,490)Current Service CostInterest cost

(1,034) (4,046)

Contributions by Scheme ParticipantsRe-measurements

(397)(13,444)

CurtailmentsBenefits paid

(12) 5,460

Closing Balance at 31 March (107,963)

Reconciliation of fair value of the scheme (plan) assets:

2014/15 £000

Opening Balance at 1 April 57,847Interest on Plan Assets 2,551Re-measurementsAdministration expenses

5,508 (23)

Contributions by Employer 5,345Contributions by Scheme (plan) Participants 397Benefits Paid (5,460)Closing Balance at 31 March 66,165


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Pension Scheme Assets comprised:

2014/15 £000

Equities 39,401

Bonds:Government Bonds 10,136Other Bonds 3,830

Property 7,218

Other 5,577

The actuaries have taken account of the changes in the Local Government Pension Scheme regulations in assuming that 50% of scheme members will take up the option for increased lump sum payments.

Scheme History

2014/15 £000

Present Values of Liabilities (107,963)Fair Value of Scheme Assets 66,165

Surplus / (Deficit) in the scheme (41,798)

Basis for Estimating Assets and Liabilities

The pension fund liabilities have been assessed by the actuaries Mercer Ltd and the main assumptions used in their calculations are as follows:

2014/15Mortality assumptions:Longevity at age 65 for current pensioners:Men 23 yearsWomen 25.6 yearsLongevity at age 65 for future pensioners:Men 25.3 yearsWomen 28.4 years

Financial assumptions:Rate of CPI inflation 2.0%Rate of increase in salaries 3.75%Rate of increase in pensions 2.0%Discount rate 3.2%

The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. A sensitivity analysis is shown in the table below:


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Central Sensitivity 1

+ 0.1% p.a. discount

Sensitivity 2

+0.1% p.a. inflation

Sensitivity 3

+0.1% p.a. pay growth

Sensitivity 4

1 year increase in life

expectancy£000 £000 £000 £000 £000

Disclosure itemLiabilities 107,963 106,195 109,761 108,278 110,122Assets (66,165) (66,165) (66,165) (66,165) (66,165)Deficit/(Surplus) 41,798 40,030 43,596 42,113 43,957Projected Service Cost for next year

1,362 1,317 1,408 1,362 1,392

Projected Net Interest Cost for next year

1,311 1,294 1,384 1,336 1,395

History of Experience Gains and Losses

The actuarial gains identified as movements on the Pension Reserves can be analysed into the following categories, measured as a percentage of assets or liabilities:

31 March 2015

%Differences between the expected and actual return on assets

12.2

Experience gains and losses on liabilities

0.0


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58. Glossary

Term Definition

Abbreviations The symbol ‘k’ following a figure represents £thousand.The symbol ‘m’ following a figure represents £million.The symbol ‘bn’ following a figure represents £billion.

Accounting Period The period of time covered by the Authority’s accounts. Normally 12 months, beginning on 1 April. Also known as the Financial Year.

Accounting Policies These are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

Accruals Concept

Income and Expenditure are recognised as they are earned or incurred, not as money is received or paid.

Added Years A discretionary award increasing the value of pensions for retiring employees aged 50 or over subject to specific conditions. Employers must exercise this discretion in accordance with the national regulations and organisation’s own policies.

Amortisation An accounting technique of recognising a cost or item of income in the Comprehensive Income and Expenditure Statement over a period of years rather than when the initial payment is made. Its purpose is to charge / credit the cost / income over the accounting periods that gain benefit for the respective item.

Capital Expenditure Expenditure that is incurred to acquire, create or add value to a non-current asset.

Capital Financing Requirement

It measures the Authority’s underlying need to borrow or finance by other long-term liabilities for a capital purpose. It represents the amount of capital expenditure that has not yet been resourced absolutely, whether at the point of spend or over the longer term. Alternatively, it means capital expenditure incurred but not yet paid for.

Capital Receipts The proceeds from the sale of capital assets which, subject to various limitations, can be used to finance capital expenditure,


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invested, or to repay outstanding debt on assets originally financed through borrowing.

Cash Comprises cash on hand and demand deposits.

Cash Equivalents These are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Consistency Concept The consistency concept requires that there should be a consistent method of accounting treatment of like items within each accounting period and from one period to the next.

Contingency A condition which exists at the Balance Sheet date, where the outcome will be confirmed only on the occurrence of one or more uncertain future events not wholly within the Authority’s control.

Credit Risk The possibility that one party to a financial instrument will fail to meet their contractual obligations, causing a loss to the other party.

Creditors Amounts owed by the Authority for work done, goods received or services rendered, for which no payment has been made at the date of the Balance Sheet.

Debtors Amounts owed to the Authority for work done, goods received or services rendered, for which no payment has been received at the date of the Balance Sheet.

Defined Benefit Scheme

A pension or other retirement benefit scheme, other than a Defined Contribution scheme. Usually, the scheme rules define the benefits independently of the contributions payable, and the benefits are not directly related to the investments of the scheme. The scheme may be funded or unfunded (including notionally funded).

Defined Contribution Scheme

A pension or other retirement benefit scheme into which an employer pays regular contributions fixed as an amount or as a percentage of pay and will have no legal or constructive obligation to pay further contributions if the scheme does not have sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.


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Depreciation The measure of the wearing out, consumption or other reduction in a non-current asset either as a result of its use, ageing or obsolescence.

Fair Value Fair Value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Finance Lease A lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. The payments usually cover the full cost of the asset together with a return for the cost of finance.

Financial Instrument A contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another. The term “financial instrument” covers both financial assets and financial liabilities and includes both straightforward financial assets and liabilities such as trade receivable (debtors) and trade payables (creditors) and complex ones such as derivatives.

General Fund The total services of the Authority.

Goodwill The difference between the aggregate fair value of the net assets of a business and the value of the business as a whole. Goodwill can be internally developed or purchased.

Impairment A reduction in the value of a non-current asset below its carrying amount on the Balance Sheet.

Examples of factors which may cause such a reduction in value include general price decreases, a significant decline in a fixed asset’s market value and evidence of obsolescence or physical damage to the asset.

Intangible Assets Non-financial assets that do not have physical substance but are identified and are controlled by the entity through custody or legal rights. The two broad types of intangible non-current assets applicable to local authorities are goodwill and other intangible assets. Examples of other intangible assets might be patents or software licences.

International Financial Accounting standards developed by the International Accounting


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Reporting Standards (IFRS)

Standards Board which determine the standards to be adopted in the preparation and presentation of the Authority’s accounting records.

Inventories Inventories are assets: in the form of materials or supplies to be consumed in the

production process or consumed or distributed in the rendering of services

held for sale or distribution in the ordinary course of operations

in the process of production for sale or distribution

Investment Property Property held solely to earn rentals or for capital appreciation or both, rather than for use in the production or supply of goods or services or for administration purposes or sale in the ordinary course of operations.

Materiality Omissions or misstatements of items are material if they could, individually or collectively, influence the decisions or assessments of users made on the basis of the financial statements. Materiality depends on the nature or size of the omission or misstatements judged in the surrounding circumstances. The nature or size of the item, or a combination of both, could be the determining factor.

Minimum Revenue Provision (MRP)

The minimum amount which must be charged to an Authority’s revenue account each year and set aside as provision for credit liabilities, as required by the Local Government and Housing Act 1989.

Net Book Value The amount at which non-current assets are included on the Balance Sheet, i.e. their historical cost or current value less the cumulative amount provided for depreciation.

Net Current Replacement Cost

The cost of replacing or recreating the particular asset in its existing condition and in its existing use i.e. the cost of its replacement or of the nearest equivalent asset, adjusted to reflect the current position of the existing asset.

Net Realisable Value The open market value of the asset in its existing use (or open market value in the case of non-operational assets), less the expenses incurred in realising the asset.

Operating Lease A lease other than a Finance Lease. An agreement in which the


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Authority derives the use of an asset in exchange for rental payments, though the risks and rewards of ownership of the asset are not substantially transferred to the Authority.

Private Finance Initiative (PFI)

A contract in which the private sector is responsible for supplying services that are linked to the provision of a major asset. Payments are made for the provision of service, which is linked to availability, performance and levels of usage.

Property, Plant and Equipment

Tangible assets that are held for use in the production or supply of goods and services, for rental to others, or for administrative purposes, and expected to be used during more than one period.

Provisions Amounts charged to revenue during the year for costs with uncertain timing, though a reliable estimate of the cost involved can be made.

Prudence Concept Requires that revenue is not anticipated until realisation can be assessed. Provision is made for all known liabilities whether the amount is certain or can only be estimated in light of the information available.

Public Works Loan Board (PWLB)

A government agency, which provides loans to authorities at favourable rates.

Related Party The definition of a related party is dependent upon the situation, though key indicators of related parties are if: One party has direct or indirect control of the other party One party has influence over the financial and operating

policies of the other party to an extent that the other party might be inhibited from pursuing at all times its own separate interests.

Remuneration All sums paid to or receivable by an employee and sums due by way of expenses allowances (as far as those sums are chargeable to UK income tax) and the money value of any other benefits received other than in cash. Pension contributions payable by either employer or employee are excluded.

Reserves Result from events that have allowed monies to be set aside, surpluses, decisions causing anticipated expenditure to have been postponed or cancelled, or by capital accounting arrangements.


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Revenue Expenditure Expenditure incurred on the day-to-day running of the Authority, for example, staffing costs, supplies and transport.

Specific Government Grants

These are designed to aid particular services and may be revenue or capital in nature. They typically have specified conditions attached to them such that they may only be used to fund expenditure which is incurred in pursuit of defined objectives.

Termination Benefits These are benefits payable as a result of either an employer’s decision to terminate an employee’s employment before the normal retirement date, or an employee’s decision to accept voluntary redundancy in exchange for those benefits.

Unsupported (Prudential) Borrowing

Borrowing for which no financial support is provided by Central Government. The borrowing costs are to be met from current revenue budgets.


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59. South Yorkshire Passenger Transport Pension Fund

SOUTH YORKSHIRE PASSENGER TRANSPORT PENSION FUND

FUND ACCOUNT

2013/14 2014/15 Note£'000 £'000 £'000

Dealings with members, employers and others directly involved in the Fund

4,248 Contributions receivable 1,941 731 Transfers in from other pension funds 8 8

4,279 1,949

(10,120) Benefits payable (11,692) 9(254) Payments to and on account of leavers (176) 10

(10,374) (11,868)

(6,095) (9,919)

(817) Management expenses (807)

Returns on investments

5,472 Investment income 5,248 123,916 Profit and losses on disposal of investments

and changes in value of investments21,273 14

(34) Taxes on income (33) 129,354 26,488

2,442 Net increase (decrease) in the net assets available for benefits during the year

15,762

194,220 Net assets of the Fund at 1 April 196,662

196,662 Net assets of the Fund at 31 March 212,424

Fund account presentation changed due to administration expenses and investment management expenses being merged into Management expenses.


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NET ASSETS STATEMENT

31 March 2014 31 March 2015 Note£’000 £’000 £’000

Investment assets31,980 Fixed Interest Securities 33,95183,909 Equities 87,68868,036 Index-Linked Securities 79,231

8,981 Pooled Investment Vehicles 8,872557 Cash - Foreign currency 745

1,815 Cash - Sterling 6141,326 Other investment balances 1,264

196,604 212,365Investment liabilities

(-) Other investment liabilities (-)(-) (-)

196,604 Net investment assets 212,365 16

348 Current assets 141- Long Term Debtors -

348 141 21(290) Current liabilities (82) 22

196,662 Net assets of the Fund available to fund benefits at 31 March

212,424


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NOTES TO THE PENSION FUND ACCOUNTS

1. Description of the Fund

a) GeneralThe South Yorkshire Passenger Transport Pension Fund (“the Fund”) is part of the Local Government Pension Scheme (LGPS). It is a contributory defined benefit pension scheme.Each constituent LGPS fund is managed by an administering authority: in this case it is the Barnsley, Doncaster, Rotherham and Sheffield Combined Authority, known as the Sheffield City Region Combined Authority (“the Authority”).

The Authority has appointed South Yorkshire Pensions Authority (SYPA) to manage the day-to-day affairs of the Fund. This includes all aspects of pensions administration, including the calculation and payment of benefits, and the overall management of the Fund. The Authority has, in addition to SYPA, appointed Old Mutual Global Investors as an investment manager. More information is shown in Note 16. Barnett Waddingham LLP is the Fund’s retained actuary and Eric Lambert has been employed as an independent investment advisor. All of these appointments are governed by management agreements in accordance with LGPS Regulations and are kept under review.

The Authority has delegated its administering authority duties and responsibilities to a specialist Committee of six Authority councilors (South Yorkshire Passenger Transport Pension Fund Committee). Committee meetings are held at least quarterly and Authority and SYPA officers and independent advisors usually attend.

The Fund has only one contributing employer, First South Yorkshire Limited, and 2,127 members (see note 1b).

The Fund’s Statement of Investment Principles (SIP) and Funding Strategy Statement (FSS) were reviewed during the year. Copies of both are posted on the Fund’s website (www.sypensions.org.uk).

b) Membership

The following summarises the position with regard to membership as at 31 March:

31 March 31 March2015 2014

Active Contributors 203 251Pensioners and Dependents 1,510 1,445Deferred Pensions 414 443

Total 2,127 2,139

c) Funding

Benefits are funded by contributions and investment earnings. Contributions are made by active members of the fund and range from 5.5% to 12.5% of pensionable pay for the financial year ending 31 March 2015.Employee contributions are matched by employer’s contributions which are set based on triennial actuarial funding valuations. The last such valuation was as at 31 March 2013 and the Employer’s contribution rate required to cover the cost of accruing benefits and expenses is 23.1% of pensionable pay from 1 April 2014 for the duration of this valuation period. Deficit payments are also due in 2015/16 and 2016/17.


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d) Benefits

Prior to 1 April 2014, pension benefits under the LGPS were based on final pensionable pay and length of pensionable service, summarized below:

Service pre 1 April 2008 Service post 31 March 2008Pension Each year worked is worth 1/80

x final pensionable salary Each year worked is worth 1/60 x final pensionable salary

Lump sum Automatic lump sum of 3/80 x salary. In addition, part of the annual pension can be exchanged for a one-off tax-free cash payment. A lump sum of £12 is paid for each £1 of pension given up.

No automatic lump sum.Part of the annual pension can be exchanged for a one-off tax-free cash payment. A lump sum of £12 is paid for each £1 of pension given up.

From 1 April 2014, the scheme became a career average scheme, whereby members accrue benefits based on their pensionable pay in that year at an accrual rate of 1/49th. Accrued pension is uprated annually in line with the Consumer Prices Index.

There are a range of other benefits provided under the scheme including early retirement, disability pensions and death benefits. For more details please refer to the LGPS website.

2. Basis of preparation

The Statement of Accounts summarises the Fund’s transactions for 2014/15 and its position at the year end of 31 March 2015. It has been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2014/15, issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) which is recognised by statute as representing proper accounting practice.

The accounts summarise the transactions of the Fund and show the net assets at the disposal of the Fund. They do not take account of obligations to pay pensions and benefits which fall due after the end of the financial year. The actuarial present value of promised retirement benefits, valued on an International Accounting Standard (IAS) 19 basis, is disclosed at Note 20 of these accounts.

3. Accounting policies

Fund account – revenue recognition

a) Contributions income

Normal contributions, both from the members and from the employer, are accounted for on an accruals basis at the percentage rate recommended by the Fund actuary in the payroll period to which they relate.

Employer deficit funding contributions are accounted for on the due dates on which they are payable under the schedule of contributions set by the scheme actuary or on receipt if earlier than the due date.


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Employers’ augmentation contributions and pensions strain contributions are accounted for in the period in which the liability arises. Any amount due in year but unpaid will be classed as a current financial asset. Amounts not due until future years are classed as long-term financial assets.

b) Transfers to and from other schemes

Transfer values represent the amounts received and paid during the year for members who have either joined or left the Fund during the financial year and are calculated in accordance with the Local Government Pension Scheme Regulations (see Note 8). Individual transfers in/out are accounted for when received/paid, which is normally when the member liability is accepted or discharged.Bulk (group) transfers are accounted for on an accruals basis in accordance with the terms of the transfer agreement.

c) Investment Income

i. Interest incomeInterest income is recognised in the fund account as it accrues, using the effective interest rate of the financial instrument as at the date of acquisition or origination. Income includes the amortisation of any discount or premium, transaction costs or other differences between the initial carrying amount of the instrument and its amount at maturity calculated on an effective interest rate basis.

ii. Dividend incomeDividend income is recognised on the date the shares are quoted ex-dividend. Any amount not received by the end of the reporting period is disclosed in the net assets statement as an investment asset.

iii. Distributions from pooled fundsDistributions from pooled funds are recognised at the date of issue. Any amount not received by the end of the reporting period is disclosed in the net assets statement as an investment asset.

iv. Movement in the net market value of investmentsChanges in the net market value of investments (including investment properties) are recognised as income and comprise all realised and unrealised profits/losses during the year.

Fund account – expense items

d) Benefits payable

Pensions and lump-sum benefits payable include all amounts known to be due as at the end of the financial year. Any amounts due but unpaid are disclosed in the net assets statement as current liabilities.

e) Taxation

The Fund is a registered public service scheme under section 1(1) of Schedule 36 of the Finance Act 2004 and as such is exempt from UK income tax on interest received and from capital gains tax on the proceeds of investments sold. Income from overseas investments suffers withholding tax in the country of origin, unless exemption is permitted. Irrecoverable tax is accounted for as a fund expense as it arises.f) Management expenses


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The code does not require any breakdown of pension fund administration expenses. However, in the interests of greater transparency, the Authority discloses its pension fund management expenses in accordance with the CIPFA guidance Accounting for Local Government Pension Scheme Management Costs.

Administration expenses

All administration expenses are accounted for on an accruals basis. All costs incurred by SYPA (the Fund Manager) in respect of administration expenses are charged directly to the Fund.

Oversight and governance costs

All oversight and governance expenses are accounted for on an accruals basis. All costs incurred by SYPA (the Fund Manager) in respect of oversight and governance are charged directly to the Fund.

Investment management expenses

All investment management expenses are accounted for on an accruals basis. Fees of the overseas equity portfolio manager are fixed, however the Authority has negotiated that an element of their fee be performance related. This performance related fee was £0.346m in 2014/15 (£0.341 in 2013/14).

All costs incurred by SYPA (the Fund Manager) in respect of investment management expenses are charged directly to the Fund.

Net assets statement

g) Financial assets

Financial assets are included in the net assets statement on a fair value basis as at the reporting date. A financial asset is recognised in the net assets statement on the date the Fund becomes party to the contractual acquisition of the asset. From this date any gains or losses arising from changes in the fair value of assets are recognised by the Fund.

The values of investments as shown in the net assets statement have been determined as follows:

i. Market-quoted investmentsQuoted securities are valued at closing bid prices on the relevant stock

market.ii. Fixed interest stocks

Fixed interest stocks are included in the valuation on a “clean” basis (that is, excluding the value of interest accruing from the previous interest payment date to the valuation date). The “clean” basis has been used for accounting for fixed interest stocks, including for purchase and sale activity on these stocks, as it enables the capital and income elements of total investment returns to be accounted for distinctly.

iii. Unquoted investmentsThe fair value of investments for which market quotations are not readily available is determined as follows:


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Valuations of delisted securities are based on the last sale price prior to delisting, or where subject to liquidation, the amount the Fund expects to receive on wind-up, less estimated realisation costs.

Securities subject to takeover offer – the value of the consideration offered under the offer, less estimated realisation costs.

Directly held investments include investments in limited partnerships, shares in unlisted companies, trust and bonds. Other unquoted securities typically include pooled investments in property, infrastructure, debt securities and private equity. The valuation of these pools or directly held securities is undertaken by the investment manager or responsible entity and advised as a unit or security price. The valuation standards followed in these valuations adhere to industry guidelines or to standards set by the constituent documents of the pool or the management agreement.

Investments in unquoted property and infrastructure pooled funds are valued at the net asset value or a single price advised by the fund manager.

Investments in private equity funds and unquoted listed partnerships are valued based on the Fund’s share of the net assets in the private equity fund or limited partnership using the latest financial statements published by the respective fund managers in accordance with the guidelines set out by the British Venture Capital Association or other professional bodies.

iv. Limited partnershipsFair value is based on the net asset value ascertained from periodic valuations provided by those controlling the partnership.

v. Pooled investment vehiclesPooled investment vehicles are valued at closing bid price if both bid and offer prices are published; or if single priced, at the closing single price. In the case of pooled investment vehicles that are accumulation funds, change in market value also includes income which is reinvested in the fund, net of applicable withholding tax.

.h) Foreign Currency transactions

Dividends, interest and purchases and sales of investments in foreign currencies have been accounted for at the spot market rates at the date of transaction. End-of-year spot market exchange rates are used to value cash balances held in foreign currency bank accounts, market values of overseas investments and purchases and sales outstanding at the end of the reporting period. Any gains or losses arising on conversion or translation are dealt with as part of the change in market value.

i) Cash and cash equivalents

Cash comprises cash in hand and demand deposits.Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to minimal risk of changes in value.

j) Financial liabilities

The Fund recognises financial liabilities at fair value as at the reporting date. A financial liability is recognised in the net assets statement on the date the Fund


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becomes party to the liability. From this date any gains or losses arising from changes in the fair value of liability are recognised by the Fund.

k) Actuarial present value of promised retirement benefits

The actuarial present value of promised retirement benefits is assessed at the period end using a roll forward of the results of the triennial valuation (as at 31 March 2013) allowing for the different financial assumptions required under IAS19.As permitted under IAS26, the Fund has opted to disclose the actuarial present value of promised retirement benefits by way of a note to these accounts (Note 20).

l) Additional Voluntary Contributions (AVCs)

In accordance with regulation 4(2)(b) of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 (SI 2009 No 3093) contributions to AVCs have not been included in either the Authority’s Fund Account or Net Assets Statement, as they are paid directly to the AVC providers by employers of contributors. AVCs are specifically for the provision of additional benefits for individual contributors. AVC funds returned to the scheme and benefits paid as a result of this are included in the Fund account as part of Transfer values received and benefits paid respectively.

Details of AVC investments are however shown in Note 23

4. Critical Judgements in applying accounting policies

Pension Fund Liability

The pension fund liability is calculated every three years by the Fund’s actuary, Barnett Waddingham, with annual updates in the intervening years. The methodology used is in line with accepted guidelines and in accordance with financial standards. Assumptions underpinning the valuations are agreed with the actuary and are disclosed in Notes 19 and 20. This estimate is subject to significant variances based on changes to the underlying assumptions.

5. Assumptions made about the future and other major sources of estimation uncertainty

The Pension Fund Accounts contain estimated figures that are based upon assumptions made about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates.

The one item in the Pension Fund Accounts at 31 March 2015 for which there is a significant risk of material adjustment in the forthcoming financial year is as follows:


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Item Uncertainties Effect if actual results differ from assumptions

Pensions liability Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries (Barnett Waddingham) is engaged to provide the fund with expert advice about the assumptions to be applied.

The funding level at the 2013 actuarial valuation was 86%The effects on the funding level of changes in individual assumptions can be measured. For instance, no allowance for asset performance in excess of gilt yields reduces the funding level by 13% (£37.5m). A 1.5% increase in mortality long term rate of improvement would reduce the funding level by 2% (£5.3m).

6. Events after the Balance sheet date

There have been no events since 31 March 2015, and up to the date when these accounts were authorised that require any adjustments to these accounts.

7. Contributions receivable

Contributions represent the total amount receivable from First South Yorkshire Limited in respect of its own contributions and those of its pensionable employees.

When First South Yorkshire Limited (the Employer) retires staff early, on redundancy or efficiency grounds, a strain on the Fund is generated through the early payment of their benefits. The Authority requires the employer to reimburse the fund for that strain by making capital injections over a phased period of up to 3 years. These capital injections are accounted for in full when they occur.

Analysis of contributions receivable:- 2014/15 2013/14 £’000 £’000 From the Employer

Normal Contributions 1,334 1,349Deficit Funding lump sums - 2,500Additional Capital contributions 233 -Additional cost of early retirement - -

1,567 3,849From Members 374 399

1,941 4,248

8. Transfers In 2014/15 2013/14 £’000 £’000 Group transfers in - -

Individual transfers in 8 31 8 31

9. Benefits Payable


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Analysis of benefits payable:- 2014/15 2013/14 £’000 £’000 Retirement Pensions 8,528 7,981

Retirement Pensions 8,528 7,981Commutation of benefits and lump sum retirement benefits 2,990 1,977Lump sum death benefits 174 162

11,692 10,120

10. Payments to and on account of leavers 2014/15 2013/14 £’000 £’000 Group transfers out - -

Individual transfers out 176 254Refunds of Contributions - -

176 254

11. Management Expenses

2014/15 2013/14 £’000 £’000 Administrative costs 45 39Investment Management Expenses 613 598Oversight and Governance 149 180Administrative Costs 45 39

807 817

The General Administration cost includes fees payable to the Fund’s auditor KPMG of £21,000 (£21,000 in 2013/14) This analysis of the costs of managing the South Yorkshire Passenger Transport Pension Fund during the period has been prepared in accordance with CIPFA guidance.These management expenses include a VAT liability of £65,696 (£55,308 in 2013/14)

12. Investment Income 2014/15 2013/14

£’000 £’000

Interest from fixed interest securities 1,620 1,597Dividends from equities 2,332 2,537Income from index Linked Securities 979 1,001Income from pooled investment vehicles (property) 311 343Interest on cash deposits 5 5Other 1 (11) 5,248 5,472Irrecoverable withholding tax - equities (33) (34)Total Investment Income 5,215 5,438

13. Investment Management Expenses


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2014/15 2013/14 £’000 £’000

South Yorkshire Pensions Authority 101 87Old Mutual 374 369Custody 27 44Other Management Expenses 57 56VAT Liability 54 42

613 598

14. Change in Market Value of Investments

The change in market value of investments during the year comprises all the increases and decreases in the market value of investments held at any time during the year, including all realised and unrealised profits and losses.

Mkt Value Purchases Sale Change in Mkt Value at 1/4/14 at Cost Proceeds Mkt Value at 31/3/15

£'000 £'000 £'000 £'000 £'000

Fixed Interest Securities 31,980 5,935 (5,769) 1,805 33,951Equities 83,909 98,089 (104,336) 10,026 87,688Index-Linked Securities 68,036 9,698 (6,779) 8,276 79,231Pooled Investment Vehicles 8,981 - (1,281) 1,172 8,872

192,906 113,722 (118,165) 21,279 209,742Cash – Foreign currency 557 (6) 745Cash - Sterling 1,815 614

Other investment assets 1,326 1,264Other investment liabilities - -NET INVESTMENT ASSETS 196,604 21,273 212,365

Previous year comparative:

Mkt Value Purchases Sale Change in Mkt Value at 1/4/13 at Cost Proceeds Mkt Value at 31/3/14

£'000 £'000 £'000 £'000 £'000

Fixed Interest Securities 29,807 8,214 (5,058) (983) 31,980Equities 82,509 97,345 (103,681) 7,736 83,909Index-Linked Securities 70,176 12,525 (10,948) (3,717) 68,036Pooled Investment Vehicles 8,862 - (811) 930 8,981

191,354 118,084 (120,498) 3,966 192,906Cash – Foreign currency 332 (50) 557Cash - Sterling 873 1,815

Other investment assets 1,457 1,326Other investment liabilities - -NET INVESTMENT ASSETS 194,016 3,916 196,604


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15. Investment Position

The Fund’s market value (not including current net assets) rose during the year and closed at £212.3m (£196.6m in 2013/14) producing an overall return of 13.7% (4.9% in 2013/14). The Fund’s benchmark return was 13.7% (1.8% in 2013/14).

From a global investor’s standpoint the year was dominated by the persistently low level of interest rates and sovereign bond yields which in some cases actually turned into negative territory. Financial markets continued to be distorted by central bank intervention policies. Investors had gradually increasing concerns over the prospects for economic growth and, at the same time, the desire to secure both safety of capital and improving income. For most of the period the Fund was overweight in international equities and relatively light in UK equities and corporate bonds. Given the continuing outperformance of the overseas equity portfolios and strong returns from the UK equity and property unit trust holdings this proved to be the correct route to follow. Bond performance was adversely affected by the decision to be short of duration. Overall, the Fund produced a return of 13.7% which was in-line with its benchmark.Changes were made to the Fund’s customised benchmark during the year but the implementation of these were not completed before the year end. With effect from 1 April 2015 the split will be 38% to growth assets and 62% to protection assets.

An analysis by investment manager is shown in Note 16.

The total value of purchases and sales made during the year is as follows:

2014/15 2013/14

£’000 £’000Purchases 113,722 118,084Sales 118,165 120,498

Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs include costs charged directly to the Fund such as fees, commissions, stamp duty and other fees. Transaction costs incurred during the year amounted to £143,062 (£153,618 in 2013/14). In addition to the transaction costs disclosed above, indirect costs are incurred through the bid-offer spread on investments within pooled investment vehicles. The amount of indirect costs is not separately provided to the scheme.

16. Net Investment Assets


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31/03/15 31/03/14 £’000 £’000

Fixed Interest SecuritiesUK corporate bonds 33,951 31,980

EquitiesUK quoted 33,169 32,125Overseas quoted 54,519 51,784

87,688 83,909Index-Linked SecuritiesUK public sector quoted 67,222 57,904UK corporate bonds 12,009 10,132

79,231 68,036Pooled Investment VehiclesUK Property 8,872 8,981

Cash - Foreign currency 745 557

Cash - Sterling 614 1,815

Other investment assets (broker balances, 1,264 1,326outstanding dividend entitlement and recoverable withholding tax)Other Investment liabilities (broker balances) - -

Total Investment Assets 212,365 196,604

The Fund has one investment that represents more than 5% of the net assets of the Scheme:

2014/15Security Holding Valuation £’000 % of total

fund

Treasury Index Linked 2020 4,205,000 15,315 7.2

2013/14Security Holding Valuation £’000 % of total

fund

Treasury Index Linked 2020 5,395,000 19,627 10.0

Analysis of the market value of investments by investment manager at 31 March 2015.

Manager £’000 %

South Yorkshire Pensions Authority 160,853 75.74Old Mutual (overseas equities) 51,512 24.26

Investments at market value 212,365 100.00

17. Financial Instruments

Accounting policies describe how different asset classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are


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recognised.The Fund’s financial instruments are the investment assets and debtors and creditors, these are all disclosed on the Net Assets Statement. The assets and debtors are all carried at fair value. The creditors are carried at amortised cost.

a) Classification of Financial InstrumentsThe items in the Net Assets Statement are made up of the following categories of financial instrument:

31 March 2015 31 March 2014£’000 £’000

Fair value through profit or lossFinancial AssetsFixed Interest Securities 33,951 31,980Equities 87,688 83,909Index-Linked Securities 79,231 68,036Pooled Investment Vehicles 8,872 8,981Other investment balances 1,264 1,326Total 211,006 194,232Financial LiabilitiesOther investment balances (-) (-)Total (-) (-)

Loans and receivablesFinancial AssetsCash – Foreign currency 745 557Cash - Sterling 614 1,815Current assets 141 348Total 1,500 2,720

Financial Liabilities at amortised costFinancial LiabilitiesCurrent liabilities (82) (290)Total (82) (290)

See Note 3(h) re method of valuation of asset classes. Debtors and creditors are included at cost.

b) Net gains and losses on Financial Instruments

31 March 2015 31 March 2014

£’000 £’000Financial assetsFair value through profit and loss 21,279 3,966Loans and receivables (6) (50)

Financial liabilitiesFair value through profit and loss - -Financial liabilities measured at amortised cost - -Total 21,273 3,916


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c) Fair value of Financial Instruments

The following table summarises the carrying values of the categories of financial assets and liabilities presented in the Net Assets Statement:

Carrying amount

Fair Value Carrying amount

Fair Value

31 March 2014 31 March 2014£’000 £’000 £’000 £’000

Financial AssetsTrading and other financial assets at fair value through profit or loss

211,006 211,006 194,232 194,232

Loans and receivables 1,500 1,500 2,720 2,720

Total financial assets 212,506 212,506 196,952 196,952

Financial LiabilitiesTrading and other financial liabilities at fair value through profit or loss

(-) (-) (-) (-)

Financial liabilities at amortised cost

(82) (82) (290) (290)

Total financial liabilities (82) (82) (290) (290)

See Note 3(h) for method of valuation for asset classes. Debtors and creditors are included at cost.Gains/losses are reflected in the change in market value and in investment income in the Fund Account (See Note 14).

d) Valuation of financial instruments carried at fair value

The valuation of financial instruments has been classified into three levels, according to the quality and reliability of information used to determine fair values.

Level 1

Financial instruments at Level 1 are those where the fair value are derived from unadjusted quoted prices in active markets for identical assets or liabilities. Products classified as level 1 comprise quoted equities.Listed investments are shown at bid prices. The bid value of the investment is based on the bid market quotation of the relevant stock exchange.

Level 2

Financial instruments at level 2 are those where quoted market prices are not available; for example, where an instrument is traded in a market that is not considered to be active, or where valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data. This includes composite prices for fixed income instruments and fund net asset value prices.


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Level 3

Financial instruments at level 3 are those where at least one input that could have a significant effect on the instrument’s valuation is not based on observable market data.Such instruments would include unquoted equity investments and hedge fund of funds, which are valued using various valuation techniques that require significant judgement in determining appropriate assumptions. Investments in private equity funds and unquoted listed partnerships are valued based on the Fund’s share of the net assets in the private equity fund or limited partnership using the latest financial statements published by the respective fund managers in accordance with the guidelines set out by the British Venture Capital Association or other professional bodies.The following table provides an analysis of the financial assets and liabilities of the Fund grouped into Levels 1 to 3, based on the level at which the fair value is observable.

Quoted market

price

Using observable

inputs

With significant

unobservable inputs

Value at 31 March 2015 Level 1 Level 2 Level 3 Total£’000s £’000s £’000s £’000s

Financial assetsFinancial assets at fair value through profit or loss

88,952 122,054 - 211,006

Loans and receivables 1,500 - - 1,500

Total financial assets 90,452 122,054 - 212,506

Financial liabilitiesFinancial liabilities at fair value through profit or loss

(-) (-) (-) (-)


(82) (-) (-) (82)

Total financial liabilities (82) (-) (-) (82)

Net financial assets 90,370 122,054 - 212,424

Quoted market

price

Using observable

inputs

With significant

unobservable inputs

Value at 31 March 2014 Level 1 Level 2 Level 3 Total£’000s £’000s £’000s £’000s

Financial assetsFinancial assets at fair value through profit or loss

85,235 108,997 - 194,232

Loans and receivables 2,720 - - 2,720

Total financial assets 87,955 108,997 - 196,952

Financial liabilitiesFinancial liabilities at fair value through profit or loss

(-) (-) (-) (-)


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(290) (-) (-) (290)

Total financial liabilities (290) (-) (-) (290)

Net financial assets 87,665 108,997 - 196,662

18. Nature and Extent of risks arising from Financial Instruments

The Fund’s activities expose it to a variety of financial risks:

market risk – the possibility that financial loss might arise for the Fund as a result of changes in such measures as interest rates and stock market movements.

credit risk – the possibility that other parties might fail to pay amounts due to the Fund

liquidity risk – the possibility that the Fund might not have funds available to meet its commitments to make payments

The management of risk is described within the Fund’s SIP which is posted on the Fund’s website (www.sypensions.org.uk). It centres upon the adoption of an investment strategy, as represented by the Fund’s customised benchmark, which is appropriate to meet the objectives of the Funding Strategy Statement. It focuses on the unpredictability of financial markets and seeks to minimise the potential adverse effects on the resources available to fund services.

The Fund Manager’s (SYPA) treasury management activities are governed by the Local Government Act 2003 and the Fund has broadly adopted CIPFA’s Treasury Management Code of Practice. The annual Treasury Management Strategy was approved by the Authority in March 2014.As a pension fund the primary risks which affect it are market risk and credit risk.

a. Market Risk

Market Risk – Price Risk – The Fund publishes its SIP which details how the real risk of negative returns due to price fluctuations is managed.

Because different asset classes have different risk and return characteristics they will react differently to external events and will not necessarily do so in a pre-determined or correlated manner to each other. No single asset class or market acts in isolation from other assets or markets. It is, therefore, extremely difficult to meaningfully estimate the consequences of a particular event in a particular asset on other asset classes. It is important to recognise that returns, volatility and risks vary over time. In order to minimise the risks associated with market movements the Fund is well diversified across asset classes and within individual portfolios and constantly monitored and reviewed.

Price risk – sensitivity analysis

Potential price changes are determined based on the observed historical volatility of asset class returns. ‘Riskier’ assets such as equities will display greater potential volatility than bonds as an example, so the overall outcome depends largely on the


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Fund’s’ asset allocations. Based on this the following movements in market price risk are reasonably possible for the 2014/15 reporting period.

Asset type Potential market movements (+/-)31 March 2015 31 March 2014

Bonds 5.55% 6.00%Uk Equities 10.4% 12.26%Overseas Equities 10.1% 11.62%Index Linked securities 7.39% 8.10%Property (unit trusts) 3.05% 3.11%

This analysis assumes that all other variables, in particular foreign currency exchange rates and interest rates, remain the same.

Had the market price of the Fund investments increased/decreased in line with the above, the change in the net assets available to pay benefits in the market price would have been as follows:

Asset type Value as at 31

March 2015

Percentage change

Value on increase

Value on decrease

£’000 % £’000 £’000Bonds 33,951 5.55 35,835 32,066UK Equities 33,169 10.4 36,618 29,719Overseas equities 54,519 10.1 60,026 49,013Index linked securities 79,231 7.39 85,086 73,376Property (unit trusts) 8,872 3.05 9,143 8,602Cash - Foreign currency 745 0 745 745Cash - Sterling 614 0 614 614Other investment assets 1,264 0 1,264 1,264

Net investment assets 212,365 229,331 195,399

Asset type Value as at 31

March 2014

Percentage change

Value on increase

Value on decrease

£’000 % £’000 £’000Bonds 31,980 6.00 33,899 30,061UK Equities 32,125 12.26 36,064 28,186Overseas equities 51,784 11.62 57,801 45,767Index linked securities 68,036 8.10 73,547 62,525Property (unit trusts) 8,981 3.11 9,260 8,702Cash - Foreign currency 557 0 557 557Cash - Sterling 1,815 0 1,815 1,815Other investment assets 1,326 0 1,326 1,326

Net investment assets 196,604 214,269 178,939


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Market Risk – Interest Rate Risk – This primarily impacts upon the valuation of the Fund’s bond holdings and, to a lesser degree, the return it receives on cash held. A rise in interest rates would lead to the income earned on variable rate investments increasing but would cause the value of fixed rate investments to fall. The Fund’s correlation to interest rates will vary depending upon the profile of investments held.The Fund manages its cash investments with a view to obtaining the best returns possible whilst ensuring the security of the deposits. The Fund also holds foreign currency balances which could be affected by interest rate movements but are more sensitive to exchange rate movements (see Market risk – Currency risk).

The Fund’s direct exposure to interest rate movements as at 31 March 2015 and 31 March 2014 is set out below. These disclosures present interest rate risk based on the underlying financial assets at fair value:

Asset type As at 31 March 2015

As at 31 March 2014

£’000 £’000Cash - Sterling 614 1,815Total 614 1,815

Interest rate risk – sensitivity analysis

The Authority recognises that interest rates can vary and can affect both income to the fund and the value of the net assets.The one standard deviation of the 10 year government bond yield (annualised) amounts to just over 0.9%.

The following analysis assumes that all other variables, in particular exchange rates, remain constant, and shows the effect in the year on the net assets of a +/- 0.9% (previous year 0.9%) change in interest rates:

Asset type Carrying amount as at 31 March

2015

Change in year in the net assets

+0.9% -0.9%£’000 £’000 £’000

Cash - Sterling 614 6 (6)Total change in assets available 614 6 (6)

Asset type Carrying amount as at 31 March

2014

Change in year in the net assets

+0.9% -0.9%£’000 £’000 £’000

Cash - Sterling 1,815 16 (16)Total change in assets available 1,815 16 (16)


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Market Risk – Currency Risk – the Fund holds cash balances in foreign currency and has investments quoted in foreign currency. The risk of exchange rate movements is accepted as part of the overall management strategy of the Fund.

The following table summarises the Fund’s currency exposure as at 31 March 2015 and as at the previous year end:

Currency exposure – asset type Asset value as at 31 March

2015

Asset value as at 31 March

2014£’000 £’000

Overseas quoted securities 54,519 51,784Overseas property funds - -Cash - Foreign currency 745 557

Total overseas assets 55,264 52,341

Currency risk – sensitivity analysis

The potential volatility of the aggregate currency exposure within the fund based on historical data for the last 3 years associated with foreign exchange rate movements is 8.63% (7.91% at 31 March 2014).A 8.63% (7.91%) strengthening/weakening of the pound against the various currencies in which the fund holds investments would increase/decrease the net assets as follows:

Currency exposure – asset type Asset value as at 31 March 2015

Value on increase

Value on decrease

+8.63% -8.63%£’000 £’000 £’000

Overseas quoted securities 54,519 59,224 49,814Overseas property funds - - -Cash - Foreign currency 745 809 681

Total change in assets available 55,264 60,033 50,495

Currency exposure – asset type Asset value as at 31 March 2014

Value on increase

Value on decrease

+7.91% -7.91%£’000 £’000 £’000

Overseas quoted securities 51,784 55,880 47,688Overseas property funds - - -Cash - Foreign currency 557 601 513

Total change in assets available 52,341 56,481 48,201

b. Credit Risk

Credit Risk - arises from deposits with banks and financial institutions, as well as credit exposures to the Fund’s customers. The risk is minimised through the SYPA Treasury Management Strategy, which requires that deposits are not made with financial


126

institutions unless they meet identified minimum criteria set by SYPA. The Treasury Management Strategy also imposes a maximum sum to be invested with each institution. In practice the Fund holds minimal cash balances. Counterparties must have a short term debt credit rating of F1 or better.

The Fund’s benchmark allows for cash at 31 March 2015 to a maximum of 5% of the Fund (actual cash holdings were 0.29%).Interest received on advances during 2014/15 was £4,429 (£4,464 in 2013/14) at an average rate of 0.39% (0.35% in 2013/14) (as the Fund maintains short term deposits only, the rate of interest is closely aligned to the Bank of England base rate which has remained at 0.5% since March 2009). For illustration purposes an increase of 0.25% in interest rates achieved would have resulted in an increase of £2,839 (£3,188) in interest received provided that bank balances had remained the same.

c. Liquidity Risk

Liquidity Risk – the Fund ensures it has adequate cash resources to meet its commitments. This is particularly the case for cash to meet pensioner payroll costs and investment commitments.The Fund has immediate access to its cash holdings with a majority of cash being deposited for no longer than a week and no cash being deposited for more than a month. Also the Fund holds Government bonds amounting to £67.2m (£57.9m at 31 March 2014) which can be realised within a week in normal market conditions, if necessary, to meet expected or unexpected demands for cash.All financial liabilities are due to be paid in less than one year.

19. Actuarial Position

In accordance with Regulation 36 of the Local Government Pension Scheme (Administration) Regulations 2008, Barnett Waddingham, the consulting actuary, carried out an examination of the financial position of the Fund as at 31 March 2013. The market value of the Fund’s assets at the date of the valuation was £194.220m. The previous valuation had been completed as at 31 March 2010 (market value £158.374m).

The assumptions adopted are (2010 valuation assumptions shown in brackets):-

Financial assumptions: (non-pensioner/ pensioner)

Price inflation RPI 3.6% / 3.4% (3.6%)Price inflation CPI 2.7% / 2.5% (3.0%)General earnings increases 3.6% (3.85%)Investment return - before retirement 6.6% (6.5%)

- after retirement 3.6% / 2.8% (5.5%)

Demographic assumptions

Mortality table 120% S1PAIll health mortality table 120% S1PA + 6 years

Mortality projections CMI_2012 (CMI_2009


127

long term rate of long term rate ofimprovement improvement1.0% pa 0.5% pa)

Allowance for cash commutation 70% of members elect to take maximum cash

The funding objective is to ensure that the funding level is 100% and that the long term future contribution rate is relatively stable over time.

On an ongoing basis, the Fund had a valuation deficit in respect of past service rights of £32.8m at 31 March 2013 (£26.5m at 31 March 2010). This represents a funding level of 86% (86% at 31 March 2010).The contribution rate payable by First South Yorkshire Limited has been calculated at 23.1% (21.5% in 2010) per annum and will be effective throughout the three year period 1 April 2014 to 31 March 2017. Additional deficit payments are due in 2015/16 and 2016/17 (none were due in 2014/15).

20. Actuarial Present Value of Promised Retirement Benefits

IAS26 requires the present value of the Fund’s promised retirement benefits to be disclosed. To assess the value of the liabilities as at 31 March 2015 the actuary has rolled forward the value calculated for the triennial valuation as at 31 March 2013 allowing for the different financial assumptions required under IAS19.

The financial assumptions used for the purposes of the calculations are shown in the table below:-

31 March 2015 31 March 2014CPI increases 2.1% p.a. 2.6% p.a.Salary increases 3.0% p.a. 3.5% p.a.Pension increases 2.1% p.a. 2.6% p.a.Discount rate 3.0% p.a. 4.3% p.a.

It is not possible to assess the accuracy of the estimated liability as at 31 March 2015 without completing a full valuation. However the actuary is satisfied that the approach of rolling forward the previous valuation results to 31 March 2015 should not introduce any material distortions in the results provided that the actual experience of the Fund has been broadly in line with the underlying assumptions, and that the structure of the liabilities is substantially the same as at the latest formal valuation. There appears to be no evidence that this approach is not appropriate.On this basis, the value, for IAS26 purposes, of the Fund’s promised retirement benefits as at 31 March 2015 was £230.55m (£209.26m as at 31 March 2014) giving a net liability of £18.129m (£12.598m as at 31 March 2014).The Actuarial Present Value of Fund Obligation consists entirely of Vested Obligations.

21. Current Assets


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Debtors:31 March 31 March

2015 2014£’000 £’000

Contributions due - employers - 227Contributions due - employees - 5Additional cost of early retirement - -Sundry debtors 141 116

141 348

Analysis of debtors:31 March 31 March

2015 2014£’000 £’000

Central government bodies 54 55Other local authorities - 232Public corporations and trading funds 1 -Other entities and individuals 85 61

140 348Cash at bank 1 -

There are no long term debtors.

22. Current Liabilities

Creditors:31 March 31 March

2015 2014£’000 £’000

Benefits Payable - 213Sundry creditors 82 77

82 290

The Authority is unable to accurately accrue for benefits payable at 31 March 2015 and so no accrual has been made. This would not be a material figure.

Analysis of creditors:31 March 31 March

2015 2014£’000 £’000

Other local authorities 55 42Public corporations and trading funds 12 9Other entities and individuals 15 239

82 290

23. Additional Voluntary Contributions

Additional Voluntary Contributions (AVCs) made by pension fund contributors are managed by Equitable Life and Scottish Widows. The Fund value of AVCs with these


129

managers and contributions received during the year are shown below:

Fund value Contributions received

31 March 2015

31 March 2014

2014/15 2013/14

£’000 £’000 £’000 £’000Equitable Life

11 10 - -

Scottish Widows

210 203 - 3

24. Related Party Transactions

There are no material transactions with related parties other than those which have been properly recorded and disclosed elsewhere in the accounts.

The employer, First South Yorkshire Limited, is a related party to the Fund and has material transactions with the Authority during the year in the form of contributions described elsewhere in the accounts.The fund managers are related parties to the Fund and fees paid to them are included in Investment management expenses (see Note 13).

25. Compensation Payments

The Fund makes compensation payments in respect of non-statutory pension benefits (e.g. ‘added years’). These costs are not chargeable to the Fund, but are recovered from First South Yorkshire Limited. During 2014/15, the Fund made payments in respect of non-statutory pension benefits of £109,773 (£110,062 in 2013/14).

Independent Auditors Report

1

KPMG LLP1 The EmbankmentNeville StreetLeedsLS1 4DW

Dear Sirs,

Barnsley, Doncaster, Rotherham and Sheffield Combined Authority, known as Sheffield City Region Combined Authority - Audit for the year ended 31 March 2015

This representation letter is provided in connection with your audit of the financial statements of the Barnsley, Doncaster, Rotherham and Sheffield Combined Authority (“the Authority”), for the year ended 31 March 2015, for the purpose of expressing an opinion:

(i) as to whether these financial statements give a true and fair view of the financial position of the Authority and the Group as at 31 March 2015 and of its expenditure and income for the year then ended;

(ii) whether the Pension Fund financial statements give a true and fair view of the financial transactions of the Pension Fund during the year ended 31 March 2015 and the amount and disposition of the Fund’s assets and liabilities as at 31 March 2015, other than liabilities to pay pensions and other benefits after the end of the scheme year; and

(iii) have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2014/15.

These financial statements comprise the single entity and group Movement in Reserves Statements, Comprehensive Income and Expenditure Statements, the Balance Sheets, the Cash Flow Statements, and the related notes. The Pension Find financial statements comprise the Fund Account, the Net Assets Statement and the related notes.

The Authority confirms that the representations it makes in this letter are in accordance with the definitions set out in the Appendix to this letter.

The Authority confirms that, to the best of its knowledge and belief, having made such inquiries as it considered necessary for the purpose of appropriately informing itself:

2

Financial statements

The Authority has fulfilled its responsibilities, as set out in regulation 8 of the Accounts and Audit (England) Regulations 2011, for the preparation of financial statements that:

˗ give a true and fair view of the financial position of the Authority and the Group as at 31 March 2015 and of the Authority’s and the Group’s expenditure and income for the year then ended;

˗ give a true and fair view of the financial transactions of the Pension Fund during the year ended 31 March 2015 and the amount and disposition of the Fund’s assets and liabilities as at 31 March 2015, other than liabilities to pay pensions and other benefits after the end of the scheme year; and

˗ have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2014/15.

The financial statements have been prepared on a going concern basis.

Measurement methods and significant assumptions used by the Authority in making accounting estimates, including those measured at fair value, are reasonable.

All events subsequent to the date of the financial statements and for which IAS 10 “Events after the reporting period” that requires adjustment or disclosure have been adjusted or disclosed.

The effects of uncorrected misstatements are immaterial, both individually and in the aggregate, to the financial statements as a whole.

Information provided

The Authority has provided you with:

˗ access to all information of which it is aware, that is relevant to the preparation of the financial statements, such as records, documentation and other matters;

˗ additional information that you have requested from the Authority for the purpose of the audit; and

3

˗ unrestricted access to persons within the Authority from whom you determined it necessary to obtain audit evidence.

All transactions have been recorded in the accounting records and are reflected in the financial statements. The Authority confirms the following:

˗ The Authority has disclosed to you the results of its assessment of the risk that the financial statements may be materially misstated as a result of fraud.

˗ Included in the Appendix to this letter are the definitions of fraud, including misstatements arising from fraudulent financial reporting and from misappropriation of assets.

The Authority has disclosed to you all information in relation to:

˗ fraud or suspected fraud that it is aware of and that affects the Authority and the Group and involves:

o management; o employees who have significant roles in internal control; or o others where the fraud could have a material effect on the financial

statements; and

˗ allegations of fraud, or suspected fraud, affecting the Authority’s and the Group’s financial statements communicated by employees, former employees, analysts, regulators or others.

In respect of the above, the Authority acknowledges its responsibility for such internal control as it determines necessary for the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In particular, the Authority acknowledges its responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud and error.

The Authority has disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing the financial statements.

The Authority has disclosed to you and has appropriately accounted for /or disclosed in the financial statements in accordance with IAS37 Provisions, Contingent Liabilities and

4

Contingent Assets all known actual or possible litigation and claims whose effects should be considered when preparing the financial statements.

The Authority has disclosed to you the identity of the Authority’s and the Group’s related parties and all the related party relationships and transactions of which it is aware. All related party relationships and transactions have been appropriately accounted for and disclosed in accordance with IAS24 Related Party Disclosures.

The Authority confirms that:

˗ The financial statements disclose all of the key risk factors, assumptions made and uncertainties surrounding the Authority’s and the Group’s ability to continue as a going concern as required to provide a true and fair view.

˗ Any uncertainties disclosed are not considered to be material and therefore do not cast significant doubt on the ability of the Authority and the Group to continue as a going concern.

On the basis of the process established by the Authority and having made appropriate enquiries of its subsidiaries, the Authority is satisfied that the actuarial assumptions underlying the valuation of subsidiary pension scheme liabilities are consistent with its knowledge of the business and are in accordance with IAS19 (revised) Employee Benefits.

The Authority further confirms that:

˗ all significant retirement benefits, including any arrangements that:

o are statutory, contractual or implicit in the employer's actions; o arise in the UK and the Republic of Ireland or overseas;o are funded or unfunded; and o are approved or unapproved,

have been identified and properly accounted for by South Yorkshire Passenger Transport Executive; and

˗ all settlements and curtailments have been identified and properly accounted for by South Yorkshire Passenger Transport Executive.

5

The Authority confirms the new Pensions Administration system has been unable to calculate the Benefits Payable accrual, however it believes that the entry of £nil is materially correct.

This letter was tabled and agreed at the meeting of the Combined Authority Leaders on 14th September 2015.

Yours faithfully,

Signed: ……………………………..

Name: Eugene Walker

Position: Director of Finance

Date: 14th September 2015

Signed: ……………………………..

Name: Sir Stephen Houghton OBE

Position: Combined Authority Chairman

Date: 14th September 2015

6

Appendix to the Authority Representation Letter of Barnsley, Doncaster, Rotherham and Sheffield Combined Authority, known as Sheffield City Region Combined Authority: Definitions

Financial Statements

A complete set of financial statements comprises:

A Comprehensive Income and Expenditure Statement for the period

A Balance Sheet as at the end of the period

A Movement in Reserves Statement for the period

A Cash Flow Statement for the period

Notes, comprising a summary of significant accounting policies and other explanatory information.

A local authority is required to present group accounts in addition to its single entity accounts where required by chapter nine of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2014/15.

A housing authority must present:

a HRA Income and Expenditure Statement; and

a Movement on the Housing Revenue Account Statement.

A billing authority must present a Collection Fund Statement for the period showing amounts required by statute to be debited and credited to the Collection Fund.

A pension fund administering authority must prepare Pension Fund accounts in accordance with Chapter 6.5 of the Code of Practice.

An entity may use titles for the statements other than those used in IAS 1. For example, an entity may use the title 'statement of comprehensive income' instead of 'statement of profit or loss and other comprehensive income'

Material Matters

Certain representations in this letter are described as being limited to matters that are material.

7

IAS 1.7 and IAS 8.5 state that:

“Material omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.”

Fraud

Fraudulent financial reporting involves intentional misstatements including omissions of amounts or disclosures in financial statements to deceive financial statement users.

Misappropriation of assets involves the theft of an entity’s assets. It is often accompanied by false or misleading records or documents in order to conceal the fact that the assets are missing or have been pledged without proper authorisation.

Error

An error is an unintentional misstatement in financial statements, including the omission of an amount or a disclosure.Prior period errors are omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

a) was available when financial statements for those periods were authorised for issue; and

b) could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.

Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud.

Management

For the purposes of this letter, references to “management” should be read as “management and, where appropriate, those charged with governance”.

Related Party and Related Party Transaction

Related party:

A related party is a person or entity that is related to the entity that is preparing its financial statements (referred to in IAS 24 Related Party Disclosures as the “reporting entity”).

8

a) A person or a close member of that person’s family is related to a reporting entity if that person:

i. has control or joint control over the reporting entity; ii. has significant influence over the reporting entity; or iii. is a member of the key management personnel of the reporting entity or of a

parent of the reporting entity.b) An entity is related to a reporting entity if any of the following conditions applies:

i. The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

ii. One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

iii. Both entities are joint ventures of the same third party.iv. One entity is a joint venture of a third entity and the other entity is an associate

of the third entity.v. The entity is a post-employment benefit plan for the benefit of employees of

either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

vi. The entity is controlled, or jointly controlled by a person identified in (a).vii. A person identified in (a)(i) has significant influence over the entity or is a

member of the key management personnel of the entity (or of a parent of the entity).

Key management personnel in a local authority context are all chief officers (or equivalent), elected members, the chief executive of the authority and other persons having the authority and responsibility for planning, directing and controlling the activities of the authority, including the oversight of these activities.

A reporting entity is exempt from the disclosure requirements of IAS 24.18 in relation to related party transactions and outstanding balances, including commitments, with:

a) a government that has control, joint control or significant influence over the reporting entity; and

b) another entity that is a related party because the same government has control, joint control or significant influence over both the reporting entity and the other entity.

Related party transaction:

A transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

SCR COMBINED AUTHORITY 14th September 2015

COMBINED AUTHORITY TREASURY OUTTURN REPORT 2014/15

Summary

This paper represents a compliance report for the CA’s Treasury Management activity during financial year 2014/15

The report highlights an increase in debt associated with the £72.9m grant award to SYPTE that will significantly increase the amount of revenue reserves available to support sustainable SY transport levy reductions

The paper also highlights investment activity which struggled against the budget income target due to the challenging operating environment

The paper reports compliance against all parameters, bar a breach on an investment counterparty limit in early 2014 that has previously been reported to members

1. Issue

1.1. Treasury management concerns the management of risk associated with the investment of cash flow surpluses and the management of the CA’s debt portfolio.

1.2. Parameters and targets are set at the start of each year by members to govern Treasury actions.

1.3. This compliance report provides an update on performance, compliance against the parameters set for us, and the wider economic environment that has a significant influence on performance.

1.4. Returns on investment income missed their very challenging income target (set by the former ITA Board) during the year, as high-yielding investments matured and could not be replaced with similar yielding products without exposing the CA to unacceptable risk.

1.5. New debt was incurred during the year associated with the award of the £72.9m grant from the CA to SYPTE. This grant facilitates the creation of £72.9m revenue reserves between the CA and SYPTE that will allow for sustainable levy reductions.

1.6. This grant will be paid down through annual debt provisions into the future.

1.7. Treasury actions complied with the parameters set by the Treasury Management Strategy bar a temporary breach on counterparty limits at the beginning of the financial year during the interim phase where the CA did not have access to its own deposit accounts. This breach was anticipated, planned, and reported on to the CA S151 and CA Leaders.

2. Recommendations

2.1. Leaders to note the Treasury performance and compliance with the parameters laid out in the 2014/15 Treasury Management Strategy.

3. Background Information

3.1. The full Treasury Outturn Report is appended to this paper.

3.2. The paper principally details CA performance as a single entity, but touches on the debt and loan position of SYPTE for information purposes.

4. Implications

i. FinancialThis paper sets out performance against the 2014/15 Treasury Management Strategy.

The paper reports no material breaches against parameters laid down, other than that which was previously reported to members.

ii. Legal

iii. Diversity

iv. Equality

Gareth SuttonCA Finance Manager

Officer responsible: Eugene Walker, S151 OfficerSCR Combined Authority

Appendix A: Treasury Management Outturn ReportAppendix B: Capita Year-End Treasury Portfolio Report

ANNUAL TREASURY MANAGEMENT OUTTURN REPORT 2014/15

1. Introduction and Background

1.1 Treasury Management in local government is regulated by the CIPFA Code of

Practice on Treasury Management (the Code) and the CIPFA Prudential Code for

Capital Finance in Local Authorities (the Prudential Code). The Barnsley, Doncaster, Rotherham and Sheffield Combined Authority (the CA) has adopted the Code and incorporated its requirements into its Financial Regulations.

1.2 The primary requirements of the Code are as follows:

(a) Creation and maintenance of a Treasury Management Policy Statement which sets out the policies and objectives of the Council’s treasury management activities.

(b) Creation and maintenance of Treasury Management Practices which set out the manner in which the authority will seek to achieve those policies and objectives.

(c) Receipt by the authority of an annual treasury management strategy report (including the annual investment strategy report) for the year ahead and an annual review report of the previous year.

(d) Delegation by the authority of responsibilities for implementing and monitoring treasury management policies and practices and for the execution and administration of treasury management decisions.

1.3 Treasury management is defined as:

“The management of the local authority’s cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks.”

2. The Annual Treasury Report

2.1 This report covers:• The treasury position as at 31 March 2015;• The strategy for 2014/15;• The economy in 2014/15;• Borrowing rates in 2014/15;• The borrowing outturn for 2014/15;

• Compliance with treasury limits and Prudential Indicators;• Investment outturn for 2014/15.

3. Overall Treasury Position as at 31 March 2015

3.1 The CA debt and investment position at the beginning and the end of the year is as follows;

31st March 2014 31st March 2015

Principal

£m

Rate/

Return

%

Average

Life

Yrs

Principal

£m

Rate/

Return

%

Average

Life

Yrs

Fixed RateFunding:

- PWLB 25.0 5.6% 16.3 25.0 5.6% 15.3

- Locals 0.0 0% 0 0.7 0% 1

Variable RateFunding

- LOBOs 0.0 0% 0 0.0 0% 0

Total Debt 25.0 5.6% 16.3 25.7 5.4% 15.3

CFR 39.8 110.7

Over / (Under) Borrowed

14.8 85.0

Investments 205.5 188.8 0.68%

At 31st March 2015, SYPTE also held loans of £201.4m and had investments managed through its own accounts of £2.2m.

The table shows that the CA’s debt, measured by the Capital Finance Requirement (CFR), has risen on the year, but not at the same rate as the loan portfolio. Debt has risen because of the award of a capital grant by the CA to SYPTE, but as this cash was not required immediately, we did not need to take new loans.

The £0.7m of loans shown as ‘locals’ in the table above relates to the Inward Investment Loans advanced to the LEP which were adopted onto the CA’s balance sheet at the 1st April 2014.

4. The Strategy for 2014/15

4.1 The strategy for 2014/15 was approved by the former ITA board on 6th March 2014.

4.2 The expectation for interest rates within the strategy for 2014/15 anticipated low but rising Bank Rate (starting in quarter 1 of 2015), and gradual rises in medium and longer term fixed borrowing rates during 2014/15. Variable, or short-term rates, were expected to be the cheaper form of borrowing over the period. Continued uncertainty in the aftermath of the 2008 financial crisis promoted a cautious approach, whereby investments would continue to be dominated by low counterparty risk considerations, resulting in relatively low returns compared to borrowing rates.

4.3 The bank base rate had been unchanged at 0.50% since March 2009. Bank rate is forecast to commence rising in quarter 2 of 2016 and then to rise steadily from there on. Bank rate forecasts for financial year ends (March) are as follows: -

(a) 2015/16 0.50%

(b) 2016/17 0.50%

(c) 2017/18 1.00%

(d) 2018/19 1.75%

There was a downside risk to these forecasts if recovery from the recession proves to be weaker and slower than currently expected.

5. The Economy and Interest Rates

5.1 The original market expectation at the beginning of 2014/15 was for the first increase in Bank Rate to occur in quarter 1 2015 as the unemployment rate had fallen much faster than expected through the Bank of England’s initial forward guidance target of 7%. In May, however, the Bank revised its forward guidance. A combination of very weak pay rises and inflation above the rate of pay rises meant that consumer disposable income was still being eroded and in August the Bank halved its forecast for pay inflation in 2014 from 2.5% to 1.25%. Expectations for the first increase in Bank Rate therefore started to recede as growth was still heavily dependent on buoyant consumer demand.

5.2 During the second half of 2014 financial markets were caught out by a halving of the oil price and the collapse of the peg between the Swiss franc and the euro. Fears also increased considerably that the ECB was going to do too little too late to ward off the threat of deflation and recession in the Eurozone. In mid-October, financial markets had a major panic for about a week. By the end of 2014, it was clear that inflation in the UK was going to head towards zero in 2015 and could possibly even turn negative. In turn, this made it clear that the MPC would have great difficulty in starting to raise Bank Rate in 2015 while inflation

was around zero and so market expectations for the first increase receded back to around quarter 2 of 2016.

5.3 Gilt yields were on a falling trend for much of the last eight months of 2014/15 but were then pulled in different directions by increasing fears after the anti-austerity parties won power in Greece in January; developments since then have increased fears that Greece could be heading for an exit from the euro. Whilst the UK’s direct economic and financial exposures to Greece are small, there could be an adverse impact on the UK’s economy from a wider fallout and period of general financial market instability that would be likely to prevail if a “Grexit” were to occur – although this may have been averted by the proposed bail out deal.

5.4 Another downward pressure on gilt yields was the announcement in January that the ECB would start a major programme of quantitative easing, purchasing EZ government and other debt in March. On the other hand, strong growth in the US caused an increase in confidence that the US was well on the way to making a full recovery from the financial crash and would be the first country to start increasing its central rate, probably by the end of 2015. The UK would be closely following it due to strong growth over both 2013 and 2014 and good prospects for a continuation into 2015 and beyond.

6. Borrowing Rates in 2014/15

6.1 PWLB borrowing rates - the graph for PWLB maturity rates below show, for a selection of maturity periods, how PWLB certainty rates have fallen to historically very low levels during the year. However there has been an upward trend since the start of the 2015/16 financial year.

6.2 The Authority continues to carry out borrowing on behalf of the PTE and pays the PTE by way of Capital Grant to finance its capital expenditure programme.

7. Borrowing Outturn for 2014/15

7.1 The Authority’s underlying need to borrow to finance capital expenditure is termed the Capital Financing Requirement (CFR).

31st March 2014 Actual £m

31 March 2015 Actual £m

CFR 39.8 110.7

7.2 The Authority’s external debt (by way of loans) increased by £0.7m following the adoption of the LEP Inward Investment Loans, whilst our overall need for borrowing which is represented by the Capital Financing Requirement has increased by £70.9m.

The material change to the CA’s financial position over the course of the year principally relate to the award of the CA of a capital grant worth £72.9m to its operating subsidiary; SYPTE. The grant was awarded to resource past capital expenditure that could have been funded by the CA (formerly ITA) at the point of defrayment in previous accounting periods (see Appendix A for more detail). This increase is partially offset by debt provisions made in year of £1.9m.

7.3 No additional borrowing was undertaken during the year.

7.4 The CA had the following PWLB loans outstanding as at 31 March 2015:

Number of Years Amount

(£’000)

Average Interest

Rate

5 to 10 years 4,000 5.9%

10 to 15 years 16,000 5.9%

Over 15 years 4,000 4.3%

TOTAL 25,000 5.6%

7.5 For information purposes, the PTE had the following PWLB loans outstanding as at 31 March 2015:


(£’000)

Average Interest

Rate

Under 1 year 18,500 11.2%

2 to 5 years 21,500 9.8%

5 to 10 years 115,375 7.5%

10 to 15 years 22,000 4.9%

Over 15 years 4,000 4.5%

TOTAL 181,375 7.6%

7.6 The PTE also had the following LOBO loans outstanding as at 31 March 2015:


(£’000)

Average Interest

Rate

Over 15 years 20,000 4.7%

TOTAL 20,000 4.7%

7.7 The average debt portfolio interest rate remained the same over the course of the year for fixed interest borrowings at 5.6% for the CA and declined to 7.7% for the PTE following a maturity in March 2015. The LOBO average borrowings at the PTE remained at 4.7%.

No new loans were required during the year as the CA retains significant cash balances. It is efficient to use these balances whilst investment rates remain low, and counter-party risk remains elevated.

8. Temporary Borrowing

8.1 During the year, no short-term borrowing was required to cover temporary cash flow shortages, with investment balances being drawn upon as necessary.

9. Compliance with Treasury Limits

9.1 As a result of the Combined Authority being established by statute at the 1st April 2014, there was a period when investments had to be transacted through Sheffield City Council (SCC). This caused an unavoidable and planned temporary breach of the Combined Authority’s counterparty criteria during April and early May 2014/15 as investment balances held with SCC were at a higher level than permitted by the Combined Authority’s counterparty policy.

This breach was reported to the Section 151 officer and the Combined Authority immediately. During the remainder of the 2014/15 financial year the Authority operated within the treasury limits.

9.2 The Prudential Indicators were set out in a report approved by Members on 6th March 2014 and the 2014/15 Prudential Indicators outturn figures for the Authority are shown in Appendix A.

10. Investment Outturn for 2014/15

10.1 The Authority manages its investments in-house and invests with institutions listed in the Authority’s approved lending list. The Authority invests for a range of periods from overnight to 6 months with various banks and building societies as approved by Capita Asset Services Ltd, and with local authorities for up to 364 days. Investments are subject to the Authority cash flows, its interest rate view and the interest rates on offer.

10.2 The Authority used a range of Money Market Fund accounts. Whiles these funds are typically “AAA” rated, these accounts provide below base rate levels of interest so the funds are used in a limited way when alternative counterparties are available.

10.3 The total external investment interest generated for the Authority in 2014/15 was £1.326m, set against a budgeted investment income target of £1.56m. This budget figure was set by the ITA, and was particularly challenging given the operating environment.

10.4 The average interest rate on all investments was 0.68%, which can be compared favourably to the average seven day LIBID rate of 0.35% and to the average 3 month LIBID rate of 0.43%.

10.5 The return on investments has been affected by a number of high-yielding investments placed during the financial crisis maturing, with us not being able to recycle the cash at similar rates without compromising on the security of the investment. This has been compounded by the continuation of bank rates at historically low levels throughout the financial year.

10.6 The total CA investments outstanding, including those shown as cash & cash equivalents at the year-end were £188.8m, of which £135m represents grant monies not yet requested by the PTE.

11. Icelandic Bank Defaults

11.1 The CA (in its former guise as the ITA) invested £5m with Landsbanki Iceland in July 2008. The bank collapsed as part of the global banking crisis in October 2008 and local authorities were awarded preferential creditor status in October 2011. The Landsbanki Winding-Up Board made four distributions in various currencies including Icelandic Krona. During November and December 2013 the Local Government Association (LGA) and their appointed Solicitors looked at options of selling the debts of preferential creditors to other banks and counterparties. At the end of January 2014, the ITA along with the majority of other preferential creditors including the PTE and the South Yorkshire Pensions Authority agreed to sell the outstanding claim to Deutsche Bank. The sale of the outstanding debt also included the “escrow account” monies held in Icelandic Krona.

11.2 During the year the remaining non-tradable Icelandic Krona balances held by the PTE were converted into Euro’s and were held on the PTE’s behalf by Sheffield City Council at the year end. The corresponding impairment provision was released.

12. Debt Rescheduling

12.1 There was no debt rescheduling at the CA or the PTE carried out in 2014/15.

Appendix A: Prudential and Treasury Indicators

During 2014/15, the Authority complied with its legislative and regulatory requirements. The key actual prudential and treasury indicators detailing the impact of capital expenditure activities during the year, with comparators, are as follows:

Actual prudential and treasury indicators 2013/14

Actual

£000

2014/15

Actual

£000

Capital expenditure 30,500 106,225

Capital Financing Requirement: 39,826 110,732

Gross borrowing-

25,000 25,684

Investments Longer than 1 year Under 1 year Total

15,000

103,047

103,047

0

114,000

114,000

Commentary

The Authority’s external debt increased by £684k during the year which relates to the absorption of the CA/LEP Inward Investment Loan advanced by the CA’s constituent and non-constituent partners. Our overall need for borrowing which is represented by the Capital Financing Requirement has increased by £70.9m.

The material change to the CA’s financial position over the course of the year principally relate to the award of the CA of a capital grant worth £72.9m to its operating subsidiary; SYPTE. The grant was awarded to resource past capital expenditure that could have been funded by the CA (formerly ITA) at the point of defrayment in previous accounting periods.

The award of the grant moves capital financing liabilities upstream from SYPTE to the CA. This is in common with how other CA/ITAs transact within their group structures. In moving the liability upstream, the award of the grant allows the CA to properly align the costs associated with the financing decisions to the period over which the assets created provide economic benefit to the region. This alignment allows the CA to create a more prudent provision for the repayment of debt and avoid placing undue pressure on the South Yorkshire Transport Levy.

The award of the grant increases the CA’s indebtedness by £72.9m; which will eventually be fully provided for through debt provisions. The CA has commissioned external surveyors to determine useful economic lives for the assets funded by this grant award and minimum revenue provision (MRP) profiles have been created on the basis of these assessments.

Gross borrowing and the CFR - in order to ensure that borrowing levels are prudent over the medium term and only for a capital purpose, the Authority should ensure that its gross external borrowing does not, except in the short term, exceed the total of the capital financing requirement in the preceding year (2013/14) plus the estimates of any additional capital financing requirement for the current (2014/15) and next two financial years. This essentially means that the Authority is not borrowing to support revenue expenditure. This indicator allows the Authority some flexibility to borrow in advance of its immediate capital needs.

The authorised limit - the authorised limit is the “affordable borrowing limit” required by s3 of the Local Government Act 2003. Once this has been set, the Authority does not have the power to borrow above this level. The table below demonstrates that during 2014/15 the Council has maintained gross borrowing within its authorised limit.

The operational boundary – the operational boundary is the expected borrowing position of the Authority during the year. Periods where the actual position is either below or over the boundary is acceptable subject to the authorised limit not being breached.

Actual financing costs as a proportion of net revenue stream - this indicator identifies the trend in the cost of capital (borrowing and other long term obligation costs net of investment income) against the net revenue stream.

These limits are set to include SYPTE loans.

2014/15

£m

Authorised limit £265m

Maximum gross borrowing position £217m

Operational boundary £250m

Average gross borrowing position £212m

The ratio of financing costs to net revenue stream shows how much of the CA’s revenue income from the transport levy is spent on interest and debt provision costs:

31 March 2014

actual

31 March 2015

actual

Ratio of financing costs to net revenue stream

2.3% 4.5%

The ratio has increased both due to the MRP associated with the capital grant awarded by the ITA to the PTE to create overall revenue savings, and the falling transport levy which reduced by £10m.

31 March 2014

Actual

31 March 2015

actual

£m £m

Incremental impact of capital investment decisions

0 £1.4m

This table portrays the cost of debt provisions associated with the award of the first retrospective capital grant from the ITA to the PTE. It should be noted that this award accrued revenue savings well in excess of this cost.

The maturity structure of the CA debt portfolio (not including PTE loans) was as follows:

31 March 2014

Actual

2014/15

Original Limits

31 March 2015

Actual

Under 12 months 0% 0% 3%

12 months and within 24 months 0% 0% 0%

24 months and within 5 years 0% 0% 0%

More than 5 years 100% 100% 97%

This table highlights that the CA’s loan portfolio is fixed into the future, with £25m of PWLB loans maturing between 2024 and 2052.

The following table incorporates SYPTE loans, showing the overall loan portfolio maturity mix for the CA Financial Group:

31 March 2014

Actual

2014/15

Original Limits

31 March 2015

Actual

Under 12 months 5% 15% 8%

12 months and within 24 months 8% 15% 7%

24 months and within 5 years 11% 45% 33%

More than 5 years 76% 100% 52%

The table highlights that the Group’s debt portfolio is relatively long, but that we will begin to repay loans over the coming year. This will result in falling interest charges at SYPTE, but less cash on deposit generating investment income for the CA.

The maturity structure of the investment portfolio (excluding cash & cash equivalents) which have same day access was as follows:

Investments

2013/14

Actual

£000

2013/14

Actual

£000

Longer than 1 year

Under 1 year

Total

15,000

103,047

118,047

0

114,000

114,000

The exposure to fixed and variable rates was as follows:

31 March

2013

Actual

31 March 2014

Actual

£m £m

Fixed rate debt £25m £25m

Fixed rate investments -£103m -£99m

Net fixed rate exposure nil nil

Variable rate debt £0m £0m

Variable rate investments -£15m -£15m

Net variable rate exposure Nil nil

SCR COMBINED AUTHORITY

14th September 2015

2016/17 BUDGET SETTING: SCR BUDGET AND BUSINESS PLAN PROCESS

Summary

This paper sets out the engagement plan for the CA’s revenue budgets

These budgets comprise of:

The CA/SYPTE budget that culminates in the SY transport levy; and The CA/LEP budget that will determine subscription on the CA partners

1. Issue

1.1. The CA is required to agree a budget for its SY transport activity in order to set the SY Transport Levy by the statutory deadline of 16th February. This budget will need to be agreed by the 1st February CA Leaders’ meeting

1.2. Equally, the CA also needs to set a budget for its CA/LEP economic development activity. This budget is approved distinctly to the transport budget because it encompasses pan-regional activity, and is funded separately to SY transport activity.

1.3. This budget will determine subscriptions for the CA partners, and will need to be agreed by the 14th March CA Leaders’ meeting.

1.4. This paper sets out proposed reporting routes that will enable engagement with stakeholders.

2. Recommendations

2.1. The Combined Authority notes the proposed reporting routes.


3.1. The CA’s revenue budget is composed of two distinct work streams:

- South Yorkshire Transport activity, culminating in the SY transport levy; and,

- Regional economic development activity in collaboration with the LEP.

CA/SYPTE South Yorkshire Transport Budget

3.2. Under law, the SY transport levy can only be used to fund SY transport activity. Accordingly, we set two distinct budgets to ensure that we can distinguish costs and funding.

3.3.To comply with statutory deadlines, the SY transport budget set jointly for the CA and SYPTE will need to be agreed at the 1st February CA Leaders’ meeting.

3.4.As in prior years, the CA Transport Committee will have a key role in the budget’s development. Engagement will also be possible through the Transport Executive Board.

3.5.The CA S151 has set a framework for budget build up based upon a three tier process of:

- Examining proposals for reserve release following the work done to free up revenue resource following the award of capital grants;

- Identifying savings generated by operational efficiencies at SYPTE; and,

- Developing proposals for policy choices that will look at what SYPTE delivers.

3.6. The Directors of Finance are engaged on the first two tiers, and early work has been done by CA and SYPTE to identify a base level of savings achievable. This work is now being refined and tested with the help of regional colleagues and will be reported back to the Directors of Finance in October.

3.7.SYPTE and the SYPTE Executive Board members are leading discussion around policy choices through engagement with the individual SY partners.

3.8.The following represents the proposed engagement and reporting route in the lead up to the levy setting date of the 1st February:

Date Meeting

4 October SYPTE led consultation on service priorities ends. Update to the Members Working Group (5th)

8 October Directors of Finance presented with revised budget modelling

8 October Transport Board

14 October Update to CA Chief Execs (informal)

19 October Report budget shape to SYPTE Executive Board

26 October Update to CA Leaders

October / November Consider Feedback and detailed alignment of budget work. Engagement with LA stakeholders re budget process

5 November Brief Transport Committee on budget thinking – Private paper

19 November Directors of Finance presented with latest budget modelling

19 November Transport Board

25 November Chief Execs (informal)

30 November SYPTE Executive Board - consideration of draft budget paper

7 December Combined Authority

17 December Transport Committee consulted on draft budget – private paper

14 January Final budget modelling to Directors of Finance

14 January Transport Board

20 January Chief Execs (informal)

25 January Executive Board

1 February Combined Authority approve budget – Public paper

CA/LEP Economic Development Budget

3.9.The CA/LEP revenue budget will fund the regional economic development activity. This budget must be set by the end of the financial year, and will be presented for agreement at the CA Leaders’ meeting on the 14th February.

3.10. Budget assumptions are currently being revised in line with the refreshed business plans that are being submitted to the new Executive Boards.

3.11. The activity of these work streams will be shaped and challenged as part of the budget setting process.

3.12. The following represents the proposed route for engagement and planning in the run up to the 14th March. This route allows for engagement with the regional Directors of Finance, CEX, and CA Leaders. It also builds in a special business planning session to enable the Directors of Finance to engage the SCR Executive on the scale and scope of activity, in order to bring greater transparency, and help partners understand the synergies and interactions with activity being undertaken in each of the partner authorities.

DoFs CA CEX CA Leaders

Budget Planning Session 22nd September

Update 1 8th October 14th October 26th October

Update 2 19th November 25th November 7th December

Update 3 14th January 20th January 1st February

Approval 25th February 2nd March 14th March

4. Implications

i. FinancialThis paper sets out the engagement and reporting routes to allow the CA/SYPTE and CA/LEP revenue budgets to be agreed.

ii. LegalNone

iii. DiversityNone

iv. Equality None


Officer responsible: Eugene Walker, Section 151 OfficerSCR Combined Authority

SCR COMBINED AUTHORITY 14th September 2015

CA REVENUE BUDGET & CAPITAL PROGRAMME QUARTER 1 UPDATE

Summary

The CA’s non-programme revenue budget at quarter 1 shows a forecast overspend on SY transport activity, and a small forecast underspend on CA/LEP economic development activity.

Both issues are likely to change due to decisions made after Q1 end with regards to business support, the forecast need for additional accommodation, and improved investment activity for our surplus cash.

Delivery models for the CA’s revenue programme activity - which includes Skills Bank, Apprenticeship Grant for Employers and the Growth Hub – were developed during the quarter, with activity due to commence in Q2.

Robust appraisal of potential capital schemes continued during the quarter to ensure the efficient allocation of our LGF funding. Expenditure will be incurred on capital schemes as they pass through the programme management frameworks.

It is anticipated that material underspends will be incurred on capital activity due to slippage and potential schemes being withdrawn. Work is underway with the Executive Boards to consider options for managing the headroom this creates.

1. Issue

The CA’s revenue budget is split between SY transport activity and CA/LEP economic development activity.

The CA’s transport budget ended Q1 showing a potential forecast overspend of £200k. This is principally due to revisions made to budget assumptions on investment income.

Since the Q1 end, this position has been mitigated due to agreements to advance loans to Sheffield City Council and Rotherham MBC.

At the end of Q1, the CA/LEP’s non-programme activity revenue budget showed a forecast underspend of c. £25k. This is principally due to the slower than planned pace of recruitment into vacant posts.

This underspend situation is likely to be reversed due to the need to recruit additional finance and legal support officers to help cope with the significant upswing in demand.

However, work was also underway during Q1 to secure agreement with government for more favourable top-slicing of revenue programme delivery, which would help to mitigate cost pressures associated with delivery.

Delivery models for the CA’s revenue programme activity were still being developed during Q1. This work is necessary to ensure efficient and effective spend, but meant that no expenditure was incurred during the quarter on the CA’s revenue programmes that are directly funded by grant.

The CA’s direct capital programme relates to the activity managed directly by the SCR Executive rather than partner organisations, and includes: SCRIF; Skills Capital; and the Regional Growth Fund programme.

During Q1 work was underway to appraise schemes to ensure they delivered value-for-money, and would support the SEP objectives. This appraisal is a critical part of the assurance framework agreed with government, and ensures that we deliver on our promises to spend money efficiently in line with the region’s priorities.

During the quarter one SCRIF scheme was live and accruing costs, with work underway across the other work streams to bring good schemes forward.

Material underspend is expected due to slippage and schemes being withdrawn by sponsoring partners. The Executive Boards are considering options to take advantage of the funding capacity these issues create.

Some regional activity is managed by partners on behalf of the CA. This includes Skills Made Easy, JESSICA, Growing Places Fund, and the pre-CA Regional Growth Fund programme. Updates are provided on this activity.

2. Recommendations

That the Combined Authority notes the revenue budget position at Q1

That the Combined Authority notes the capital programme position at Q1

That the Combined Authority notes the financial positions of the regional activity managed by partners on behalf of the CA.


SY Transport Revenue Budget

The SY transport revenue budget consists principally of the revenue grant payable to SYPTE and costs associated with the CA’s transport related debt.

Operational costs are also incurred associated with business support (legal & governance (£44k), finance (£50k), and SCR Exec officer time (£75k)), and audit fees (£30), insurance (£29k), and other costs (£50k).

Provision is also made for costs associated with member training and expenses (£40k), though it should be noted that the CA does not provide members with allowances.

These costs are principally funded through the SY transport levy (£68.3m), but also from income generated from cash held on deposit (£1.35m).

The balancing funding item is planned draws on reserves. The 2015/16 budget was set with a planned £2m draw on the CA’s PFI reserve, and a further £3.2m draw on the reserves created by the CA’s award of the second retrospective capital grant to SYPTE.

4. During Q1 revisions were made to assumptions on investment rates. These were made to reflect market sentiment that continued to suggest that interest-rate rises and associated improvements in investment rates would be delayed as inflation and growth remained low.

5. This was exacerbated by a failure during the quarter to find longer-term better-yielding investments with safe counterparties. Our investment strategy for the year is largely based on switching out of AAA rated money-market funds into

higher yielding instruments (such as longer-term loans to local partners) that don’t expose us to higher risk.

6. This change adversely affected our view on investment returns, suggesting we would miss our income target by £202k.

7. Since the end of Q1 agreement has been reached to advance loans to both SCC and RMBC. The terms of these loans were shared in advance with regional finance colleagues for transparency and challenge. The returns that accrue on these loans mitigate the reported position, and a full refresh will be reported in Q2 reporting.

CA/LEP Economic Development Budget

8. The CA/LEP revenue budget can be split between programme activity in line with the thematic work streams, and operational activity centred on the core SCR Exec team including officer costs, consultancy budgets, business support, and overheads which resource and facilitate the delivery of the overall SEP.

9. The following image exemplifies that operational budgets are retained in a corporate core to allow the SCR Exec Director to allocate resource in support of the thematic work streams, whilst programme activity can be more directly aligned to each theme:

10. The 2015/16 revenue budget for the SCR Executive was set with an emphasis on officer costs, with expected recruitment in line with the pivot towards delivery.

11.The following table shows the budgeted costs by expenditure line and team:

Value % of team spend % of cost spendSCR EXEC FUNCTIONS Total Core IIT Skills Core IIT Skills Core IIT SkillsSalaries £1,254,589 £805,277 £261,212 £188,100 54% 36% 87% 64% 21% 15% 100%Consultancy £692,000 £417,000 £275,000 £0 28% 37% 0% 60% 40% 0% 100%Business Support £155,250 £155,250 £0 £0 10% 0% 0% 100% 0% 0% 100%ICT £68,028 £24,528 £18,500 £25,000 2% 3% 12% 36% 27% 37% 100%Conferencing £67,000 £0 £67,000 £0 0% 9% 0% 0% 100% 0% 100%Travel £64,200 £5,000 £59,200 £0 0% 8% 0% 8% 92% 0% 100%Rents and Service Charges £45,380 £33,500 £11,880 £0 2% 2% 0% 74% 26% 0% 100%Employee Expenses £29,000 £10,000 £17,000 £2,000 1% 2% 1% 34% 59% 7% 100%Catering £19,800 £13,800 £6,000 £0 1% 1% 0% 70% 30% 0% 100%Marketing & Comms £18,100 £0 £18,100 £0 0% 2% 0% 0% 100% 0% 100%Insurance £15,000 £15,000 £0 £0 1% 0% 0% 100% 0% 0% 100%Audit £15,000 £15,000 £0 £0 1% 0% 0% 100% 0% 0% 100%

£2,443,347 £1,494,355 £733,892 £215,100 100% 100% 100%

12. Income for the SCR Exec comes from a variety of sources, but principally from retained business rates generated on the region’s Enterprise Zone:

13. The 2015/16 budget was set recognising a £312k deficit on SCR Exec activity. This would be mitigated by capitalisations of costs (£334k) incurred in the delivery of the capital programme (principally officer time in relation to Skills Capital and SCRIF), and top-slices of revenue programme activity ((again, officer time on the skills programmes) £94k). The balance accrued (£116k) would be transferred to the CA/LEP’s general reserve as contingency.

14.During Q1, delays to the recruitment of vacant posts has led to a net forecast underspend of £25k. This underspend comes after a £15k write down on the expected investment income return arising from surplus CA/LEP cash held on deposit, arising from the ongoing subdued investment environment.

15.This position is likely to change due to additional recruitment both at the SCR Exec and in BMBC and SCC in relation business support activity that was being considered during Q1, and potential asks for additional resource to fund enhanced marketing and attendance at the MIPIM conferences. During Q1 there was also a growing anticipation of a need to provide further accommodation for the SCR Executive beyond their existing capacity.

16.However, in mitigation of these issues, the ongoing slippage on the capital and revenue programmes is likely to mean that the CA/LEP will arrest the forecast decline in investment income, as cash remains available for investment for longer.

17. The full cost effect of these issues will be reported in Q2 reporting when costs are clarified.

Revenue Programmes

18.The CA/LEP’s revenue budget includes three work streams:

Skills Bank;

Apprenticeship Grant for Employers; and,

Growth Hub

19.During Q1 much work was done to develop delivery models for this activity. These models facilitate the effective and efficient use of the revenue funding.

20.Skills Bank cash was to be retained by government and defrayed under an SFA framework. However, delay in government issuing contracts has meant no money has been spent from the SCR allocation.

21.During the quarter, discussion was underway with government to seek a different delivery model that would see cash transferred from SFA to the CA/LEP to be spent by us directly. This decision was reached after the quarter end, and an update will be provided in Q2 reporting once the position with government has been formalised.

22.During the quarter the CA/LEP was working with SCC to develop a managing agent contract that would allow SCC to deliver the AGE work stream on its behalf. Agreement on this was reached after the end of the quarter, and accordingly no money was spent during Q1.

23.SCC have begun work on this activity, and at the time of writing 1,021 grants with a potential value of £1,2m have been identified through an intentions process.

24.Direct recruitment into Growth Hub posts was delayed during the quarter. A Head of Hub has, however, been recruited recently, and work will commence shortly to re-profile delivery budgets.

CA Direct Capital Programme

25.The CA’s direct capital programme encompasses the activity managed by the SCR Executive and funded from the LGF.

26.This activity is:

SCRIF;

Skills Capital; and,

RGF.

27.LGF also funded the Sustainable Transport Exemplar Plan (STEP), but the funding and management for this is delegated to SYPTE through the LTP team and reported on through the Transport Committee.

28.The 2015/16 capital programme was set with the following approved expenditure profiles for the direct programmes:

29.During quarter 1 there was no defrayed expenditure on the direct capital programmes.

30.The final Growth Deal monies advanced to the region totalled £43.8m, of which £4m was for revenue funding. Accordingly, the region has £39.8m of capital resource available to it this year.

31.The Assurance and Appraisal frameworks adopted by the region are designed to ensure that this resource is above all spent efficiently. This principle underpins the government’s decision to award us grant under Section 31 status, giving us the ability to manage our resource with the maximum flexibility.

32.This flexibility affords us the capacity to move funding between budget heads, and delay expenditure across financial years, where in so doing we can create maximum value. At present underspend across all capital schemes is forecast. This is due to both slippage on schemes, and schemes being withdrawn from the programme. Work is underway with the Executive Boards to identify means of using this additional capacity to bring forward existing or new schemes, without sacrificing the principles of efficient expenditure.

SCRIF

33.One SCRIF scheme (Sheffield Grey-to-Green Phase 1, £2.2m) was live during the quarter and accruing costs, but no claim was made during the quarter.

34.SCRIF schemes and their approval are subject to a robust appraisal system that ensures that only viable and efficient schemes that support our SEP objectives are advanced to the CA/LEP for approval. This rigorous appraisal approach is part of the assurance framework we agreed with government and central to our aspiration of spending money more efficiently than government departments.

35.The expenditure is reflective of the necessary iterative process that refines and challenges the schemes seeking funding within the SCRIF approval framework. SCR Exec officers continue to work closely with scheme sponsors to develop projects, and ensure that the region makes best use of its funding.

36. In addition to the live Grey-to-Green scheme, the Superfast broadband scheme was advancing to funding agreement during the quarter, with a further two due to enter funding agreement stage during the quarter. Six schemes are at the full business case stage, with on at the outline business case stage.

37.Since the start of the year, two schemes have been removed from the programme of which £3.2m was earmarked for this financial year. Slippage has also occurred across most schemes, the majority of which (£8.3m) relates to the M1 J36 scheme. This expenditure is expected to be recovered in 2016/17. It is anticipated that around £15m will be defrayed on SCRIF activity during the year.

38.The Infrastructure Executive Board is actively considering a full range of options to deal with the forecast underspend. These include:

Options to deal with slippage; and,

Options to take up headroom.

Skills Capital

39.Skills Capital comprises £4m for the estate investment programme and £3.5m for the Glass Academy.

40.During the quarter SCR Executive officers invited bids from Further Education colleges for the £4m investment programme, working under a Skills Funding Agency framework for project appraisal and commission. This process was ongoing at the end of the quarter, and thus no money was defrayed.

41.Since this point, agreement has been reached to award a grant worth £310k to North Nottinghamshire College.

42.A second calls for schemes is currently live with project mandates being due to be received mid-September.

43.During the quarter the region also approved £6m of support for the rail college, to be paid for from Growth Deal 1 skills capital money. However, it is unlikely that any funding will be defrayed on this scheme during the financial year.

44.Work is ongoing with partners on the Glass Academy, and since the quarter end the CA/LEP has moved to appoint project managers to work with partners to scope and plan the project. However, during the quarter no expenditure was defrayed.

45.Work required to bring this scheme forward is so significant that there is a material risk that the scheme could be deferred from this financial year, or withdrawn completely.

46.Deployment of skills capital should also be reflective of the need to consider the outcomes of the Area Based Review (ABR). This review is due to be undertaken between September 2015 and January 2016, and will consider the post 16 provision estate, and future potential for specialisation in the training or

deployment of technology in the region. In this context it would be prudent for the CA/LEP to deploy its funding in line with recommendations of this review.

Regional Growth Fund

47.The RGF programme is allocated £2.5m in 2015/16, increasing in future years to £7m then £10m p/a.

48.SCR Exec officers have also developed a strategy with associated governance and processes for the RGF programme. This strategy was developed in collaboration with the Directors of Finance and other stakeholders and is seeking to come forward for Executive Board approval in October 2015.

49.The CA/LEP has invited bids from partners for the delivery agent role, and once this is resolved and the programme is approved activity can commence. Current pipeline activity suggests there are 19 potential investment opportunities that would draw upon the full £2.5m allocation, with further potential investment opportunity should funding be diverted to the programme from other underspending activity.

Partner Led Activity

Growing Places Fund

50. The Growing Places Fund is supporting key infrastructure projects designed to unlock wider economic growth, create jobs and build houses

51.The region’s fund totals £18.2m, and is currently over-profiled by £257k:

52. It is anticipated that the level of grant being made available through GPF will be reduced following a revaluation of the developments post completion. A limited amount of GPF over commitment may be incurred in 17/18 and 18/19 due to timing of loan repayments. The Combined Authority may be requested to provide short term ‘cashflow’ funding during this period.

JESSICA

53.GPF part funds the JESSICA programme:

54. The JESSICA fund has secured an in principle approval to extend the deadline for first round investments from December 2015 to June 2016.

Regional Growth Fund

55. The first RGF programme for the region was managed through Creative Sheffield.

56.The below table provides an update on the current position of the fund both in terms of spend and outputs. Each is broken down into what has been achieved to date and the forecast for the remainder of the delivery period:

57.Commitments are c. 5% under target due to the withdrawal of two significant schemes, despite earlier overprogramming.

58.As the first RGF programme was provided under pre-Local Growth Fund rules, DCLG have confirmed that unspent monies (totalling £1,3890k) will need to be returned; the process will see the majority of the underspend being invoiced in the next month, with a final payment due next year once actual delivery costs to March 2016 (salaries for the programme management team) are confirmed.

Skills Made Easy (SME)

59.At quarter one 1,252 SME eligible apprenticeship starts had been made from a target of 4,000. The project is now 2/3rds of the way through its timetable.

60.The activity is funded by a £4m fund, with the region being awarded access to £23.8m of performance related funding released on eligible apprenticeship starts.

61.During the quarter, £288k was spent from the £4m pump-priming fund awarded to the region. Of this fund, £1.8m remains at the end of Q1 with an anticipated full-year spend of £1.2m. The balance of the fund will be spent by the end of the programme in July 2016.

62.The region drew down £610k from the £23.8m performance fund during Q1, which takes the overall draw to £4m since the programme’s inception.

Ambition SCR

63.Ambition SCR has a budget of £5m and began relatively recently.

64.Funding is split between allocations awarded to partner authorities based upon their share of 18-24 year olds registered at Job Centre Plus for Job Seekers Allowance, and a performance related element called ‘Back to Work Bonus’.

65.The following table shows partner allocations and spend to-date:

66.The balance of the budget is allocated for ‘Back to Work’ bonus.

67.The table highlights that expenditure is relatively slow as the project is still in its infancy.

68.Discussions are underway between SCC as managing agent for the project and BMBC with regards to their need for their allocation.

South Yorkshire Passenger Transport Executive (SYPTE)

69.SYPTE reported to their Executive Board on the 17th August that they anticipate a full year underspend of £1.4m, representing 2% of their budget.

70.This underspend is split amongst a variety of activity:

71.The large underspend on concessionary fares represents ongoing lower than anticipated patronage. This position reflects the unexpected decline in patronage

that arose towards the end of financial year 2014/15, and the matter is being investigated by SYPTE officers.

72.The overspend shown against bus tendered services is expected to be mitigated following the review of the Sheffield Bus Partnerships network.

73.Underspends on strategy relate principally to staffing vacancy control, whilst small underspends across customer and support services contribute to the underspends across that activity.

SY ITA Properties Ltd

74.The Section 151 officer and new company Directors have commissioned a review of the property company by PWC.

75.PWC are undertaking an expansive review of the company’s past, current, and future performance with a view to offering an opinion of the suitability of the company as a vehicle for managing the CA’s transport property portfolio.

76.This review is expected to conclude shortly, and the findings will be reported to stakeholders at the first available opportunity.

77.The review follows on from an Internal Audit review that reported that whilst no impropriety was evident, governance and reporting fell well below the standards expected of a body managing public assets.

78.The company is expected to turn a taxable profit of c. £200k during the year, which will flow to the company’s profit and loss reserve. The CA’s appointed directors can then vote for dividend to be awarded to the company on any surplus profit.

79. Implications

i. FinancialThis report highlights a mixed position across the CA’s revenue budgets with small under and over spends across activity. This is not unusual at the start of the financial year, and members and officers will be kept apprised of developments as activity matures during the year.

No spend was incurred across the capital programme during the quarter, with only one live scheme across the entire programme. SCR Exec officers are working to accelerate activity.

It is noted that SYPTE are forecasting a material underspend at Q1 which will be fed into modelling for the ongoing CA/SYPTE MTFS, and will affect planning for future years’ transport levy activity.

It is further noted that an external review is underway on the CA’s subsidiary property company. The results of this review will be reported to members as soon as they become available.

ii. Legal

iii. Diversity

iv. Equality


Officer responsible: Eugene Walker, S151 OfficerSCR Combined Authority

Summary

The ESIF Programme provides the SCR access to €210m ERDF, ESF and EAFRD funding to support the delivery of the SEP.

As part of the ESIF Programme the Core Cities and London have been requested to submit a proposal to establish a Sustainable Urban Development (SUD) which would see €10.5m ERDF allocated to a specific programme where the selection of projects is formally undertaken by a local body rather than just providing advice to the Managing Authority. This formal process would see the establishment of an Integrated Territorial Investment (ITI) within the SCR and the appointment of an Intermediate Body (IB) to undertake the project selection process. It is recommended that the Combined Authority undertakes this roll.

With the approval of the national ESIF Programmes there has been a request to refresh the ESIF Strategy including working with a revised exchange rate. This refresh provides an opportunity to review the allocation of funds against the SEP priorities and make amendments accordingly.

1. Issue

1.1 This paper provides an update on the progress of the ESIF Programme and raises the following issues to be considered:

A response is required to the invitation to establish a €10.5mm Sustainable Urban Development (SUD) within the SCR. This will require the development and submission of a SUD strategy and the creation of a new governance regime to oversee the delivery of the activity. Whilst the benefits of the SUD are seen as relatively limited given the scale of funding involved it is seen as an important step in the devolution process for the SCR and the role of the Combined Authority in that process.

The original ESIF Strategy was developed 2 years ago since which time the SEP has been completed and a number of deals struck with Government. Using up to date intelligence there is an opportunity to revisit the ESIF allocations to ensure they align with the final version of the SEP and current SCR priorities.

2. Recommendations

SHEFFIELD CITY REGION COMBINED AUTHORITY3rd SEPTEMBER 2015

ESIF UPDATE – SUDS AND ESIF REFRESH

It is recommended that the Combined Authority:

2.1 Agrees that the SCR Combined Authority be the Intermediate Body for ESIF purposes in respect of the SCR ITI/SUD.

2.2 Agrees to delegate the approval and submission of the final ITI/SUD Strategy to the Executive Director of the Combined Authority in consultation with the Chair of the Combined Authority and Legal Officer and subject to endorsement of SCR ESIF Committee.

2.3 Agrees to delegate completion of the written Agreements with DCLG in respect of the ITI/SUD to the Executive Director of the Combined Authority in consultation with the Chair and Legal Officer.

2.4 Agrees to delegate the Selection of Operations (projects) associated with the SUD to the Infrastructure Executive Board.

2.5 Agrees to delegate the refresh of the SCR ESIF strategy to the to the Executive Director of the Combined Authority in consultation with the SCR ESIF Committee

Background information

3. Sustainable Urban Development

3.1 Members will recall that the Core Cities, together with London, have been identified as areas to establish Sustainable Urban Developments (SUD) as part of their ESIF Programme, utilising 10% of their ERDF allocation. Previously an outline £9m SUD strategy for South Yorkshire has been drafted. The MA has now formally requested the SCR to submit a SUD proposal by 25th September. It should be noted that the value of the SUD has been reduced to £7.6m as a result of exchange rate revisions (see section 4 below).

3.2 The SUD will have formal status within the ESIF Programme and will be structured through an Integrated Territorial Initiative (ITI) and by the appointment of an Intermediate Body (IB) with delegated powers to select SUD projects. In practice this means the IB will develop and issue Calls for Proposals, assess and consider responses to Calls and formally recommend decisions to the MA in respect to investments. Notably the MA will be responsible for compliance and other technical issues and will also issue contracts and pay claims. The MA is seeking proposals for the SUD including the nomination of an appropriate Urban Authority to deliver the IB role.

3.3 The key activities to progress prior to the submission of the SUD proposal are as follows:

SUD Strategy – Due to the limited funds available and the urban focus of SUD’s the strategy will be confined to South Yorkshire. The strategy itself will be set within the context of the wider SCR and to do this the ITI Boundary will be for the whole SCR. This will establish the SCR as a formally recognised area within the ESIF Programme to which the MA could delegate further powers or funding in the future. This option has been captured within the current draft of the Devolution Deal.

The initial draft SUD looked to develop a ‘Green and Inclusive’ strategy using ERDF funding from Low Carbon and Social Inclusion Thematic Objectives. However the MA has now confirmed that this Social Inclusion funding is no longer available. As a result a consultation draft has been circulated to key groups that propose a SUD based on Low Carbon, Climate Change Adaptation and Green Infrastructure (Appendix 1).

Comments from the consultation were generally positive and where appropriate will be incorporated in the next version. Subject to time constraints a further round of consultation might take place prior to the submission at the end of September.

SUD Governance – The MA is required to appoint and delegate some or all of its functions to an IB when establishing an ITI. It is proposed that the SCR Combined Authority becomes the IB for the SCR ITI. This will require the creation of a SCR ITI Board made up of CA representatives who will consider all SUD proposals and seek advice from the ESIF Committee. The CA will need to put in place appropriate measures to develop Calls, assess applications and advise potential applicants. In doing so there will need to be a clear separation of functions between project development and project assessment but notably this does not prevent the CA or any of its constituent members applying for ERDF contained within the SUD. It is also important to note the CA will be making recommendations to the MA to enter into Funding Agreements and will not be responsible for making final investments decision. Technical Assistance funding is available to support the IB functions associated with the ITI/SUD.

Given the focus of the SUD on low carbon, flood relief and green infrastructure it is recommended that the actual process of Project Selection is delegated to the Infrastructure Executive Board.

3.4 The benefits and risks associated with the SUD are outlined below:

Benefits Risks / ConsThe SUD strategy will be wholly aligned with the needs of the SCR and protected from influences within the wider national ERDF Programme.

The Governance arrangements will be subject to Audit and need to be robust in terms of separation of functions and process to mitigate any conflicts of interest.

The Calls and Project selection process will fully align with local needs and requirements.

Under no circumstances will projects be approved by the MA without a positive recommendation from the IB.

The final decisions on investments remain with the MA which has the potential to undermine the role of the IB.

The creation of the ITI at the SCR level creates a framework for the devolution of further ESIF funding in the future.

There will be a cost in resourcing the ITI/SUD and whilst Technical Assistance is available to support the process there will still be a need for match funding.

The limited IB status provides the CA with the ability to select projects without the need to consider complicated technical issues such as ERDF eligibility, state aid etc.

In this context the IB status is another

There are complications with the ‘overlap’ area in D2N2 and SCR that need to be considered in detail with the MA which may impact upon the final boundary of the ITI.

demonstration to Government of the willingness and ability of the SCR to take greater control of decision making within its own region.The SUD provides access to the EU’s Urban Development Network and potential funding streams established solely for SUDs.

The scale of the SUD at £7.6m means that the ITI/SUD infrastructure may only consider a very limited number of projects unless further ESIF funding is devolved.

By establishing an ITI the SCR will be able to have attendance at the national Programme Management Committee.

The loss of ERDF Social Inclusion funding needs to be managed with the Social Inclusion and Equalities Advisory Board.

3.4 Subject to the approval of the Combined Authority, the ITI/SUD strategy will be presented to the SCR ESIF Committee on 30th September and submitted to DCLG thereafter. Once approved the necessary governance and processes to implement the SUD will be developed in negotiation with DCLG.

4. ESIF Refresh

4.1 In light of the approval of the ERDF and ESF Operational Programme documents by the EC the MA’s have requested a refresh of ESIF strategies to reflect the final Investment Priorities within the Operational Programmes and allocations of Indicator (outputs and results) targets that are being confirmed on a pro-rata basis.

4.2 In addition the MAs will also provide a revised exchange rate to be applied to our ESIF allocations that are provided in Euros. It is expected that the recent strength of the Pound relative to the Euro will see a significant reduction of funding in the region of 15%. The implications of this are summarised in the table below:

Fund €’m Previous £’m Revised £’mERDF 123.3 105.5 90.0ESF 83.8 71.8 61.2EAFRD 3.5 3.0 2.5Total 210.6 180.3 153.8

In light of these reductions and wider progress with the funding and delivery of the SEP consultation is progressing with the SCR Team and the relevant thematic Boards to consider whether any amendments are required to the ESIF allocations in respect to the SCR priority areas.

4.3 Endorsement from the SCR ESIF Committee will be required prior to submitting a ‘refreshed’ Strategy to the MA at the end of October.

5. Implications

5.1. Financial

5.1.1 The creation of IB status for the SUD relates to project selection only and will not involve any financial or contractual requirements with project sponsors. However the actions of the IB will be subject to Audit scrutiny which results in some accountability for the Combined Authority albeit with limited financial risk. This risk is mitigated in part by the requirement for the MA to approve all IB processes as part of establishment of the ITI/SUD.

5.1.2 Costs associated with the ITI/SUD would be largely in relation to the administration of the IB, project pipeline development and project appraisal. Further discussions with the MA are required to fully clarify the role of the IB and to quantify such costs.

Proposals to fund these costs will be included within ITI/SUD strategy and will take account of the ability to access Technical Assistance.

5.2 Legal

5.2.1 The 2014-20 ESIF Regulations provide for European Regional Development Fund (Article 7, 1301/2013) to support sustainable urban development through strategies that set out integrated actions to tackle the economic, environmental, climate, demographic and social challenges affecting urban areas, while taking into account the need to promote urban-rural linkages.

5.2.2 EC regulations require that a minimum of 5% of the ERDF earmarked for the UK as a whole must be allocated in support of Sustainable Urban Development in line with the Regulation.

5.2.3 In England, the MA has determined that SUDs will be delivered through the use of Integrated Territorial Investments (Article 36, 1303/2013) which also further requires that any Urban Authority within a City or City Region delivering a SUD strategy must be established as an Intermediate Body (IB) and the Managing Authority (MA) must then, as a minimum, delegate the MA function of project selection to the designated Urban Authority. In England this will involve the delegation of tasks in line set out in Functions of the MA (Article 125, 1303/2013, para 3 tasks a) and b)) which relate primarily to the ‘selection of projects’.

5.2.4 It is recommended that the Combined Authority acts as the IB for the SCR ITI/SUD.

5.3 Diversity

5.3.1There is no direct diversity implication raised through this paper.

Author: Ben Morley, on behalf of Sheffield City Region Executive.

Officer responsible: Ben Morley, on behalf of Sheffield City Region Executive

Tel: 0114 2232389 Email: [email protected]


Summary

At the SCR Chief Executive’s meeting held 21st May 2015, space requirements facing the SCR Executive Team were outlined as an issue

Following a call for proposals from across the city region two options were put forward: Doncaster MBC Civic Building and Broad Street West, Sheffield, both of which were appraised in a detailed report (which is summarised in Annex A). This report also addressed the long term issue of under-occupancy of Broad Street West, a Combined Authority owned building, and included alternative options for BSW including disposal or external lets

The report was approved by CEX on 3rd September 2015 with a recommendation to proceed with a decision to fit out and move the SCR Executive team to Floor 1 of Broad Street West.

This paper requests that the CA endorses this recommendation.

1. Issue

1.1. To identify and source a cost effective office location that meets the long term requirements of the SCR Executive team

1.2. To resolve the long-standing issue of under occupancy of the Combined Authority owned Broad Street West and the financial implications of this on the Combined Authority

2. Recommendations

2.1 Approve the decision to proceed with the option to fit out and move the SCR Executive team to Floor 1 of Broad Street West on the basis that this option:

Represents the cheapest option for the CA over a 10 year period

Provides the opportunity to fully address the accommodation needs of the SCR Executive Team through the creation of self-sustained facilities


14th September 2015

SCR Team Accommodation

Would be an efficient and cost effective means of addressing the long-term problem for the CA of under-occupancy at Board Street West by aligning the need to rationalise SCR Executive accommodation with investment in Floor 1 of BSW


3.1. In May 2015 SCR CEXs were briefed as to the extent of the accommodation pressures facing the SCR Executive team and CEX approved the decision to seek suitable alternative accommodation.

3.2. Following a city region wide call for offers, two principal options were put forward

Relocate to part of DMBC’s Civic Office; or

Relocate to Floor 1 of the CA owned Broad Street West (BSW) facility in Sheffield

3.3. Financial analysis of both options was undertaken and presented to both Chief Executives and Directors of Finance (See Annex A), which concluded that:

Over a ten year period, with a lease to reflect the CA’s programme of activity, the BSW option is cheaper by £157k

The BSW option also benefits from the fact that investment and use of an underutilised asset is more efficient than the current situation

Financial analysis has also been conducted to show the impact of the CA taking a five year lease at BSW, then vacating the floor space with the Property Company renting the space externally. The analysis assumes that the Property Company could do this because a refurbished Floor 1 would be an attractive proposition for the market. In these circumstances, the BSW option would be the cheaper over the 10 year analysis period by £213k

3.4. Whilst financial analysis suggests that a move to BSW would be cheaper than the DMBC option over the analysis period, whilst also delivering a more attractive asset through capital investment, options also exist to either sell the current asset in its entirety or effectively market the vacant Floor 1 to secure a rental stream from another occupier. Alternative options are outlined in Annex A.

3.5. However, analysis concluded an external let of Broad Street West could not be achieved without the CA incurring fit out costs. This would require capital expenditure, alternative accommodation for the SCR Executive, and the risks associated with finding and retaining a tenant. Experience of finding a tenant for Floor 2 suggests that this is a significant risk that the transport levy would underwrite.

4. Implications

i. Financial

This paper has presented only the financial case for seeking the most cost effective solution for the Combined Authority.

A more detailed version of this paper was discussed by the Directors of Finance group and approved to go to the SCR CX Board.

The recommended solution involves upfront fit-out costs by the SY Property Company, but then only minimal operational costs to the SCR Executive as the building is owned by the CA. This provides an intermediate solution while a long term decision on the continued ownership of the building is taken in line with wider market conditions.

Alternative options for BSW have been considered including sale and external lease, but are not as preferable as the option recommended in this paper for reasons outlined in more detail.

ii. Legal

No legal considerations for the SCR to consider.

iii. Diversity

iv. Equality

Report authors: Gareth SuttonClaire Bowie

Officer responsible: Eugene WalkerSection 151 OfficerTel: 0114 254 1222Email: [email protected]


Annex A Financial Analysis

AssumptionsFloor 1 of BSW offers a blank canvas. This is not available to the same extent at DMBC’s Civic Building.

Accordingly, costs for a BSW fit-out have been based on replicating the DMBC proposal. This aids direct financial comparison.

For the analysis we assume that:

BSW fit out is paid for by SY ITA Properties Ltdo This allows the capital cost to be offset against Corporation Tax that

would otherwise be paid to HMRCo The benefit of this is shown as a saving, as it reduces the net overall cost

of the transactiono Capital allowances are shown as being applied in full in year 1 to take

advantage of HMRC’s special Business Premise Renovation Allowances for fit-outs of existing buildings in disadvantaged areas.

Only incremental relevant costs are showno This allows us to strip out sunk costs and costs that would be paid

regardless of the decisiono This is pertinent in both proposals where costs such as cleaning of

communal areas, building security, and external maintenance, are already paid for by SYPTE as existing tenant

o Business rates are ignored for both proposalso Rent is assumed to be ‘nil’ for BSW as all profit is passed to the CA

regardless

Revenue costs are based on direct comparableso The cost of the DMBC accommodation is assumed to be £105k p/a, with

no additional costs whatsoevero For prudency, incremental service charges are shown at £1k per montho No inflation is considered on either optiono Financing costs are based upon the net cash deficit arising from initial

investment less cash recovered through depreciation, charged at short term borrowing rates

o For BSW, utility costs are based on SYPTE’s per floor costs with cleaning costs based upon SCC’s most recent costs for Moorfoot,

Capital costs have been derived from a commission to professional surveyors for the fit-out of BSW

o Surveyors have costed on the basis of a direct comparison to DMBC’s Civic Building proposal, and a separate bespoke specification

Analysis assumes a refurbished Floor 1 could be let to the external market

o This reflects that one of the principal barriers to an external lease is the cost of re-fit required to make the floor ready for occupancy

o A prudent rent of £9.75 per sqft to commence in 2020 is used representing the mid-point between the SYPTE rent and that paid by Creative Sheffield for occupancy of Floor 2

o For prudency, rental income is shown after Corporation Tax deductions at 20%

Financial analysis is shown over a ten year periodo This is longer than the five year lease offered by DMBC, but reflects that

the CA has a programme of activity lasting at least ten yearso For further comparative purposes we also show how it would look should

the CA opt for a five year lease, then the floor be let externally for the residual five years

o The analysis assumes DMBC costs remain static over the periodo The Property Company also depreciates fixtures and fittings over a 10

year life profile

Analysis is shown on the potential for a re-fit Floor 1 to be let externally from the New Year

o Rent is staged at £5 per sqft until fy 2018/19, and then £9.75 to the end of the analysis period

o £5 per sqft represents the rent paid by Creative Sheffield over a similar time frame for the same floorspace on Floor 2. This is assumed to be a market rent

o £9.75 represents a mid-point between the rent paid by Creative Sheffield and SYPTE. This rent is lower than that on tenancies elsewhere in Sheffield city centre, but is indicative of the locale and ongoing regeneration requirements

o For prudency, analysis assumes that the Property Company continues to trade

o However, it is not envisaged that a move to wind the company up would impact upon capital allowance treatment in 2015/16

o Depreciation profiles would be swapped for similar MRP profileso Other costs would remain the sameo The CA would, however, benefit from a Corporation Tax saving on rental

income

Results

10 Year LeaseOver a ten year analysis period, with a lease to reflect the length of the CA’s programme of activity, the BSW option is the cheaper by £157k:

BSW is cheaper principally because there is no rent shown in the analysis. No rent is shown because rent would simply be an intra-group transaction with the benefit flowing back to the CA. For this reason, intra-group transactions are eliminated on consolidation.

The BSW option also benefits from the fact that investment and use of an underutilised asset is more efficient.

Currently, the Property Company pays over £100k a year in Corporation Tax to HMRC. By investing in Floor 1, and taking advantage of capital allowance rules, the CA can offset its investment costs against this profit, and reduce the tax burden that would otherwise take revenue from the region.

Furthermore, by making use of Floor 1 the CA actually gets more for what it is already paying for. Currently, the Property Company pays business rates for Floor 1 despite it being unoccupied. By taking on the floor the CA will then not incur additional costs.

Equally, the PTE is already incurring costs that aren’t sensitive to the CA occupying the floorspace (such as maintenance costs). These costs are funded by the CA Financial Group as a whole.

5 Year Lease

Financial analysis has also been conducted to show the impact of the CA taking a five year lease at BSW, then vacating the floor space with the Property Company renting the space externally.

The analysis assumes that the Property Company could do this because a refurbished Floor 1 would be an attractive proposition for the market.

In these circumstances, the BSW option would be the cheaper over the 10 year analysis period by £213k, as the Property Company could then lease Floor 1 to a third part after five years, generating an additional rental income stream (£293k) that would enable profit to be generated and passed to the CA as dividend.

Alternative options at BSW

Sale of BSWThe property company currently generates rent from BSW of c. £500k. Profit from this rent is distributed to the CA by way of dividend which is received as revenue and goes towards supporting the budget and transport levy. However, this rent is largely paid by SYPTE, representing an intra-group transaction that nets to nil before tax considerations. The cost to the CA, would then, be in providing SYPTE with alternative accommodation at an appropriate cost.

The CA would be required to consider recycling any capital receipt into the purchase of a new more appropriate asset, or potentially applying the receipt to reduce the capital financing requirement and thus offset it against provisions for debt repayment (MRP) which would provide a revenue benefit.Purchase of a new asset would attract stamp duty land tax charges, and thus erode the purchasing power of the receipt.

Applying the receipt to offset MRP charges would see the benefit spread into the distant future, and therefore reduce the flexibility we would otherwise have from straight revenue income.

It would be advisable to avoid any property disposals until the future of the Property Company is decided, such that effective tax planning measures can be put in place.It would also be preferable to wait on a disposal decision for BSW until a decision is made on the Sheffield station for HS2. As BSW is within a short walking distance from the proposed Victoria station, the building’s value could improve significantly if a city centre station is chosen.

Long-term leases to external parties should be also be considered within this context, and it would be preferable for the CA to retain as much flexibility over the building’s future as it can.

External LeaseAn external lease of Floor 1 would require a fit-out, with capital costs incurred by the CA.

Financial analysis concludes that re-fitting the Floor and then leasing to an external tenant would be marginally less cost-effective than moving the SCR Exec into the building. However, should the route be pursued the CA would expose itself to the risk of failing to find and/or retain a tenant.

A variance of this size is immaterial. However, it is also very sensitive to assumptions made on rental income generated.

For every £1 that rental income moves favourably or adversely, the rental income generated will vary by £7,500.

Equally, the modelling assumes there is no break in occupation over the 10 year period. For every one month that the floor lies empty, the financial position will deteriorate by c. £6k.

It is the SY transport levy that will bear this material risk and reward.

APPENDIX 1 to ANNEX A

Summary

In its original drafting, the Sheffield City Region Combined Authority Constitution was written on the understanding that the SCR would have an Audit Committee and that this Committee would undertake all functions akin to a Local Authority Audit Committee.

Subsequent consideration has refined this position. This paper summarises the correct role of the Committee and presents a revised Terms of Reference.

1. Issue

1.1. This paper presents the proposed, revised Terms of Reference for the SCR CA Audit Committee

2. Recommendations

That the Combined Authority Members

2.1. Agree the revised Terms of Reference for the SCR CA Audit Committee

2.2. Note that the Combined Authority itself remains the body ‘charged with Governance’.

2.3. Note that if recommendation 2.1 is agreed, the SCR CA Constitution will be amended accordingly.


3.1. In its original drafting, the Sheffield City Region Combined Authority Constitution was written on the understanding that the SCR would have an Audit Committee and that this Committee would undertake all functions akin to a Local Authority Audit Committee.

3.2. However, following internal consideration, supported by informal negotiation with the External Audit, it has since been decided that ‘it would be wrong conceptually and in principle for the Audit Committee to be treated as the


14th SEPTEMBER

SCR AUDIT COMMITTEE - CHANGE TO TERMS OF REFERENCE

body “charged with governance”, in respect of approving the accounts of the Combined Authority, when none of the Audit Committee Members are Members of the Combined Authority itself’

3.3. Whilst this responsibility therefore rests with the Combined Authority, a further important matter of consideration has recognised that whilst the Combined Authority Members are “charged with governance”, as Leaders of their respective districts they may not have the time to give audit related matters the attention they deserve and have therefore been keen to promote the Audit Committee (on which the majority of the district’s Chairs of Audit are represented) having the responsibility to make recommendations to the Combined Authority. It is therefore proposed that a number of ‘challenge-related’ functions remain delegated to the Audit Committee

3.4. This paper recommends a revised ToR for the Audit Committee (at Annex A). Points 1 and 2 have been amended to reflect the Audit Committee’s responsibility. Points 3 - 11 remain unchanged from the original drafting.

4. Implications

i. Financial

None

ii. Legal

None

iii. Diversity

None

Andrew Frosdick Monitoring Officer

Officer responsible: Craig Tyler, Principal Policy and Communications OfficerJoint Authorities Governance [email protected] 01226 772824

ANNEX A

Part 4 - Responsibility for Functions [of the Authority]

C. The Audit Committee

The Authority’s Audit Committee shall have the following terms of reference and delegated authority:-

1. To undertake preliminary consideration of the Authority’s statement of accounts (in accordance with the Accounts and Audit (England) Regulations 2011) and make appropriate recommendations to the Combined Authority;

2. To undertake preliminary consideration of the External Auditor’s Annual Audit and Inspection Letter in accordance with the Accounts and Audit (England) Regulations 2011, monitor the Authority’s response to individual issues of concern identified) and make appropriate recommendations to the Combined Authority;

3. To consider and advise the Authority on the findings of the Authority’s review of the effectiveness of its system of internal control and on the Annual Governance Statement;

4. To consider and advise the Authority on the findings of the review of the effectiveness of its internal audit;

5. To oversee the effectiveness of the Authority’s and SYPTE’s risk management arrangements, the control environment and associated anti-fraud and anti-corruption arrangements, including approving under delegated powers the Authority’s Anti-Fraud and Corruption Policy and associated Fraud Response Plan and any changes to these;

6. To challenge the Authority’s performance management arrangements;

7. To oversee and review the Authority’s internal audit strategy, and receive reports, as appropriate, from the Internal Auditor;

8. To engage with the External Auditor and external inspection agencies and other relevant bodies to ensure that there are effective relationships between external and internal audit;

9. To make recommendations to the Finance Director and Monitoring Officer in respect of Part 5F of the Authority’s Constitution (Financial Regulations);

10. To ensure effective scrutiny of the Treasury Management Strategy and Policies;

11. To consider and advise the Authority on its Code of Corporate Governance.

SHEFFIELD CITY REGION COMBINED AUTHORITYRECOMMENDATION FROM THE INFRASTRUCTURE EXECUTIVE BOARD FOR

M1 J36 PHASE 1 HOYLAND AND SEYMOUR LINK ROAD BUSINESS CASES

Summary

This paper sets out the recommendation of the Infrastructure Executive Board for: M1 J36 Phase 1 Hoyland and Seymour Link Road, both schemes are seeking to move to full approval.

1. Issue

1.1. This paper presents a recommendation from the Infrastructure Executive Board for M1 J36 Phase 1 Hoyland and Seymour Link Road to proceed to full approval.

2. Recommendations that the Combined Authority:

2.1. Agree the recommendation from the IEB on M1 J36 Phase 1 Hoyland.

2.2. Agree the recommendation from the IEB on Seymour Link Road.


3.1. Each of the schemes in the SCRIF programme is current being progressed through the SCR Assurance Framework. The Assurance Framework was developed in consultation with Local Authority partners, Government Departments and experts in the field of business case development and appraisal.

3.2. This Framework establishes a robust, transparent and efficient process for taking investment decisions. The stages of the Assurance Framework are set out in Figure 1. The Assurance Framework Documentation is provided online http://sheffieldcityregion.org.uk/investment-fund-assurance-framework.

Figure 1 Assurance Framework Process

3.3. The Infrastructure Executive Board met on 3 September to consider the recommendations of the Central Independent Appraisal Team (CIAT) for this business case. The board has agreed the recommendations for consideration by the Combined Authority. The following section summarises the recommendations.

M1 J36 Phase 1 Hoyland

3.4. Barnsley MBC is seeking £17.1 SCRIF investment to support four work packages of activity at M1 Junction 36 in Hoyland – Work package 1 will address major infrastructure requirements around M1 J36 whilst work packages 2,3 and 4 will address viability requirements for key employment sites. SCRIF funding is sought as part of a total scheme cost of £57m and is linked to a second phase of improvements at Goldthorpe that will be assessed via a separate 1B submission. The scheme is forecast to create 4,744 new jobs on the sites brought forward directly as a result of this specific project in Hoyland, 1545 of which by 2024.

3.5. The scheme is of local, regional and national significance given the forecast employment impacts. It is recognised as one of seven spatial priorities by the Sheffield City Region in its Strategic Economic Plan. The business case demonstrates the fit between the scheme and policy at all spatial levels. The fit with national policy is strong given the focus on growth and connectivity. The fit with local policy is strong given the scheme forecast employment impacts. It will therefore help to deliver the aspirations within the Sheffield City Region’s Strategic Economic Plan and the Barnsley Jobs and Business Plan.

3.6. The market failure argument for the development of employment land is clearly identified and evidenced. A range of evidence has been used to identify constraining issues with the current supply of employment land and floor space that acts as a brake on employment and economic growth. Similarly the short term demand case is well made with a range of evidence provided to demonstrate demand be it within a context of market failure where project viability is only achieved with public subsidy.

3.7. Realising the scheme outcomes carries a high level of risk and is reliant on future development outside of the scheme remit. This is heightened due to changes to the Local Plan timescales means that the point at which development of sites can commence is delayed. To manage this risk SCR is proposing to implement a performance based clawback mechanism as part of the funding agreement. This will incentivise both the scheme promotor and developer partners to deliver not only the outputs, but also the outcomes. BMBC has prepared a comprehensive Developer Agreement which has been agreed with all developer partners to share the risks.

3.8. The Combined Authority has previously considered the full business case for the scheme. The recommendation to progress the scheme identified a number of areas for improvement which need to be addressed before the scheme could be given full approval. The following highlights the areas for improvement previously identified and the extent to which these have now been satisfied:1. In order to protect and ensure that the SCRIF funding is used

effectively and for consistency with previous recommendations on other schemes we would suggest that any investment by SCRIF in the scheme is structured to include a clawback mechanism.

A performance-based clawback arrangement has been agreed with BMBC that will incentivise the scheme promoter to ensure delivery of the outcomes. This has been reinforced by the scheme promoter who will enter into a Developer Agreement with the relevant partners to share the risk. The terms of this clawback arrangement will be reported to the Infrastructure Executive Board to oversee the implementation and monitoring of the scheme overtime.

2. Further work to improve the transport economic case

A revised transport economic case has been provided. The evidence indicates a Benefit Cost Ratio of 2.94, this represents good value for money in transport terms and supports the overall economic contribution that scheme can make.

3.9. The scheme promoter has now satisfied the CIAT and the Infrastructure Executive Board that the scheme is likely to provide value for money, has a strong strategic case and is deliverable. It is recommended to the SCR Combined Authority to provide full approval for the scheme up to £17.1m.

Seymour Link Road

3.10. The project is to construct the Seymour Link Road between junction 29A of the M1 and development plots at Markham Vale North, part of the Sheffield City Region’s Markham Vale Enterprise Zone. The Seymour Link Road will access 33 ha of ‘oven-ready’ serviced plots being supported with a £14.2m Capital Grant Fund (CGF) award from DCLG. Derbyshire County Council (DCC) is leading the project and is seeking £3.78m from SCRIF matching another 50% from D2N2 £2.52m and £1.26m from DCC. D2N2 has already approved their share of the link road investment at the August meeting of their Infrastructure Investment Board.

3.11. The strategic rationale for SCRIF investment is embedded in Enterprise Zone policy and the delivery of Markham Vale as a key strategic spatial priorities in the Strategic Economic Plan, providing a major inward investment location targeting the manufacturing, technology, environmental and logistics sectors. Markham Vale as a strategic initiative however long pre-dates its Enterprise Zone designation in 2012. Total job potential is estimated at 1,234 net additional jobs related to the SCRIF application for a seven year period from 2015/16.

3.12. The investment in Seymour Link Road will support the unlocking of a strategically important development site at Markham Vale North, which has a good strategic rationale for public sector investment and which is being supported by a £14.2m investment from DCLG through the Enterprise Zone Capital Grant Fund. The scale of the commercial development proposed and the potential employment and GVA benefits of over £300m by 2024 are significant and could make a considerable contribution to economic growth in the City Region. If these benefits are realised in the timescales proposed within this business case, then the

SCRIF investment as part of the wider public sector funding package will represent very good value for money.

3.13. The Combined Authority has previously considered the full business case for the scheme. The recommendation to progress the scheme identified a number of areas for improvement which need to be addressed before the scheme could be given full approval. The following highlights the areas for improvement previously identified and the extent to which these have now been satisfied:1. A revised set of project objectives is produced which are appropriate

for measuring the progress and success of SCR’s investment;

The business case has been revised an improved to set out clear objectives, importantly separating out the objectives that relate to SCRIF investment and those that relate to the EZ Accelerator activity. The business case now provide a clear set of outputs and outcomes that will be reflected in the funding agreement and used to monitor the success of the investment.

2. Up-dated market commentary outlining what enquiries / interest / agreements have been reached with occupiers during 2014 up-dating the market analysis dated October/November 2013) presented within the business case;

An updated market assessment has now been provided which demonstrates an immediate demand for the plots that are unlocked by the link road. The evidence provides a high level of confidence that once the public sector investment is complete that above ground development will commence. The promoter will need to ensure consistent effort to market the site to achieve full take-up, a new brochure for the Northern part of the site has been produced and supplied as part of the evidence.

Terms have now been agreed for the construction of a 220,000 sq. ft building on Seymour. This development will be the first plot to be taken on the northern phase of Markham Vale and shows a continuing level of interest. However, this development is critical on completing the Seymour Link Road. The Earthworks contractor is currently on site creating the development plots (financed by the EZ CGF).

Evidence provided by the promoter indicates that in addition to information provided in the schedule, enquires continue to come in and currently are in the range of 25,000 sq. ft. to 50,000 sq.ft and also 200,000 sq ft to 250,000 sq. ft.

3. Adequately detailed cost plans are provided including tendered prices for the work, cost breakdowns and timed cost plans demonstrating that the Seymour Link Road can be delivered within the £7.56m estimated budget cost;

The Target cost Price from the delivery partner is being prepared and will be issued to DCC on Friday 28th August. Evidence has been provided that the scheme has a detailed cost plan and the outcome of communication between the scheme promoter and deliver partner will be provided at the meeting.

4. Written details are provided of the other match funding agreements and commitments and clarification of whether they have any conditions that have to be satisfied before funding can be drawn-down, to include details / clarification of the interdependency with SCRIF investment;

D2N2 has already approved their share of the link road investment at the August meeting of their Infrastructure Investment Board, details are provided within the minutes of the D2N2 board. DCC has confirmed their contribution and that none of the funding provided for the road has conditions that could impinge on the delivery of the scheme.

5. A project management plan is produced to include the roles and responsibilities of individuals and partner organisations;

A full project management plan has been produced and provided to support the scheme. This sets this investment within the wider Markham Vale programme. The plan is clear and robust, providing a high level of confidence that the scheme is deliverable and that foreseeable risks can be mitigated.

6. A project timetable is produced to include procurement timetable, itemised key tasks and delivery milestones;

A full task list has been provided which builds on the project management plan. This provides further confidence that the scheme is deliverable. The scheme promoter has also committed to provide updated project timetables as required.

7. A full risk register is produced identifying individual risks, likelihood, impact, mitigating / management measures, and individual responsibilities

A full and updated risk register has been provided to support the business case. This identifies a total forseeable risk value of 632,450 and a clear set of mitigation actions and risk owners. As with the task list the scheme promoter has committed to provide an updated register if required.

3.14. The scheme promoter has now satisfied the CIAT the Infrastructure Executive Board that the scheme is likely to provide value for money, has a strong strategic case and is deliverable. It is recommended to the SCR Combined Authority to provide full approval for the scheme up to £3.78m.

3.15. Subject to confirmation of the transport economic case, the scheme promoter has now satisfied the CIAT that the scheme is likely to provide value for money, has a strong strategic case and is deliverable. It is recommended to the SCR Combined Authority to provide full approval for the scheme up to £17.1m.

4. Implications

Financial

4.1. Barnsley Metropolitan Borough Council will be seeking to enter into a funding agreement with SCR CA for the M1 J36 Phase 1 Hoyland project. Derbyshire County Council will be seeking to enter into a funding agreement with SCR CA for the Seymour Link Road project. The SCR Finance Manager has programmed this spend within the SCR capital programme and funding is available if the scheme is given approval.

Legal

4.2. The funding agreement for each scheme is being prepared by SCR CA lawyers. Barnsley Metropolitan Borough Council and Derbyshire County Council will be consulted on the terms of the respective agreements such that if approved all parties are clear on the basis of the funding agreement.

Diversity

4.3. There are no diversity implications arising from this report.

REPORT AUTHOR: Neal Byers

POST: SCRIF Coordinator

Officer responsible: Ben Still

Tel: 0114 254 1335

Email: [email protected]

Other sources and references:

None

ANNEX / APPENDIX:

None


TRANSPORT COMMITTEE

1 SEPTEMBER 2015

PRESENT: Councillor T Fox (Chair)Councillors: , I Auckland, S Cox, T Downing, A Law, D Leech, D Lelliott, R Miller, D Pidwell and G Weatherall

Officers: N Broadhead, G Challis, L Fannon, T Finnegan-Smith, A Frosdick, S King, K Platts, D Proctor, C Tyler, I Wilson and D Young

Apologies for absence were received from Councillors Councillor J Blackham, J Burrows, M Godfrey, M Gordon, B Mordue, L Rose and A Syrett

1 APOLOGIES

Members’ apologies were noted as above.

The Chair welcomed Committee Members, officers and the members of the public present.

2 ANNOUNCEMENTS

The Chair informed Members that Julie Hurley had just taken up the new post of Director of Transport at the SCR Executive Team and thanked Julie for her work in support of the Committee and her work for SYPTE.

D Young informed Members that the position of SYPTE Executive Director has now gone out to advertisement. This post will replace the SYPTE Director General position.

D Young informed Members of the consultation exercises about to commence on Concessions, Supported Bus Services and Ticketing. It was confirmed that appropriate briefings would be provided and Members were asked to help communicate pertinent matters to wider audiences where possible.

3 URGENT ITEMS

No urgent items were requested.

4 ITEMS TO BE CONSIDERED IN THE ABSENCE OF THE PUBLIC AND PRESS

No agenda items requested.

5 DECLARATIONS OF INTEREST BY INDIVIDUAL MEMBERS IN RELATION TO ANY ITEM OF BUSINESS ON THE AGENDA

SCR-CA TRANSPORT COMMITTEE1/09/15

None.

6 REPORTS FROM AND QUESTIONS BY MEMBERS

No reports or questions requested.

7 RECEIPT OF PETITIONS

Members were advised that 9 petitions have been received in relation to the Sheffield bus network consultation. It was agreed to consider these under agenda item 11.

Members were informed that a 120 signature petition has been received regarding dissatisfaction with the No.34 bus services operated by Tates Travel. Members were reminded that the Traffic Commissioner will commence the Public Inquiry of Tates’ services on 6th October.

8 MINUTES OF THE MEETING HELD ON 20 JULY 2015

D Young informed members that the letter to the Secretary of State regarding concerns with the delays to the rail electrification programme was sent off as requested.

Members were advised of what actions have been implemented to raise awareness of user groups and improve the website content associated with enabling the public to submit queries and concerns regarding services.

RESOLVED, that the minutes of the meeting of the SCR Transport Committee held on 20th July are agreed to be an accurate record.

9 DEVOLUTION DEAL - BUS IMPROVEMENTS

As an introduction to the next 2 agenda items, Members were presented with a covering report providing an update on the outcome of recent work on the public transport element of the Devolution Deal and seeking endorsement of the package of measures proposed.

It was noted that the report focuses on the delivery of the bus elements of the Devolution Deal for the Sheffield City Region. The deal outlines a more efficient network, more attractive ticketing and improved retail options, so this report addresses these points in turn.

Members were informed that since the last report to Transport Committee on 20 July 2015 SYPTE has developed a Devolution Deal package of phased improvements across South Yorkshire. Elements of this package are at a different stage in each Local Authority area and the current positions for each of these, together with the countywide measures, are given in this report. The approvals for the next steps in Doncaster and approval to implement the proposals in Sheffield are requested in following reports.


It was noted that SYPTE believes these proposals mark an important development in the bus offer in South Yorkshire and will deliver:

A more stable network for customers that is also a more viable network for Operators. This will also protect the more vulnerable services and reduce the risk of a potential call on SYPTE revenue budget to fund bus services.

An efficient network that will see cheaper fares for many customers. This network has enabled Operators to reduce the cost of Multi-Operator fares by up to 23% and form the basis for future investment by the private sector.

A network for Sheffield that has been both informed by the recent consultation, and altered to respond to the majority of points raised

Improvements that are delivered quicker, and at lower cost and risk, than alternative models such as a Quality Contract. This sets further national precedence on what can be achieved through the Partnership model, building on the trail-blazing work of Statutory Quality Partnership Schemes in Barnsley and North Sheffield and the original Bus Partnerships in Rotherham and Sheffield.

A simplified ticket range which still gives scope for commercial offers from Operators, with the Multi-Operator ticket range, weekly and longer products all retailed on “Smartcards” when purchased off-bus.

A programme of improvements to the retail offer and customer experience. A reduction in tendered service budget.

Members were informed that these proposals are at the leading edge of what can be delivered using Partnerships. The approach that SYPTE and the Operators have taken to negotiations during development, have been discussed with DfT and the Competition and Markets Authority and this experience is directly informing DfT’s forthcoming guidance on Bus Partnerships due to be published this autumn. The DfT chose to involve the Interim Director General in its drafting and content of this document due to the ground breaking work that has been done locally.

It was noted that if approved, the network will be launched in Sheffield on 1 November 2015, with ticketing improvements in Sheffield and Rotherham being launched at the same time.

Members were informed that the report also gives details of the retailing proposals (at section 3.3.4) and includes the agreed ticketing range being offered on an ITSO smartcard.

It was noted that the report concludes with a summary of the next steps for SYPTE (at section 3.7) in delivering this element of the Devolution Deal.

Members were reminded of their obligation to have due regard to the Equality Act Duties (at section 4.3) in considering whether to receive the proposed recommendations.

RESOLVED, that the Transport Committee Members:

1. Endorse the package of measures proposed for the Devolution Deal across South Yorkshire noting that:

i) All elements of the package are interdependent, and therefore can only be progressed as a whole;


ii) Some elements of the package are outside the remit of SYPTE therefore Transport Committee approval is not appropriate;

2. Endorse the next steps for progressing the Devolution Deal work; noting that reports on progress and the seeking of approvals will be submitted to future meetings as required.

10 DEVOLUTION DEAL - DONCASTER

Members were presented with a report seeking approval for SYPTE to enter into a Voluntary Partnership Agreement (VPA) with Doncaster Metropolitan Borough Council (DMBC) and the principal bus Operators in Doncaster, to be known as the Doncaster Bus Partnership (DBP), to work together to improve bus services in the area.

It was noted that the report set out the first steps required to achieve the Doncaster element of the Bus Devolution package (introduced in the previous agenda item) through putting in place the foundation of a VPA and seeking endorsement for SYPTE to enter into a VPA to be known as the Doncaster Bus Partnership.

It was noted that the report describes what a VPA is (at section 3.1) and the Operators currently willing to join (at paragraph 3.2).

Members were asked to note paragraph 3.3 of the report which summarises the issues to be tackled in the Doncaster area, such as:

falling patronage; stalling performance improvements; low satisfaction levels; reducing journey speeds; low emission standards

Members were also asked to note the contents of paragraph 3.4 which explains the primary objectives of the Partnership including (but not limited to):

improved services (performance, quality and access), to encourage modal shift and grow patronage;

improved punctuality and reliability; create a stable bus network offer;

It was noted that these aims align to the Devolution Deal objectives of securing: a bus network that is co-ordinated, efficient and integrated; which avoids

excess duplication (thereby minimising congestion and pollution), allowing buses to be reinvested to improve access or reduce fares.

a simplified single ticket range, attractively priced, and to limit fare increases to once per year for each fare.

It was noted that to enable the DBP to be progressed, the report also seeks endorsement for the next steps leading to a launch of the Bus Devolution package network and ticket offer, provisionally targeted for introduction on the weekend of 23 April – 25 April 2016



1. Grant approval for SYPTE to enter into the Doncaster Bus Partnership in line with Heads of Terms (attached as Appendix A to the report) and confirm that the Agreement satisfies the Competition Test (attached as Appendix B to the report), with the aim of improving the bus services in the area and delivering the Doncaster part of the Devolution Deal;

2. Endorse the next steps for the work of this Partnership as summarised in Section 3.5 of the report.

11 DEVOLUTION DEAL - SHEFFIELD

The Chair invited the members of the public present to address the Committee regarding matters associated with potential changes to the Bus Network in Sheffield and the corresponding public consultation.

Ms Geraldine O’Connor suggested that cuts will reduce access to essential services.

Ms O’Connor also noted that she only found out about Sheffield Bus Network’s public consultation on the closing date.

Ms O’Connor noted how the proposed changes to the Network equate with the aims and ambitions of the Sheffield City Region Transport Strategy and suggested the Strategy’s primary goal of ‘a transport system that supports the economic growth of SCR’ fails to meet the needs of mobility pass holders and disabled customers, is contrary to SYPTE’s commitment to equality and may be deemed subject to judicial review. Ms O’Connor suggested the second goal of the Transport Strategy, which is to develop a transport system to enhance social inclusion and health, is undermined if the No.70 bus is cut, noting that the cutting of the No.70 bus will have a huge impact on disabled people travelling from Dore and Banner Cross to the Hallamshire Hospital.

Ms O’Connor noted that many disabled people have no access to a car and are prevented from driving and cycling because of their disability. Ms O’ Connor noted that her mobility pass is no use if there is no bus. Ms O’Connor also indicated that taxis will be in greater demand if the No.70 bus is cut, which will not help SCC achieve its core priority to “reduce the emissions from vehicles.

Ms Diana Stimely posed a number of questions to the Committee relating to issues that changes might cause residents in the Graves Park Ward of Sheffield:

1. Why has Graves Park Ward not been given a small bus that takes people to where they can get transport around the city? It was noted that Stannington has such a bus.

2. Why has the four 20 buses not been divided to give two to 20 and two to 20a service?


3. The new 18 bus that takes over from 20a is classed at one an hour. The length of the route is so long it will be impossible for the bus to be on time. Therefore the 50 Plus residents will either have to wait another hour or get a taxi or use their car

4. Why is Sheffield Council saying constantly that taxis and cars can cause pollution in Sheffield and telling the public to avoid pollution by using buses if there are no buses?

5. Regarding punctuality, numerous buses arrive late or not at all. If the changes do take place, guaranteed punctuality need to be assured.

In addition, Ms Stimely noted how ‘50 Plus people’ have the old idea that the buses are here to serve the people with their services and lamented the reality that this is no longer true as we are now dealing with bus businesses not bus services.

Mr Martin Mayer, on behalf of Sheffield Trades Council and affiliated groups, suggested that SYPTE’s consultation had been poorly publicised and at very short public notice and that the slogan ‘Working Together to improve your Bus Travel’ is at best misleading and at worst designed to deceive.

Mr Mayer suggested the Transport Committee was being used by the private bus operators and SYPTE to take the political responsibility for the biggest ever cut in a single day to Sheffield's bus network. Mr Mayer suggested that the network changes would in fact reduce frequencies on the majority of services, merges routes together, involve a massive route renumbering exercise and switching of cross-city links, cuts evening and Sunday services, in a ‘Beeching-style’ proposal whose only objective is to help the private bus operators reduce their operations to a high profit core network.

Mr Mayer questioned why the Committee would agree to a plan that could involve the loss of jobs and asked whether the Committee has received any information at all about the impact of reduced job opportunities and the impact on the local economy.

Mr Mayer questioned why the Committee would agree to a proposal that provides no evidence of achieving a goal of a profitable core, suggesting that the lack of obvious examples of any improvement to services will lead to yet a further exodus of passengers from the network, leading to a never ending cycle of cuts to come in the years ahead as that elusive profitable core slips further out of reach.

Mr Mayer questioned why the Committee would agree to a plan that involves the retrenchment of public transport in Sheffield when policies should be looking for its expansion and a strategy that gets people out of their cars and back onto the bus, addressing emissions, traffic congestion and pollution; and makes the city a healthier and safer environment in the process. Mr Mayer asked whether there has been an environmental risk assessment done on the proposals.

In responding to the comments provided, D Young introduced the report to Members which sought approval to implement the package of network and ticketing changes proposed for Sheffield as part of the wider Devolution Deal programme.


It was noted that the report provides a summary of recent work undertaken and details the recently completed consultation process used, and a review of the scale of response compared to other recent consultations, and a summary of the outcome of the consultation and the changes proposed to address the issues raised.

Members were advised that SYPTE believe the overall process and level of response prove the robustness of the consultation but recognise that there is always learning and refinement that can be made following any consultation process. It was further noted that SYPTE believe that the changes made following consultation significantly address the majority of the issues raised within the constraints of the current budget availability and the powers available to SYPTE.

It was noted that the consultation has received a considerably higher number of responses that other similar bus network consultations (c2500 responses).

Petitions received will be responded to individually and comments incorporated into the assessment process with other responses.

Regarding points made by the members of the public present, D Young confirmed to Members that; all legal requirements have been given appropriate consideration, that a judicial review did not come to fruition in court in respect of past concessionary travel changes as Members reviewed their decision at that time; that the consultation ran for 4 working weeks not the suggested 3; that a series of additional service enhancements are being introduced as a direct consequence of some other service reductions and that suggested job cut numbers do not accord with numbers being reported by the objectors.

It was acknowledged that more work needs to be done with bus service operators to address punctuality concerns.

Members were advised that the report outlines the network, ticketing and retailing package for Sheffield and of which the benefits of this package of these proposals include:

A more stable and viable network for Sheffield that protects the more vulnerable services and reduces the potential call on SYPTE revenue budget

A network that meets the needs of the Strategic Economic Plan (SEP) and the majority of users, without the cost, risk or delays associated with alternative delivery models

Reduced Multi-Operator ticket prices benefiting a significant percentage of users

A simplified ticket offer for all users Reduction in the 2016/17 tendered bus budget of £253k. Retaining existing route numbers where possible to avoid unnecessary

confusion.

Members were informed that the report gives details of the necessary steps and approvals to move to implementation, including the need to consider the outcomes of the Equality Impact Assessment (EIA) and Equality Act consideration of the


needs of groups with and protected characteristics. Members were expressly invited to raise any questions of uncertainty in this respect.Regarding the Competition Test Members were reminded that under current law, individual operators still have the freedom to set their fares and can continue to compete on price and quality of service.

It was noted that the report seeks endorsement for the next steps leading to a launch of the new network and ticket offer on the weekend of 31 October/1 November 2015.

Cllr Downing asked whether a longer consultation could have been run. D Young explained the context of the longer term process required to consider, approve and introduce service changes and why the public consultation element of this process took place when it did and for the length of time that it did.

Cllr Auckland questioned whether hourly services present a genuine travel option, noting the effect that 1 cancelled bus can have, particularly if this is the last bus of the day and the consequent reluctance that commuters will have to rely on such services. It was further suggested that a compensation scheme should be introduced to reimburse passengers if buses don’t run. D Young agreed that hourly buses are not ideal and informed Members of the constraints and additional factors which dictate this frequency. It was noted that some operators have compensation schemes in place but few people tend to claim given the low amounts involved. D Young agreed that such schemes should be discussed further with the operators, particularly in relation to ‘last buses’.

Members considered the opportunities and constraints associated with achieving the ambition of improved multi-operator ticketing. It was acknowledging that future uncertainties regarding patronage make it difficult to model future ticketing offers.

Cllr Auckland suggested franchise models of service provision should be favoured over partnership models, noting that a shrinking network leads to fewer passengers and will eventually see the network reduced to a few profitable corridors only unless a ‘network floor’ can be agreed with the operators. Members acknowledged, however, that as commercial organisations the operators will continue to be minded to make commercial decisions and only through partnership working can the network be protected.

It was confirmed that Members would be provided with specific details of all service changes.


1. As part of the bus devolution package, approve the changes to the Sheffield Voluntary Partnership Agreement Network as detailed in Section 3.3 of the report, having had regard to the Equality Impact Assessment (Section 3.5) and the Equality Act duty (Section 4.2.3), the consultation process and responses (Section 3.2) and noting that the Agreement satisfies the Competition Test (Section 3.7) and is subject to final agreement by SCC;

Cllr Auckland voted against this recommendation.


2. As part of the bus devolution package, agree to certify the Qualifying Agreements between Sheffield Partnership Agreement Operators (as detailed in Section 3.6 of this report) that are required to deliver Network changes referred to in 2.1 above, noting that the Qualifying Agreements are in the interests of passengers and that they do not impose on the Operators restrictions that are not indispensable to securing improvements for passengers and noting that they satisfy the Competition Test;

3. Support the changes to the Multi-Operator Ticketing offer being proposed by the Sheffield Partnership Agreement Operators, as part of the bus devolution package;

4. Endorse TM Travel Limited being a partner in the Sheffield Voluntary Partnership Agreement (VPA) as originally envisaged in 2012; and

5. Endorse the next steps for this work as summarised in Section 3.10 of the supporting report.

6. Will be provided with specific details of all service changes.

12 REVENUE BUDGET MONITORING REPORT FOR 3 MONTHS ENDING 30 JUNE 2015

A report was presented to brief the members of the Transport Committee on the year to date financial operating performance for SYPTE in 2015/16, as compared to the budget agreed at the CA meeting in January 2015.

It was noted that the year to date favourable variance is £ £348k, positive management actions will continue to ensure that revenue expenditure savings are delivered in line with the agreed budget and in-year favourable variances will be used for future levy savings, and embedded in future year’s budgets.


1. Note the contents of the report.

2. Note the full year outturn

3. Note the level of earmarked reserves.

13 LAND DISPOSALS

A paper was presented recommending that the Transport Committee pre- approve certain disposals of land and property in order to increase the efficient operation of SYPTE and the Transport Committee.

Cllr Auckland asked if there was any risk of bad publicity if a ‘much loved’ premise is turned over to an alternate commercial usage.


Members agreed that the proposed revision to the protocol should be adopted, subject to Members being provided with a list of land assets subject to potential disposal. It was noted that these assets are largely commercial units in interchanges.

RESOLVED, that the Transport Committee Members: Approve, under section 10 of the Transport Act 1968, disposals of land that fall within the categories listed in paragraph 3.4 of the report (“Pre Approved Disposals”) such that further reference to the Transport Committee is not required for those disposals, such decisions being determined by the Executive Board of SYPTE, subject to members being provided with a list of said assets.

14 SHEFFIELD BETTER BUS AREA 2014/15 OUTCOMES AND KEY HIGHLIGHTS

Members were presented with a report commenting on the key performance highlights and outcomes of the Sheffield Better Bus Area (BBA) programme in 2014/15, primarily focussing on programme outcomes to date and dialogue with the Department for Transport (DfT) for the next steps in the reporting process.

It was noted that Key Highlights of the BBA programme have been: Fare-paying bus passenger journey growth of 5.8% year-on-year Timekeeping (punctuality) up 0.1 points to 91.2%, whilst reliability declined

by 0.1 points to 98.6% Sheffield bus user satisfaction up 3.1 points to 65.1% Customer complaints down 17.6% to 328

RESOLVED, that the Transport Committee Members: Note the key highlights of the Sheffield BBA programme outcomes to date, including next steps and plans for future reporting.

15 2015/16 SYPTE CAPITAL PROGRAMME OF WORKS - Q1 PROGRESS REPORT

Members were presented with a report looking back at the first quarter of the 2015/16 financial year, with an update on progress, outputs delivered and budgetary changes provided for each project.


1. Note the contents of this report;

2. Endorse the budget changes as set out in Section 4 of the report

CHAIR

notice of meeting · 9/14/2015 · accepted, from bis, the revenue funding for the scr skills bank...

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