This document sets out the published statement of accounts of the Authority for 2005/06.

This foreword gives a brief summary of the overall financial position of the County Council, sets out how the County Council’s budget is spent and financed and explains the purpose of the financial statements that are contained within the accounts.

The chart below details the main sources of funds received by the County Council.

This income is used to finance the various services provided by the County Council. As the chart below shows, the most significant in terms of expenditure are Education and Social Services.

In overall terms the County Council underspent against the original budget by £3.3m net of carry forwards (£8.8m gross).   The significant underspends against the updated budget are set out below:-

Readers of the accounts should note that the underspend reported in the explanatory foreword cannot be directly compared to that reported in the consolidated revenue account. This is because the financial accounts comply with various reporting standards whereas the management accounts are compiled on slightly different basis. The key differences relate to the way in which reserves, provisions and carry forwards have been reported.

In 2005/06 the County Council spent £88.686m on capital projects. The table below shows the main areas of expenditure.

The above expenditure was financed through several sources, the details of which appear in note 5 to the balance sheet.

The Council’s long term borrowings, used to finance the purchase of assets were £362m at 31^st March 2006. The book value of assets was £780m.

The most significant items of expenditure are set out below.  Some of these projects represent work in progress and will be completed within the next two years.

The County Council contracted for the construction of a replacement warehouse and offices on behalf of the ESPO consortium.  Ownership vests in the 7 members of the consortium.  This expenditure has been financed by earmarked loans which are repayable to the County Council by ESPO.

The relatively low increases in Central Government funding along with the objective to deliver reasonable council tax increases means that the County Council will operate within a very tight financial environment over the medium term.  Although Central Government has calculated that the 'like for like' increases in formula grant are 2% in 2006/07 and 2.7% in 2007/08 the cash increase in 2007/08 is only 0.8%.  It is unlikely that the 2007 comprehensive spending review will improve the outlook in later years.

The main demand and cost pressures over the medium term continue to be within Social Services and Waste Management.  In Social Services they relate to home care and residential and nursing placements.  The main pressure in Waste Management relates to landfill tax and recycling costs.  Other pressures include capital financing, pension costs and the impact of traffic management legislation.

The County Council, to balance the medium term financial position and at the same time delivering reasonable council tax increases and investment in service improvements, will need to deliver significant savings.  These will be generated from a combination of efficiency and disinvestment from lower priority services.

The Corporate Strategy priorities have been factored into the financial plan. The most significant financial investments are likely to be in waste, learning disability services, children’s services, and libraries.

The medium term financial strategy (MTFS) was approved by the County Council in February and it will be updated at regular intervals to take account of new information and circumstances.  This strategy sets out in more detail the medium term financial outlook and is available on the County Council’s website at www.leics.gov.uk.  

Changes in Accounting Policies

With effect from 2005/06 premiums that arise from the early repayment of debt will be charged to the revenue account over the lesser of the remaining period of the loan being repaid or 25 years. All outstanding premiums arising from earlier periods are being charged to revenue over 25 years.

Covers expenditure and income for all services (other than the Pension Fund) which is funded from a combination of Revenue Support Grant, National Non-Domestic Rate income and precepts upon collection funds maintained by District Councils.

Sets out the financial position of the County Council on 31st March 2006. It incorporates all the funds of the Authority, both capital and revenue, with the exception of the Pension Fund and Trust Funds.

Brings together all the recognised gains and losses of the Authority during the period and identifies those which have and have not been recorded in the consolidated revenue account. The statement separates the movements in revenue reserves and capital reserves.

Gives a summary of the inflows and outflows of cash arising from transactions with third parties during the financial year.  Internal transfers are thus excluded from expenditure and income.

Shows the annual results of the Leicestershire County Council administered Local Government Pension Fund for Leicestershire covering both County Council employees and those of District Councils and other admitted bodies.

The accounts were authorised for issue 18th September 2006, by the Director of Resources.  This was the last date when events after the balance sheet date have been considered.