Foreword by the Director of Finance

Financial Position and General Fund Balances as at 31 March 2004.

The net assets of the Comhairle have increased by £2.9m over the year to £9.8m. The Balance on the General Fund has risen to £8.5m while providing £0.3m in specific revenue reserves.

Council Dwellings are shown at a net book value of £11.5m based on a valuation at 1 April 2000. The Comhairle is considering voluntary stock transfer, subject to the agreement of tenants, preliminary estimates indicate that the housing stock may be overvalued and I will be discussing with the auditors when it would be most appropriate to adjust the valuation to take account of the likelihood of stock transfer.

The analysis of assets employed shows the net assets of the Housing Revenue Account to be negative to the tune of £25.3m (largely due to historic housing debt of £38.4m) whereas the General Fund shows a healthy position of over £32m net assets.

General Fund

The General Fund enjoyed a surplus in the year of £3.1m taking the balance to £8.5m. However £4.1m of this is already earmarked for specific purposes:

Uncommitted balances therefore stand at £4.4m. The Comhairle has a policy of holding £1m of balances and taking this into account, together with the forecast budget deficits for the next two years leaves approximately £1m of free balances.

The net departmental carry forward of 970K includes 67K allocated to schools under the Comhairle’s Devolved Schools Management Scheme.

The winter maintenance reserve has been increased by an underspend of £21K to £167K whilst under the new requirements for statutory trading accounts, introduced in the Local Government Act 2003, the £288K held in DSO/DLO reserves has transferred back to the General Fund.

In the first year of the new legislation the Comhairle identified four Significant Trading Operations: Highway Maintenance, Building Maintenance, Refuse Collection and the Bus Operation. With the exception of the Bus Operation, which has been subject to a new contract that started on 1 April 2004, the operations met the statutory requirements.

The Comhairle has a policy to allow underspends on revenue budgets of up to 2% to be carried forward and permits overspends of up to 1%, in the case of an overspend it has to be contained within the following year’s budget. Certain other specific underspends, e.g. where specific funding has been received but not fully utilised, are also allowed to be carried forward. The only overspend outwith tolerance arose in Social Work (£298K). £105K of underspends over tolerances were returned to balances.

Housing Revenue Account

A surplus of £51K was achieved, which has increased the HRA general balances to £398K. In addition £220K of Capital was funded from the Housing Repairs Fund, reducing the balance to £420K.

Capital Expenditure

The Comhairle spent £23.0m on capital projects in 2003-04. The Comhairle continued to invest (£4.3m) in private sector housing while also spending a further £2.5m on its own housing stock. A total of £4.9m was spent on Arts & Leisure principally on new sports centres in Stornoway and Harris. Careful management of the programme ensured that the total spend was within tolerances in the last year of capital consent. From 1 April 2004 this has been replaced by the new Prudential Borrowing Regime.

Local Taxation and Revenue Support Grant

The Income Accounts on pages 46 - 48 show the amounts raised from Non-Domestic Rates, Residual Community Charge, Council Tax and Revenue Support Grant.

BCCI

The Comhairle had a total of £24.1m invested in the BCCI when it was closed by the Bank of England on 5 July 1991. By 31 March 2003 dividends totalling £17.4m had been received and £2.4m had been charged to revenue. On the 27 June 2003 the Comhairle received another dividend of £3.9m bringing the total repaid to 75% and reducing the outstanding debt to £0.4m. This will be paid in 2004-05 leaving the Comhairle free of BCCI debt.

Euro

The nature and potential impact of the introduction of the Euro are not deemed to be significant at 31 March 2004. No estimate has yet been made of the costs to the Comhairle of the introduction of the Euro.

Accounting Statements

The accounting statements that follow consist of:

• Consolidated Revenue Account gives the expenditure against budget for all the Comhairle’s services and the source of funding for them, this gives the surplus for the year on General Fund and the cumulative balance of the Fund.
• Income Accounts show the gross and net income derived from council tax and non-domestic rates and the contribution to the national pool for non-domestic rates and the distribution from the pool to the Comhairle.
• Housing Revenue Account gives the expenditure, including capital financing, for the provision of rented housing and how these costs are financed from rents, housing support grant and other income.
• DLO / DSO Summary Revenue Accounts summarise the surpluses on each of the nine activities that the Comhairle provides having won contracts that have been subject to compulsorily competitive tendering.
• Consolidated Balance Sheet is a consolidation of the general fund, loans fund, housing revenue account and each of the DLO / DSO balance sheets. All inter-fund balances have been eliminated on consolidation.
• Statement of Movement in Reserves gives the major changes in each of the Comhairle’s capital and revenue reserves.
• Cash Flow Statement shows the inflows and out-flows of cash as a result of all the Comhairle’s transactions, capital and revenue in all its funds.

Thanks

I would like to thank Members of the Comhairle, my fellow Directors and their Delegated Budget Managers for their efforts during the year in ensuring that the Comhairle remains in control of its finances. I am particularly grateful for the efforts of my staff in this regard but it would not be possible without the efforts of staff throughout the Comhairle so I extend my thanks to them.

Finally, I would like to thank our external auditors for their professionalism, helpful advice and courtesy.