Statement of Accounting Policies_________________________________________

1. General principles

1.1 The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in Great Britain: A Statement of Recommended Practice (SORP) 2004 and the Accounts and Audit Regulations 2003. Any significant non-compliance is explained in the following notes.

2. Debtors and creditors

2.1 Debtors and creditors have been accrued in accordance with the Code of Practice.

2.2 There is, however, one exception. Electricity and other utility companies' payments are accounted for at the date of meter reading rather than being shared between financial years.

2.3 The above exceptions apply every year and do not have a material effect on the year's accounts.

3. Reserves and provisions

3.1 Variations to reserves and provisions are shown in the notes to the summary revenue account

3.2 Provisions represent legal liabilities when the amount or date of payment is uncertain. They are charged to the revenue account in the year they are recognised.

3.3 The Authority holds two provisions. The first is a provision for bad debts which is deducted from the total for debtors. The second is for uninsurable and other claims. This covers costs which may arise as a result of the Authority being uninsured for a period, possible tribunals and other claims made against the Authority.

3.4 The Authority has the following reserves:

· the Revenue Account balance is the surplus of revenue income over expenditure. It can be used to supplement income in future years

· the capital reserve is used to help pay for future years' capital payments

· the modernisation reserve will be used to help finance the range of initiatives required by the modernisation programme

· the underspendings reserve is used to carry forward specific budget underspends from one year to the next

· the transitional grant reserve will be used to repay the transitional funding as and when required by the Government.

Statement of Accounting Policies_______________________________________________

4. Fixed Assets

4.1 All spending on a fixed asset which yields benefits for a period of more than one year is treated as capital expenditure in the accounts.

4.2 Fixed assets are valued on the basis recommended by the Chartered Institute of Public Finance and Accountancy (CIPFA) and in accordance with the Statements of Asset Valuation Principles and Guidance Notes issued by the Royal Institution of Chartered Surveyors. Fixed assets are classified into the groupings in the Code of Practice on Local Authority Accounting.

4.3 Land, property and other assets used for service provision are called "operational assets". They are included in the balance sheet at the open market value for their present use when there is sufficient evidence to support the value, or at depreciated replacement cost otherwise.

4.4 Assets not used to provide services are called "non-operational assets" and are assets that are currently not in use. These are included in the balance sheet at open market value.

4.5 Surpluses arising on the valuations of fixed assets have been credited to the fixed asset restatement reserve. Land and building assets were revalued during 1999/00 and the accounts reflect these values.

4.6 Income from the disposal of fixed assets is accounted for in the year in which it occurs. This is used to meet expenditure for capital purposes.

5. Basis of charges for capital

5.1 Notional interest charges are based on asset valuations at the beginning of the financial year. In 2004/05 an interest rate of 3.5% was used as prescribed by the CIPFA/Local Authority (Scotland) Accounts Advisory Committee (LASAAC) Joint Committee.

5.2 Depreciation charges are made on all fixed assets other than land and non-operational assets in line with FRS 15.

5.3 Depreciation is calculated on a straight line basis over the useful economic lives of the assets. In the case of permanent buildings a provisional average residual life has been assumed of 25 years for building components and 100 years for the other parts of the building pending a detailed review of the economic lives of individual assets. Furniture and equipment is assumed to have a life of ten years and vehicles between five and 15 years.

6. Deferred charges

6.1 Deferred charges are payments, which are capitalised but do not create tangible fixed assets. There are, for 2004/05, two categories of expenditure

Statement of Accounting Policies________________________________________________

coming under the heading of deferred charges, deferred revenue costs relating to the setting up of the Authority and the costs associated with the Home Fire Risk Check Initiative.

7. Redemption of debt

7.1 The Authority's borrowing limit for capital purposes is based on the cumulative amount of capital expenditure it has incurred and for which it has received borrowing approval from the Government. The borrowing limit increases each year by the amount of that years capital approvals and reduces by the amount of that years minimum revenue provision. The Council makes provision for the redemption of debt in accordance with requirement that a minimum revenue provision is put aside from revenue. This must be at least equal to 4% of the borrowing limit for capital purposes at the start of each financial year.

8. Stocks and stores

8.1 Stocks worth £595,000 have been included in the consolidated balance sheet.

Several stocks are held with the largest relating to vehicle spares, uniforms and operational equipment. All stocks are valued at latest buying price which is not in line with the SORP however the difference is immaterial.

9. Support Services

9.1 The costs of the support services are allocated over services according to their usage by direct services with the exception of some corporate services which are allocated on the basis of net expenditure.

10. Pension arrangements

10.1 The Authority participates in two different pension schemes which meet the needs of employees. Both schemes provide members with defined benefits relating to pay and service. The costs of providing pensions for employees are charged to the accounts in accordance with the statutory requirements.

11. Leasing

11.1 The Authority has, on occasions, used operating leases to acquire vehicles as an alternative to capital financing. The rentals on the leases are charged to services in the revenue account. The Authority took the decision not to take out any further operating leases for operational vehicles in February 2004.