NVQ/SVQ Level 4 in Accounting Drafting Financial Statements (Local Government) (DFSL) (2003 standards) June 2006 SUGGESTED ANSWERS

Transcription

1 NVQ/SVQ Level 4 in Accounting Drafting Financial Statements (Local Government) (DFSL) (2003 standards) June 2006 SUGGESTED ANSWERS Note: The suggested answers may, in parts, be longer than would be expected of candidates in the exam. The fuller version is given for tutorial purposes.

2 SECTION 1 Task 1.1 Cremeham District Council HRA for the year ended 31 March Workings INCOME Dwelling rents 19,000 Supporting People grant 600 Subsidy 4,000 General Fund contribution 500 Item 8 credit 70 24,170 EXPENDITURE Repairs and Maintenance Planned works 300 Day-to-day repairs 600 Emergency works 870 ( ) Minor works 420 Management costs 249 2,439 General Management 1,743 Special Management Recharge general management 249 Cleaning materials 95 Sheltered housing 1,010 Communal lighting 140 Grounds maintenance 100 Caretaking 320 Lifts 190 2,104 Rents, Rates, Taxes and other charges Related to administrative buildings 190 Landlord responsibility for Council tax Capital Financing Depreciation 2,880 (2, ) Notional interest 7,100 9,980 Gross Expenditure 16,566 Net cost of service 7,604 Net HRA income on the AMRA 7,100 Net operating surplus 504 Appropriations Transfers major repairs reserve 780 (2, ,100 Surplus for the year 1,284 Balance b/f 2,000 Balance c/f 3,284 2

3 Task 1.2 Asset Management Revenue Account Interest costs 0 Capital charges Provision for depreciation 2,880 Notional interest 7,100 Depreciation 2,880 Balance to HRA appropriation 7,100 9,980 9,980 3

4 Task 1.3 JUG consortium revenue account for the year ended 31 March 2006 EXPENDITURE Workings Employees - direct Salaries 480,000 National Insurance 40,800 Superannuation 30,600 Wages 44, ,200 Employees - indirect Training 5, ,200 Premises related expenditure Business rates 7,800 Rents 9,900 Energy costs 1,600 19,300 Transport Related Expenditure Car allowances 16,200 Supplies and services Subscriptions 1,300 (1, ) Stationery 2,900 Telephone costs 6,000 Computing services 234,600 Maintenance of equipment 6, ,800 Support Services Vacume stationery 2,600 2,600 Gross Expenditure 890,100 INCOME Grant ODPM 77,710 Customer and Client Receipt Training materials 113,000 (111, ,000) 190,710 Net Expenditure 699,390 Deficit Contributions Vacume 305,659 Turnedoff 248,672 Blinkered 145, ,390 4

5 Workings for Task 1.3 Net cost calculation Gross Expenditure 890,100 Customer and client receipt 113, ,100 ODPM grant due 10% 77,710 Total service expenditure Deficit Contributions calculation ,000 Vacume 305,659 48,000 Turnedoff 248,672 28,000 Blinkered 145, , ,390 5

6 Task 1.4 Joined Up Government (JUG) Consortium 01/04/2005 Balance B/f 18,000 31/03/2006 JUG Deficit contribution 305,659 31/03/2006 Cash 301,000 31/03/2006 JUG revenue a/c 2,600 stationery 31/03/2006 Balance C/f 20, , ,659 01/04/2005 Balance B/f 12,000 31/03/2006 Cash 280,000 31/03/2006 JUG Deficit contribution 248,672 1/03/2006 Revenue a/c training 2,000 31/03/2006 Balance C/f 41, , ,000 01/04/2005 Balance B/f 13,000 31/03/2006 JUG Deficit contribution 145,059 31/03/2006 Cash 134,000 31/03/2006 Balance C/f 1, , ,000 31/03/2006 JUG Revenue a/c 77,710 31/03/2006 Cash 80,000 31/03/2006 Balance c/f 2,290 80,000 80,000 6

7 Task 1.5 Dr Cr Note 1 FARA 1,500,000 Accumulated depreciation 500,000 Fixed assets 2,000,000 Note 1, continued Fixed assets 5,200,000 FARA 5,200,000 Note 1, continued AMRA ultimately affecting CFA via MRP adjust 105,000 Accumulated depreciation 105,000 Note 2 Revenue account services unknown GF impact provision for doubtful debts 20,000 20,000 being the increase in provision for doubtful debts Note 3 Debtor 100,000 Revenue account services unknown GF impact 100,000 being the increase in provision for doubtful debts Note 4 Cash 770,000 Usable capital receipts 770,000 FARA Accumulated depreciation 450,000 50,000 Fixed assets 500,000 7

8 Task 1.6 Cremeham District Council Working Note of Movement in Fixed Assets for the year ended 31 March 2006 Fixed Assets Non- Operational Assets Total Fixed Assets balance at 31 March ,000 35, ,100 Remove asset revalued (2,000) - (2,000) Restate asset revalued 5,200-5,200 Remove asset sold (500) - (500) 142,700 35, ,800 Fixed Assets depreciation balance at 31 March ,500-40,500 Remove asset revalued (500) (500) Restate asset revalued Remove asset sold (50) (50) 40,055-40,055 Net book value 31 March ,645 35, ,745 8

9 Task 1.7 Cremeham District Council Balance Sheet as at 31 March Workings Fixed Assets (net) 137,745 see note Total long-term assets 137,745 Current Assets Stock 80 Debtors 5,900 ( ) Investments 1,000 Bank 1,670 8,650 ( ) Total long-term assets 146,395 Current Liabilities Creditors 1100 Total assets less current liabilities 145,295 Long-term liabilities Less long-term borrowing 10,000 Pension fund liability for defined benefits 25,000 35,000 Total Assets less Liabilities 110,295 Fixed Asset restatement account 60,050 ( ) Capital financing account 51,995 ( ) Usable capital receipts 20,770 (20, ) Pension fund reserve (25,000) General Fund 2,480 (2, ) Net worth 110,295 9

10 SECTION 2 Task calculations Calculations Deficiency 2005/06-699,390 Variance Existing Method Weighted CPA scores Favourable/Adverse Gross Expenditure No Vacume 305, , ,833 F Turnedoff 248, , ,979 A Blinkered 145, ,913 45,146 F Total 699, ,390 0 No of JUG report No Vacume 305, ,378-39,719 A Turnedoff 248, ,544 37,128 F Blinkered 145, ,468 2,591 F Total 699, ,

11 Task 2.1 Chief Technical Officer Vacume District Council Town Hall Gap Lane Vacume V110 1G2 Accountancy Assistant JUG Consortium Faith House Trust Town 14 June 2006 Dear Ginger Bruce Apportionment of deficiencies between Consortium members The calculation of the deficiencies included in the final accounts for 2005/06 resulted in a charge based on gross expenditure to Vacume District Council of 305,659. I understand that the weighted CPA scores have been agreed from 1 April This revised basis would have resulted in a decrease in Vacume s share of the deficiency of 105,833 to 199,826 based on the CPA score for 2004/05 and the deficiency suffered in 2005/06. The 2005/06 deficiency will not be distributed on this basis, but had this been the agreed method, Vacume District Council would have found that their deficiency contribution of 345,378 for 2005/06 would have been 39,719 higher than the gross expenditure method. I hope this information is helpful in your consideration of this matter. Yours sincerely Accounting Technician 11

12 Task 2.2 MEMO To: Head of Property Services Subject: Housing Revenue Account Considerations From: Housing Revenue Accountant Date: 14 June 2006 Thank you for you memo of 12 June. I can provide the following information on the points you raised. Right to Buy (RTB) administration First, the costs of administering RTB sales which progress to full sale are charged directly to the CRA, but the Council meets these costs from usable capital receipts from the sale proceeds. In this way, a credit reducing the costs of the CRA is applied below the line avoiding the costs falling on the Council taxpayer. Secondly, abortive costs are not met from capital receipts, and different councils approach this in different ways. At Cremeham the costs fall on the Housing General Fund and while small in size are therefore met from council tax and other central income. Capital charges The capital charges for depreciation are offset in the HRA appropriation section. This is because the charge to the HRA can be no higher than the MRA allowance which is received from the Government in the form of a subsidy. Cremeham is debt free and the item 8 rules require the General Fund to pay interest income received which belong to the HRA into the HRA. The calculation is based on the capital finance requirement and the average cash balance on revenue. The item 8 credit is not really connected to the depreciation issue. Housing benefit costs The Government made a decision to remove housing rebates from the HRA with effect from 2004/05. Sheltered housing The HRA receives a General Fund contribution for sheltered housing because some sheltered housing costs because they are over and above the basic housing costs. The council could have alternatively charged these costs direct to the General Fund. If you require any more information on any of the above issues, please contact me. Best wishes Housing Revenue Accountant 12