Wednesday 14 June 2006 (morning) EXAMINATION. Time allowed 3 hours plus 15 minutes reading time

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NVQ/SVQ Level 4 in Accounting Drafting Financial Statements (Local Government) (DFSL) (2003 Standards) Wednesday 14 June 2006 (morning) EXAMINATION Time allowed 3 hours plus 15 minutes reading time

1 NVQ/SVQ Level 4 in Accounting Drafting Financial Statements (Local Government) (DFSL) (2003 Standards) Wednesday 14 June 2006 (morning) EXAMINATION Time allowed 3 hours plus 15 minutes reading time Important: This exam paper is in two sections. You should complete all tasks in both sections. We recommend that you use the 15 minutes reading time to study the exam paper fully and carefully so that you understand what to do for each task. However, you may begin to write your answers within the reading time, if you wish. We strongly recommend that you use a pen rather than a pencil. You may not use programmable calculators or dictionaries in the exam. Do NOT open this paper until instructed to do so by the Supervisor. DFSL

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3 This exam paper is in TWO sections. You must show competence in both sections, so attempt and aim to complete EVERY task in EACH section. Please use the answer booklet provided. All workings should be shown in the answer booklet. The answer booklet includes the following pro-formas: Housing revenue account Revenue account Personal accounts for ODPM and local authorities Journal Working note of movement in fixed assets Consolidated balance sheet You should spend about 125 minutes on Section 1 and about 55 minutes on Section 2. 3

4 SECTION 1 You should spend about 125 minutes on this section. DATA Cremeham District Council has extracted the following information from its financial information system relating to the housing service for the year ended 31 March EXPENDITURE Special management costs 000 Cleaning 95 Sheltered housing 1,010 Communal lighting 140 Grounds maintenance 100 Caretaking 320 Lifts 190 General management costs Employee related 1,600 Premises related 240 Transport 220 Supplies and services 430 Rents, rates, taxes and other charges Related to administrative buildings 190 Landlord responsible for council tax 110 Repair and maintenance Planned works 300 Day to day works 600 Emergency works 830 Minor works 420 Capital financing costs Depreciation on housing stock 2,800 Depreciation on other assets 80 Notional capital interest charge 7,100 Right To Buy (RTB) Administration costs Processing sales 270 Processing abortive applications 20 INCOME 000 HRA subsidy receivable (including MRA) 4,000 Rents 19,000 Supporting People grant 600 4

5 No adjustments have yet been made for the following: 1. A General Fund contribution of 500,000 is required for sheltered housing costs. 2. The general management costs above relate to the centralised housing department. These have not yet been allocated to the different activities performed by the housing department. The following information will allow apportionment to be made (with amounts rounded to the nearest 000) on the basis of the following percentages of staff time spent on each activity. Staff time data % Enabling activities with housing associations 3 Special management costs 10 General management of council stock 70 Travellers sites 1 Housing advice centre 3 Homelessness (Bed & Breakfast) 3 Repairs and maintenance An invoice has just been received from Stubbs building contractors. The invoice is for emergency repair work carried out during March 2006 and amounts to 40, The Capital financing heading includes the following items. The depreciation on the housing stock, which was based on asset lives. The Major Repairs Allowance (MRA) for the year was 2,100,000. The interest charge to the Housing Revenue Account (HRA) is notional. The Council is debt free, the item 8 credit from the General Fund is 70,000, which should be included as income to the HRA. 5. The HRA appropriation section needs to record the adjustment for depreciation comparative to the MRA, as well as the removal of notional interest. 6. The balance on the HRA brought forward into was 2,000, Right To Buy (RTB) administration costs, which are not related to abortive sales, should be charged to the General Fund directly through the Consolidated Revenue Account. Abortive costs will be charged to the Housing General Fund. Task 1.1 Using the pro-forma in your answer booklet, prepare a draft Housing Revenue Account for the year ended 31 March Task 1.2 Which entries will appear in the Asset Management Revenue Account for Cremeham District Council for the year ended 31 March 2006? 5

6 ADDITIONAL DATA You have been given the following information relating to the revenue activities of the Consortium known as Joined Up Government (JUG). The JUG Consortium was formed to provide advice and guidance to three local authorities as follows: Vacume District Council Turnedoff Town Council Blinkered District Council Joined Up Government Consortium Balances for the year ending 31 March 2006 Computing services 234,600 Car allowances 16,200 Subscription charges 1,400 Stationery 2,900 Telephone costs 6,000 Employer s National Insurance 40,800 Employer s superannuation contributions 30,600 Training costs 5,000 Income from training materials 111,000 Salaries 480,000 Wages 44,800 Business rates 7,800 Rent 9,900 Maintenance of equipment 6,000 Energy costs 1,600 The following additional information is relevant and no adjustments have yet been made. 1. The Office of the Deputy Prime Minister (ODPM) has agreed to meet 10% of the net costs of the JUG Consortium. The ODPM has paid 80,000 on account to the consortium. This has been recorded in a personal account for the ODPM but is not included in the list of balances. 2. The Consortium shares the net cost of running the services based on total service expenditure less income. These deficiency contributions should be calculated after adjusting for the ODPM grant, rounded up to the nearest. Total service expenditure 000 Vacume District Council 59,000 Turnedoff Town Council 48,000 Blinkered District Council 28,000 6

7 3. Cash received from each Consortium member is not recorded in the data above but is as follows: 000 Vacume District Council 301 Turnedoff Town Council 280 Blinkered District Council Balances on the personal accounts of the Consortium members as at 1 April 2005 were as follows: Dr Cr Vacume District Council 18 Turnedoff Town Council 12 Blinkered District Council Vacume District Council has provided some stationery for the Consortium. The cost to Vacume District Council is 2,600, and this cost is borne by the Consortium as it is regarded as a support service cost. 6. The Consortium provided Turnedoff Town Council with a training seminar on 31 January 2006, at an agreed cost of 2,000. The Consortium did not raise the invoice until April The subscription charges in the list of balances include a half-year cost of 100 for the period ending 31 August Task 1.3 Using the pro-forma in your answer booklet, prepare the Revenue Account for the Consortium for the year ended 31 March The format should follow the standard classification of income and expenditure. Task 1.4 Prepare the personal accounts for the three contributing authorities and the ODPM. 7

8 ADDITIONAL DATA Cremeham District Council has produced the following list of balances: Cremeham District Council List of balances as at 31 March 2006 Dr Cr Cremeham Pension fund balance 25,000 Cremeham Pension under funded 25,000 Usable capital receipts 20,000 Investments 1,000 County / General Fund balance 2,400 Long-term borrowing 10,000 Fixed assets 140,000 Accumulated depreciation 40,500 Bank 900 Creditors 1,100 Debtors 6,000 Provision for doubtful debts 180 Stocks 80 Fixed asset restatement reserve 56,800 Capital financing reserve 52,100 Non-operational assets 35,100 Total 208, ,080 The following additional information is relevant and no adjustments have yet been made. 1. Included in the fixed assets is an asset with a gross value of 2,000,000 with 500,000 depreciation. It should have been re-valued as at 1 April 2005 at 5,200,000, (land 1,000,000; building 4,200,000) and should have been depreciated during on the basis of a life of 40 years. This will change the balance sheet asset values but not the fund balance because of the entries in the AMRA. 2. The provision for doubtful debts should be increased by 20, Fees and charges income invoiced in April 2006 included 100,000 for services provided in the period January to March Proceeds from the sale of a General Fund building amounted to 770,000.The capital receipt needs to be recorded as well as the removal of the asset, which is shown in the accounts at a cost of 500,000 depreciated by 50,000. Assume 0% of the capital receipt is required to be set aside. 5. The pension fund balances have been provided for in accordance with FRS17. 8

9 Task 1.5 Using the pro-forma provided in your answer booklet, prepare journal entries for note numbers 1,2,3,4. For note 1 remove the asset, and then replace it at the higher value. You do not need to give narratives. Task 1.6 Using the pro-forma in your answer booklet, prepare a working note of the Movement in Fixed Assets for Cremeham District Council as at 31 March Task 1.7 Using the pro-forma provided in your answer booklet, prepare a Consolidated Balance Sheet as at 31 March 2006 for Cremeham District Council. Show your workings. 9

10 SECTION 2 DATA You should spend about 55 minutes on this section. After you completed Tasks 1.3 and 1.4, you received the following letter. Vacume District Council Town Hall, Gap Lane Vacume V110 1G2 Accounting Officer JUG Consortium Faith House Trust Town 10 June 2006 Dear Sir/Madam Apportionment of deficiencies between Consortium members You will be aware that, for some time, there has been a debate about the above issue. You will also be aware that a decision has now been reached to activate a new apportionment base (CPA scores) from 1 April Can you advise me of how much the Vacume District Council proportion of costs would have been during 2005/06 had the basis of apportionment been weighted by CPA score for each authority? The numbers of scores for 2004/05 have been confirmed as follows (1 is the best score, and suffers the lowest apportionment): Weighted CPA scores Vacume District Council 2 Turnedoff Town Council 4 Blinkered District Council 1 It would also be useful to have the deficiency figure for the method that could not be agreed, which was the number of JUG reports received. The figures here were as follows: JUG reports Vacume District Council 80 Turnedoff Town Council 49 Blinkered District Council 33 Thank you in advance for any assistance you can provide. Yours faithfully Ginger Bruce Chief Technical Officer Vacume District Council 10

11 Task 2.1 Prepare a letter to the Chief Technical Officer of Vacume District Council, which sets out the information he has requested. ADDITIONAL DATA Since you prepared your answers to Tasks 1.1 and 1.2, a series of questions have been raised by the Head of Property Services. You have received the following memo. MEMO To: Housing Revenue Accountant Subject: Housing Revenue Account Considerations From: Head of Property Services Date: June 2006 I was appointed only recently at Cremeham District Council and have not been involved, in any management capacity, with the HRA. I therefore need your advice on the following issues. Right To Buy administration Which costs related to RTB administration are recorded in the HRA, and which ones go to the Consolidated Revenue Account? Does this mean that council taxpayers pay some costs? Capital charges The capital charges for depreciation seem to be offset in the HRA appropriation section, and there is also a figure for an item 8 credit. Are these all related? Housing benefit costs The HRA does not seem to have any costs related to rent rebates. Why is this? Sheltered Housing Why does the HRA receive a General Fund contribution for sheltered housing? Task 2.2 Prepare a memo in reply to the Head of Property Services queries. 11

NVQ/SVQ qualification codes Technician (2003 standards) - 100/2942/4 / G794 24 Unit number (DFSL) - R/101/8111 AAT 06.

12 NVQ/SVQ qualification codes Technician (2003 standards) - 100/2942/4 / G Unit number (DFSL) - R/101/8111 AAT Clerkenwell Road, London EC1R 5AD, UK Tel: +44 (0) Fax: +44 (0) aat@aat.org.uk Website:

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

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