Agenda item

This report considers the accounting implications of the abortive costs associated with the administrative accommodation project. It also examines the overall funding position and the creation of a separate item within the Capital Programme to reflect the transfer of the land assembly costs relating to the original scheme from the administrative accommodation budget.

RESOLVED: (i) That it be noted that the abortive costs of £1.092m included in the overall Administrative Accommodation budget of £43.804m have been written off directly to the Income and Expenditure Account and funded from reserves as part of the preparation of he 2008/09 Statement of Accounts, but will remain within the total budget allocation of £43.804m.

(ii) That the overall funding of the Administrative Accommodation project, which is estimated to use a combination of capital receipts, reserves and borrowing as the sources of funding used to support the £43.804m budget, be noted.

                        (ii)        That it be noted that the overall funding position will continue to fluctuate in relation to the timing and value of capital receipts and will impact upon borrowing accordingly, and that the project remains viable in accordance with the affordability indicators, with the NPV savings remaining positive and the Venture Fund revenue reserve being sufficient to cover the early years revenue deficit and the abortive costs paid to date (paragraphs 25-27 of the report refer).

                        (iii)       That it be noted that the £2.2m costs of relocating the Peasholme Hostel include the costs of betterment, that this element should not be accounted for as part of the Hungate land assembly costs, and that Officers be requested to table a statement indicating both the revenue and capital implications of this improvement in Social Services provision.

REASON:      To ensure that Members are kept informed of the funding position on this major project and to ensure that the accounting position is correctly recorded.

[See also under Part B Minutes]

Members considered a report which examined the accounting implications of the abortive costs incurred on the Administrative Accommodation project following the decision not to develop the site at Hungate, together with details of the current overall funding position and options for removal of the Land Assembly costs from the project.

Costs identified as ‘abortive’ could no longer be treated as capital expenditure and must therefore be written off as revenue cost and funded from the Venture Fund Reserve.  Actual project costs identified as abortive since 2005/06 totalled £1.092m, of which £520k expenditure incurred in 2008/09 and £572k incurred prior to 2008/09 had been funded by the Venture Fund.  This had resulted in an increased call of £0.690m on the Venture Fund reserve and a consequent fall of £1.092m in the overall level of capital funding for the project.  A comparison of the current headline funding position with that in July 2008 showed an indirect saving of £0.402m, due to alterations in the timings and sources of funding.  Full details of the changes were set out paragraphs 27 to 39 of the report.

The reasons for the recommendation to remove the Land Assembly costs from the project budget of £43.804m was explained in paragraphs 42 to 45 of the report.  Briefly, these costs, amounting to £3.54m, contributed specifically to the Hungate site and not to the project in its current form.  The following options were presented for funding the Land Assembly costs if this recommendation was accepted:

Option A – fund the land assembly costs from sale of the Hungate site in the current market environment, receive a lower capital receipt than expected and fund the difference from long term prudential borrowing.

Option B – fund the land assembly costs from sale of the Hungate site when the property market recovers, receive the expected capital receipt and cover the interim shortfall by prudential borrowing.

Option C – use the Hungate site for a future Council development and fund the land assembly costs from alternative identified funding.

Having noted the comments of the Shadow Executive on this item, it was

RESOLVED: (i) That it be noted that the abortive costs of £1.092m included in the overall Administrative Accommodation budget of £43.804m have been written off directly to the Income and Expenditure Account and funded from reserves as part of the preparation of the 2008/09 Statement of Accounts, but will remain within the total budget allocation of £43.804m.

(ii) That the overall funding of the Administrative Accommodation project, which is estimated to use a combination of capital receipts, reserves and borrowing as the sources of funding used to support the £43.804m budget, be noted.

                        (ii)        That it be noted that the overall funding position will continue to fluctuate in relation to the timing and value of capital receipts and will impact upon borrowing accordingly, and that the project remains viable in accordance with the affordability indicators, with the NPV savings remaining positive and the Venture Fund revenue reserve being sufficient to cover the early years revenue deficit and the abortive costs paid to date (paragraphs 25-27 of the report refer).

                        (iii)       That it be noted:

·        that the £2.2m costs of relocating the Peasholme Hostel include the costs of betterment at £710k;

·        that this element should not be accounted for as part of the Hungate land assembly costs;

·        that, therefore, a capital scheme will be included in the capital programme for £2.83m, which is the cost of clearing the Hungate site, plus the relocation of Peasholme Hostel on a like for like basis;

·        that a second scheme will be included in the capital programme for the £0.710k costs relating to the ‘betterment’ of the Peasholme Hostel.

                        (iv)       That Officers be requested to table a statement indicating both the revenue and capital implications of this improvement in Social Services provision.¹

REASON:      To ensure that Members are kept informed of the funding position on this major project and to ensure that the accounting position is correctly recorded.