Scottish Government

Term

Explanation or Description

Accounts Commission

An independent body created by the Local Government (Scotland) Act 1973 with responsibility for securing the audit of all local authority accounts.

Aggregate External Finance (AEF)

AEF is the total amount of money paid by the Scottish Executive to local government through the core local government finance settlement in support of their non housing net revenue expenditure. AEF is made up of three elements: Specific Revenue Grants, Non Domestic Rate Income (NDRI), Revenue Support Grant (RSG)

Asset Management Plan (AMP)

Plans produced by local authorities which set out:

• the value and condition of their assets

• proposals to safeguard the value and condition of these assets

• capital implications of community plans, corporate needs and service priorities

• the revenue implications of capital investment decisions.

Audit Scotland

Audit Scotland's role is to provide the Auditor General and the Accounts Commission with the services they need to carry out their duties. The duty of the Auditor General and the Accounts Commission is to check that public money is spent properly, efficiently and effectively.

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Term

Explanation or Description

Best Value Accounting Code of Practice (BVACOP)

A Code of Practice produced by CIPFA to provide a consistent approach to reporting the total cost of services.

Budget Estimate (BE)

Local authorities' estimates of their budgeted expenditure for the forthcoming year. This is part of the POBE (Provisional Outturn & Budget Estimate) forms that local authorities complete and return to the Executive.

Business Improvement Districts (BIDs)

A Business Improvement District (BID) is a precisely defined geographical area of a town, city, or commercial district, where businesses vote to invest collectively in local improvements resulting in improved economic performance. BIDs are developed, managed and paid for by the business sector by means of a compulsory BID levy on each business's non-domestic rates bill.

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Term

Explanation or Description

Capital Expenditure

Capital Expenditure is expenditure incurred on the purchase or improvement of significant assets including land, buildings and equipment, which will be of use or benefit in providing services for more than one financial year. Capital expenditure, therefore, related to the provision and improvement of tangible fixed assets (such as schools, new houses and machinery) which continue to be of value long after their acquisition. Such expenditure may be financed out of capital receipts, capital grant, direct revenue financing or by borrowing.

Capital Financing Requirement

A prudential indicator defined in the CIPFA Prudential Code. This indicator can be derived by aggregating information in local authorities' balance sheets. The indicator generally represents the underlying need to borrow for capital expenditure.

Capital Grant

Grant provided for the purposes of capital expenditure projects.

Capital Receipts

Receipts from the disposal of a fixed asset.

CIPFA

Chartered Institute of Public Finance and Accountancy.

Cities Growth Fund (CGF)

The Cities Growth Fund is providing around £173.1 million to Scotland's six cities over five years ( 1 April 2003-31 March 2008).. The broad aim of the Fund is to support the development of a ten year Vision for each city from 2003 to 2013. . Funding was allocated through the Local Government Finance settlement, with each city's allocation being proportional to its population. CGF monies are being spent on projects that enable the Vision to be attained.

Client Group Approach

An objective method of estimating the relative need of local authorities to incur expenditure on a particular service or sub service, taking into account variations in the demand for services and the costs of providing them to a similar standard and with a similar degree of efficiency.

Code of Audit Practice

The Code explains how auditors should carry out their functions under the Public Finance and Accountability (Scotland) Act 2000 or the Local Government (Scotland) Act 1973. The audit of financial statements is covered by engagement standards issued by the UK Auditing Practices Board (APB), so the Code focuses more on the wider functions of public sector auditors. It includes the expectations of the Auditor General and the Accounts Commission in areas such as Best Value and statements of corporate governance, internal control or internal financial control. The current edition of the Code came into effect on 28 March 2007.

Council Tax assumption

In reaching an agreed level of support through AEF, the Scottish Executive makes an assumption about how much a local authority can expect to raise through the local council tax. The calculation is made at an all Scotland level then allocated between each authority on the basis of the number of Band D properties in each local authority area. This calculation would ensure that if each local authority spent at the level of its TEE then the Band D council tax would be the same across Scotland.

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Term

Explanation or Description

Depreciation

An accounting charge that measures the wearing out or consumption of fixed assets over their useful lives. The accounting definition of depreciation is provided in the local authority SORP.

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Term

Explanation or Description

Estimated Service Expenditure (ESE)

ESE is a combination of Grant Aided Expenditure (GAE) and Special Islands Needs Allowance (SINA).

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Term

Explanation or Description

Floor

The floor is part of the overall calculation of each local authority's share of AEF. It is an adjustment made after the shares of AEF have been calculated to ensure that all councils receive a minimum guaranteed increase in funding from one year to the next. This is because some local authorities with falling population or high levels of deprivation would be faced with a cut in funding if only the needs based formula was used. By the introduction of the floor this gives these councils time to adjust their overall spending levels.

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Term

Explanation or Description

Grant Aided Expenditure (GAE)

GAE is not money nor is it a spending target or budget. It is used to distribute the funding through AEF using a needs based methodology (the Client Group Approach). GAE represents the Scottish Executive's view of what requires to be spent by local government on services in order to provide a standard level of service across Scotland based on need. To encourage local authorities to move away from thinking of GAEs as what they should be spending on services we have added GAE plus Special Islands Needs Allowance (SINA) to give Estimated Service Expenditure (ESE ) to highlight that the figures are only an estimate of what Scottish Ministers think authorities need to spend.

Grants outwith AEF

There are currently over £1 billion worth of grants, both revenue and capital, being paid by the Executive to local government outwith AEF. Each of these grants has individual grant conditions and is administered by the relevant portfolio area. All of these grants are for a specific, usually short term or time limited period.

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Term

Explanation or Description

Housing Revenue Account (HRA)

Local authorities are required to maintain a separate account, the Housing Revenue Account, defined by Section 74 and Schedule 4 of the Local Government and Housing Act 1989. This account sets out the expenditure and income arising from council housing provision.

Housing Revenue Account Subsidy

A grant issued by the Scottish Executive towards the cost of providing, managing and maintaining council housing dwellings.

Hypothecated Support

Specific government support for expenditure on particular services, or service initiatives.

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Term

Explanation or Description

Indicators

Invest to Save Schemes

Capital projects or schemes which allow the cost of investment in new and more efficient infrastructure or capital build to be met wholly or in part from reductions in maintenance costs and energy bills.

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Term

Explanation or Description

Local Financial Return (LFR)

Final outturn and expenditure statistics relating to each Local authority (and Joint Board) are collected on an annual basis in this series of detailed returns. The LFR information is used to monitor on an annual basis in a series of detailed returns. The LFR information is used to monitor local authority expenditure for policy purposes and it is used for some GAE assessments (with secondary indicators or based directly on expenditure).

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Term

Explanation or Description

Non-Domestic (Business) Rates (NDR)

Occupiers of non domestic property in Scotland pay non domestic rates. Non domestic rates are levied on the basis of a uniform poundage rate multiplied by the rateable value of each non domestic subject on the valuation roll. Adjustments are made for any rate relief entitlement before arriving at the rates liability for the year ahead.

Non Domestic Rate Income (NDRI)

NDRI (or business rates) is the amount paid by businesses to the local authority in which the business is situated. The amount of NDRI is set nationally, collected locally then pooled by the Scottish executive and redistributed to local authorities on a pro rata basis to population as part of AEF. This transaction is a notional one in that no money actually changes hands. The Executive assumes a certain level of NDRI income in calculating the amount of RSG a council is paid.

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Term

Explanation or Description

Option Appraisal

The process of defining objectives, examining options and weighing up the costs benefits, risks and uncertainties before a decision is made. Under the prudential system option appraisal can consider different capital schemes or revenue and capital schemes.

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Term

Explanation or Description

Poundage Rate

Non-Domestic rates are levied on the basis of a national poundage rate multiplied by the Rateable Value of the property you occupy. If you occupy a property with a rateable value in excess of £29,000 then you will be required to pay a supplement on the poundage rate. The national poundage rate is set annually by the Scottish Ministers and covers the period 1 April to 31 March.

Provisional Outturn ( PO )

Local authorities' provisional figure for their expenditure in the current year.

Prudential Code (CIPFA's)

The CIPFA Prudential Code for Capital Finance in Local Authorities sets out the procedures and indicators (see below) which will assist local authorities in meeting their requirements under Part 7 of the 2003 Act. The 2004 Regulations provide statutory backing to the Code.

Prudential Indicators/Limits

Indicators set out in the Prudential Code which will help authorities meet the statutory requirements in relation to borrowing limits or which will help authorities demonstrate affordability and prudence with regard to their prudential capital investment.

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Term

Explanation or Description

Rate Relief (Schemes)

There are a number of rate relief schemes which businesses can apply for in order to ease the impact of their Non-Domestic (Business) Rates bill.

Rateable Value

Apart from properties which are exempt from valuation, each non-domestic property has a rateable value. The Scottish Assessors set the rateable values. The rateable value broadly represents the yearly rent the property could have been let for on the open market on a particular date.

Redetermination

This is a redetermination of Revenue Support Grant (RSG) and is the amount of funding that becomes payable to local authorities after the annual RSG figures have been approved (or 'determined') by Parliament . Each annual Local Government Finance Order seeks approval for the payment of RSG for the financial year about to begin and also approves grant for the current and any previous financial years. This additional funding must be notified to Local Government Finance Division (by November) and approved by Parliament (normally February) before it can be paid in the last two weeks of March.

Revenue Support Grant (RSG)

A grant paid by the Scottish Executive to support local authority services in general.

Revenue Support Grant (RSG)

This is a block grant paid by the Scottish executive to local government in support of their non housing net revenue expenditure and is the balancing factor between an authority's assessed spending need and their income raised locally through the council tax and NDRI. The total of NDRI plus RSG is guaranteed by the Executive so a loss of NDRI is supplemented by additional RSG and vice versa. RSG is paid out to councils on a weekly basis.

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Term

Explanation or Description

Scottish Assessors Association

The Scottish Assessors are responsible for the valuation of both domestic and non domestic properties within one or more Council Areas. A valuation of non domestic properties is undertaken every five years and is referred to as the Revaluation.

Scottish Executive Accounting System (SEAS)

Scottish Executive on line payment system.

SORP

The Code of Practice on Local Authority Accounting in the United Kingdom, A Statement of Recommended Practice (the SORP). This code is produced by the CIPFA/LASAAC Joint Committee and sets out the requirements for the annual statement of accounts. Section 12 of the 2003 Act states that proper accounting practice is that regarded as generally recognised as proper accounting practice. Therefore, the SORP is accepted as proper accounting practice.

Special Islands Needs Allowance (SINA)

SINA is a supplement added to a local authorities GAE allocation to reflect the additional costs of a local authority servicing its island communities.

Specific Grants

As the name suggests funding through a specific grant is provided for a specific purpose and cannot be spent on anything else. Currently, there are only 6 specific grants within AEF and these grants represent less than 10 per cent of AEF. The largest 2 specific grants are Police and the National Priorities Action Fund. There are also a range of specific grants that are provided outwith the core settlement (see Grants outwith AEF).

Supported Borrowing

Assumed level of borrowing that the Scottish Executive will support through unhypothecated Revenue Support Grant towards principle repayments and interest.

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Term

Explanation or Description

Three year settlements

A three year settlement usually confirms the local government finance settlement for the coming year (the last year of the previous spending review) and produces provisional figures for the 2 following years. As Spending Review 2006 was postponed by a year, Spending Review 2007 will now set the local government finance settlements for the years 2008-2011.

Total Estimated Expenditure (TEE)

TEE is the Government's view of what Scottish local authorities notionally need to spend on servicing debt and delivering services to enable AEF to be calculated (Central Government Grant).

Transitional Arrangements

Every five years, the rateable values of all the non domestic property in Scotland is re-valued by the Scottish Assessors. The next revaluation takes effect on 1 April 2010. Rateable values can increase or decrease fairly significantly between revaluations. This does not necessarily mean that there will be a significant change in the rates bill as the poundage rate is adjusted downwards following a revaluation to offset the overall rise in values. Some ratepayers however, may see significant changes in their rates bills and for those rate payers, transitional arrangements will come into play.

Transitional arrangements soften the impact of the revaluation by phasing in changes to the rates bill over a period of time.

Treasury Management Code (CIPFA's)

The CIPFA's Treasury Management in the Public Services: Code of Practice and Cross Sectoral Guidance. This sets out practices, procedures and reporting requirements which underpin the prudential system.

Treasury's Fiscal Strategy

On a high level basis the Treasury's Fiscal Strategy is represented by the Golden Rule and the Sustainable Investment Rule:

• The Golden Rule: Over the economic cycle, the Government will borrow only to invest and not to fund current spending

• Sustainable investment rule: public sector net debt as a proportion of GDP will be held at a stable and prudent level (other things being equal below 40%).

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Term

Explanation or Description

Unhypothecated Support

Government support for expenditure or services not linked to any specific scheme or initiative.

Unsupported Borrowing

Borrowing undertaken in the prudential system (not supported by Scottish Executive grants) which local authorities have assessed to be affordable.

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Term

Explanation or Description

Whole of Life Costing

Costing information analysed for an asset over the whole period that it will be useful for an authority, including purchase price, repairs and maintenance costs, energy bills, asset utilisation charges, income generated from the asset, and any residual value. Provides full information on the revenue implications of ownership of the asset.