NOTES TO THE ACCOUNTS

Notes Index Number Description

Basis of preparation
Significant accounting policies
Critical accounting judgements, estimates and assumptions
Accounting standards issued but not yet adopted
Reconciliation of Total Comprehensive Income and
Expenditure to Surplus or deficit for the year under funding basis Expenditure and Funding Analysis
Expenditure and income analysed by nature
Transport services
Combined Authority wider services
Investment Programme
Mayor's office
Mayoral elections
Other operating expenditure
Financing and investment income and expenditure
Government and other grant income
Officers’ remuneration
Members' allowances
External audit costs
Property, plant and equipment
Intangible assets
Investments
Inventories
Short-term debtors
Cash and cash equivalents
Borrowing
Short-term creditors
Provisions
Transferred debt
Usable reserves
Unusable reserves
Capital expenditure and capital financing
Pension schemes
Financial risk management
Financial instruments
Operating leases
Reconciliation of liabilities arising from financing activities
Contingent liabilities and guarantees
Related party disclosures
Events after the reporting period
Prior period adjustments

1. Basis of preparation

General principles

The Statement of Accounts summarises the Authority and the Group’s transactions for the 2021/22 financial year and the position as at 31 March 2022. The Authority is required to prepare an Annual Statement of Accounts by the Accounts and Audit (England) Regulations 2015, which require the accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2021/22 (the Code), supported by International Financial Reporting Standards (IFRS).

The Group financial statements have been prepared in accordance with the Code.

Basis of preparation

Authority Accounts

The accounts have been prepared on a historical cost basis modified by the revaluation of certain categories of non-current assets in accordance with the Code. Income and expenditure are accounted for on an accruals basis (recognised in the period to which they relate) rather than when cash payments are made or received.

Group Accounts

The Code requires local authorities with, in aggregate, material interests in subsidiary and associated companies and joint ventures, to prepare group financial statements.

The Group’s financial statements have been prepared using uniform accounting policies and on a historical cost basis modified by the revaluation of certain categories of non-current assets in accordance with the Code and incorporate the financial statements of the Authority and its material subsidiaries as at 31 March 2022.

The accounting policies of the subsidiaries have been aligned with the policies of the Authority, for the purposes of Group accounts, where materially different.

Going concern

The accounts of the Authority and the Group have been prepared on a going concern basis as it is considered by the Mayor that their activities will continue in operational existence for the foreseeable future by meeting their liabilities as they fall due for payment.

2. Significant accounting policies

Consolidation

The Authority is required to produce group accounts where it has interests in subsidiaries, associates and/or joint ventures unless the interest is considered not material. The group boundary is dependent upon the extent of the Authority’s control or significant influence over the entity.

Inclusion in the group is dependent upon the extent of the Authority’s interest in and power to influence an entity. The Authority is considered to control an entity if it has power over the entity, exposure or rights to variable returns from its interest with the entity and the ability to use its power to affect the level of returns. The determining factor for assessing the extent of interest and power to influence is either through ownership of an entity or representation at an entity’s board of directors or management board.

An assessment of all the Authority’s interests has been carried out during the year to determine the relationships that exist and whether they should be included within the Authority’s group accounts. As such, the accounts of Midlands Development Capital Limited, Network West Midlands Limited and West Midlands Development Capital Limited which are subsidiaries of the Authority; its associates, West Midlands Rail Limited, and joint ventures in HTO1 LLP and HTO2 LLP have not been consolidated with those of the Authority because the companies are either dormant and do not hold any assets or liabilities or are not material (see note 21 on investments).

The accounts of Midland Metro Limited and WM5G Limited have been consolidated into the group accounts on a line-by-line basis.

Taxation

Corporation, income and capital gains tax

Authority

The Authority is exempt from corporation, income and capital gains tax by virtue of regulations section 74 of the Local Government Finance Act 1988.

Subsidiaries

Corporation tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in the Comprehensive Income and Expenditure Statement except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

Current tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed by the Balance Sheet date, except as otherwise indicated. The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Deferred tax is calculated using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference.

Value added tax (VAT)

Revenues, expenses and assets are recognised net of the amount of VAT except:

Irrecoverable VAT on the purchase of assets or services is recognised as an expense in the Comprehensive Income and Expenditure Statement.
Receivables and payables that are stated with the amount of VAT included.

The net amount of VAT recoverable from HMRC, or payable to the Authority and the Group is included as part of receivables or payables in the Balance Sheet.

Income

Revenue grants and other funding income is recognised on an accruals basis where there is reasonable assurance that the income will be received and all attached conditions have been complied with.

Income arising from ticket sales is recognised when the services are transferred to the service recipient in accordance with the performance obligations in the contract.

Government grants and other contributions

Grants and contributions are accounted for on an accruals basis and recognised immediately in the Comprehensive Income and Expenditure Statement, except to the extent that the grant or contribution has a condition that the Authority has not satisfied. Where a grant has been received and conditions remain outstanding at the Balance Sheet date, the grant is recognised in the Balance Sheet as grants receipts in advance. Once the condition has been met, the grant or contribution is transferred from grants receipts in advance and recognised as income in the Comprehensive Income and Expenditure Statement.

With respect to capital grants, if the expenditure to be financed from the grant has been incurred at the Balance Sheet date, the grant is transferred from the General Fund to the Capital Adjustment Account via the Movement in Reserves Statement. If the expenditure has not been incurred at the Balance Sheet date, the grant is transferred to the capital grants unapplied reserve via the Movement in Reserves Statement. When the expenditure is incurred, the grant is transferred to the Capital Adjustment Account via the Movement in Reserves Statement.

With respect to revenue grants, if the expenditure has not been incurred at the Balance Sheet date, the grant is transferred to Earmarked Reserves via the Movement in Reserves Statement. When the expenditure is incurred, the grant is transferred back via the Movement in Reserves Statement.

Revenue expenditure funded from capital under statute

Revenue expenditure funded from capital under statute (REFCUS) is expenditure of a capital nature that does not result in the creation of a non-current asset on the Balance Sheet.

As part of its policy of improving and co-ordinating public transport within the area, the Authority meets the cost of upgrading transport facilities within the West Midlands. These costs are attributed to tangible assets where possible with the remainder written off to Cost of Services in the year as REFCUS.
The Authority makes payments of capital grants and contributions to Constituent Authorities and other organisations carrying out economic development and regeneration functions on behalf of the Authority. These are included within REFCUS.

REFCUS is charged to the Cost of services as the expenditure is incurred and reversed out through the Movement in Reserves Statement and a transfer made to the Capital Adjustment Account.

Any grants and/or contributions receivable by the Authority in relation to REFCUS are charged to the Cost of services that the related expenditure is expensed to. These are then reversed out of the General Fund balance to the Capital Adjustment Account in the Movement in Reserves Statement.

Pensions scheme

Defined Benefit Pension Scheme

Employees of the Authority are members of the West Midlands Pension Fund. This is a funded defined benefits career average salary statutory scheme administered by the City of Wolverhampton Council in accordance with the Local Government Pension Scheme Regulations 2013 (previously a funded defined benefits final salary statutory scheme). The scheme provides defined benefits to members (e.g. retirement lump sums and pensions) which are earned as employees who worked for the Authority. The fund is valued every three years by a professionally qualified independent actuary.

Pension costs have been charged to the Comprehensive Income and Expenditure Statement and the Authority’s share of the fund’s assets and liabilities are recognised in the Balance Sheet in accordance with IAS 19. The Comprehensive Income and Expenditure Statement has therefore been charged with the full cost of providing for future pension liabilities arising from in-year service.

In the Movement in Reserves Statement an appropriation equal to the difference between this amount and the actual employer’s pension contribution is made to the Pensions Reserve, so that any additional costs arising from applying IAS 19 do not impact on the amount to be levied on the Local Authorities, and therefore ensuring no additional impact on local taxation. This appropriation is made under the general application of the Code. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits earned by employees.

Defined Contribution Pension Scheme

Midland Metro Limited and WM5G Limited operate a defined contribution pension plan for their employees. A defined contribution plan is a pension plan whereby the company pays fixed contributions into a separate entity. Once the contributions have been paid, the company has no further payment obligations.

The contributions are recognised as an expense in the Comprehensive Income and Expenditure Statement when they fall due. Amounts not paid are shown in creditors as a liability in the Balance Sheet. The assets of the plan are held separately from the company in independently administered funds.

Financial assets

Financial assets are classified based on a classification and measurement approach that reflects the business model for holding the financial assets and their cash flow characteristics. There are three main classes of financial assets measured at:

amortised cost
fair value through profit or loss (FVPL); and
fair value through other comprehensive income (FVOCI)

The Authority’s business model is to hold investments to collect contractual cash flows. Financial assets are therefore classified as amortised cost, except for those whose contractual payments are not solely payment of principal and interest.

The financial assets include investments, long-term debtors, trade debtors and cash and cash equivalents.

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Deposits with original maturities of over three months are classified as short- term investments. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses. For the purpose of the Cash Flow Statement, bank overdrafts that are repayable on demand and form an integral part of the Authority and the Group’s cash management are included as a component of cash and cash equivalents.

Trade debtors are recognised and carried at invoice or contract value less an allowance for any amounts which may not be collectable. Should such an amount become uncollectable, it is written off to the Comprehensive Income and Expenditure Statement in the period in which it is recognised.

Financial assets measured at amortised cost

Financial assets measured at amortised cost are recognised on the Balance Sheet when the Authority and the Group become a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at amortised cost. Annual credits to the Financing and Investment Income and Expenditure in the Comprehensive Income and Expenditure Statement (CIES) for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the financial assets held by the Authority and the Group, this means that the amount presented in the Balance Sheet is the outstanding principal amount (plus accrued interest) and interest credited to the CIES is the amount receivable for the year.

The Authority has made a loan at less than market rates (soft loan). When soft loans are made, a loss is recorded in the CIES (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal.

Interest is credited to the Financing and Investment Income and Expenditure line in the CIES at a marginally higher effective rate of interest than the rate receivable from the organisations, with the difference serving to increase the amortised cost of the loan in the Balance Sheet. Statutory provisions require that the impact of soft loans on the General Fund Balance is the interest receivable for the financial year – the reconciliation amounts debited and credited to the CIES to the net gain required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

Any gains and losses that arise on derecognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the CIES.

Expected credit loss model

The Authority and the Group recognise expected credit losses on all of its financial assets held at amortised cost (or where relevant FVOCI), either on a 12-month or lifetime basis. The expected credit loss model also applies to lease receivables and contract assets. Only lifetime losses are recognised for trade debtors held by the Authority and the Group.

Impairment losses are calculated to reflect the expectation that the future cash flow might not take place because the borrower could default on their obligations. Credit risk plays a crucial part in assessing losses. Where risk has increased significantly since an instrument was initially recognised, losses are assessed on a lifetime basis. Where risk has not increased significantly or remains low, losses are assessed on the basis of 12-month expected losses.

The Authority has a Collective Investment Fund portfolio which loans to property developers within the Authority geography. Loss allowances for these loans are assessed on an individual basis.

Financial assets measured at fair value through other comprehensive income (FVOCI)

Financial assets that are measured at FVOCI are recognised on the Balance Sheet when the Authority becomes party to the contractual provisions of a financial instrument and are initially measured at cost and carried at fair value. Fair value gains and losses are recognised as they arise in other comprehensive income.

With the adoption of IFRS 9 Financial Instruments, the standard requires that investments in equity is classified as fair value through profit or loss unless there is an irrevocable election to designate the asset as fair value through other comprehensive income. The investment in HTO1 LLP and HTO2 LLP is an equity instrument and as such, the default position is that any gains and losses would be recognised through profit or loss.

As the Authority’s equity in HTO1 LLP and HTO2 LLP is a strategic investment and not held for trading, the Authority has opted to make the irrevocable election to designate it as fair value through other comprehensive income. The impact of the election is that the movements in fair value will not be recognised in the surplus or deficit on the provision of services. The movements in fair value will be accumulated in the financial instruments revaluation reserve until the equity instrument is derecognised, at which point the net gain or loss would be transferred to the General Fund balance.

Financial assets measured at fair value through profit or loss (FVPL)

Financial assets that are measured at FVPL are recognised on the Balance Sheet when the Authority becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Fair value gains and losses are recognised as they arise in the surplus or deficit on the provision of services.

Any gains and losses that arise on the derecognition of the asset are credited or debited to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement.

Fair value measurements of financial assets

Fair value of an asset is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The fair value measurements of the financial assets are based on the following techniques:

instruments with quoted market prices – the market price
other instruments with fixed and determinable payments – discounted cash flow analysis

The inputs to the measurement techniques are categorised in accordance with the following three levels:

level 1 inputs – quoted prices (unadjusted) in active markets for identical assets that the Authority can access at the measurement date
level 2 inputs – inputs other than quoted prices included within level 1 that are observable for the asset, either directly or indirectly
level 3 inputs – unobservable inputs for the asset

Financial liabilities

Financial liabilities include loans and borrowings and trade creditors. Loans and borrowings consist of bank overdrafts and finance leases.

Financial liabilities are recognised initially at fair value. Subsequent to initial recognition loans and borrowings are measured at amortised cost using the effective interest method. Annual charges for interest payable are made to the Comprehensive Income and Expenditure Statement based on the carrying value of the liability multiplied by the effective rate of interest for the instrument.

Gains and losses on the repurchase or early settlement of borrowing are credited or debited to the Comprehensive Income and Expenditure Statement in the year they occur. Any premium or discount arising on restructuring of the loan portfolio is respectively deducted from or added to the amortised cost of the new or modified loan and charged to the Comprehensive Income and Expenditure Statement over the life of the loan.

Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Authority has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance would be managed by a transfer to or from the Financial Instruments Adjustment Account in the Movements in Reserves Statement. In 2021/22, no such transactions have occurred.

Trade creditors are recognised and carried at invoice or contract value. Should an amount become non-payable, it is written back to the Comprehensive Income and Expenditure Statement in the period in which it is recognised. For finance leases see note 2(m).

Financial assets and liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Authority and the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Intangible assets

Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Authority will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the assets and is restricted to that incurred during the development phase (research expenditure cannot be capitalised).

Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Authority can be determined by reference to an active market. In practice, no intangible asset held by the Authority meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life, in this case 5 years, on a straight-line basis to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the other operating expenditure line in the Comprehensive Income and Expenditure Statement.

Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund balance. The gains and losses are therefore reversed out of the General Fund balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account.

Property, plant and equipment

Recognition and measurement

Infrastructure and assets under construction are measured at historical cost less accumulated depreciation and/or accumulated impairment losses, if any. Assets classified as infrastructure include bus and railway stations, bus shelters, park and ride sites, trams and Midland Metro infrastructure.

All other assets are measured at current value. Vehicles, plant and equipment are valued at depreciated historical cost as a proxy for current value as they have short useful lives and/or low values. Current value for land and buildings is interpreted by the Code as the amount that would be paid for the asset in its existing use. Valuations are performed frequently to ensure that the current value of a revalued asset does not differ materially from its carrying amount.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The Authority does not have a de minimis level for capitalisation. Each capital project is reviewed on an individual basis and the costs considered for capitalisation. Non-enhancing expenditure is written off to the Comprehensive Income and Expenditure Statement.

Any revaluation surplus is credited to the Revaluation Reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the Comprehensive Income and Expenditure Statement, in which case the increase is recognised in the Comprehensive Income and Expenditure Statement. A revaluation deficit is recognised in the Comprehensive Income and Expenditure Statement, except to the extent that it offsets an existing surplus on the same asset in the Revaluation Reserve.

An annual transfer is made from the Revaluation Reserve to the General Fund for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets’ original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other operating expenditure. When revalued assets are sold, any revaluation reserve relating to the particular asset is transferred to the General Fund.

Depreciation

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. Leased assets as identified in note 2(m) are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated. A full year’s depreciation is charged in the financial year that the asset becomes operational. No depreciation is charged in the year of disposal.

Fixed assets are recorded at significant component level. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost is depreciated separately. The estimated useful lives for the current and comparative periods are as follows:

Buildings - 40 years
Equipment - 5-40 years
Midland Metro
Infrastructure - 10-30 years
Trams - 30 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

Midland Metro – future routes

Expenditure, other than land purchase, on other areas of the network will be capitalised once approval for a particular line is received and the development is likely to proceed. Development costs are written off in the year. Land acquired for the expansion of the network is capitalised and included in land, measured at fair value.

Assets under construction

Expenditure in respect of assets which are not yet complete at the reporting date is classified as assets under construction. Upon the asset becoming operational, the expenditure is transferred to property, plant and equipment. In the event that capital expenditure does not directly result in an operational asset, the costs are recognised within the Comprehensive Income and Expenditure Statement.

Inventories

Inventories are included in the Balance Sheet at the lower of cost and net realisable value and comprise of assets acquired under the Land Fund pending completion of remediation works.

Midland Metro Limited

Inventories are included in the Balance Sheet at the lower of cost and net realisable value, on a “first in, first out” basis.

Joint operations

Joint operations are arrangements where the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. The activities undertaken by the Authority in conjunction with other joint operators involve the establishment of a separate entity. The Authority recognises its interest in the joint operations and its share of profit or loss from the joint operations in line with the contractual arrangements set out in the joint arrangement.

Leases

Leases in terms of which the Authority and the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the Comprehensive Income and Expenditure Statement.

Operating leases are not recognised in the Balance Sheet but charged as an expense in the Comprehensive Income and Expenditure Statement on a straight-line basis over the lease term.

Impairment

Non-financial assets

The carrying value of non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assets’ recoverable amount is estimated.

Impairment losses are recognised in the Comprehensive Income and Expenditure Statement. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Provisions and contingent liabilities

Provisions are recognised when the Authority and the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to the provision is recognised in the Comprehensive Income and Expenditure Statement.

A contingent liability arises where an event has taken place that gives the Authority and the Group a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Authority. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.

Minimum Revenue Provision

Capital Finance Regulations require the Authority to provide for the repayment of long-term capital programme borrowing through a revenue charge in accordance with the Minimum Revenue Provision (MRP) requirements. The MRP policy is detailed within the Treasury Management Strategy and agreed by the Authority prior to the start of the financial year. The approved MRP statement for the current year is:

For capital expenditure incurred before 1 April 2008, MRP will be determined as 2% of the capital financing requirement in respect of that expenditure.
For unsupported capital expenditure incurred after 31st March 2008, MRP will be determined by charging the expenditure over the expected useful life of the relevant asset as the principal repayment on an annuity with an annual interest rate of 2%, starting in the year after the asset becomes operational.
For capital expenditure loans to third parties WMCA will make nil MRP but will instead apply the capital receipts arising from principal repayments to reduce the capital financing requirement instead.

In relation to the Authority wider Devolution Investment Programme, MRP is charged over 30 years in order to repay all the Investment Plan borrowing.

A revenue charge is also made to provide for the repayments of the former West Midlands County Council inherited debt of the Authority.

Events After the Reporting Period

Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:

Those that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts is adjusted to reflect such events.
Those that are indicative of conditions that arose after the reporting period – the Statement of Accounts is not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts.

Prior Period Adjustments and changes in accounting policies

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Authority’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.

3. Critical accounting judgements, estimates and assumptions

The preparation of the financial report in conformity with the Code requires the Authority to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Judgements

In applying the accounting policies set out in note 2, the Authority has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgement made in the Statement of Accounts is shown below:

Group Boundaries

The Authority has a number of interests in other entities which fall within the group boundary (see note 21). Midland Metro Limited and WM5G Limited are deemed to be material and are therefore consolidated into the group accounts.

Estimates and assumptions

The financial report contains estimated figures that are based on assumptions about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates.

The item in the Balance Sheet at 31 March 2022 for which there is a risk of material adjustment in the forthcoming financial year is as follows:

Defined pension benefits:

The cost of defined benefit pension plans is determined using independent actuarial valuation involving the use of assumptions about discount rates, returns on assets, future salary increases, mortality rates and future pension increases. Such assumptions are reviewed at each period end, and determined jointly between the pension fund management and the actuaries. When actual experience is not in line with the assumptions adopted, a surplus or shortfall will emerge at the next full actuarial valuation and will require a subsequent contribution adjustment to bring the funding back into line with target.

The effects of changes in individual assumptions have been measured by the fund’s actuaries in their 2022 IAS 19 valuation report:

A 0.1% p.a. decrease in the Real Discount Rate will increase the pension fund liability by £4.629m.
An increase of life expectancy at retirement by 1 year will increase the pension fund liability by £14.229m.
0.1% p.a. increase in the Salary Increase Rate will increase the pension fund liability by £0.404m.
0.1% p.a. increase in the Pension Increase Rate (CPI) will increase the pension fund liability by £4.184m.

4. Accounting Standards issued but not yet adopted

The Code of Practice on Local Authority Accounting in the United Kingdom (the Code) requires changes in accounting policy to be applied retrospectively unless alternative transitional arrangements are specified in the Code.

The Code requires local authorities to disclose information relating to the impact of an accounting change that will be required by a new standard under the International Financial Reporting Standard (IFRS) that has been issued but not yet adopted by the Code. The accounting standards that are to be introduced in the 2022/23 CIPFA Code of Practice are:

Annual Improvements to IFRS Standards 2018 – 2020 – amendments to IFRS 1 (First-time adoption), clarification on IAS 37 (Onerous contracts), amendment to IFRS 16 (Leases) and IAS 41 (Agriculture)
Amendments to IAS 16 – Property, Plant and Equipment: Proceeds before Intended Use

These amendments will not be applicable and there will be no impact on the Authority or the Group’s financial performance or position.

5. Reconciliation of Total Comprehensive Income and Expenditure to Surplus or deficit for the year under funding basis

		2021/2022		2020/2021
	Notes	Authority Net expenditure	Group net expenditure	Authority Net expenditure	Group net expenditure
Total Comprehensive Income and Expenditure		(87,684)	(86,591)	17,429	18,235
Adjustments between funding and accounting basis under regulations	6	19,989	19,989	(34,496)	(34,496)
Transfer to Pensions Reserve	32	33,353	33,353	(20,118)	(20,118)
Transfer to Financial Instruments Revaluation Reserve	30	877	877	-	-
Transfers to/from Earmarked Reserves
General fund	29	15,558	14,712	14,382	13,944
Unapplied revenue grants	29	16,181	16,181	9,307	9,307
Investment programme funding	29	4,221	3,988	13,450	13,082
(Surplus) or deficit for the year under funding basis		741	755	(46)	(46)

6. Expenditure and Funding Analysis - Authority

Expenditure and Funding Analysis

The Expenditure and Funding analysis shows how annual expenditure is used and funded from resources (transport levy, government grants, constituent and non-constituent contributions) by the Authority in comparison with those resources consumed or earned in accordance with generally accepted accounting practices. It also shows how this expenditure is allocated for decision making purposes between the Authority’s services. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the Comprehensive Income and Expenditure Statement.

		Adjustments to arrive at amounts chargeable to the General Fund
	As reported for resource management (notes 7 - 10)	Reserves Transfer	Financing	Net expenditure chargeable to the General Fund	Adjustments between funding and accounting basis (note 5b	Net expenditure in the Comprehensive Income and Expenditure Statement
Transport services (note 8)	114,720	515	6,243	108,992	28,063	137,055
Combined Authority wider services (note 9)	6,603	15,326	2,245	6,478	10,327	3,849
Investment Programme (note 10)	45,683	24,289	1,619	19,775	75,838	95,613
Mayor's office (note 11)	-	22	-	22	-	22
Mayoral elections (note 12)	-	3,118	-	3,118	-	3,118
Cost of services	167,006	35,960	5,617	125,429	114,228	239,657
Other operating expenditure	-	-	-	-	6,226	6,226
Financing and investment income and expenditure	976	-	5,617	4,641	803	5,444
Taxation and non-specific grant income and expenditure	165,289	-	-	165,289	141,246	306,535
(Surplus) or deficit on provision of services	741	35,960	-	35,219	19,989	55,208
Opening General Fund Balance (Including Earmarked Reserves)	-	-	-	186,044	-	-
Closing General Fund Balance (including Earmarked Reserves)	-	-	-	221,263	-	-

		Adjustments to arrive at amounts chargeable to the General Fund
	As reported for resource management (notes 7 - 10)	Reserves Transfer	Financing	Net expenditure chargeable to the General Fund	Adjustments between funding and accounting basis (note 5b	Net expenditure in the Comprehensive Income and Expenditure Statement
Transport services (note 8)	114,531	7,539	6,306	100,686	24,124	124,810
Combined Authority wider services (note 9)	6,107	7,760	-	1,653	3,683	2,030
Investment Programme (note 10)	44,106	21,829	1,347	23,624	72,820	96,444
Mayor's office (note 11)	-	11	-	11	-	11
Cost of services	164,744	37,139	4,959	122,646	100,627	223,273
Other operating expenditure	-	-	-	-	1,584	1,584
Financing and investment income and expenditure	1,001	-	4,959	3,958	617	4,575
Taxation and non-specific grant income and expenditure	163,789	-	-	163,789	65,164	228,953
(Surplus) or deficit on provision of services	49	37,139	-	37,185	34,496	2,689
Opening General Fund Balance (Including Earmarked Reserves)	-	-	-	148,859	-	-
Closing General Fund Balance (including Earmarked Reserves)	-	-	-	186,044	-	-

Note to the Expenditure and Funding Analysis

This note provides an analysis of the adjustments to Net Expenditure Chargeable to the General Fund to arrive at the amounts in the Comprehensive Income and Expenditure Statement. The relevant transfers between reserves are shown in the Movement in Reserves Statement.

Adjustments for 2021/22

	Adjustments for capital purposes
	Depreciation/ revaluation/ loss on disposal	REFCUS	Grants/ contributions	Financing
Transport services	21,801	127,661	122,405
Combined Authority wider services	-	20,771	13,047
Investment Programme	-	88,869	-
Mayor's office	-	-	-
Mayoral elections	-	-	-
Net cost of services	21,801	237,301	135,452	21,386
Other operating expenditure	6,226	-	-	-
Financing and investment income and expenditure	-	-	-	-
Taxation and non-specific grant income and expenditure	-	-	141,246	-
(Surplus) or deficit on provision of services	28,027	237,301	276,698	21,386

Financial Instrument Adjustments Account	Pension adjustment	Accumulated Absences Account	Total adjustment
-	9,253	108	28,063
-	2,603	-	10,327
-	-	-	75,838
-	-	-	-
-	11,856	108	114,228
-	-	-	6,226
541	1,344	-	803
-	-	-	141,246
541	13,200	108	19,989

Comparatives for 2020/21

	Adjustments for capital purposes
	Depreciation/ revaluation/ loss on disposal	REFCUS	Grants/ contributions	Financing
Transport services	19,919	44,404	42,985	2,086
Combined Authority wider services	-	9,354	9,354	-
Investment Programme	-	89,295	-	16,475
Mayor's office	-	-	-	-
Mayoral elections	-	-	-	-
Net cost of services	19,919	143,053	52,339	18,561
Other operating expenditure	10	-	-	1,594
Financing and investment income and expenditure	-	-	-	-
Taxation and non-specific grant income and expenditure	-	-	65,164	-
(Surplus) or deficit on provision of services	19,929	143,053	117,503	20,155

Financial Instrument Adjustments Account	Pension adjustment	Accumulated Absences Account	Total adjustment
-	4,338	534	24,124
2,595	1,088	-	3,683
-	-	-	72,820
-	-	-	-
2,595	5,426	534	100,627
-	-	-	1,584
207	824	-	617
-	-	-	65,164
2,388	6,250	534	34,496

Depreciation - charges for depreciation of non-current assets, revaluation and loss on disposal of property, plant and equipment are chargeable to the Comprehensive Income and Expenditure Statement.

REFCUS - revenue expenditure funded from capital under statute is added to services lines as it is chargeable to Cost of Services. Also included within REFCUS are amounts written off to Cost of Services in respect of capital development schemes.

Grants/contributions – capital grants and contributions receivable funding REFCUS are credited to the services and the taxation and non-specific grant income and expenditure line is credited with capital grants receivable and payable in the year without conditions or for which conditions were satisfied in the year.

Financing - the statutory charges for capital financing i.e. Minimum Revenue Provision, debt repayment and other revenue contributions are deducted from other income and expenditure as these are not chargeable under generally accepted accounting practices.

Financial Instruments Adjustments Account – the adjustment to reverse the impact on the General Fund of accounting for soft loans and pooled investment funds in the surplus or deficit on the provision of services in accordance with relevant statutory provisions.

Pensions adjustments - the adjustment to transport services represents the removal of the employer contributions made by the Authority as allowed by statute and the replacement with current service costs and past service costs calculated under accepted accounting practices (IAS 19). The adjustment to Financing and investment income and expenditure is the net interest on the defined benefit liability charged to the Comprehensive Income and Expenditure Statement under IAS 19.

The methodology for allocating pensions adjustments between services reflects the underlying activity.

Accumulated Absences Account – the adjustment for the removal of the accrued element of short-term accumulating compensated absences (for example holiday pay) to the salaries actually payable in the financial year in accordance with relevant statutory provisions that allow authorities to adjust the effect of accounting for benefits on the General Fund in the Movement in Reserves Statement, via the use of an Accumulated Absences Account.

7. Expenditure and income analysed by nature

The Authority’s expenditure and income is analysed as follows:

	2021/22	2020/21
Expenditure
Employee benefits expenses	39,513	33,733
Other service expenses	256,684	245,853
Pension	13,200	6,250
Depreciation, amortisation and impairment	21,801	19,919
REFCUS	237,301	143,053
Other operating expenditure	6,226	1,584
Interest payments	6,780	5,726
	581,505	452,950
Income
Fees and charges and other service income	151,895	12,269
Government revenue grants and contributions	212,103	196,603
Local Authority business rates growth and contributions	14,069	12,569
Levies	114,720	114,720
Capital grants and contributions (net of payments)	141,246	117,503
Interest and investment income	2,680	1,975
	636,713	455,639
Surplus on provision of services	55,208	2,689

8. Transport services

Analysis for 2021/22

	Gross expenditure	Gross Income	Net Expenditure
Concessions	56,229	176	56,053
Bus Services	33,598	13,920	19,678
Rail and metro services	8,721	1,666	7,055
Integration	12,078	3,492	8,586
Network Resilience	2,546	130	2,416
Commonwealth games	5,279	5,279	-
Business Support Costs	4,905	1,236	3,669
Strategic Development	5,561	1,620	3,941
Transport Governance	128	-	128
LSTF/Midlands Connect Programmes	5,225	5,225	-
Finance Charges	8,874	-	8,874
Reserves transfer - approved contribution to 2022-23 budget	3,600	-	3,600
Reserves transfer - transport risks	6,350	-	6,350
Use of Reserves	5,630	-	5,630
As reported to management (note 6)	147,464	32,744	114,720
Adjustments to arrive at amounts chargeable to the General Fund	6,186	458	5,728
Adjustments between funding and accounting basis (note 6b)	150,468	122,405	28,063
Per Comprehensive Income and Expenditure Statement	291,746	154,691	137,055

Comparatives for2020/21 (restated)

	Gross expenditure	Gross Income	Net Expenditure
Concessions	58,155	94	58,061
Bus Services	33,988	11,796	22,192
Rail and metro services	10,348	2,822	7,526
Integration	9,285	3,596	5,689
Network Resilience	2,198	444	1,754
Commonwealth games	1,503	1,503	-
Business Support Costs	3,581	-	3,581
Strategic Development	4,378	1,204	3,174
Transport Governance	127	-	127
LSTF/Midlands Connect Programmes	5,004	5,004	-
Finance Charges	12,160	-	12,160
Reserves transfer - transport risks	3,900	-	3,900
Use of Reserves	3,633		3,633
As reported to management (note 6)	140,994	26,463	114,531
Adjustments to arrive at amounts chargeable to the General Fund	13,342	503	13,845
Adjustments between funding and accounting basis (note 6b)	67,109	42,985	24,124
Per Comprehensive Income and Expenditure Statement	194,761	69,951	124,810

The Authority manages and administers two public transport ticketing schemes in the West Midlands on behalf of bus, tram and rail operators. The nNetwork scheme is a ticketing scheme which allows holders of tickets to travel on bus, rail and tram services within the West Midlands.

The nBus & nBus/Metro schemes are ticketing schemes covering the majority of bus services within the West Midlands and the Midland Metro (tram).

The Authority receives revenues from ticket sales which are then pooled and distributed to operators net of commission based on passenger journeys. Net amounts to operators during the year amounted to £17.6m (2021: £9.6m). The lower amount experienced in 2021 was due to the decline in patronage resulting from the lockdown measures throughout 2020/21.

9. Combined Authority wider services

Analysis for 2021/22

	Gross expenditure	Gross income	Net expenditure
Economy and Innovation	7,082	5,488	1,594
Environment & Energy, HS2	1,116	773	343
Culture and Digital	5,803	5,593	210
Public Service Reform and Social Economy	1,566	671	895
Wellbeing	1,357	940	417
Housing and Land	1,242	1,242	-
Inclusive Communities	67	-	67
Productivity and Skills	131,446	129,665	1,781
Business Support	2,729	234	2,495
Use of Reserves	1,199	-	1,199
As reported to management (note 6)	151,209	144,606	6,603
Adjustments to arrive at amounts chargeable to the General Fund	1,313	14,394	13,081
Adjustments between funding and accounting basis (note 6b)	23,374	13,047	10,327
Per Comprehensive Income and Expenditure Statement	175,896	172,047	3,849

Comparatives for 2020/21 (restated)

	Gross expenditure	Gross income	Net expenditure
Economy and Innovation	3,134	5,488	1,594
Environment & Energy, HS2	1,147	649	498
Culture and Digital	1,693	1,531	162
Public Service Reform and Social Economy	1,258	628	630
Wellbeing	1,179	629	550
Housing and Land	1,386	1,386	-
Inclusive Communities	84	-	84
Productivity and Skills	129,727	129,108	619
Business Support	2,714	193	2,521
Use of Reserves	420	-	420
	141,902	135,795	6,107
Adjustments to arrive at amounts chargeable to the General Fund	1,313	14,394	13,081
Adjustments between funding and accounting basis (note 6b)	23,374	13,047	10,327
Per Comprehensive Income and Expenditure Statement	175,896	172,047	3,849

Amounts for the Adult Education Budget included in Skills and Productivity are as follows:

		Gross expenditure	Gross income	Net expenditure
Adult Education Budget	2021/22	125,169	125,169	-
	2021/20	120,440	120,440	-

10. Investment Programme

Analysis for 2021/22

	Gross expenditure	Gross income	Net expenditure
Revenue costs of project and programme delivery	5,195	-	5,195
Programme resource	2,951	-	2,951
Investment programme financing costs	39,106	-	39,106
Interest income		1,569	1,569
As reported to management (note 6)	47,252	1,569	45,683
Adjustments to arrive at amounts chargeable to the General Fund	27,477	1,569	25,908
Adjustments between funding and accounting basis (note 6b)	75,838	-	75,838
Per Comprehensive Income and Expenditure Statement	95,613	-	95,613

Comparatives for 2020/21

	Gross expenditure	Gross income	Net expenditure
Revenue costs of project and programme delivery	4,858	-	4,858
Programme resource	2,291	-	2,291
Investment programme financing costs	38,260	-	38,260
Interest income	-	1,303	1,303
As reported to management (note 6)	45,409	1,303	44,106
Adjustments to arrive at amounts chargeable to the General Fund	21,785	1,303	20,482
Adjustments between funding and accounting basis (note 6b)	72,820	-	72,820
Per Comprehensive Income and Expenditure Statement	96,444	-	96,444

11. Mayor's office

Analysis for 2021/22

	Gross expenditure	Gross income	Net expenditure
Staff	719	-	719
Premises and services	37	-	37
Promotions, information and initiatives	1	-	1
Travel and subsistence	3	-	3
Grants and other contributions	-	760	760
As reported to management (note 6)	760	760	-
Adjustments to arrive at amounts chargeable to the General Fund	22	-	22
Adjustments between funding and accounting basis (note 6b)	-	-	-
Per Comprehensive Income and Expenditure Statement	782	760	22

Comparatives for 2020/21

	Gross expenditure	Gross income	Net expenditure
Staff	752	-	752
Premises and services	52	-	52
Promotions, information and initiatives	-	-	-
Travel and subsistence	3	-	3
Grants and other contributions	-	807	807
As reported to management (note 6)	807	807	-
Adjustments to arrive at amounts chargeable to the General Fund	11	-	11
Adjustments between funding and accounting basis (note 6b)	-	-	-
Per Comprehensive Income and Expenditure Statement	796	807	11

12. Mayoral Election

	Gross expenditure	Gross income	Net expenditure
Postage, Printing and Office Supplies	757	-	757
Promotions, Information and Initiatives	98	-	98
Election Costs	2,263	-	2,263
Use of reserves	3,118	-	3,118
As reported to management (note 6)	-	-	-
Adjustments to arrive at amounts chargeable to the General Fund	3,118	-	3,118
Adjustments between funding and accounting basis (note 6b)	-	-	-
Per Comprehensive Income and Expenditure	3,118	-	3,118

13. Other operating expenditure

	Authority 2021/22	Group 2021/22	Authority 2020/21	Group 2020/21
Loss on disposal of property, plant and equipment	6,226	6,226	10	10
Share of disposal proceeds on asset funded from grant	-	-	1,594	1,594
Total	6,226	6,226	1,584	1,584

The loss on disposal of property, plant and equipment relates to the replacement of track between Bull Street and Corporation Street, the removal of historic signalling equipment and bus stops/shelters; and the replacement of Longbridge car park.

14. Financing and investment income and expenditure

	Authority 2021/22	Group 2021/22	Authority 2020/21	Group 2020/21
Interest payable and similar charges on borrowings:
PWLB	6,610	6,610	5,596	5,596
Barclays	403	403	403	403
Other	12	12	-	-
Interest payable on the former transferred debt	304	304	431	431
Impairment loss allowance (notes 21, 23 and 34)	319	527	704	266
Net interest on the net defined benefit liability (note 32)	1,344	1,344	824	824
(Gains)/losses on financial assets at fair value through profit and loss	230	230	-	-
	8,124	8,970	6,550	6,988
Interest receivable and similar income	1,111	1,070	672	635
Other investment income	1,569	1,569	1,303	1,303
Total	5,444	6,331	4,575	5,050

Impairment loss allowance relates to potential losses recognised on the Collective Investment Fund and the loan to Midland Metro Limited, in accordance with the requirement of IFRS 9 Financial Instruments. The loss allowance includes consideration for the impact of COVID-19 (see notes 21 and 23).

Other investment income relates to the loan interest income from the Collective Investment Fund (see note 21).

15. Government and other grant income

The following grants and contributions were credited to the Comprehensive Income and Expenditure Statement of the Authority:

	2021/22	2020/21
Revenue grants and contributions credited to cost of services
Active Travel Fund	1,027	-
Adult Education Budget	142,699	131,871
Bus Service Operator Grant	1,792	1,792
Bus Services Support Grant	793	4,280
Business and Tourism Programme	5,240	1,508
Commonwealth Games	5,279	1,503
Construction Skills	945	1,044
Digital Bootcamp	1,492	1,545
Employment Support Pilot	967	1,489
Housing Package	1,133	1,218
Local Transport Authority Bus Recovery	1,132	-
Made Smarter West Midlands	1,519	-
Mayoral Capacity Fund	1,000	1,000
Midlands Connect Programme	5,129	4,884
Sales, Fees & Charges Support Grant	391	1,606
UK Community Renewal Fund	1,744	-
Other grants and contributions less than £1m	3,321	6,363
Total	175,603	160,103
Capital grants funding Revenue Expenditure Funded from Capital under Statute credited to cost of services
A45 Sprint	21,969	12,026
All-Electric Bus Town or City	11,111	10
Brownfield Housing	5,038	193
Bus Priority	5,617	-
Commonwealth Games	9,060	5,011
Future Mobility Zones	3,929	2,141
Getting Building	7,802	3,381
Land Fund	8,009	9,161
Local Growth Fund	144	8,666
Local Transport Fund	898	395
Transforming Cities Fund	29,555	4,373
Contributions from third parties	25,526	189
Other grants and contributions	6,794	6,793
Total	135,452	52,339
Grants and contributions credited to taxation and non-specific grant income
Transport levy from the West Midlands districts*	114,720	114,720
Gainshare contribution - MHCLG	36,500	36,500
Business rates growth	9,000	7,500
Constituent, non-constituent and observers membership fees and contributions*	5,069	5,069
Capital grants and contributions	204,891	142,303
Gross income	370,180	306,092
Capital grants paid	63,645	77,139
Total	306,535	228,953

*An analysis of the transport levy and constituent and non-constituent member membership fees and contributions by district is shown in note 38 Related party disclosures.

The Authority receives grants from the DfT which it administers and passes on to district partners. This expenditure does not form part of the Authority’s capital programme but is included within taxation and non-specific grant income and expenditure.

The Authority has received a number of grants and contributions that have yet to be recognised as income as they have conditions attached to them that will require the monies to be returned to the giver. These are recognised in the Balance Sheet as grants receipts in advance until such time as the conditions are met. The balances at the year-end are shown below:

	2021/22	2020/21
Grants received in advance - capital
Active Travel Fund	24,402	8,187
All-Electric Bus Town or City	38,880	49,990
Brownfield Housing	99,665	39,553
Bus Priority	18,348	23,965
Clean Bus Technology	247	786
Commonwealth Games	-	3,100
Future Mobility Zones	9,527	14,912
Getting Building	-	3,984
Joint Air Quality	162	412
Land Fund	63,478	77,316
Local Authority Major Project	55,873	36,689
Local Growth Fund	269	530
Local Transport Fund	7,415	7,378
Midlands Connect	2,000	2,000
Social Housing Decarbonisation	7,511	-
Transforming Cities Fund	57,221	60,003
Zero Emission Bus Regional Area	30,383	-
Contributions from third parties	7,292	6,000
Other grants less than £2m	1,436	2,335
	424,109	337,140
Grants received in advance - revenue
Active Travel Fund	1,040	2,167
Bus Service Operator Grant	627	627
Cycle for Everyone	1,972	-
Employment Support Pilot	555	1,523
Housing Package	3,621	4,754
Intra-City Transport Settlements	3,862	-
Local Authority Capability Fund	1,841	-
Midlands Connect	4,047	1,785
UK Community Renewal Fund	1,625	-
Other	1,746	2,120
	20,936	12,976

16. Officers’ remuneration

The remuneration paid to the Authority’s senior employees was as follows:

Salary, fees and allowances

Pension contributions

Total

Executive Director of Housing, Property and Regeneration

2020/21

145

136

53

3

7

34

60

12.

Head of Mayoral Operations

2021/22

2020/21

47

-

6

-

53

-

12.

Head of Mayoral Policy & Delivery

2021/22

2020/21

64

-

8

-

72

-

1 The role was held by two individuals during 2021/22. The current post holder, with an annualised salary of £169k for 2021/22, was appointed from the Executive Director, Transport for West Midlands role from June 2021.

2 Director of Law and Governance resigned in May 2021. Therefore, the pay does not reflect a full year’s salary.

3 The Interim Director of Law and Governance was employed in April 2021 through a third party. The amount disclosed is the amount that has been received by the postholder.

4 The title of Director of Housing & Regeneration was renamed to Executive Director of Housing, Property and Regeneration with effect from 1 May 2022.

5 The title of Director of Inclusive Growth & Public Service Reform was renamed to Executive Director of Strategy, Integration and Net Zero with effect from 1 May 2022.

6 The title of Director of Productivity and Skills was renamed to Executive Director of Economy, Skills and Communities with effect from 1 May 2022.

7 Director of Strategic Communications and Public Affairs resigned in October 2020. Therefore, the pay does not reflect a full year’s salary. This post was appointed in April 2021 and the title was renamed to Operational Director of Strategic Communications with effect from 1 May 2022.

8 Director of Strategy resigned in October 2021. Therefore, the pay does not reflect a full year’s salary. The amount disclosed includes compensation for loss of office of £25k.

9 The title of Finance Director was renamed to Executive Director of Finance & Business Hub with effect from 1 May 2022.

10 The role was held by two individuals during 2021/22. The current post holder, with an annualised salary of £86k for 2021/22 was appointed from Director of Network Resilience, Transport for West Midlands role from July 2021. The title of Managing Director, Transport for West Midlands was renamed to Executive Director, Transport for West Midlands with effect from 1 May 2022.

11 Deputy Mayor did not receive any remuneration from the Authority and no amount was re- charged from other District Authorities for his service during the period.

12 Chief of Staff resigned in July 2021 and the role was divided between Head of Mayoral Operations and Head of Mayoral Policy & Delivery effective August 2021. Therefore, the pay does not reflect a full year’s salary.

The Authority’s other employees receiving more than £50,000 remuneration which includes exit packages for the year (excluding pension contributions) were paid the following amounts:

	2022	2021
£50,000 - £54,999	35	31
£55,000 - £59,999	41	32
£60,000 - £64,999	27	15
£65,000 - £69,999	22	23
£70,000 - £74,999	7	3
£75,000 - £79,999	11	7
£80,000 - £84,999	9	4
£85,000 - £89,999	1	2
£90,000 - £94,999	3	-
£95,000 - £99,999	1	-
£100,000 - £104,999	5	5
£105,000 - £109,999	1	-
£110,000 - £114,999	1	4
£115,000 - £119,999	1	-
£120,000 - £124,999	-	1
£120,000 - £124,999	2	-
£130,000 - £139,999*	-	-
£140,000 - £144,999	-	1

* there were no employees within these bands

The numbers of exit packages with total cost per band are set out in the table below. Exit packages include pension contributions paid to the pension fund.

	Compulsory redundancies		Total exit packages		Total cost of packages in each band
Cost band (including special payments)	2022	2021	2022	2021	2022	2021
£0 - £20,000	16	9	16	9	69	47
£20,001 - £40,000	1	1	1	1	27	33
£40,001 - £60,000	1	-	1	-	57	-
£60,001 - £80,000	-	-	-	-	-	-
£80,001 - £100,000	-	1	-	1	-	99
	18	11	18	11	153	179

17. members allowance

	2022	2021
Allowances	125	127
Expenses	-	-
Total	125	127

18. External audit costs

Charges relating to work undertaken by the external auditors

	Authority 2022	Group 2022	Authority 2021	Group 2021
Fees payable to external auditors with regard to external audit services carried out by the appointed auditor for the year	67	98	67	98
Fees payable in respect of other services provided by external auditors during the year	-	-	-	-
Total	67	98	67	98

19. Property, plant and equipment

Infrastructure assets comprise bus and railway stations, park and ride sites and the Midland Metro system including trams. Other land and buildings include the head office at Summer Lane and non-operational land acquired for the future expansion of park and ride sites and the Midland Metro.

Assets under construction largely consists of expenditure on the construction of the Midland Metro extension.

In light of the recent issues with the trams, a full review of the asset lives and impairment was undertaken with the manufacturer. There are no indications of impairment and there is no change to their useful lives.

Movements in 2021/22 Authority	Land and buildings	Vehicles, plant and equipment	Infra-structure assets	Assets under construction	Total Authority
Cost or valuation
At 1 April 2021	3,559	39,465	432,602	126,849	602,475
Additions - capital programme (note 31)	-	3,637	5,263	84,638	93,538
Transfers	-	1,778	2,191	3,969	-
Transfers to intangible assets (note 20)	-	-	-	584	584
Transfers to provision of services	-	-	-	517	517
Disposals	-	-	334	-	334
At 31 March 2022	3,559	44,880	439,722	206,417	694,578
Accumulated depreciation
At 1 April 2021	87	26,793	164,709	-	191,589
Charge for the year	87	2,540	16,894	-	19,521
Disposals	-	-	324	-	324
At 31 March 2022	174	29,333	181,279	-	210,786
Net book value
At 31 March 2022	3,385	15,547	258,443	206,417	483,792
At 31 March 2021	3,472	12,672	267,893	126,849	410,886

Group	Land and buildings	Vehicles, plant and equipment	Infra-structure assets	Assets under construction	Total Authority
Cost or valuation
At 1 April 2021	3,559	45,507	439,722	206,417	695,205
Additions - capital programme (note 31)	-	3,320	7,083	134,162	144,565
Additions - other	-	201	-	-	201
Transfers	361	8,420	25,634	34,415	-
Transfers to intangible assets (note 20)	-	-	-	255	255
Transfers to provision of services	-	-	=	817	817
Disposals	-	3,994	17,256	-	21,250
At 31 March 2022	3,920	53,454	455,183	305,092	817,649
Accumulated depreciation
At 1 April 2021	174	29,708	181,279	-	211,161
Charge for the year	87	3,870	17,313	-	21,270
Disposals	-	3,940	11,084	-	15,024
At 31 March 2022	261	29,638	187,508	-	217,407
Net book value
At 31 March 2022	3,659	23,816	267,675	305,092	600,242
At 31 March 2021	3,385	15,799	258,443	206,417	484,044

Comparative movements in 2020/21 Authority	Land and buildings	Vehicles, plant and equipment	Infra-structure assets	Assets under construction	Total Authority
Cost or valuation
At 1 April 2021	3,559	39,465	432,602	126,849	602,475
Additions - capital programme (note 31)	-	3,637	5,263	84,638	93,538
Transfers	-	1,778	2,191	3,969	-
Transfers to intangible assets (note 20)	-	-	-	584	584
Transfers to provision of services	-	-	-	517	517
Disposals	-	-	334	-	334
At 31 March 2022	3,559	44,880	439,722	206,417	694,578
Accumulated depreciation
At 1 April 2021	87	26,793	164,709	-	191,589
Charge for the year	87	2,540	16,894	-	19,521
Disposals			324		324
At 31 March 2022	174	29,333	181,279		210,786
Net book value
At 31 March 2022	3,385	15,547	258,443	206,417	483,792
At 31 March 2021	3,472	12,672	267,893	126,849	410,886

Group	Land and buildings	Vehicles, plant and equipment	Infra-structure assets	Assets under construction	Total Authority
Cost or valuation
At 1 April 2021	3,559	40,063	432,602	126,849	603,073
Additions - capital programme (note 31)	-	3,637	5,263	84,638	93,538
Additions - other	-	29	-	-	29
Transfers		1,778	2,191	3,969	-
Transfers to intangible assets (note 20)	-	-	-	584	584
Transfers to provision of services	-	-	-	517	517
Disposals	-	-	334	-	334
At 31 March 2022	3,559	45,507	439,722	206,417	695,205
Accumulated depreciation
At 1 April 2021	87	27,033	164,709	-	191,829
Charge for the year	87	2,675	16,894	-	19,656
Disposals	-	-	324	-	324
At 31 March 2022	174	29,708	181,279	-	211,161
Net book value
At 31 March 2022	3,385	15,799	258,443	206,417	484,044
At 31 March 2021	3,472	13,030	267,893	126,849	411,244

Revaluations

Land and buildings are revalued at least every five years at current value and a full valuation was carried out as at 31 March 2019. This valuation was carried out by Bruton Knowles in accordance with the Practice Statements in the Valuation Standards (The Red Book) published by The Royal Institution of Chartered Surveyors. Current value is determined by reference to market-based evidence. This means that valuations performed by the valuer are based on active market prices adjusted for any difference in the nature, location or condition of the asset.

Between valuations, a desktop review is carried out by independent valuers for indications of material changes to values and adjustments are made to the carrying value of assets as appropriate.

Authority	Land and buildings	Vehicles, plant and equipment	Infra-structure assets	Assets under construction	Total authority
Carried at historical cost	-	-	-	305,092	305,092
Carried at depreciated historical cost	-	55,069	455,183	-	510,252
Valued at current value as at:	-	-	-	-	-
31 March 2022	-	-	-	-	-
31 March 2021	-	-	-	-	-
31 March 2020	-	-	-	-	-
31 March 2019	3,920	-	-	-	3,920
31 March 2018	-	-	-	-	-
31 March 2017	-	-	-	-	-
Total cost or valuation	3,920	55,069	455,183	305,092	819,264

Capital commitments

At 31 March 2022, the Authority has entered into a number of contracts for the construction or enhancement of property, plant and equipment and future years budgeted to cost £37.8m (2021: £53.8m). The major commitments are listed in the table below:

	2022	2021
Metro Third Generation Trams	31,494	42,474
Metro extension schemes	6,338	8,220
West Midlands Cycle Hire scheme	-	3,128
	37,832	53,822

20. Intangible assets

	2022	2021
Cost
At 1 April	1,992	-
Additions - capital programme (note 31)	699	1,408
Transfers from assets under construction (note 19)	255	584
At 31 March	2,946	1,992
Amortisation
At 1 April	398	-
Amortisation for the year	637	398
At 31 March	1,035	398
Net carrying amount
At 31 March	1,911	1,594

The intangible assets are internally generated assets. The carrying amount of the intangible assets is amortised over 5 years on a straight-line basis. The amortisation is charged to the transport service in the Comprehensive Income and Expenditure Statement.

21. Investments

	Long term		Current		Authority and group total
	2022	2021	2022	2021	2022	2021
Loans investments - Collective
Investment Fund	16,157	8,074	5,334	13,390	21,491	21,464
Loss allowance	2,714	1,433	238	992	2,952	2,425
Loans investments - Collective
Investment Fund	13,443	6,641	5,096	12,398	18,539	19,039
Investments in subsidiaries and joint ventures	3,673	-	-	-	3,673	-
Pooled investment funds	5,230	-	-	-	5,230	-
Short-term deposits	-		247,123	105,700	247,123	105,700
Total	22,346	6,641	252,219	118,098	274,565	124,739

The Collective Investment Fund is a fund of investments held by the Authority which provides loans to property developers to support the acceleration of commercial property developments within the West Midlands region. The Fund was originally managed by Birmingham City Council on behalf of the Authority and was transferred to the Authority in October 2018.

The loss allowance is assessed on an individual basis (see accounting policy - note 2 (g)) and recognised in the Comprehensive Income and Expenditure (see note 14).

Investments in subsidiaries and joint ventures mainly consist of the equity investments in HTO1 LLP and HTO2 LLP. Further details on these investments are set out on page 88 and in note 34 on page 110.

The pooled investment funds consisted of CCLA Local Authority Property Fund and Fundamentum Social Housing REIT.

The Authority has interests in the following entities which were incorporated in England.

	Ownership (%)	Share capital (£)	Nature of business
Midlands Development Capital Limited	100	100	Dormant
Midland Metro Limited	100	100	Trading
Network West Midlands Limited	100	100	Dormant
West Midlands Development Capital Limited	100	100	Trading
WM5G Limited	100	n/a - limited by guarantee	Trading
West Midlands Growth Company Limited	5	n/a - limited by guarantee	Trading
West Midlands Rail Limited	50	n/a - limited by guarantee	Trading
HTO Group (HTO1/HTO2 LLP)	44	n/a - limited by partnership	Trading

Midlands Development Capital Limited was incorporated under the Companies Act 2006 as a private limited company on 27 March 2017.

Midland Metro Limited was incorporated under the Companies Act 2006 as a private limited company on 24 August 2017.

Network West Midlands Limited was incorporated under the Companies Act 1985 as a private limited company on 31 July 2000.

West Midlands Development Capital Limited was incorporated under the Companies Act 2006 as a private limited company on 8 May 2017.

WM5G Limited was incorporated under the Companies Act 2006 as a private limited company (limited by guarantee) on 26 February 2019.

West Midlands Rail Limited was incorporated under the Companies Act 2006 as a private limited company (limited by guarantee) on 10 April 2014.

HTO1 LLP was incorporated under the Limited Liability Partnerships Act 2000 on 3 March 2021. This entity is jointly owned by City of Wolverhampton Council and the Authority with each member having equal voting rights.

HTO2 LLP was incorporated under the Limited Liability Partnerships Act 2000 on 9 March 2021. This entity is owned by HTO1 LLP, City of Wolverhampton Council and the Authority with each member having equal voting rights.

22. Inventories

	Authority	Group 2022	Authority	Group 2021
Balance at 1 April	13,082	13,904	12,424	13,253
Purchases	1,290	1,821	658	1,221
Recognised as an expense in the year	-	402	-	570
Balance at 31 March	14,372	15,323	13,082	13,904

23. Short-term debtors

	Authority	Group 2022	Authority	Group 2021
Loans to group undertakings	346	-	1,192	-
Loss allowance	346	-	1,192	-
Loans to group undertakings	-	-	-	-
Trade debtors and accrued income	42,119	46,000	36,441	38,177
Other debtors	10,561	10,586	4,521	4,636
Prepayments	14,068	14,299	8,752	9,188
Total	66,748	70,885	49,714	52,001

Included within trade debtors and accrued income are monies owed in respect of grant funding claims, business rates growth and also monies owed from operators for ticketing. Prepayments consist of prepayments for concessions to operators and capital prepayments for the Midland Metro extension. Other debtors consist of amounts recoverable for VAT.

The loss allowance relates to potential losses recognised in the Comprehensive Income and Expenditure (see note 14) for the impact of COVID-19.

24. Cash and cash equivalents

	Authority	Group 2022	Authority	Group 2021
Cash at bank and in hand	465	701	1,813	2,102
Short-term deposits	369,038	370,388	142,600	146,600
Total	369,503	371,089	144,413	148,702

Daily cash balances are invested overnight. The balance at 31 March 2022 represents monies held on deposit as at 31 March 2022 to be repaid on the next available banking day. Interest is earned at the respective short-term deposit rates.

25. Borrowing

	Authority	Group
Lender
Public Works Loan Board (PWLB)	431,991	108,431
Barclays	10,000	10,000
UK Infrastructure Bank	10,000	-
Accrued interest payable	2,560	1,572
Total	454,551	120,003

Maturity
Principal and accrued interest due within one year	15,319	1,925
1 - 2 years	25,563	368
2 - 5 years	38,464	1,193
5 - 10 years	111,537	12,326
Over 10 years	263,668	104,191
Principle due after more than one year	439,232	118,078
Total	454,551	120,003

The Group adopts a low risk treasury management approach seeking to maximise low interest loans when the opportunity arises. During the year, the Group undertook £47m of short-term borrowing which was repaid in year (2021: nil). The amount of fixed rate debt is 100% (2021: 100%) with no variable rate debt (2021: nil).

Historically, the majority of Group borrowing has been undertaken through HM Treasury’s lending facility (i.e. Public Works Loan Board (PWLB)). In November 2020, PWLB reduced the margin on its standard loans by 1% reversing a policy decision made a year earlier aimed at slowing the pace of borrowing by Local Authorities. As such, the Authority continues to review all options to obtain competitively priced debt to fund its Capital programme.

Following the rate reduction, the Group is able to access PWLB debt at 80 basis points above the UK Gilt rate. Loans totalling £125m were secured from this source in 2021/22 to unwind the Group’s previously under borrowed position and provide low interest rate funding prior to bank rate rises during the year. In addition, through a competitive bidding process, the Group also accessed £200m of PWLB borrowing during 2021/22 at the Governments Local Infrastructure Rate (Gilts + 60 basis points) and a further £10m of borrowing from the UK Infrastructure Bank at an equivalent rate.

In order to mitigate against the cost of rising interest rates the Authority has set up a forward rate borrowing facility with Phoenix Group who will provide lending up to £100m at a predetermined fixed rate. This is the first deal of this kind to be executed by the Authority and reduces the interest rate risk the Authority is exposed to in delivery of the WMCA Investment Programme. The funding is expected to be called down by August 2023.

During 2005/06 WMITA entered into a £10.0m LOBO (“Lenders Option Borrowers Option”) loan with Barclays Bank Plc at 4.03% repayable in 2055/56. In June 2016, Barclays decided to waive its right permanently under the lenders option of the LOBO feature to change interest rates in the future and converted it into a fixed rate loan. No other terms or conditions of the loan were amended, and the loan will still mature in June 2055.

26. Short-term creditors

	Authority	Group 2022	Authority	Group 2021
Trade creditors and accruals	115,065	119,687	106,054	110,031
Taxes and social security	1,102	1,925	845	1,057
Payments received on account	5,385	5,525	4,961	5,061
	121,552	127,137	111,860	116,149

Included within trade creditors and accruals are accruals for capital expenditure relating to various projects, amounts due to operators for concessions, subsidised services and ticketing, and sundry accruals for other goods and services. Payments received on account include ticketing income received but not yet paid to operators and advertising income billed in advance.

27. Provisions

Current year movements	Transport development	Buildings maintenance	rail services/ insurance	Total
Balance at 1 April 2021	2,071	1,224	1,010	4,305
Additional provision	-	384	219	603
Amounts used	60	-	-	60
Balance at 31 March 2022	2,011	1,608	1,229	4,848
Current	2,011	-	-	2,011
Long-term	-	1,608	1,229	2,837
Total	2,011	1,608	1,229	4,848

Prior year comparatives
Balance at 1 April 2020	933	1,000	810	2,743
Additional provision	1,182	224	200	1,606
Amounts used	44	-	-	44
Balance at 31 March 2021	2,071	1,224	1,010	4,305
Current	2,071	-	-	2,071
Long term	-	1,224	1,010	2,234
Total	2,071	1,244	1,010	4,305

Transport Development

This has been provided to meet the Authority’s present obligations for the West Midlands regions’ transport developments.

Buildings maintenance

This has been provided to meet contractual obligations in respect of the Authority’s properties.

Rail services/insurance

This has been provided in order to meet estimated liabilities and risks in relation to local rail services and the net expected costs of claims outstanding, and their administration, relating to the activities of the former West Midlands Passenger Transport Executive as a bus operator prior to 26 October 1986.

28. Transferred debt

This consists of loans inherited from the former West Midlands County Council which are managed by Dudley MBC on behalf of all the West Midlands authorities. When the County Council was disbanded, the loans were nominally distributed amongst the various local government authorities in the West Midlands with the former West Midlands Integrated Transport Authority’s share of the loan set at 5.495%. The loan is repayable in annual instalments on an annuity basis with the last instalment due in 2025/26.

	2022	2021
Balance at 1 April	5,660	6,428
Accrued interest payable - brought forward	65	-
Repayment in the year - principal	916	833
Accrued interest payable - carried forward	65	65
Balance at 31 March	4,744	5,660
Due within one year	1,074	982
Due over one year	3,670	4,678
Total	4,744	5,660

29. Usable reserves

The purpose of the individual reserves are as follows:

General Fund Balance

The General Fund Balance is a statutory fund which represents funds available to the Authority to meet unexpected short-term requirements. Movements in the General Fund are detailed in the Movement in Reserves Statement.

Earmarked Reserves

Current year movements Authority	Earmarked general fund	Investment programme funding reserve	Unapplied revenue grants	Total
Balance at 1 April 2021	41,019	114,575	28,102	183,696
Receivable in year	-	-	145,820	145,820
Utilised in year	-	-	129,639	129,639
Net unapplied in year	--	-	16,181	16,181
Released in year to general reserves	19,877	41,462	-	61,339
Transfers in year from general reserves	35,435	45,683	-	81,118
Net transfer (to)/from general reserves	15,558	4,221	-	19,779
Balance at 31 March 2022	56,577	118,796	44,283	219,656

Group	Earmarked general fund	Investment programme funding reserve	Unapplied revenue grants	Total
Balance at 1 April 2021	42,211	115,912	28,102	186,225
Receivable in year	-	-	145,820	145,820
Utilised in year	-	-	129,639	129,639
Net unapplied in year	-	-	16,181	16,181
Released in year to general reserves	20,723	41,462	-	62,185
Transfers in year from general reserves	35,435	45,450	-	80,885
Net transfer (to)/from general reserves	14,712	3,988	-	18,700
Balance at 31 March 2022	56,923	119,900	44,283	221,106

Prior year comparatives Authority	Earmarked general fund	Investment programme funding reserve	Unapplied revenue grants	Total
Balance at 1 April 2021	26,637	101,125	18,795	146,557
Receivable in year	-	-	137,075	137,075
Utilised in year	-	-	127,768	127,768
Net unapplied in year	-	-	9,307	9,307
Released in year to general reserves	7,411	32,226	-	39,637
Transfers in year from general reserves	21,793	45,676	-	67,469
Net transfer (to)/from general reserves	14,382	13,450	-	27,832
Balance at 31 March 2022	41,019	114,575	28,102	183,696

Group	Earmarked general fund	Investment programme funding reserve	Unapplied revenue grants	Total
Balance at 1 April 2021	28,267	102,830	18,795	149,892
Receivable in year	-	-	137,075	137,075
Utilised in year	-	-	127,768	127,768
Net unapplied in year	-	-	9,307	9,307
Released in year to general reserves	7,849	32,226	-	40,075
Transfers in year from general reserves	21,793	45,308	-	67,101
Net transfer (to)/from general reserves	13,944	13,082	-	27,026
Balance at 31 March 2022	42,211	115,912	28,102	186,225

Earmarked General fund

This reserve contains contributions in the year to provide funding to back transport capital programme commitments.

Investment programme funding reserve

This reserve contains the Gainshare contribution received from the Department for Levelling up, Housing and Communities (DLUHC) (previously known as MHCLG) along with other income sources relating to the Investment Programme including Business Rates Growth where the expenditure has not been incurred at the Balance Sheet date. The funding will be transferred to the General Fund via the Movements in Reserves Statement as the expenditure is incurred.

Unapplied revenue grants

This reserve contains revenue grants that the Authority has received from the DfT in respect of the Local Sustainable Transport Fund and the Midlands Connect Programme where the expenditure has not been incurred at the Balance Sheet date. These grants are transferred to the General Fund via the Movements in Reserves Statement as the expenditure is incurred.

Capital Receipts Reserve

The Capital Receipts Reserve holds the proceeds from the disposal of land or other assets, which are restricted by statute from being used other than to fund new capital expenditure or to be set aside to finance historical capital expenditure. The balance on the reserve shows the resources that have yet to be applied for these purposes at the year end.

	2022	2021
Opening balance at 1 April	1,841	247
Share of disposal proceeds of asset funded from the Brownfield Land & Property Development Fund	-	1,594
Transfer to the Capital Receipts Reserve upon receipt of cash from loan repayments under Collective Investment Fund	27,971	11,931
Use of the Capital Receipts Reserve to finance capital expenditure	27,971	11,931
Closing balance at 31 March	1,841	1,841

Profit and Loss Reserve

The Profit and Loss Reserve consolidates the in-year results for subsidiaries. This is kept separate from the General Fund given the specific statutory restrictions that apply to the General Fund.

	2022	2021
Opening balance at 1 April	-	-
In-year profit/(loss) results for subsidiaries, adjusted for Group accounting policies and elimination of intra-group transactions	14	-
Closing balance at 31 March	14	-

30. Unusable reserves

The purpose of the individual reserves are as follows:

Revaluation Reserve

The Revaluation Reserve contains the gains made from increases in the value of its property, plant and equipment. The balance is reduced when assets with accumulated gains are:

revalued downwards or impaired and the gains are lost,
used in the provision of services and the gains are consumed through depreciation, or
disposed of and the gains are realised.

	2022	2021
Opening balance at 1 April	6,319	6,531
Difference between current value depreciation and historical cost	193	212
Closing balance at 31 March	6,126	6,319

Capital adjustment account

The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions.

The account is debited with the cost of acquisition, construction or subsequent costs as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert current and fair value figures to a historical cost basis). The account is credited with capital grants and contributions receivable and amounts set as finance for the costs of acquisition, construction and subsequent costs (MRP).

	2022	2021
Opening balance at 1 April	57,222	83,928
Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement
Charges for depreciation and amortisation of non-current assets (notes 19 and 20)	21,801	19,919
Adjusting amount written out of the Revaluation Reserve (note 30)	193	212
Loss on disposal of property, plant and equipment (note 13)	6,226	10
Non-current assets transferred to provision of services (note 19)	817	517
Inventory recognised as an expense (note 22)	-	-
Revenue expenditure funded from capital under statute (note 31)	236,484	142,536
Capital financing applied in the year
Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing (note 31)	266,496	116,258
Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing in prior years	10,202	1,245
Statutory provision for the financing of capital investment charged against the General Fund (MRP - note 31)	2,336	400
Debt repayment charged against the General Fund (note 28)	916	833
Capital expenditure charged against the General Fund (note 31)	8,239	1,715
Capital expenditure funded by the Gainshare contribution (note 31)	9,895	15,613
Closing balance at 31 March	90,171	57,222

Financial Instruments Revaluation Reserve

The financial instruments revaluation reserve contains the gains or losses made by the Authority arising from the increase or decrease in the value of its investments that are measured at fair value through other comprehensive income and fair value through profit or loss.

	2022	2021
Opening balance at 1 April	-	-
Upward revaluation of investments	230	-
Accumulated gains or losses on equity investments designated at fair value through other comprehensive income	877	-
Closing balance at 31 March	647	-

Financial Instruments Adjustment Account

The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. This account is used by the Authority for recognised losses on loans advanced at less than commercial interest rate. These values are debited or credited to the Comprehensive Income and Expenditure Statement when they are incurred but reversed out from the General Fund balance to this account in the Movement in Reserves Statement. Over time, the expense is posted back to the General Fund balance in accordance with statutory arrangements. In the Authority’s case, this period is the unexpired term that was outstanding on the loans when they were redeemed. As a result, the balance on account at 31 March 2022 will be charged to the General Fund over the next 11 years.

	2022	2021
Opening balance at 1 April	2,388	-
Amounts by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements	311	2,388
Closing balance at 31 March	2,077	2,388

Pension Reserve

The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The debit balance on the reserve shows the shortfall in the benefits earned by past and current employees and the resources the Authority has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

	2022	2021
Opening balance at 1 April	66,270	39,902
Remeasurements (liabilities and assets) (note 32)	33,353	20,118
Reversal of items relating to retirement benefits debited or credited to the surplus or deficit on provision of services in the Comprehensive Income and Expenditure Statement (note 32)	16,788	9,334
Employer's pension contributions payable in the year: Current year (note 32)	3,588	3,084
Closing balance at 31 March	46,117	66,270

Accumulated absences account

The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, for example annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the account.

	2022	2021
Opening balance at 1 April	1,030	496
Movement in the year	108	534
Closing balance at 31 March	1,138	1,030

31. Capital expenditure and capital financing

The total amount of capital expenditure in the capital programme incurred in the year, together with the resources that have been used to finance it are shown in the tables below.

	2022	2021
Directly delivered capital schemes
Midland Metro	131,077	86,207
Rail infrastructure	54,952	21,960
Key Routes network	46,721	18,927
Bus infrastructure	13,500	2,641
Land Fund	22,061	18,767
Future Transport Zone	2,624	3,024
Connected vehicles	613	6,972
Regional Transport Coordination Centre	4,440	2,601
Sustainable Transport	3,837	2,611
Other	14,345	4,487
	294,170	168,197
Grants to local authorities	88,869	69,943
Investments in equity instruments	4,550	-
Total capital expenditure	387,589	238,140
Property, plant and equipment (note 19)	144,566	93,538
Intangible asset (note 20)	699	1,408
Inventories (note 22)	1,290	658
Investments in equity instruments (note 21)	4,550	-
Written off to cost of services - capital development/district schemes	236,484	142,536
	387,589	238,140
Funded by:
Central Government grants	231,252	107,168
District/Local Enterprise Partnership (LEP) grants and contributions	9,413	9,004
3rd party contributions	25,831	86
Total grants and contributions	266,496	116,258
Gainshare contribution	9,895	15,613
Borrowing	111,198	106,269
	387,589	238,140

The Authority has a statutory obligation to make adequate provision to meet its liabilities in respect of capital expenditure financed by external borrowing through a revenue charge (the Minimum Revenue Provision or MRP). The method of calculating the provision is defined by statute and is based on the Authority’s underlying Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Authority that has yet to be financed. The CFR is analysed below:

	2022	2021
Opening Capital Financing Requirement Capital investment	472,555	347,731
Capital programme costs funded by borrowing (note 31)	111,198	106,269
Other capital expenditure funded by borrowing - Collective Investment Fund	26,484	16,679
Other capital expenditure funded by borrowing - soft loan	-	18,000
Sources of finance
Minimum Revenue Provision (MRP)	2,336	400
Use of the Capital Receipts Reserve to finance capital expenditure (note 29)	27,971	11,931
Transferred debt repayment (note 28)	916	833
Capital expenditure charged to the General Fund	8,239	1,715
Capital grants received previously funded through borrowings	10,202	1,245
Closing Capital Financing Requirement	560,573	472,555
Explanation of movement in year
Increase in underlying need to borrow (unsupported by government financial assistance)	88,018	124,824
Increase in Capital Financing Requirement	88,018	124,824

32. Pension schemes

Defined benefit pension scheme

Employees of the Authority participate in the West Midlands Pension Fund, a defined benefit career average salary statutory scheme, meaning that the Authority and employees pay contributions into a fund, calculated at a level intended to balance the pensions liabilities with investment assets. This scheme is administered by the City of Wolverhampton Council in accordance with the Local Government Pension Scheme Regulations 2013 and is governed by the Pensions Committee at the West Midlands Pension Fund.

In general, participating in a defined benefit pension scheme means that the employer is exposed to a number of risks:

investment risk – the fund holds investment in assets classes, such as equities, which have volatile market values and while these assets are expected to provide real returns over the long-term, the short-term volatility can cause additional funding to be required if a deficit emerges.
interest rate risk – the fund’s liabilities are assessed using market yields on high quality corporate bonds to discount future liability cash flows. As the fund holds assets such as equities, the value of the assets and liabilities may not move in the same way.
inflation risk – all of the benefits under the fund are linked to inflation and so deficits may emerge to the extent that the assets are not linked to inflation.
longevity risk – in the event that the members live longer than assumed, a deficit will emerge in the fund. There are also other demographic risks.

An actuarial valuation of this fund was carried out by Barnett Waddingham LLP, an independent firm of actuaries in accordance with the Regulations as at 31 March 2019. Based on the results of this valuation, the actuaries set the Authority’s employer contributions for the three years from 1 April 2020 at a net primary rate of 12.4% of the current employees’ pensionable pay to meet 100% of the overall fund liabilities. This pension cost has been determined after allowing for the amortisation of the difference between the assets and the accrued liabilities relating to the Authority over the average remaining service lives of the current members of the fund.

In April 2020 a prepayment of employer’s contributions of £9.739m was made for the three years to 2022/23 to take advantage of discounts available.

Hymans Robertson LLP was appointed as the new actuary on 1 January 2022, replacing Barnett Waddingham LLP. Disclosures in this note are taken from the actuarial report provided by Hymans Robertson LLP.

Following the recent McCloud and Sargeant judgement which relate to age discrimination within the Judicial and Fire Pension Schemes respectively, an allowance was made in 2018/19 for the estimated potential impact on the employer’s defined benefit obligation based on analysis carried out by the Government Actuary’s Department (GAD) and the employer’s liability profile. Following government confirmation in a statement by the Chief Secretary to the Treasury on 15 July 2019 that the principles of the outcome would be accepted as applying to all public service schemes, this allowance is therefore incorporated in the roll forward approach and is remeasured at the accounting date along with the normal LGPS liabilities. No explicit additional adjustment for McCloud has been added to the current service cost for 2021/22.

On the High Court’s recent ruling on the equalisation of Guaranteed Minimum Pension (GMP) between genders, the impact of the full GMP indexation has been allowed for in the calculation of the latest funding valuation. WMCA’s funding valuation results are used as a starting point for the accounting roll forward calculations and therefore an allowance for full GMP indexation has already been included in the accounting disclosure.

The further ruling on historical transfers is unlikely to have a significant impact on pension obligations and therefore no allowance has been made for this within calculations as at 31 March 2022.

Calculation method

The figures as at 31 March 2022 are based on the 31 March 2019 formal valuation of the fund. Membership data as at 31 March 2019 was used to develop current funding requirements. Liabilities are based on benefit payment and contribution information provided by the fund’s administrator as at 31 March 2022. This valuation was carried out by Hymans Robertson LLP.

Net liability and pension reserve

The net amount recognised on the Balance Sheet at 31 March 2022 is a deficit of £42.991m compared to a deficit of £59.603m at 31 March 2021. The deficit has been reduced by the prepayment of £3.126m for 2022/23. As a result, the pension liability does not agree to the pension reserve by that amount.

Movement in pension fund liability during the year

	2022	2021
Opening balance at 1 April	59,603	39,902
Employer's pension contributions payable in the year:
Current year	3,588	3,084
Prepayment for 2020/21 and 2021/22	3,541	6,667
Post employment benefit charged to the surplus or deficit on provision of services:
Current service cost*	15,414	8,503
Past service cost	30	7
Net interest cost	1,344	824
Total cost	16,741	417
Remeasurements (liabilities and assets)	33,353	20,118
Closing balance at 31 March	42,991	59,603

Transactions relating to post employment benefits

The cost of retirement benefits is recognised in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge required to be made against the levy is based on the cash payable in the year, so the real cost of post-employment benefits is reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year:

Comprehensive Income and Expenditure Statement

	2022	2021
Cost of services
Current service cost*	15,414	8,503
Past service cost	30	7
Financing and investment income and expenditure
Net interest cost	1,344	824
Total post employment benefit charged to the surplus or deficit on provision of services	16,788	9,334
Remeasurements (liabilities and assets)	33,353	20,118
Total post employment benefit charged/(credited) to the Comprehensive Income and Expenditure Statement	16,565	29,452
Movement in Reserves Statement
Reversal of net charges made to the surplus or deficit on provision of services for post employment benefits in accordance with the Code	16,788	9,334
Actual amount charged against the General Fund Balance for pensions in the year	3,588	3,084
	13,200	6,250

Assets and liabilities in relation to post-employment benefits

	2022	2021
Present value of scheme liabilities	355,735	355,122
Present value of scheme assets	312,744	295,519
Amounts recognised as liabilities	42,991	59,603

Reconciliation of present value of the scheme liabilities (defined benefit obligation)

	2022	2021
Opening balance at 1 April	355,122	289,789
Current service cost	15,414	8,325
Interest cost	7,169	6,671
Change in demographic assumptions*	2,517	4,119
Change in financial assumptions	12,031	70,720
Experience (gain)/loss on defined benefit obligations	815	4,380
Contributions by scheme participants	2,134	1,843
Benefits paid	10,401	13,734
Past service costs/curtailments	30	7
Closing balance at 31 March	355,735	355,122

* the change in demographic assumptions can be found in the valuation assumptions on page 103

Reconciliation of fair value of the scheme assets

	2022	2021
Opening balance at 1 April	295,519	249,887
Interest on plan assets	5,825	5,847
Administration expenses*	-	178
Return on assets less interest	19,620	42,103
Employer contributions - current year	3,588	3,084
Employer contributions - prepayment for 2020/21 and 2021/22	3,541	6,667
Contributions by scheme participants	2,134	1,843
Benefits paid	10,401	13,734
Closing balance at 31 March	312,744	295,519

* Administration expenses for 2021/22 are included in ‘Current service cost’ within ‘Reconciliation of present value of the scheme liabilities (defined benefit obligation)’

The plan assets at the year-end were as follows:

Authority	2022 (%)	2022 (£)	2021 (%)	2021 (£)
Asset
Equities	60.6	189,663	60.2	177,994
Gilts	6.2	19,358	8.3	24,597
Other bonds	5.8	18,193	6.3	18,744
Property	7.2	22,431	7.5	22,175
Cash/liquidity	3.9	12,282	4.9	14,448
Other*	16.3	50,817	12.8	37,561
Total	100.0	312,744	100.0	295,519

* mainly consists of infrastructure, other debt securities and derivatives

Basis for estimating assets and liabilities

Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels etc.

The expected rate of return on plan assets is based on market expectations, at the beginning of the period, for investments returns over the entire life of the related obligation.

	2022 (%)	2021 (%)
Valuation assumptions
Discount rate	2.7	2.0
Rate of salary increase	4.3	3.9
Rate of pension increase	3.3	2.9
Future life expectancies from age 65
Retiring today:
Males	21.2	21.6
Females	23.6	23.9
Retiring in 20 years
Males	22.9	23.4
Females	25.4	25.8

It is assumed that:

members will elect to take 50% of both the maximum additional tax free cash up to HMRC limits for pre-April 2008 service and for post-April 2008 service;
members will retire at one retirement age for all tranches of benefit, which will be the pension weighted average tranche retirement age; and
the proportion of the membership that had taken up the 50:50 option at the previous valuation date will remain the same.

Defined Contribution Pension Scheme – Midland Metro Limited and WM5G Limited

Income Statement

The amounts recognised in Midland Metro’s Income Statement and consolidated into the Group Comprehensive Income and Expenditure Statement are £182k (2021: £164k).

The amounts recognised in WM5G Limited’s Income Statement and consolidated into the Group Comprehensive Income and Expenditure Statement are £57k (2021: £50k).

33. Financial risk management

The Authority’s principal financial liabilities comprise trade and other payables. The main purpose of these financial liabilities is to fund the Authority’s activities. The Authority has trade and other receivables, and cash, short-term deposits and investments that derive directly from its activities. The Authority does not enter into any derivative transactions.

The Authority is exposed to credit risk, liquidity risk and market risk. Whilst some transactions for Metro operations are executed in Euros, currency risk is not a significant factor for the Authority since it ensures that substantially all financial assets and liabilities are contracted for in Sterling.

The Authority is also exposed to the risk of default against loans made to commercial and residential developers under its investment funds. The Authority negates the risk of default through employing sector specific professional fund managers, full and thorough due diligence on all investments as they pass through the assurance framework and the securing of loans on developer land and assets.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Authority is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks, other financial institutions and local authorities.

The Authority manages the credit risk from its financing activities by restricting its exposure with financial institutions to those that are on the official lending list as compiled by the Authority’s treasury management advisors. The criteria for these lending lists are set out in the Treasury Management Strategy report and credit ratings monitored constantly through the receipt of credit rating bulletins from its treasury management advisors. If a financial institution fails to meet the criteria they are removed from the official lending list. The lending list contains financial as well as duration limits to reduce risk. Minimal balances are held for daily cash flow management and any surplus funds are invested on the overnight money market with HSBC Bank plc.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

	Authority 2021/22	Group 2021/22	Authority 2020/21	Group 2020/21
12-month expected credit losses:
Investments (note 21)	265,662	274,565	124,739	124,739
Cash and short-term deposits (note 24)	369,503	371,089	144,413	148,702
Pooled investment funds (note 21)	5,230	5,230	-	-
	640,395	650,884	269,152	273,441
Simplified approach:
Trade debtors and accrued income (note 23)	42,119	46,000	36,441	38,177
Total	682,514	696,884	305,593	311,618

The loss allowance recognised during the year are as follows:

Authority	12-month expected credit losses		Lifetime expected credit losses - simplified		Total
Asset class (amortised cost)	2021/22	2020/21	2021/22	2020/21	2021/22	2020/21
Opening balance as at 1 April	3,617	4,321	-	-	3,617	4,321
Individual financial assets transferred to 12-month expected credit loss	319	704	-	-	319	704
Individual financial assets transferred to lifetime expected credit losses	-	-	-	-	-	-
Closing balance at 31 March	3,298	3,617	-	-	3,298	3,617

Group	12-month expected credit losses		Lifetime expected credit losses - simplified		Total
Asset class (amortised cost)	2021/22	2020/21	2021/22	2020/21	2021/22	2020/21
Opening balance as at 1 April	2,425	2,691	-	-	2,425	2,691
Individual financial assets transferred to 12-month expected credit loss	527	266	-	-	527	266
Individual financial assets transferred to lifetime expected credit losses	-	-	-	-	-	-
Closing balance at 31 March	2,952	2,425	-	-	2,952	2,425

Liquidity risk

Liquidity risk covers the ease of access to finance. The Authority has a comprehensive cash flow management system that seeks to ensure that cash is available as needed. The Authority maintains a sufficient level of liquidity through the use of Money Market Funds/overnight deposits and call accounts. If longer term funding is required, the Authority has ready access to borrowings from the money markets and the Public Works Loans Board (PWLB). There is no significant risk that it will be unable to raise finance to meet its commitments. Instead, the risk is that the Authority will be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates, but effective cash management assists in ensuring any borrowing is undertaken at favourable rates.

Market risk

The Authority is exposed to the risk of interest rate movements on its borrowings and investments. It manages those risks as follows:

New long-term borrowings are only undertaken if required to meet cash flow requirements or to mitigate against forecast interest rate rises thereby reducing future interest costs.
Debt restructuring is undertaken when financially viable to take account of fluctuating interest rates.
Limits are set on the proportion of its borrowing limits in accordance with the Treasury Management Strategy.

Coronavirus

The Authority will continue to monitor closely the ongoing impact of COVID-19 pandemic including the effect on financial markets and the stability of the financial institutions the Authority has dealings with to ensure that security and liquidity of Group investments are not adversely affected. The Authority is assisted in this regard by professional Treasury Management advisors, Link Treasury Services.

With respect to the commercial loans, the Authority is continually reviewing the impacts on the construction sector and the potential impact on its loan portfolio. Provision has been made in the 2021/22 accounts for potential defaults and the Authority will continue to maintain a close dialogue with borrowers through its sector specialist fund manager. In the event that any of the investments encounter difficulty, each will be managed on a case by case basis and if necessary, the Authority’s rights over control of the development or assets will be exercised.

Maturity analysis of financial liabilities

All trade and other payables are due to be paid in less than one year.

34. Financial Instruments

The following categories of financial instrument are carried in the Balance Sheet at amortised cost. Long-term debtors consist of loan receivables (soft loan) and lease receivables, short-term debtors consist of trade debtors and accrued income, and short-term creditors consist of trade creditors and accruals.

Analysis for 2021/22	Long term		Current		Total
	Authority	Group	Authority	Group	Authority	Group
Financial assets at amortised cost
Investments (note 21)	13,443	13,443	252,219	252,219	265,662	265,662
Long-term debtors	16,159	16,159	-	-	16,159	16,159
Short-term debtors (note 23)	-	-	42,119	46,000	42,119	46,000
Cash and cash equivalents (note 24)	-	-	369,503	371,089	369,503	371,089
Financial assets at fair value through other comprehensive income
Investments in subsidiaries and joint ventures (note 21)	3,673	3,673	-	-	3,673	3,673
Financial assets at fair value through profit or loss
Pooled investment funds (note 21)	5,230	5,230	-	-	5,230	5,230
Total financial assets	38,505	38,505	663,841	669,308	702,346	707,813
Financial liabilities at amortised cost
Borrowings (note 25)	439,232	439,232	15,319	15,319	454,551	454,551
Short-term creditors (note26)	-	-	115,065	119,687	115,065	119,687
Transferred debt (note 28)	3,670	3,670	1,074	1,074	4,744	4,744
Total financial liabilities	442,902	442,902	131,458	136,080	574,360	578,982

Comparative for 2020/21	Long term		Current		Total
	Authority	Group	Authority	Group	Authority	Group
Financial assets at amortised cost
Investments (note 21)	6,641	6,641	118,098	118,098	124,739	124,739
Long-term debtors	15,951	15,951	-	-	15,951	15,951
Short-term debtors (note 23)	-	-	36,441	38,177	36,441	38,177
Cash and cash equivalents (note 24)	-	-	144,413	148,702	144,413	148,702
Total financial assets	22,592	22,592	298,952	304,977	321,544	327,569
Financial liabilities at amortised cost
Borrowings (note 25)	118,078	118,078	1,925	1,925	120,003	120,003
Short-term creditors (note26)	-	-	106,054	110,031	106,054	110,031
Transferred debt (note 28)	4,678	4,678	982	982	5,660	5,660
Total financial liabilities	122,756	122,756	108,961	112,938	231,717	235,694

Material soft loans made by the Authority

During the year, the Authority made a loan to Coventry City Council for the construction of the UK Battery Industrialisation Centre. This loan is deemed to be a material soft loan and matures in 2033. Notional interest is charged quarterly and the interest will only become payable if the total accumulated interest added to the outstanding loan balance in aggregate exceeds the agreed interest payment trigger as stipulated in the loan agreement.

The treatment of soft loans in the financial statements is as follows:

	2021/22	2020/21
Opening balance as at 1 April	15,612	-
Nominal value of new loans granted in the year	-	18,000
Fair value adjustment of new loan	-	2,595
Interest credited to Financing and Investment Income and Expenditure	311	207
Closing balance at 31 March	15,923	15,612
Nominal value at 31 March	18,000	18,000

Validation assumptions

The interest rate at which the fair value of this soft loan has been made is arrived at by taking the Authority’s prevailing cost of borrowing and adding an allowance for the risk that the loan might not be repaid by Coventry City Council, in this case a zero rate.

Income, Expense, Gains and Losses

The gains and losses recognised in the Comprehensive Income and Expenditure Statement in relation to financial instruments consist of the following items:

Authority	2021/22
	Financial assets at amortised costs (£)	Financial assets at fair value through other comprehensive income (£)	Financial assets at fair value through profit or loss (£)	Financial liabilities at authorised cost (£)	Total
Net (gains)/losses on financial instruments	-	877	230	-	647
Interest income (note 14)	2,680	-	-	-	2,680
Interest expense (note 14)	-	-	-	8,124	8,124
Net loss/(gain) for the year in the surplus or deficit on the provision of services	2,680	877	230	8,124	6,091

Authority	2020/21
	Financial assets at amortised costs (£)	Financial assets at fair value through other comprehensive income (£)	Financial assets at fair value through profit or loss (£)	Financial liabilities at authorised cost (£)	Total
Net (gains)/losses on financial instruments	-	-	-	-	-
Interest income (note 14)	1,975	-	-	-	1,975
Interest expense (note 14)	-	-	-	6,550	6,550
Net loss/(gain) for the year in the surplus or deficit on the provision of services	1,975	-	-	6,550	4,575

Group	2021/22
	Financial assets at amortised costs (£)	Financial assets at fair value through other comprehensive income (£)	Financial assets at fair value through profit or loss (£)	Financial liabilities at authorised cost (£)	Total
Net (gains)/losses on financial instruments	-	-	230	-	230
Interest income (note 14)	2,639	-	-	-	2,639
Interest expense (note 14)	-	-	-	8,970	8,970
Net loss/(gain) for the year in the surplus or deficit on the provision of services	2,639	-	230	8,970	6,101

Group	2020/21
	Financial assets at amortised costs (£)	Financial assets at fair value through other comprehensive income (£)	Financial assets at fair value through profit or loss (£)	Financial liabilities at authorised cost (£)	Total
Net (gains)/losses on financial instruments	-	-	-	-	-
Interest income (note 14)	1,938	-	-	-	1,938
Interest expense (note 14)	-	-	-	6,988	6,988
Net loss/(gain) for the year in the surplus or deficit on the provision of services	1,938	-	-	6,988	5,050

Fair value of financial assets and liabilities

Fair values are shown in the table overleaf, split by their level of fair value hierarchy:

Level 1 – where fair values are derived from unadjusted quoted prices in active markets for identical assets or liabilities (quoted equities, quoted fixed securities). Listed investments are shown at bid prices. The bid value is based on the market quotation of the relevant stock exchange.

Level 2 – where market prices are not available, for example, where an instrument is traded in a market that is not considered to be active or where valuation techniques are used to determine fair value and where these techniques use inputs that are based significantly on observable market data.

Level 3 – where at least one input that could have a significant effect on the instrument’s valuation is not based on observable data. Such instruments would include unquoted equity investments.

Analysis for 2021/22			Authority			Group
	Input level in fair value hierarchy	Valuation technique used to measure fair value	Carrying amount	Fair value	Carrying amount	Fair value
Financial assets at amortised cost
Investments	N/A	Fair value is approximated at their carrying amount	265,662	265,662	269,335	269,335
Long-term debtors	N/A	Discounted contractual (or expect) cash flows at PWLB's new annuity rate	236	236	236	236
Long-term debtors - soft loan	Level 2		15,923	15,640	15,923	15,640
Short-term debtors	N/A	Fair value is approximated at their carrying amount	42,119	42,119	46,000	46,000
Cash and cash equivalents	N/A		369,503	369,503	371,089	371,089
Financial assets at fair value through other comprehensive income
Investments in subsidiaries and joint ventures	Level 3	Earnings based valuation	3,673	3,673	3,673	3,673
Financial assets at fair value through profit or loss
Pooled investment funds	Level 1	Unadjusted quoted prices in active markets for identical shares	5,230	5,230	5,230	5,230
Total financial assets			702,346	702,063	711,486	711,203
Financial liabilities at amortised cost
Public Works Loan Board (PWLB)	Level 2	PWLB redemption and new PWLB certain rate loan discount rates	434,551	464,059	434,551	464,059
Barclays	Level 2		10,000	13,446	10,000	13,446
UK Infrastructure Bank	Level 2		10,000	9,032	10,000	9,032
Total borrowings			454,551	486,537	454,551	486,537
Short-term creditors	N/A	Fair value is approximated at their carrying amount	115,065	115,065	119,687	119,687
Transferred debt *	Level 2	PWLB new loan rates	4,744	4,987	4,744	4,987
Total financial liabilities			574,360	606,589	578,982	611,211

Comparative for 2020/21			Authority			Group
	Input level in fair value hierarchy	Valuation technique used to measure fair value	Carrying amount	Fair value	Carrying amount	Fair value
Financial assets at amortised cost
Investments	N/A	Fair value is approximated at their carrying amount	124,739	124,739	124,739	124,739
Long-term debtors	N/A	Discounted contractual (or expect) cash flows at PWLB's new annuity rate	339	339	339	339
Long-term debtors - soft loan	Level 2		15,612	16,284	15,612	16,284
Short-term debtors	N/A	Fair value is approximated at their carrying amount	36,441	36,441	38,177	38,177
Cash and cash equivalents	N/A		144,413	144,413	148,702	148,702
Total financial assets			321,544	322,216	327,569	328,241
Financial liabilities at amortised cost
Public Works Loan Board (PWLB)	Level 2	PWLB redemption and new PWLB certain rate loan discount rates	109,896	172,705	109,896	172,705
Barclays	Level 2		10,107	14,831	10,107	14,831
Total borrowings			120,003	187,536	120,003	187,536
Short-term creditors	N/A	Fair value is approximated at their carrying amount	106,054	106,054	110,031	110,031
Transferred debt *	Level 2	PWLB new loan rates	5,660	6,248	5,660	6,248
Total financial liabilities			231,717	299,838	235,694	303,815

* The transferred debt information is provided by Dudley Metropolitan Borough Council who is responsible for the West Midlands County Council Debt Administration Fund. The fair values were provided to them by their treasury advisor.

The financial assets carried at fair value through other comprehensive income largely consist of the Authority’s equity investment in the HTO Group (HTO1 LLP and HTO2 LLP), which is jointly owned by City of Wolverhampton Council. The valuation technique used in determining the fair value is an earnings approach based on the net results as reported in their draft unaudited accounts at their reporting date i.e. 31 March. The Authority holds £4.5m nominal investment in the HTO Group.

Transfers between levels of the fair value hierarchy

There were no transfers between input levels during the year.

Changes in the valuation technique

There has been no change in the valuation technique used during the year for the financial instruments.

35. Operating leases

Authority as lessee

Land and buildings - land is acquired for park and ride sites and bus stations by entering into operating leases. Some of these leases are non-cancellable with typical lives of 25 years.

The future minimum lease payments payable under non-cancellable operating leases at 31 March 2022 are shown overleaf:

	2022	2021
Land and buildings
Less than one year	480	632
Between two and five years	943	843
More than five years	3,234	3,375
	4,657	4,850

Authority as lessor

The Authority leases out parts of the Head Office at Summer Lane, various units at bus stations and land and buildings acquired for the future expansion of park and ride sites whilst they are awaiting development. These are a mixture of cancellable and non-cancellable operating leases.

Future minimum rentals receivable under non-cancellable operating leases as at 31 March 2022 are as follows:

	2022	2021
Land and buildings
Less than one year	274	357
Between two and five years	474	687
More than five years	1,797	1,840
	2,545	2,884

36. Reconciliation of liabilities arising from financing activities

	Long-term borrowings	Short-term borrowings	Grants receipts in advance	Total Authority and Group
Opening balance at 1 April	122,756	1,270	350,116	474,142
Financing cash flows	333,913	1,270	-	332,643
Non-cash changes	13,767	13,767	94,929	94,929
Closing balance at 31 March	442,902	13,767	445,045	901,714

37. Contingent liabilities and guarantees

The West Midlands Integrated Transport Authority Pension Fund (WMITA PF) was established by Government Regulation on 29 November 1991 and became active on 4 December 1991. The pension fund is guaranteed by National Express Group plc and Preston City Council. In the event of the pension fund becoming insolvent and National Express Group plc and Preston City Council not meeting their guarantee, then the Authority would be liable to meet any excess liabilities.

In 2019/20, following the enactment of UK Statutory Instrument 2019 No. 1351 (“The Local Government Pension Scheme (West Midlands Integrated Transport Authority Pension Fund and West Midlands Pension Fund Merger) Regulations 2019, all assets and liabilities of the former WMITA PF transferred to the West Midlands Pension Fund (WMPF). For any person for whom the appropriate administering authority had been, or would have been, the Authority, the appropriate administering authority became the City of Wolverhampton Council. The regulations effecting this change came into full legal force on 8 November 2019 but with retrospective effect from 1 April 2019 (the ‘merger date’ cited in the legislation).

Following the merger, the Authority is discharged from the excess liabilities of Preston Bus Limited which is guaranteed by Preston City Council but remains liable to meet any excess liabilities of West Midlands Travel Limited (WMTL) if National Express Group plc is unable to meet their guarantee. In the event that WMTL exit the pension fund (either directly or through the guarantee arrangement with National Express Group plc) without fully discharging its liabilities, the Authority will subsume the assets and liabilities of WMTL pension fund with its own assets and liabilities in the WMPF.

The market value for WMTL is only available at each triennial valuation and was valued at a deficit of £92.5m at the last triennial valuation as at 31 March 2019.

The Authority has guarantees with local authorities lodged with the bank in connection with works undertaken at various car parks as follows:

	(£)
Sandwell MBC (2 guarantees)	104
Birmingham City Council (1 guarantee)	97

38. Related party disclosures

The Authority is required to disclose material transactions with related parties - bodies or individuals that have the potential to control or influence the Authority or to be controlled or influenced by the Authority. Disclosure of these transactions allows readers to assess the extent to which the Authority might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Authority. These include:

Central Government

Central Government has significant influence over the general operations of the Authority. It is responsible for providing the statutory framework within which the Authority operates and provides funding in the form of grants. Grants received from Government Departments together with grant receipts not yet recognised due to conditions attached to them at 31 March 2022 are set out in note 15.

Members

Members of the Authority have direct control over the Authority’s financial and operating policies. The total of members allowances paid in 2021/22 is shown in note 17. All members have at least two roles under the Local Government Act 1985 in that they are members of one of the seven constituent levying District Councils and are appointed to the Authority or co-opted to one of its committees.

During the year, there were expenditure and grant payments to the following entities:

Black Country Consortium Limited totalling £311k (2021: £591k) in which three members have an interest
West Midlands Growth Company Limited totalling £7m (2021: £3.4m) in which three members (2021: one officer representation on the board as WMCA stakeholder) have an interest.

Officers

There were no significant transactions between the officers and other related parties.

Other Public Bodies (subject to common control by central government)

The Authority received the following levy payments and funding from the constituent District Councils:

	Transport Levy		Membership fees and contributions		LGF LEP funding
	2021/22	2020/21	2021/22	2020/21	2021/22	2020/21
Constituent authorities
Birmingham City Council	44,728	44,895	1,087	1,088	197	9,080
City of Wolverhampton Council	10,316	10,306	573	573	-	-
Coventry City Council	14,553	14,428	636	634	-	-
Dudley MBC	12,598	12,612	607	607	-	-
Sandwell MBC	12,866	12,878	611	611	-	-
Solihull MBC	8,476	8,454	545	545	-	-
Walsall Council	11,183	11,147	585	585	-	-
Non-constituent authorities	-	-	325	325	-	-
Total	114,720	114,720	4,969	5,018	197	9,080

Funding paid by the Authority to the constituent District Councils:

	Devolved transport funding		Economic regeneration		Adult education budget
Constituent authorities
Birmingham City Council	5,165	7,257	31,926	7,917	10,220	10,202
City of Wolverhampton Council	4,002	7,610	-	-	3,289	3,283
Coventry City Council	5,566	6,995	61,958	31,967	5,297	5,288
Dudley MBC	5,246	8,912	-	-	1,509	1,506
Sandwell MBC	6,026	7,247	-	-	1,408	1,531
Solihull MBC	4,251	5,894	11,075	11,992	-	-
Walsall MBC	4,306	7,589	18,079	9,947	-	-
Total	34,562	51,504	123,038	61,823	21,723	21,810

Entities controlled or significantly influenced by the Authority

During the year, the Authority paid management fees of £100k (2021: £150k) and £600k (2021: £600k) to West Midlands Development Capital Limited, a wholly-owned subsidiary, for the management of the Brownfield Land and Property Development Fund and the Collective Investment Fund respectively.

West Midlands Rail Limited, a company limited by guarantee where the Authority has 50% interest, received funding contributions of £41k (2021: £41k) from the Authority. In addition, the Authority recharged expenses of £201k (2021: £380k) which the Authority paid on behalf of West Midlands Rail Limited. The Authority has also charged corporate support and professional services of £55k (2021: £46k).

Other than as disclosed in note 23, Midland Metro Limited, a wholly-owned subsidiary which is consolidated in the group accounts, received a subsidy of £3.6m (2021: £407k) from the Authority under the terms of the Public Service Agreement. The Authority has charged corporate support and professional services of £529k (2021: £502k). The Authority has also recharged expenses of £98k (2021: £72k). Additionally, Midland Metro Limited has recharged £3.7m (2021: £1.7m) in respect of Metro network developments and enhancements to the Authority.

During the year, the Authority provided grants and services of £982k (2021: £647k) to WM5G Limited, a wholly-owned subsidiary which is consolidated in the group accounts, in respect of funding of initiatives and competitions to acceleration 5G infrastructure and applications. The Authority has also recharged expenses of £10k (2021: £27k).

Transactions with West Midlands Development Capital Limited, West Midlands Rail Limited, Midland Metro Limited and WM5G Limited were conducted at arm’s length. The outstanding balances as at 31 March 2022 are as follows:

Due from

Midland Metro Limited - £408k

West Midlands Rail Limited - £63k

39. Events after the Reporting Period

The unaudited Statement of Accounts were authorised for issue by the Authority’s Section 151 officer on 23 June 2022. Events taking place after this date are not reflected in the financial statements or notes to the accounts. Where events taking place before this date provided information about conditions existing as at 31 March 2022, the amounts in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.

40. Prior period adjustments

Capital grants funding revenue expenditure funded from capital under statute (REFCUS) were incorrectly credited to taxation and non-specific grant income. These should be credited to the services that the qualifying expenditure is charged to.

As a result, the 2020/21 comparatives in the Comprehensive Income and Expenditure Statement have been restated with no impact to the General fund balance.

The effect on the restatement is detailed below:

Effect on Comprehensive Income and Expenditure Statement

Authority	As previously reported
	Gross expenditure	Gross income	Net expenditure
Transport services	194,761	26,966	167,795
Combined Authority other services	155,983	144,599	11,384
Investment Programme	96,444	-	96,444
Mayor's office	796	807	11
Cost of services	447,984	172,372	275,612
Other operating expenditure	1,584	-	1,584
Financing and investment income and expenditure	6,550	1,975	4,575
Taxation and non-specific grant income and expenditure	77,139	358,431	281,292
(Surplus) or deficit on provision of services	530,089	532,778	2,689

Reclassification			As restated
Gross expenditure	Gross income	Net expenditure	Gross expenditure	Gross income	Net expenditure
-	42,985	42,985	194,761	69,951	124,810
-	9,354	9,354	155,983	153,953	2,030
-	-	-	96,444	-	96,444
-	-	-	796	807	11
-	52,339	52,339	447,984	224,711	223,273
-	-	-	1,584	-	1,584
-	-	-	6,550	1,975	4,575
-	52,339	52,339	77,139	306,092	228,953
-	-	-	530,089	532,778	2,689

Group	As previously reported
	Gross expenditure	Gross income	Net expenditure
Transport services	206,111	38,353	167,758
Combined Authority other services	164,815	152,532	12,283
Investment Programme	96,173	-	96,173
Mayor's office	796	807	11
Cost of services	467,895	191,692	276,203
Other operating expenditure	1,584	-	1,584
Financing and investment income and expenditure	6,988	1,938	5,050
Taxation and non-specific grant income and expenditure	76,879	358,431	281,552
(Surplus) or deficit on provision of services	550,178	552,061	1,883

Reclassification			As restated
Gross expenditure	Gross income	Net expenditure	Gross expenditure	Gross income	Net expenditure
-	42,985	42,985	206,111	81,338	124,773
-	9,354	9,354	164,815	161,886	2,929
-	-	-	96,173	-	96,173
-	-	-	796	807	11
-	52,339	52,339	467,895	244,031	223,864
-	-	-	1,584	-	1,584
-	-	-	6,988	1,938	5,050
-	52,339	52,339	76,879	306,092	229,213
-	-	-	550,178	552,061	1,883

AUDIT OF ACCOUNTS YEAR ENDED 31 MARCH 2022 NOTICE OF PUBLIC RIGHTS