STATEMENT OF ACCOUNTS 2018/19 (AUDITED) CONTENTS
Narrative report………..………...…………………………………………..………………….…………………… 2
Auditors' report……………………………….…………………………………………………………..………… 13
Statement of responsibilities for the statement of accounts…………..………...……………………………………… 16
Core financial statements:
Balance sheet …………..………………………...…………..………………………………………… 17
Comprehensive income and expenditure statement………………………………….………………… 18
Movement in reserves statement ……………………………………………………………………… 19
Cash flow statement………………………………………………………………..………………… 20
Notes to the core financial statements………………………………..…………………………………………………21
Supplementary financial statements and explanatory notes:
Housing revenue account…………………………………………….………………………………… 96
Collection fund……………………………………………………...…………………………………107
Pension fund accounts……………………………...…………………………………………………………………109
Glossary of terms………………………………..……………………………………………………………………142
Abbreviations……………………………………..……………………………………………………………………162
Index…………………………………………………...…………………………………………………………… 163
Copies of this and previous years’ accounts are available for viewing, along with other information on the Council’s services, on our website at www.eastriding.gov.uk or from East Riding of Yorkshire Council, County Hall, Beverley, East Riding of Yorkshire, HU17 9BA.
East Riding of Yorkshire Council 1 Statement of Accounts 2018/19 NARRATIVE REPORT
1. ABOUT THE COUNCIL
East Riding of Yorkshire Council covers approximately 930 square miles, making it one of the largest unitary authorities in the country. It is generally an affluent area and is ranked amongst the least socially deprived area in England but it also faces significant challenges, some of which include; pockets of deprivation in places such as Bridlington, Goole and south-east Holderness, a predominately rural area, with over half the population living in dispersed rural communities bringing challenges in respect of transport, service delivery and social isolation. an increasingly older population due to migration by retired people, particularly to coastal resorts. a 48 kilometre coastline of soft glacial till (clay, pebbles and sand), particularly vulnerable to coastal erosion. The coastline is eroding at an average rate of 1.5-2.5 metres per year, with some locations which are not defended experiencing individual cliff losses of 20 metres or more. many parts of the East Riding are susceptible to flooding, and the impacts can be wide ranging and severe. The East Riding is ranked within the top ten areas in the country with the highest number of homes in areas at risk of river and tidal flooding. The risk of surface water flooding is also significant in many parts of the East Riding. The level of flood risk is expected to increase in the future due to climate change, with greater quantities of rainfall and rises in sea level. significant funding uncertainty due to a combination of continued reductions in Government funding, planned changes to the business rates retention system and the associated fair funding review, rising cost pressures - the most significant of which relate to adult social care, and the need to deliver £39m of budget savings over the next four years.
The Council’s Business Plan sets out the Council’s vision and priorities for addressing some of these key challenges, together with progress made in the previous year and supports the wider ambitions set out in the Community Plan for the area. During 2018/19, the Council’s vision, values and priorities were refreshed:
OUR VISION Your East Riding... where everyone matters
OUR VALUES Quality: We work together to provide the best possible services Pride: We are proud of what we do and we positively embrace change Respect: We treat people fairly and are open, honest and lead by example
OUR PRIORITIES • Growing the economy – working with others to support sustainable economic growth and strong communities, ensuring the East Riding is a great place to invest in, live, work and visit • Valuing the environment – Responding to climate change, developing our infrastructure and safeguarding our heritage • Promoting healthy lifestyles – helping people to stay healthy, strong and fit for the future • Protecting the vulnerable – Supporting in times of need, protecting from harm and improving the quality of life • Helping children and young people achieve – Supporting and inspiring children to raise their aspirations and reach their potential
COMMUNITY PLAN The Council is working together with public sector and voluntary sector partners through the East Riding Place Partnership to deliver the ambitions set out in the Community Plan and the East Riding Health, Care and Wellbeing Plan. These plans for the area builds on previous community plans, and reflects the continued changes and challenges affecting the East Riding. Partner organisations were closely involved in its development to ensure that it recognises the issues faced by both residents and partner organisations operating in the area. The Plan provides a sense of ‘place’, describing, for example, the key geographical and socio-economic aspects of the East Riding and aligning itself to key documents including the East Riding Local Plan. The Community Plan set out a range of agreed priorities: Children and young people are happy, healthy, confident, safe and resilient, to reach their full potential Older people enjoy a healthy, independent lifestyle Communities are healthy, thriving, prosperous and safe
East Riding of Yorkshire Council 2 Statement of Accounts 2018/19
NARRATIVE REPORT
Regeneration transforms deprived areas and reduces health and other inequalities The built and natural environment is protected through sustainable development and economic growth. The Community Plan also includes the partners’ commitment to a shared direction of travel around how they will work together to transform their organisations (through, for example, use of technology, joint use of assets and more efficient working practices), in order to collectively respond to the financial and demographic challenges. Details of the key actions the Council planned to take to deliver the corporate priorities can be found in the Council’s Business Plan at www.eastriding.gov.uk.
2. OPERATIONAL PERFORMANCE It is a priority for the Council to ensure that performance is monitored and managed effectively. To make sure that Elected Members and officers are able to make informed decisions that will drive service improvement, a new corporate performance framework has been developed during 2018/19 which provides greater flexibility to adapt to emerging priorities and has an even greater focus on outcomes.
East Riding of Yorkshire Council 3 Statement of Accounts 2018/19
NARRATIVE REPORT The resulting outcome based framework measures activities identified in the Council’s key corporate strategies, so providing an assessment of the impact that the Council is making. It is intended that all strategically important activity across the organisation will be captured and aligned with the Council’s new vision and priorities. The key corporate strategies are: Asset Management and Capital Investment Strategy 2016-2046 Adults Strategy (currently in development) Children and Young People’s Strategic Plan 2017-2020 Economic Strategy 2018-2022 Joint Health and Wellbeing Strategy 2019-2022 East Riding Local Plan 2012-2029 SEND Strategy 2019
The new corporate performance framework was introduced in Quarter 3 of 2018/19 and development is ongoing with the new Adults Strategy scheduled to be finalised in autumn 2019. Current performance measures and monitoring processes ensure that progress in this area is effectively managed. The new framework is represented by a performance ‘wheel’ which provides a graphical visualisation of hierarchical data underpinning the corporate strategies, showing performance and status through colour, using a ‘Red/Amber/Green’ (RAG) performance rating scheme. An interactive version of the performance report which allows users to view detailed performance data can be accessed by clicking the following link: http://CorporatePerformanceWheel Performance at the end of Quarter 4 2018-19 is represented in the following performance wheel and shows that five out of the seven key strategies are performing above or within their set tolerance targets (the Adults Strategy is currently under development).
The Economic Strategy 2018-2022 has missed its variance target. As shown in the following graphic, this variance has been mainly affected by the result for one measure in the ‘Lifelong Learning’ strategic aim. The measure affecting the (red) Lifelong Learning segment reflects a 22.1% reduction in the number of apprenticeship starts. As both employers and training providers adapt to the Government’s apprenticeship levy scheme, it is anticipated that the number of apprenticeship starts will increase going forward. The implementation of the scheme will, accordingly, continue to be reviewed and monitored and appropriate action taken wherever possible. East Riding of Yorkshire Council 4 Statement of Accounts 2018/19 NARRATIVE REPORT
A detailed report on Quarter 4 performance will be reported to the Council’s Cabinet on 9 July 2019 and will be accessible on the Council’s website at: https://www.eastriding.gov.uk/council/committees/the-cabinet/
3. FINANCIAL PERFORMANCE
GENERAL FUND
The 2018/19 financial position of the General Fund as reported to management is set out in the table below. Through successful implementation of budget plans, business transformation projects and vacancy management, a net General Fund underspend of £1.8m has been achieved.
2019/20 2020/21 2021/22 Later Total £000 £000 £000 £000 £000 Sources of Funding Grants & Contributions 73,169 48,811 10,093 30,135 162,208 Revenue & Reserves 49,973 32,230 23,376 23,061 128,640 Borrowing 20,594 13,686 5,306 268 39,854 Capital Receipts 16,230 3,687 2,659 1,250 23,826 159,966 98,414 41,434 54,714 354,528
The Council’s robust financial strategy has four core aspects:
Transformation of the Council’s business processes, utilising technology and enabling digital services to reduce costs. Using reserves to support the budget as part of a prudent and planned strategy to provide time for services to prepare for budget reductions and to enable further savings which may impact upon service delivery to be delayed until the Council’s funding position for future years is more certain. Maximising income by taking a more commercial approach to income generation to maximise existing and developing new income streams. Cost reduction through a rigorous value for money approach to service delivery. This principle is entrenched in the culture of the Council and examples of its application include fundamental service reviews and driving down costs through robust contracting procedures.
This strategy has delivered planned budget savings of £9m in 2018/19, which were required to meet continuing reductions to the local government finance settlement from the Government and unavoidable budget pressures. The inherent risks have been successfully managed and spend in key areas maintained. Further budget savings of £12.6m in 2019/20 are required, along with a continued focus on planning ahead to deliver savings whilst maintaining service outcomes.
East Riding of Yorkshire Council 5 Statement of Accounts 2018/19
NARRATIVE REPORT The Expenditure and Funding Analysis on page 34 analyses the movement from the outturn reported to management (as shown in the previous table) to the Comprehensive Income and Expenditure Statement on page 18.
CORE FUNDING AND BUSINESS RATES RETENTION The Council has seen a reduction in its funding settlement from Government in recent years. In 2018/19, the settlement funding assessment was £64m, a reduction of £6m from the amount received in 2017/18. The Council’s actual business rates demand on the collection fund for 2018/19 was £51.5m. Business Rates top-up grant of £14.1m and section 31 grants of £5.9m were also receivable from Government to compensate for policy decisions made that affected the Council’s retainable business rate income in 2018/19. It remains the intention of the Government to move towards a funding system where local authorities retain 75% of business rates from 2020/21. Alongside the move to the new rates retention scheme, the Government is conducting a fair funding review, which involves a full review of the spending needs assessment methodology in time for the introduction of the new business rates system. It is this review that will determine the level of business rates that individual local authorities will retain to deliver local services. The new spending needs assessment will set a new funding baseline for each local authority, representing the amount of funding that each local authority needs from the system to run its services. The Government has not yet released any firm proposals to allow local authorities to assess the potential impact of the new business rates retention scheme and more importantly the associated fair funding review with any certainty at this point in time.
COUNCIL TAX The Government allowed increases to council tax of up to 6% in 2018/19, including a core council tax increase of up to 3% and an adult social care precept of up to 3%. The social care precept was introduced by the Government in recognition of the challenges faced by local authorities with adult social care responsibilities. In 2017/18, the Government introduced “flexibility” over the social care precept, enabling local authorities to charge up to 3% per year but no more than 6% in total over the period 2017/18 to 2019/20. The Council accepted this flexibility in 2018/19 and increased council tax by 5.99%. The council tax charge on a band D equivalent property was £1,402.75. The Council’s council tax requirement was set at £161.4m in 2018/19.
SCHOOLS The ring-fenced Schools Budget, funded by the Dedicated Schools Grant (DSG), has an outturn overspend of £0.2m. South Holderness School converted to an academy on 1 October 2018, with a budget deficit of £0.4m. As the school has converted with the aid of an external sponsor, regulations require that the deficit remains with the Council to be met from its core budget. Consequently, the deficit has been funded from the General Fund. The remaining underspend of £0.2m on the ring-fenced Schools Budget has been transferred to schools earmarked reserves. The Council continues to work with schools to help plan ahead to bring school budgets back into balance through deficit reduction plans where needed. As at 31 March 2019, local authority maintained schools totalled 117 (2017/18 122). During the year, Airmyn Park, Hook, Riston and Melbourne Community primary schools and Howden secondary school also converted to academies. Further details on schools are disclosed in notes 7 and 51.
HOUSING REVENUE ACCOUNT The Council owns and manages 11,314 domestic houses and flats. The housing revenue account records all revenue expenditure and income relating to the provision of council dwellings and related services. The account is ring-fenced, meaning that tenant rents cannot be used to subsidise other Council services. The HRA business plan sets out the long term strategy for managing the Council’s housing stock. Further details are disclosed from page 96. For 2018/19, the HRA outturned with an overspend of £0.8m against budget, mainly due to a £0.5m overspend on depreciation. An upward revaluation of council dwellings completed during 2018/19 has resulted in an increased depreciation charge to the HRA, which in turn increases the year-end transfer into the Major Repairs Reserve to fund capital investment in existing stock. The overspend will be funded from the HRA general reserve. Overall, HRA reserves stand at £50.9m (2017/18 £48.2m) which include general reserves and reserves earmarked for debt repayment and investment in new stock and repairs.
CAPITAL The Council successfully delivered its planned capital programme during 2018/19 amounting to investment of £115.3m across the various service areas. The outturn spend was £1.1m (0.9%) less than planned. The majority of the net underspend is due to timing of the planned spend which will now take place in future years. Key areas of investment in 2018/19 included:
East Riding of Yorkshire Council 6 Statement of Accounts 2018/19
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An additional 66 new properties were added to the supply of affordable housing, including shared ownership and rented accommodation Completion of the Parkside Primary School Scheme, providing four additional classrooms. The scheme created almost 400m2 of state of the art internal teaching spaces. The Council received an additional £4.9m from the Department for Transport, which allowed an additional 72,350m2 (approximately the size of 10 football pitches) of carriageway treatments to be undertaken. It has also funded an additional 11,819m2 of footway treatment including reconstruction and slurry sealing. Fixed or prevented 25,300 potholes, ensuring that roads in the East Riding remain safe and fit for purpose. Significant continuing investment in the major flood alleviation schemes, Cottingham & Orchard Park, Pocklington, and Anlaby & East Ella which will reduce risk of flooding to over 8,000 houses and over 400 commercial properties. The programme for 2018/19 was funded by loans of £16.6m, capital grants and contributions of £63.5m, capital receipts of £1.0m, and revenue and reserves of £34.2m.
SUMMARY OF PENSION FUND ACTIVITY FOR 2018/19 At 31 March 2019, the Fund was valued at £5.058bn, representing an increase in the Fund value of £272m from 31 March 2018. The Fund generated a return of 6.8% for the year to 31 March 2019 compared to the strategic benchmark return of 6.4%. Over the three years to 31 March 2019 the Fund returned 10.4% per annum, compared to the strategic benchmark return of 9.7% per annum and the long term investment objective of 6.0% per annum. These returns were due to capital appreciation in the major equity markets resulting from the continued loose monetary policy, ongoing strength in corporate earnings, and a further improvement in investor risk sentiment. The strongest returns were seen in the Alternatives Sector, in particular Infrastructure and Private Equity. In addition, sterling returns from overseas investments received a significant boost due to the depreciation of the currency in the aftermath of the EU referendum. The Fund also benefitted from the strong performance of the internal manager and the recently appointed pooling partner, Border to Coast Pensions Partnership. During the year, the Fund paid out £197.2m of benefits to scheme members. At 31 March 2019, the number of employers in the Fund was 321 (31 March 2018: 300). The increase during the year was due mainly to the continued conversion of schools to academy status. The Fund continues to be managed in a cost effective manner with total pension administration, investment management, and oversight and governance costs equating to just 0.14% (2018: 0.09%) of funds under management. The average pension payment is £4,531.78 per annum, equivalent to a weekly payment of £86.91. Further details are disclosed from page 109.
East Riding of Yorkshire Council 7 Statement of Accounts 2018/19 NARRATIVE REPORT 4. COUNCIL WORKFORCE
The Council (excluding schools) employs just under 5,000 whole time equivalents (WTE) in approximately 6,500 posts. Key facts about the workforce include: 42.5% of the workforce have part time contracts 65% of the Council’s workforce are female Turnover is currently 9.6% 29% of the workforce is over 55 6.5% of the workforce is under 25 5.0% of the workforce consider themselves to have a disability non-white British employees represent 3.3% of the workforce The Council has a long and proud record as an excellent and supportive employer that people want to work for and enjoy working for once they do. The Council has always made it a priority to support and invest in its staff. It remains critical to its future success that the Council has a talented, well-motivated workforce guided by a clear strategic direction and underpinned by excellent leadership. Achieving this has been assisted by the recently refreshed Council values, behaviours and priorities, and its new vision: ‘Your East Riding – Where Everyone Matters’. The nature of the workplace has changed greatly in recent years and is likely to continue to change significantly in the coming years. This is changing how people work, what people expect from their employer and is providing employers with both opportunities and challenges. Successfully meeting these challenges will be aided by the Council having a ‘modern workforce in a modern workplace’. During the last twelve months, the Council has intensified its focus on workforce development particularly through the implementation of projects considering the following: flexible working recruitment of staff retention of staff coaching and mentoring leadership development apprenticeships These projects play an important part in helping the Council to deliver the workforce element of its new vision. The collaborative, whole council approach that has been adopted is indicative of a developing shift in culture, welcoming the input and views from employees across all services and at all levels.
5. RISK MANAGEMENT Risk management is an integral part of our planning and decision making framework. The Council regularly reviews its strategic risks, being the principal risks faced by the Council in relation to future service provision, to ensure that effective controls are in place to manage them. These most significant current risks include:
Risk Key Controls / Mitigation
Local authorities are experiencing significant cost Financial strategy pressures which reflect increasing demand, particularly in Business Plan adult social care and children’s services, whilst facing Adequate reserves significant financial uncertainty in the medium term due Capital investment strategy to a fundamental review of the local government funding Asset management plans system which is due to be implemented in 2020. Firm Governance framework for financial decision proposals are yet to be published by the Government and making and regular monitoring of the financial plan could be subject to further delay due to the Government’s Engagement with the Government and national ongoing focus on the Brexit process. These funding forums on future funding arrangements pressures and uncertainty have a direct impact on the Council’s ability to deliver a balanced medium term financial plan fully aligned to the achievement of the business plan, and a balanced and sustainable long term capital investment programme which allows the Council to maximise the potential of its assets.
East Riding of Yorkshire Council 8 Statement of Accounts 2018/19 NARRATIVE REPORT
Local authorities are experiencing significant and Contract arrangements and supplier relationships continuing increases in demand for both social care Professional expertise services and services for children with special education Governance arrangements needs. The uncertainty over the potential impact of Care identification and market intelligence Brexit on the social care work force can have an impact Transformation programmes on the Council’s ability to provide the required and Workforce development and multi agency training relevant services to adults and children & young people. Inspections The increase in the number of children with special education needs and in the number of education and Partnership arrangements health care plans continues to provide a significant challenge in delivering a service within the resources provided by Government.
The failure of a number of high profile companies Business continuity plans highlights the impact that the failure of partners and key Contract arrangements and supplier relationships suppliers can have on the continuity of the Council’s Market intelligence and monitoring services. Active supply chain management Regional collaboration and partnership arrangements The increased frequency of events such as extreme Multi agency emergency plans weather and terrorist attacks in the UK means that the Business continuity plans Council must be prepared to respond in an appropriate National contingency plans manner to a potential man made or natural disaster. Staff training Awareness and monitoring of potential emergency events Exercises to test plans The Council’s Annual Governance Statement provides assurance on the effectiveness of the Council’s systems of governance including internal control and risk management during 2018/19 and can be found on the Council’s website: www.eastriding.gov.uk.
6. OUTLOOK
The public sector, and in particular local government, has experienced a period of unprecedented change and uncertainty, with no indication of when this period may end. The pressure on resources, brought about by the largest public sector budget cuts in history, is immense, and comes at a time of continuing increases in demand from vulnerable people and children with high needs, a substantial growth in the number of older people living in and moving to the East Riding, and an increase in extreme climate related events. The enormity of the challenges faced by the Council require us to develop new models for service delivery if we are to maintain those services vital to the quality of life in the East Riding and address the needs of the most vulnerable in our communities. Going forward, the Council will maintain its strategy to manage these key challenges and deliver its priorities. The Council’s business and financial plan sets out how we will deliver the Council’s corporate priorities and provides a clear focus for the Council as it faces the challenges ahead including continued funding uncertainty, growing pressures on annual revenue budgets, and increasing service demand (particularly from an ageing population). As a consequence of the Government’s austerity measures, the Council’s funding has reduced by £65.8m during the 2010/11 to 2018/19 period. A further £14.4m of funding cuts are projected for the 2019/20 to 2022/23 period, bringing the total funding reduction to £80.3m. Since the austerity measures began in 2010, the Council has made savings of £169m to meet funding shortfalls as a result of Government funding cuts and service pressures; £58m of this has been met through the use of reserves. It is projected that savings will total £207.8m by 2022/23. Over the financial planning period 2019/20 to 2022/23, it is estimated that service budgets will increase by £7.1m. Budget pressures are projected to total £46m over this same period, meaning that a total of £38.9m of base budget savings will need to be made from service budgets over the period. Savings totalling £29.8m have been identified for the period 2019/20 to 2022/23 with savings of a further £9.1m still to be identified. Ensuring the Council’s financial sustainability through the life of the financial plan is fundamental, as is the recognition that the development of local area will best be achieved through a strong local economy driven by sustainable and ongoing economic growth, supported by the Council. The Council’s financial strategy during the current period of austerity has four core aspects: Transformation of the Council’s business processes, utilising technology and enabling digital services to reduce costs. Using reserves to support the budget as part of a prudent and planned strategy to provide time for services to provide time for services to prepare for budget reductions and to enable further savings which may impact upon service delivery to be delayed until the Council’s funding position for future years is more certain.
East Riding of Yorkshire Council 9 Statement of Accounts 2018/19 NARRATIVE REPORT
Maximising income by taking a more commercial approach to income generation to maximise existing and developing new income streams. Cost reduction through a rigorous value for money approach to service delivery. This principle is entrenched in the culture of the Council and examples of its application include fundamental service reviews and driving down costs through robust contracting procedures. The Council’s business transformation projects have achieved savings of £31.830m to date and aim to deliver a further £4.901m of savings by 2022/23, of which £2.060m is projected to be saved in 2019/20. Current projects are being undertaken in children’s services, culture and customer services, economic regeneration, asset strategy & infrastructure and facilities, and support services. Additionally, a cross-cutting programme, MyAccount, is looking at the way the Council interacts with customers with a view to streamlining processes and using technology to improve communication and interaction.
In order to achieve our ambitions, we will also need to work with our partners to fundamentally transform our ways of working. Increasingly, this will mean: Encouraging self-service through the delivery of high quality online services that customers prefer to use and providing assistance to those who are unable to self-serve online so that they are not disadvantaged. Using the customer intelligence we hold across multiple systems to improve our predictive capability and preventative approach so that we can encourage communities to support each other and lead healthier lifestyles and to enable people to remain independent in their own homes for longer. Further service integration across partners and different models of service delivery, such as key front line staff being able to access multiple Council services through MyAccount. Continued targeting of services to the most vulnerable, recognising that there is still a need to retain a face-to-face service for customers with the most complex needs.
It remains a key priority for the Council to work ever more closely with NHS partners, particularly the East Riding Clinical Commissioning Group, to ensure that we collaborate better together to improve outcomes for our residents. Prevention is a strong current theme across the health and social care system to help with demand management and support people to lead independent fulfilling lives. The Government also remains committed to closer working across Health and Adult Social Care and recognises that there remains base funding pressures that need to be addressed. Adult social care services have been and continue to be under significant financial pressure due to the growing population of older people in the East Riding and the rising costs of fees charged by care providers. The Council are also experiencing budget pressures within Children’s Services relating to the provision of children’s social care and special education needs and disability (SEND) services. The introduction of SEND reforms in 2014 placed additional responsibilities on local authorities for supporting children with SEND resulting in additional financial pressures. The East Riding is reporting budget pressures of £1.7m on the high needs budget in 2019/20. In terms of social care, the number of children and young people subject to child protection plans, or being taken into local council care, has increased in line with national trends. There are some 340 children and young people now in the care of the Council. Protecting vulnerable people and helping children and young people achieve are core priorities for the Council and underspends have been set aside in reserves whenever possible so that provision of these services can be maintained during this period of austerity. In 2019/20, the draft budget has been balanced through the planned use of service earmarked reserves of £8.4m. Due to the high level of uncertainty inherent in the financial plan post 2019/20, the Council are using reserves to support the budget as part of a prudent and planned strategy to provide time for services to prepare for budget reductions and to ensure that further savings which may impact upon service delivery can be delayed until the Council’s funding position for 2020/21 and beyond is more certain. The financial plan projects the planned use of service reserves will be £19.3m by 2022/23.
The financial plan includes a budget shortfall of £9.1m by 2022/23 of which £5.4m relates to Adult Services and £0.9m relates to Children’s Services. In recognition of the pressures facing adults and children’s services nationally, the Government will provide the Council with £6m of one-off funding in 2019/20 through additional improved Better Care Fund (iBCF) of £2m, winter pressures funding of £1.5m, and social care support grant of £2.5m. There is no indication that any of this additional funding will continue after 2019/20. It is hoped that the Government takes the opportunities presented by its 2019 Spending Review, reforms to the business rates retention system, the fair funding review, and the expected green paper on social care to ensure that local government receives sustainable funding to address the base budget funding gap which exists across the sector.
The Council generates a significant level of income generated through fees and charges and has taken steps to ensure that a more commercial approach to income generation will maximise existing income streams and develop new ones. There are a number of income generating opportunities that have contributed to the successful increase in income across directorates and income growth of £1.5m is projected over the financial planning period relating mainly to leisure facilities, including the expansion of South Cliff Caravan Park. This has been achieved through significant investment in state of the art leisure facilities via the Council’s capital programme. Over the financial planning period there will be further investment of £22m, including the South Cliff Caravan Park expansion.
East Riding of Yorkshire Council 10 Statement of Accounts 2018/19
NARRATIVE REPORT The Council gross budget was £740m in 2018/19 and, on average, the Council makes over 400,000 payments to circa 14,000 suppliers per annum. It is therefore critical that the Council works hard to drive through cost minimisation and reductions wherever possible. This is achieved through a rigorous value for money approach to service delivery. This principle is deeply entrenched in the culture of the Council and examples of its application include fundamental service reviews and driving down costs through robust contracting procedures. The approved Capital Strategy sets out the Council’s priorities for investment in its asset base, and the subsequent levels of investment required to keep the asset base sustainable in the future. The level of need for future investment in the Council’s assets far outweighs the available resources. One way to bridge some of this gap is to competitively bid for grants which the Council would otherwise not receive. The Capital Strategy therefore provides a coordinated approach to investment in assets and shapes all capital funding proposals including the submission of bids for competitive grants which ultimately lead to investment in the asset base. All projects, irrespective of their funding source, seeking capital funding are directed through the Council’s approved capital appraisal process. New investment has now become very much focused not only on an 'Invest to Save' approach, but also on investing in key infrastructure to ensure the continued delivery of key services to the public at the centre of its focus. Despite the continued reductions in Government funding and future investment being constrained, the current capital programme remains substantial in value. The overall capital programme for 2019/20 and future years totals £355m. Significant investment is planned within the Council's Housing Revenue Account (HRA) on both investment in its current housing stock and also delivering new build housing to assist in addressing identified housing need. Key financial investment within the HRA Business Plan over the next four years includes: £48m to be invested in remodelling, replacement and new builds. £61m of capital to be invested in improving existing council homes, for example kitchens and bathrooms, re-roofing and window replacement, including £22m to be used to improve energy efficiency. £37m to be invested in responsive repairs, void properties and cyclical maintenance. Sources of funding for the future capital programme are summarised in the following table:
2019/20 2020/21 2021/22 Later Total £000 £000 £000 £000 £000 Sources of Funding Grants & Contributions 73,169 48,811 10,093 30,135 162,208 Revenue & Reserves 49,973 32,230 23,376 23,061 128,640 Borrowing 20,594 13,686 5,306 268 39,854 Capital Receipts 16,230 3,687 2,659 1,250 23,826 159,966 98,414 41,434 54,714 354,528
The Council has adopted Border to Coast Pensions Partnership Limited as its chosen means of meeting requirements to pool Local Government Pension Scheme (LGPS) investments with other pension funds, in accordance with regulations enacted in 2016. There are twelve pension fund administering authorities that have an equal shareholding in Border to Coast and hold LGPS assets valued at c. £48bn assets as at 31 March 2018. The Pensions Committees of each of the twelve partner authorities will retain oversight of these assets and set the investment strategy for their individual pension fund’s assets, and Border to Coast will have responsibility for implementing this strategy. During 2018/19, Border to Coast received authorisation for its Authorised Contractual Scheme from the Financial Conduct Authority (FCA) and received assets from pension funds within the partnership into its first investment funds during July 2018. The process to transition all transferable LGPS assets to Border to Coast is expected to take at least two years. The East Riding Pension Fund owns assets valued at £5.058bn as at 31 March 2019 and it is expected that the majority of these assets will ultimately transfer into Border to Coast’s investment funds. During 2018/19, the East Riding Pension Fund transferred assets valued at £1.767bn, as at 31 March 2019, to Border to Coast.
East Riding of Yorkshire Council 11 Statement of Accounts 2018/19
NARRATIVE REPORT
7. THE ACCOUNTS
This statement of accounts summarises the financial performance of East Riding of Yorkshire Council (the Council) for the year ended 31 March 2019. The pension fund accounts for the year ended 31 March 2019 are included at pages 109 to 141. The accounts consist of: - The Statement of Responsibilities for the Statement of Accounts (page 16) identifies the officer who is responsible for the proper administration of the Council’s financial affairs and sets out theirs and the Council’s responsibilities in respect of the statement of accounts. The Auditor’s Report (page 13) sets out the independent auditor’s opinion on the financial statements including the conclusion on arrangements for securing economy, efficiency and effectiveness in the use of resources. The Balance Sheet (page 17) sets out the financial position of the Council as at 31 March 2019. The balance sheet shows the value of the assets and liabilities recognised by the Council at the balance sheet date. The Comprehensive Income and Expenditure Statement (page 18) identifies the income and expenditure on all services the Council provides except the pension fund (see below) and brings together all the recognised gains and losses of the Council during the period 1 April 2018 to 31 March 2019. The Movement in Reserves Statement (page 19) reconciles the outcome of the comprehensive income and expenditure statement with the outcome on the general fund balance and details the movement on all other reserves that the Council holds, both usable reserves (i.e. those that can be used to fund expenditure) and other reserves. The Cash Flow Statement (page 20) shows the changes in cash and cash equivalents of the Council during the reporting period. The Housing Revenue Account (page 96) summarises the income and expenditure in respect of the provision of local council housing accommodation. The Collection Fund (page 107) shows the level of non-domestic rates and council tax that have been received by the Council during the period and the distribution of these funds. The Pension Fund Accounts (page 109) In addition to its local authority functions, the Council is the administering authority for the East Riding Pension Fund (the pension fund) on behalf of 321 employers and 114,882 members. The pension fund accounts show the operation of the pension fund administered by the Council for its employees, employees of scheme employers and those of admitted bodies. The accounting arrangements of local government and a large organisation such as the Council are complex. The Council has prepared the accounts in accordance with International Financial Reporting Standards (IFRS) as required by the Code of Practice on Local Authority Accounting in the United Kingdom 2018/19 (the Code). To help you understand the accounts, the main statements are supported by explanatory notes and a glossary of terms and abbreviations is provided at page 142.
East Riding of Yorkshire Council 12 Statement of Accounts 2018/19 AUDITORS REPORT
Independent auditor’s report to the members of East Riding of Yorkshire Council Report on the financial statements
Opinion We have audited the financial statements of East Riding of Yorkshire Council for the year ended 31 March 2019, which comprise the Comprehensive Income and Expenditure Statement, the Movement in Reserves Statement, the Balance Sheet, the Cash Flow Statement, the Housing Revenue Account, the Collection Fund and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2018/19.
In our opinion, the financial statements: st give a true and fair view of the financial position of East Riding of Yorkshire Council as at 31 March 2019 and of its expenditure and income for the year then ended; and have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2018/19.
Opinion on the financial statements of East Riding Pension Fund
We have audited the financial statements of East Riding Pension Fund (‘the Pension Fund’) for the year ended 31 March 2019, which comprise the Fund Account, the Net Assets Statement, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2018/19.
In our opinion the financial statements:
give a true and fair view of the financial transactions of East Riding Pension Fund during the year ended 31 March 2019, and the amount and disposition of the Pension Fund’s assets and liabilities as at 31 March 2019; and have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2018/19.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities section of our report. We are independent of the Council and Pension Fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applicable to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • The Head of Finance’s use of the going concern basis of accounting in the preparation of the Council’s and the Pension Fund’s financial statements is not appropriate; or • the Head of Finance has not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Council’s or the Pension Fund’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Other information The Head of Finance is responsible for the other information. The other information comprises the information included in the Statement of Accounts, other than the financial statements and our auditor’s report thereon. Our
East Riding of Yorkshire Council 13 Statement of Accounts 2018/19 AUDITORS REPORT opinions on the financial statements do not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of the Head of Finance for the financial statements As explained more fully in the Statement of Responsibilities for the Statement of Accounts, the Head of Finance is responsible for the preparation of the Statement of Accounts, which includes the Council’s and the Pension Fund’s financial statements, in accordance with proper practices as set out in the CIPFA/ LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2018/19, and for being satisfied that they give a true and fair view. The Head of Finance is also responsible for such internal control as the Head of Finance determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Head of Finance is required to comply with the CIPFA/LASAAC Code of Practice on Local AuthorityAccounting in the United Kingdom 2018/19 and prepare the financial statements on a going concern basis, unless the Council is informed of the intention for dissolution without transfer of services or function to another entity. The Head of Finance is responsible for assessing each year whether or not it is appropriate for the Council and Pension Fund to prepare its accounts on the going concern basis and disclosing, as applicable, matters related to going concern. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the Council’s and Pension Fund’s financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Matters on which we are required to report by exception under the Code of Audit Practice We are required by the Code of Audit Practice to report to you if: • we issue a report in the public interest under section 24 of the Local Audit and Accountability Act 2014;
• we make a recommendation under section 24 of the Local Audit and Accountability Act 2014; or
• we exercise any other special powers of the auditor under sections 28, 29 or 31 of the Local Audit and Accountability Act 2014.
We have nothing to report in these respects. Conclusion on East Riding of Yorkshire Council’s arrangements for securing economy, efficiency and effectiveness in the use of resources Conclusion On the basis of our work, having regard to the guidance on the specified criterion issued by the Comptroller and Auditor General in November 2017, we are satisfied that, in all significant respects, East Riding of Yorkshire Council has put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2019.
East Riding of Yorkshire Council 14 Statement of Accounts 2018/19
CORE FINANCIAL STATEMENTS COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT
This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation or rents. The statement has been restated (2017/18) to reflect the change in structure of the Council and to enable comparison between the years. Authorities raise taxation and rents to cover expenditure in accordance with statutory requirements and this may be different from to the accounting cost. The taxation position is shown in the movement in reserves statement. The accounting (surplus)/deficit on the provision of services shown below can become a larger or smaller (surplus)/deficit in the movement in reserves statement when the adjustments between the accounting basis and the funding basis under regulations and transfers to/from earmarked reserves are applied to show the amount funded from the taxation position. 2017/18 Restate d Note 2018/19 Gross Gross Net Gross Gross Net expenditure income ex penditure expenditure income ex penditure £000 £000 £000 £000 £000 £000 Servicependiture ex 906 -19 887 Chief executive 606 -10 596 98,397 -67,900 30,497 Corporate resources 90,370 -63,239 27,131 192,642 -100,397 92,245 Adults, health & customer services 205,833 -116,590 89,243 51,902 -3,402 48,500 Children, families and schools (exc. schools) 58,770 -4,203 54,567 54,336 -9,267 45,069 Environment & Neighbourhood Services 56,823 -11,025 45,798 66,516 -22,454 44,062 Planning & economic regeneration 73,149 -25,772 47,377 28,250 -49,305 -21,055 Ho u s in g reven u e acco u n t Pg 96 29,327 -48,845 -19,518 8,617 0 8,617 Significant item - local authority housing (HRA) revaluation loss/reversal HRA 5c -403 0 -403 213,949 -192,347 21,602 Children, families and schools (schools budget) 211,477 -188,881 22,596 715,515 -445,091 270,424 Total continuing services - cost of services 725,952 -458,565 267,387 40,428 -226 40,202 Other operating expenditure 7a 38,735 -35 38,700 65,944 -42,365 23,579 Financing and investment income and expenditure 7b 65,721 -42,862 22,859 0 -312,398 -312,398 Taxation and non-specific grant income and expenditure 7c 1,631 -328,300 -326,669 821,887 -800,080 21,807 Surplus (-) or deficit on the provision of services 832,039 -829,762 2,277 -25,968 Surplus (-) / deficit on revaluation of non-current assets 34 -15,400 -3,148 Impairment loss taken to revaluation reserve 34 -2,455 12 Surplus (-) / deficit on revaluation of available-for-sale financial assets 0 -35,367 Remeasurement of the pension net defined benefit liability (asset) 27b 80,175 -64,471 Other comprehensive income and expenditure MIRS 62,320 -42,664 Total comprehensive income and expenditure 64,597
East Riding of Yorkshire Council 18 Statement of Accounts 2018/19 CORE FINANCIAL STATEMENTS
MOVEMENT IN RESERVES STATEMENT (MiRS)
This statement shows the movement from the start of the year to the end on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other ‘unusable’ reserves. The movement in reserves statement shows how the movements in year of the Council’s reserves are broken down between gains and losses incurred in accordance with generally accepted accounting practices and the statutory adjustments required to return to the amounts chargeable to council tax setting and dwellings rent-setting purposes for the year. The net increase /decrease line shows the statutory general fund balance and housing revenue account balance movements in the year following these adjustments.
General & Housing Major Usable Capital grant Total Total Total Cross ref earmarked revenue repairs capital unapplied usable unusable authority page balances account reserve recei pts account reserves reserves reserves £000 £000 £000 £000 £000 £000 £000 £000 Balance at 31 March 2017 73 / 77 151,697 3,944 41,662 14,595 710 212,608 659,635 872,243 Movement in reserves during 2017/18 Total comprehensive income and expenditure -29,208 0 7,401 0 -21,8070 64,471 42,664 Adjustments between accounting basis and funding basis under regulations 41 / 42 41,581 -7,060 2,290 3,084 -34 39,861 -39,861 0 Increase/decrease (-) in year 12,373 341 2,290 3,084 -34 18,054 24,610 42,664 Balance at 31 March 2018 carried forward 73 / 77 164,070 4,285 43,952 17,679 676 230,662 684,245 914,907
Movement in reserves during 2018/19 Total comprehensive income and expenditure -16,991 14,714 0 0 0 -2,277 -62,320 -64,597 Adjustments between accounting basis and funding basis under regulations 39 / 40 27,390 -14,337 2,310 4,720 -65 20,018 -20,018 0 Increase/decrease (-) in year 73 / 77 10,399 377 2,310 4,720 -65 17,741 -82,338 -64,597 Balance at 31 March 2019 carried forward 73 / 77 174,469 4,662 46,262 22,399 611 248,403 601,907 850,310
General and earmarked balances consist of £12.970m general fund (£15.176m 2017/18) and £161.499m of earmarked general fund reserves (£148.894m 2017/18). A detailed analysis of the movements in earmarked reserves can be found in note 30.
The adjustments between accounting basis and funding basis under regulations are further analysed in note 5.
East Riding of Yorkshire Council 19 Statement of Accounts 2018/19 CORE FINANCIAL STATEMENTS
CASH FLOW STATEMENT
The cash flow statement shows the changes in cash and cash equivalents of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery.
2017/18 Note 2018/19 £000 £000 £000 21,807 Net (surplus) or deficit on the provision of services Pg 18 2,277 Adjust net surplus or deficit on the provision of services for -96,365 non cash movements 47 -125,745 Adjustments for items included in the net surplus or deficit on the 60,912 provision of services that are investing and financing activities 48 64,457 -13,646 Net cash flows from operating activities -59,011 Investment activities 90,744 Purchase of property, plant & equipment and intangible assets 105,095 185,027 Purchase of short-term and long-term investments 181,127 0 Other payments for investing activities 118 Proceeds from the sale of property, plant & equipment, intangible -7,698 assets and non-current assets held for sale -9,271 -195,860 Proceeds from short-term and long-term investments -183,990 -55,793 Capital grants received -60,470 -20 Oth er cap ital cash receip ts 16,400 Net cash flows from investing activities 32,609 Financing activities 0 Cash receipts of short-term and long-term borrowing 0 0 Net (inflow)/outflow council tax financing activities 0 -869 Net (inflow)/outflow NNDR financing activities -542 0 Other receipts from financing activities 0 821 Principal element of finance leases and on balance sheet PFI contracts 872 11,368 Repayment of short-term and long-term borrowing 10,083 11,320 Net cash flows from financing activities 10,413 14,074 Net decrease in cash and cash equivalents -15,989 30,632 Cash and cash equivalents at 1 April 46 16,558 16,558 Cash and cash equivalents at 31 March 46 32,547
East Riding of Yorkshire Council 20 Statement of Accounts 2018/19 ACCOUNTING POLICIES
1. ACCOUNTING POLICIES
I. GENERAL The statement of accounts summarises the Council’s transactions for the 2018/19 financial year and its position at the year-end of 31 March 2019. The Council is required to prepare an annual statement of accounts by the Accounts and Audit Regulations 2015, which require that they be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2018/19 (the Code), the 2018/19 Code update and the Service Reporting Code of Practice 2018/19, supported by International Financial Reporting Standards (IFRS). The accounting convention adopted in the statement of accounts is principally historical cost, modified by the revaluation of certain categories of property, plant and equipment and financial instruments. The accounts are prepared on a going concern basis. As permitted under the Code, the concept of materiality has been utilised when determining appropriate disclosures to be made in the financial statements. Information is not material if omitting or misstating it would not influence the decisions of an informed user of the statements.
II. PRIOR PERIOD ADJUSTMENTS, CHANGES IN ACCOUNTING POLICIES, ESTIMATES AND ERRORS Prior period adjustments may arise as a result of a material change in accounting policies or to correct a material error. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period i.e. as prior period adjustments. 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 Council’s financial position or financial performance. Where a material change is required, 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 i.e. a prior period adjustment is made unless stated otherwise. A change in accounting policy generally requires the disclosure of three balance sheets to reflect the impact on the current period, the end of the preceding period and the impact on the opening balance sheet of the previous period. The nature and impact of any prior period adjustments required will be explained in a separate note to the accounts. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change, there is no prior period adjustment. IFRS 15 “Revenue Contracts with Customers” has been adopted by the code in 2018/19. The new standard has been considered and there is no impact on the Council’s Statement of Accounts. In 2018/19 there are no prior period adjustments.
III. INTERESTS IN COMPANIES AND OTHER ENTITIES The Council does not have material interests in companies and other entities that have the nature of subsidiaries, associated companies or jointly controlled entities. Group accounts have therefore not been prepared. In the Council’s own single entity accounts, the interests in companies and other entities are recorded as financial assets at cost, less any provision for losses. Should the Council be required to prepare group accounts, an entity will not be included if it is not material.
IV. ACCRUALS OF EXPENDITURE AND INCOME (CREDITORS AND DEBTORS The accounts of the Council are prepared on an accruals basis. This means that the sums due to or from the Council during the year are included in the accounts, whether or not the cash has actually been received or paid in the year in question. Accruals have been made for all known material revenue and capital debtors and creditors for goods and services supplied by and to the Council during the year, including services provided by employees.
V. SIGNIFICANT ITEMS When items of income and expenditure are material, their nature and amount is disclosed separately, either on the face of the comprehensive income and expenditure statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance.
VI. REVENUE RECOGNITION The revenue recognition policy covers the sale of goods (produced by the Council for the purpose of sale or purchased for resale), the rendering of services (excluding services directly related to construction contracts), interest, royalties
East Riding of Yorkshire Council 21 Statement of Accounts 2018/19 ACCOUNTING POLICIES and dividends, non-exchange transactions (i.e. council tax) and where previously a liability had been recognised (i.e. creditor) on satisfying the revenue recognition criteria. Revenue is recognised when (or as) the Council satisfies a performance obligation and is measured at the transaction price of the consideration receivable (i.e. the amount to which the Council expects to be entitled in exchange for transferring promised goods or services). However, if payment is on deferred terms, the consideration receivable is recognised initially at the cash price equivalent. The difference between this amount and the total payments received is recognised as interest revenue in the surplus or deficit on provision of services. Short duration receivables with no stated interest rate are measured at original invoice amount where the effect of discounting is immaterial. There is no difference between the delivery and payment dates for non-contractual, non-exchange transactions, i.e. revenue relating to council tax and non-domestic rates, and therefore these transactions are measured at their full amount receivable.
VII. TRADE AND OTHER RECEIVABLES AND PAYABLES Trade and other receivables are not recognised when the Council becomes committed to supply the goods or services but when the ordered goods or services have been delivered or rendered. Trade and other payables are not recognised when the Council becomes committed to purchase the goods or services but when the ordered goods or services have been delivered or rendered. With the exception of financial instruments, they are recognised and measured in accordance with the revenue recognition policy.
VIII. CASH AND CASH EQUIVALENTS Cash includes all bank credit balances and overdrafts held by the Council as part of its normal cash management, including all deposit accounts accessible without notice. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Cash equivalents include investments with a fixed maturity of three months or less from the date of acquisition and fair value through profit or loss financial assets such as cash placed in money market funds.
IX. SUPPORT SERVICE COSTS The Code requires that the net cost of services within the Comprehensive Income and Expenditure Statement (CIES) is presented based on how income and expenditure are reported internally to management rather than the total cost principle described by the SERCoP. For this Council, corporate and support services operate and are managed separately throughout the financial year and are, therefore, reported separately on the face of the CIES and not apportioned.
X. INTEREST RECEIVABLE OR PAYABLE The effective interest rate method is used to measure the carrying value of a financial asset or liability measured at amortised cost, and to allocate associated interest income or expense to the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to equal the amount at initial recognition. The effective interest is adjusted to the actual interest payment or receipt through the movement in reserves statement to ensure only actual interest is charged to council tax. For financial assets and liabilities carried at cost because the effective rate of interest is the same as the carrying rate of interest, the carrying value is adjusted for accrued interest.
XI. GRANTS AND CONTRIBUTIONS All revenue, revenue expenditure funded from capital under statute (REFCUS) and capital grants and contributions with conditions attached are held as receipts in advance on the balance sheet. This is until such time as the condition no longer applies, at which point the grant/contribution is recognised as income in the comprehensive income & expenditure statement. Specific revenue and REFCUS grants and contributions are accrued and credited to income within service revenue accounts when the conditions regarding their use are met. Any income credited to service revenue accounts in excess of the expenditure they are intended to fund are, subject to approval, appropriated to revenue grants and contributions unapplied earmarked reserves until the expenditure is incurred. Revenue and REFCUS grants and contributions to cover general expenditure, including revenue support grant, national non domestic rate redistribution and unringfenced government grants, are credited to taxation and non-specific grant income and expenditure at the foot of the comprehensive income and expenditure statement. General revenue grants and contributions are subject to the normal carry-forward processes attributable to general fund balances. Grants and contributions relating to the funding of non-current asset (capital) expenditure are credited to taxation and non-specific grant income and expenditure at the foot of the comprehensive income and expenditure statement when the conditions regarding their use are met. Both REFCUS and capital grants and contributions are reversed out of the East Riding of Yorkshire Council 22 Statement of Accounts 2018/19
ACCOUNTING POLICIES general fund balance in the movement in reserves statement to either the capital adjustment account if the grant/contribution has been used to finance capital expenditure in the year, or to the capital grants unapplied account reserve until it is applied to fund capital expenditure, at which point it is transferred to the capital adjustment account.
XII. OPERATING LEASE CHARGES Leases that do not meet the definition of finance leases are accounted for as operating leases. Assets leased out under operating leases are held on the balance sheet and rentals are credited to the relevant service line in the comprehensive income and expenditure statement on a straight line basis. Assets leased in under operating leases do not appear on the Council’s balance sheet. Rentals payable are charged on a straight-line basis over the term of the lease to the service receiving the benefit of the lease.
XIII. PRIVATE FINANCE INITIATIVE (PFI) AND SIMILAR ARRANGEMENTS Private Finance Initiatives (PFI) and similar contracts are agreements to receive services, where the responsibility for making available the non-current assets needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under its PFI schemes, and as ownership of the non-current assets will pass to the Council at the end of the contracts for no additional charge, the Council carries the property, plant and equipment assets used in the contracts on the balance sheet. The Council’s PFI (Bridlington schools) scheme has been accounted for in accordance with these requirements. The original recognition of these property, plant and equipment was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the assets. For the Bridlington PFI scheme, the liability was written down by an initial capital contribution of £0.910m. Property, plant and equipment recognised on the balance sheet are revalued and depreciated in the same way as property, plant and equipment owned by the Council. The amounts payable to the Bridlington Schools Services Limited PFI operators each year as a unitary payment are analysed into five elements: Fair value of the services received during the year – debited to the children, family and schools (schools budget) in the comprehensive income and expenditure statement cost of services. Finance cost – an interest charge of 9.24% on the outstanding balance sheet liability, debited to financing and investment income and expenditure in the comprehensive income and expenditure statement. Contingent rent – increases in the amount to be paid for the property arising during the contract, debited to financing and investment income and expenditure in the comprehensive income and expenditure statement. There are no contingent rentals for this scheme. Payment towards liability – applied to write down the balance sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease). Lifecycle replacement costs – recognised as property, plant and equipment on the balance sheet.
XIV. DEBT REDEMPTION Each year the Council sets aside sums to meet its credit liabilities, i.e. monies it owes from borrowings and other methods it has used to finance capital spending. The sums set aside can include: A minimum revenue provision, including the principal element of finance lease-type arrangements. Commuted payments in respect of government grants on loan charges. Voluntary amounts set aside from revenue. Voluntary amounts set aside from usable capital receipts. Voluntary amounts set aside from the major repairs reserve
XV. EMPLOYEE BENEFITS Employee benefits are accounted for in accordance with the code’s interpretation of IAS 19 – Employee Benefits. This standard covers both benefits payable during and after employment. a) Benefits payable during employment Liabilities for employees’ entitlements to ‘short term employee benefits’ i.e. wages, salaries, annual leave and other employee benefits which are expected to be paid or settled wholly within 12 months of the balance sheet date, are recognised as an expense in the year in which employees render service to the Council. Annual leave is accrued at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit where these rates are available, otherwise the accrual will be based on the prevailing rates. The accrual is charged to surplus or deficit on the provision of services, but then reversed out through the movement in reserves statement to the accumulated absences account (unusable reserve) so that annual leave benefits are charged to the financial year in which the absence occurs.
East Riding of Yorkshire Council 23 Statement of Accounts 2018/19
ACCOUNTING POLICIES The Council does not award long-term employee benefits i.e. those which are not expected to be paid or settled within 12 months of the balance sheet date. b) Termination benefits Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy in exchange for those benefits. Such benefits are charged on an accruals basis to the relevant service in the comprehensive income and expenditure statement from which the officer is being made redundant at the earlier of when the Council can no longer withdraw the offer of those benefits or when the Council recognises costs for a restructuring. c) Post-employment benefits The Council participates in three different pension schemes that meet the needs of employees in particular services. Each of the schemes provides members with defined benefits related to pay and service. The schemes are as follows: Teachers – this is an unfunded scheme administered by Capita Teachers’ Pensions on behalf of the Department for Education (DfE). Public health employees transferred from the NHS – this scheme is administered on behalf of the NHS by NHS Pensions. Other employees – subject to certain qualifying criteria, employees are eligible to join the funded Local Government Pension Scheme. The pension costs charged to the Council’s accounts in respect of these employees are calculated in accordance with IAS 19 – Employee Benefits. The arrangements for the teachers’ and NHS schemes mean that liabilities for these benefits cannot be identified specifically to the Council. The schemes are therefore accounted for as a defined contribution scheme – no liability for future payments of benefits is recognised in the balance sheet and the service revenue accounts in the comprehensive income and expenditure statement are charged with the employer’s contributions payable to teachers’ and NHS pensions in the year. d) The local government pension scheme The local government scheme is accounted for as a defined benefits scheme: The liabilities of the pension fund attributable to the Council are included in the balance sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projections of projected earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate of 2.4%, based on the indicative rate of return on a high quality corporate bond. The corporate bond yield curve is constructed as follows: o An approach to setting the discount rate has been adopted whereby a “Hymans Robertson” corporate bond yield curve is constructed based on the constituents of the iBoxx AA corporate bond index. The assets of the fund attributable to the Council are included in the balance sheet at their fair value. The change in the net pensions liability is analysed into the following components: Service cost comprising: o current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the comprehensive income and expenditure statement to the services for which the employees worked. o past service cost – the increase in liabilities as a result of a scheme amendment or curtailment whose effect relates to years of service earned in earlier years – debited to the surplus or deficit on the provision of services in the comprehensive income and expenditure statement as part of non-distributed costs. o net interest on the net defined benefit liability (asset), i.e. net interest expense for the Council – the change during the period in the net defined benefit liability (asset) that arises from the passage of time charged to the financing and investment income and expenditure line of the comprehensive income and expenditure statement – this is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined liability (asset) at the beginning of the period – taking into account any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payments. Remeasurements comprising: o return on fund assets – excluding amounts included in net interest on the net defined benefit liability (asset) – charged to the pensions reserve as other comprehensive income and expenditure. o actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – charged to the pensions reserve as other comprehensive income and expenditure.
East Riding of Yorkshire Council 24 Statement of Accounts 2018/19 ACCOUNTING POLICIES
Contributions paid to the fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense. In relation to retirement benefits, statutory provisions require the general fund balance to be charged with the amount payable by the Council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the movement in reserves statement, this means that there are transfers to and from the pensions reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the pensions reserve thereby measures the beneficial impact on the general fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the local government pension scheme. e) Long term disability benefits Long term disability benefits are accounted for in accordance with the rebuttable presumption of International Public Sector Accounting Standard 25 – Employee Benefits, in which all long-term disability benefits are accounted for in the same way as defined benefit post-employment benefits rather than IAS 19 where they are presumed not to be subject to the same degree of uncertainty as the measurement of post-employment benefits and are accounted for immediately when the obligation arises.
XVI. PROPERTY, PLANT AND EQUIPMENT a) Recognition and valuation All expenditure on the acquisition, construction or enhancement of property, plant and equipment assets is capitalised on an accruals basis. Expenditure on the acquisition of, or expenditure which adds to, and not merely maintains, the value of an existing asset, is capitalised and classified as a non-current asset, provided that it yields benefits to the Council and the cost or fair value of the expenditure can be measured reliably. Expenditure which maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred. The Council maintains a detailed asset register of all assets above deminimis levels that it owns or recognises under finance leases and PFI type arrangements. Deminimis levels for each class of asset are: HRA and Non-HRA (operational and non-operational) dwellings, land and other buildings £10,000 Intangible assets £100,000 Vehicles, furniture, plant and equipment (operational and non-operational) £10,000 Infrastructure assets £0 Community assets – parks and open spaces £10,000 The basis of valuation and depreciation for each category of asset is included in Note 17 to the core financial statements. Assets included in the balance sheet at current value are revalued at least every five years. Increases in valuations are credited to the revaluation reserve, except where they arise from the reversal of an impairment or revaluation loss previously charged to the surplus or deficit on the provision of services. Revaluation gains are depreciated with an amount equal to the difference between current value depreciation charged on assets, and the depreciation that would have been chargeable based on their historical cost. This amount is transferred each year from the revaluation reserve to the capital adjustment account. The revaluation reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation with an opening zero balance. Gains arising before that date are consolidated in the capital adjustment account. The Council does not capitalise borrowing costs where it is incurred during the period an asset is under construction. b) Impairment Asset values are reviewed each year for impairment due to the consumption of economic benefit such as obsolescence or physical damage to specific assets. Impairment loss – the difference between the carrying amount and estimated recoverable amount - is firstly written off against any revaluation gains attributable to the relevant asset in the revaluation reserve, with any excess charged to the service. Revaluation losses, which are the result of a general fall in prices not specific to an asset, are treated in the same way as impairment losses. The reversal of both impairments and revaluation losses made to services cannot exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment or revaluation loss been recognised for the asset in prior years. The reversal of an impairment loss is recognised in the circumstance that the increase in value is mirrored by the reversal of the external event that caused the original impairment to be
East Riding of Yorkshire Council 25 Statement of Accounts 2018/19
ACCOUNTING POLICIES recognised. This is not the case for a revaluation loss as it is implicit that a revaluation gain reverses a previous revaluation loss. c) Charges to revenue All services are charged with an annual provision for depreciation for property, plant and equipment used in the provision of the service, and impairment/revaluation loss as described above. These charges are reversed out in the movement in reserves statement, and therefore have a neutral impact on the amount that is required from local taxation. Assets are recognised into components for depreciation purposes when the component has a significant cost compared to the total cost of the item and a different useful life to the remainder of the asset. Significant cost is deemed to be 20% or more compared to the total asset, and the depreciable life is 20 years or more different to the remainder of the asset, or the depreciation method is different. Enhancement expenditure requires de-recognition of the component replaced or refurbished, and the new component reflected in the carrying amount, even where parts of an asset were not previously recognised as a separate component. Consideration for components takes place when an asset that has a carrying value of £500,000 or more is revalued in the five-year rolling valuation programme. Consideration also takes place when an asset is acquired at a cost of £200,000 or more, or on completion of construction or enhancement expenditure totalling £200,000 or more which is at least equal to 20% of the carrying value of existing enhanced or restored assets with a value of £200,000 or more. Amounts set aside from revenue to finance capital expenditure or as transfers to other earmarked reserves are disclosed separately in the movement in reserves statement as reconciling amounts not included in the general fund balance.
XVII. DERECOGNITION OF NON-CURRENT ASSETS With regard to the de-recognition proceeds, for the Housing Revenue Account, the Local Government Act 2003 (under various capital finance and accounting regulations), after calculating transaction costs and compensating authorities for loss of income above what has been covered in the self-financing settlement, allows HM Treasury and local authorities to receive the amounts they would have expected to receive had the policy on Right to Buy (RTB) of council dwellings remained unchanged. Other non-RTB dwelling and land disposals at market value require a percentage of these proceeds (75% for dwellings and 50% for land and other assets, net of statutory deductions) to be paid over to central government to reduce the national debt, (although if applicable to an Council, the use of the capital allowance calculation for this non-RTB category, will reduce the pool-able amount to nil). The balance is credited to the usable capital receipts reserve along with the proceeds from the sale of non-housing assets greater than £10,000. These can only be used to fund new capital investment or set aside to reduce the Council’s underlying need to borrow (the capital financing requirement). Capital receipts less than £10,000 are categorised as revenue receipts. The carrying amount of an asset is derecognised on disposal or when no future economic benefits or service potential is expected from its use or disposal. The amount by which de-recognition proceeds (capital receipts) from an asset are more (gain) or less (loss) than the value at which the asset was included in the balance sheet is credited or debited to the other operating expenditure line in the comprehensive income and expenditure statement. The gain or loss is then reversed out as a reconciling item in the movement in reserves statement, resulting in a neutral impact on the amount that is required from local taxation, other than related disposal costs which are chargeable to revenue. Any revaluation gains in the revaluation reserve for the assets disposed of are transferred to the capital adjustment account.
XVIII. REVENUE EXPENDITURE FUNDED FROM CAPITAL UNDER STATUTE (REFCUS) REFCUS encompasses expenditure which, defined by regulation or by direction of the secretary of state, may be included in the capital programme, but which does not result in the expenditure being carried on the balance sheet as property, plant and equipment. The purpose of this is to enable the expenditure to be funded from capital resources. Examples include grants, advances and financial assistance to others for expenditure of a capital nature, and revenue items treated as capital for capital control purposes as a result of Government directions e.g. redundancy costs. The Code requires the expenditure to be charged to the relevant service in the comprehensive income and expenditure statement, but statutory provision allows this to be funded by capital resources via a reconciling item in the movement in reserves statement to ensure there is no impact on the amount that is required from local taxation.
XIX. PROVISIONS Provisions are required for any liabilities of uncertain timing or amount that have been incurred. In accordance with the code, provisions are made when the Council has a present obligation (either legal or constructive) as a result of a past event; it is probable that a transfer of economic benefit will be required to settle it; and a reliable estimate can be made of the financial obligation. If it becomes probable that a transfer of economic benefit is no longer required to settle the obligation, the provision is reversed.
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ACCOUNTING POLICIES Provisions are charged as an expense to the appropriate service line in the comprehensive income and expenditure statement in the year that the Council becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the balance sheet. Estimated settlements are reviewed at the end of each financial year and where it becomes less than probable that a transfer of economic benefits will be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Council settles the obligation.
XX. RESERVES Amounts set aside for purposes falling outside the definition of provisions are reserves. Transfers into and out of reserves are shown in the movement in reserves statement and not within service expenditure in the surplus or deficit on the provision of services. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against the surplus or deficit on the provision of services in the comprehensive income and expenditure statement. The appropriate reserve amount is then appropriated back into the general fund balance in the movement in reserves statement so that there is no net charge against council tax for the expenditure. Reserves are an accumulation of previous years’ surpluses, deficits and transfers and are categorised as either ‘usable’ or ‘unusable’ and are detailed in the notes to the core financial statements. Usable reserves are those the Council may use to fund either revenue or capital expenditure as prescribed. None of the other reserves can be used to support revenue spending and are kept to manage the accounting processes for non- current assets, financial instruments and retirement benefits. However an element of the capital adjustment account can be used to repay external loan debt.
XXI. SELF-INSURANCE To obtain insurance in the most cost effective manner, the Council has chosen to carry excesses in respect of claims made under various insurance policies. The amounts set aside from the Council’s services to cover the uninsured risks at 31 March 2019 are based on the potential total liability at that date. To comply with IAS 37 this amount is allocated between a provision for known liabilities and the self-insurance reserve for claims ‘incurred but not reported’.
XXII. CONTINGENT ASSETS AND LIABILITIES Contingent liabilities are disclosed within the notes to the financial statements if there is a possible obligation that may require a payment or transfer of economic benefits as a result of past events. Contingent assets are not recognised in the financial statements but are disclosed within the notes if the inflow of a receipt or economic benefit is probable.
XXIII. FINANCIAL ASSETS The financial assets of the Council are classified based on a classification and measurement approach that reflects the business model for holding the financial assets and their cashflow 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 council’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 (ie where the cash flows do not take the form of a basic debt instrument)
Financial Assets Measured at Amortised Cost Financial assets measured at amortised cost are recognised on the Balance Sheet when the council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line 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 the instrument. The effective interest rate is the rate that exactly discounts estimated future cash flows over the life of the instrument to the amount at which it was originally recognised. For most of the financial assets held by the council, this means that the amount presented in the Balance Sheet is the
East Riding of Yorkshire Council 27 Statement of Accounts 2018/19
ACCOUNTING POLICIES outstanding principal receivable (plus accrued interest) and interest credited to the CIES is the amount receivable for the year in the loan agreement. However, the Council has taken the decision, for policy reasons, to make a number of loans at less than market rates (soft loans). When soft loans are made, a loss is recorded in the comprehensive income and expenditure statement (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 at a marginally higher effective rate of interest than the rate receivable from the loan recipients, 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 actual interest receivable for the financial year – the reconciliation of amounts debited and credited to the comprehensive income and expenditure statement 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 de-recognition of assets are credited/debited to the financing and investment income and expenditure line in the comprehensive income and expenditure statement surplus or deficit on the provision of services.
Expected Credit Loss Model The council recognises expected credit losses on all of its financial assets held at amortised cost, 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 receivables (debtors) held by the council. Impairment losses are calculated to reflect the expectation that the future cash flows 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.
Financial Assets Measured at Fair Value through Profit of Loss Financial assets that are measured at FVPL are recognised on the Balance Sheet when the council 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 arrive in the Surplus or Deficit on the Provision of Services. 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 council 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. Where fair value of an equity instrument cannot be measured reliably and the best estimate of fair value is cost, it is carried at cost (less any impairment losses). Any gains and losses that arise on the de-recognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.
XXIV. FINANCIAL LIABILITIES Financial liabilities are recognised on the Balance Sheet when the council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and thereafter carried at their amortised cost. Annual charges to the financing and investment income and expenditure line in the comprehensive income and expenditure statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. For most of the borrowings that the Council has, this means that the amount presented in the balance sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the comprehensive income and expenditure statement is the amount payable for the year in the loan agreement. Gains and losses on the repurchase or early settlement of borrowings are credited and debited to the financing and investment income and expenditure line in the comprehensive income and expenditure statement in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the surplus or deficit on the provision of services is spread over the life of the loan by an adjustment to the effective interest rate.
East Riding of Yorkshire Council 28 Statement of Accounts 2018/19 ACCOUNTING POLICIES 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 Council has a policy of spreading a premium against the term of the new loan taken out, or 10 years for a discount received. The reconciliation of amounts charged to the comprehensive income and expenditure statement to the net charge 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.
XXV. EVENTS AFTER THE REPORTING PERIOD Where an event occurs after the balance sheet date, favourable or unfavourable, which provides evidence of conditions that existed at the balance sheet date, the amounts recognised in the statement of accounts are adjusted to reflect this. Where an event occurs after the balance sheet date that is indicative of conditions that arose after the balance sheet date, the amounts recognised in the statement of accounts are not adjusted but are disclosed as a separate note to the accounts. Events after the reporting period are reflected up to the date when the statement of accounts are authorised for issue, which is the date they are authenticated by the Section 151 officer by signing and dating them before publishing.
XXVI. VALUE ADDED TAX VAT is included in relevant income and expenditure, whether of a capital or revenue nature, only to the extent that it is irrecoverable from HM Revenue & Customs.
XXVII. LOCAL TAXATION The Council is a council tax and business rates billing authority collecting on behalf of other authorities as well as itself. The collection on behalf of other authorities is treated as being on an agency basis, and thus only the elements of council tax and business rates that relate to the Council’s own income and expenditure are included in its main financial statements. The collection fund account covers all local taxation collected by the Council on behalf of itself, other local authorities and the government.
XXVIII. ACCOUNTING FOR SCHOOLS The Council has the following types of maintained schools under its control: Community Voluntary aided Voluntary controlled Trust/foundation Income, expenditure, assets (excepting some non-current assets below), liabilities, reserves and cash flows of maintained schools are recognised in the Council’s accounts. Non-current assets are recognised in the balance sheet where the Council directly owns the assets or where the school/governing body own the assets or have had rights to use the assets transferred to them. Community schools are owned by the Council and are, therefore, recognised on the balance sheet. All the Council’s voluntary aided and voluntary controlled schools are owned by religious bodies with no formal rights to use the assets passed to the school or governing bodies. As a result these schools are not recognised on the balance sheet. Where ownership of trust/foundation schools’ non-current assets is with a charitable trust/religious body, the assets are not recognised on the Council’s balance sheet. Where ownership of the assets lies with the school/governing body they are recognised on the Council’s balance sheet.
XXIX. ACCOUNTING STANDARDS THAT HAVE BEEN ISSUED BUT HAVE NOT YET BEEN ADOPTED Accounting standards that have been issued before 1 January 2019 but not yet adopted by the Code relate to: IAS 40 Investment Property: Transfers of Investment Property provides further explanation of the instances in which a property can be reclassified as investment property. IFRIC 22 Foreign Currency Transactions and Advance Consideration clarifies the treatment of payments in a foreign currency made in advance of obtaining or delivering services or goods. IFRIC 23 Uncertainty over Income Tax Treatments provides additional guidance on income tax treatment where there is uncertainty. IFRS 9 Financial instruments: prepayment features with negative compensation amends IFRS9 to make clear that amortised cost should be used where prepayments are substantially lower than the unpaid principal and interest.
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ACCOUNTING POLICIES The introduction of/amendments to the above accounting standards are not expected to have a material impact on the Council’s 2019/20 Statement of Accounts.
XXX. SIGNIFICANT JUDGEMENTS IN APPLYING ACCOUNTING POLICIES In applying the accounting policies set out above, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The Council has to decide whether the leases it enters into should be treated as operating or finance leases, and whether contractual arrangements it enters into have the substance of a lease. These judgements are made on the professional opinion of the Council’s valuers, accountants and procuring officers using flowchart assessments in the contract procedure rules based on criteria set out in IAS 17 Leases and IFRIC 4 Determining whether an arrangement contains a lease. The relevant accounting policy is applied based on the outcome of the assessment. The Council is deemed to control the services provided under the Private Finance Initiative (PFI) agreement for six schools and a library at Bridlington and also to control the residual value of the properties at the end of the agreement. The accounting policies for PFI schemes and similar contracts have been applied to the arrangement and the schools and library (with a net book value of £52.1m) are recognised as property, plant and equipment on the Council’s balance sheet. This judgement was made by the Council’s accountants and the special projects manager and independently assured by the accountancy firm Ernst & Young. In 2014/15 one of the schools covered by the PFI arrangement converted to an academy. The Council still manages the PFI scheme on behalf of this academy, but all property, plant and equipment has been written out of the balance sheet. The Council has to decide whether land and buildings owned by the Council are investment properties. The Council’s valuers and accountants make judgements in accordance with IAS 40 Investment Property. It has been determined that the Council does not have any investment property as it does not hold land and/or buildings solely for rental income or capital appreciation purposes or both. The Council has to decide whether the Council’s exposure to possible losses is to be accounted for as a provision or a contingent liability. These decisions are taken by a combination of the Council’s accountants, solicitors and departmental officers based on their detailed knowledge of the circumstances, assessed using a contingent liability decision tree. The Council has to decide whether there is a group relationship between the Council and other entities. The accountants assess each relationship that exists between the Council and other entities that may result in a group accounts relationship using a flowchart of decisions based on CIPFA group accounting guidance. It has been determined that there are no significant relationships that require the production of group accounts for 2018/19. The Council has an investment of 199 shares valued at £199, representing a 19.9% shareholding in arvato Government Services Limited, a private limited company. It has been determined that the Council does not have control of the company and it is not a subsidiary of the Council. Following the year end the shares have been disposed of at cost, therefore the investment has been carried at cost as this is an accurate reflection of the fair value of the shares. The Council has an investment of 1,693,380 ordinary shares issued, valued at £16,933.80 representing a 39% shareholding in Correct Compliance Ltd a private limited company wholly owned by the four Humber unitary authorities. The value of the councils fully paid up shares at 31 March 2019 is £16,145.40. The Council was granted 1,792,522 deferred shares (47% shareholding) recognised at nil value. It has been determined that the Council does not have control of the company and it is not a subsidiary of the Council. The fair value of the shares cannot be determined as they do not have a quoted market price in an active market; therefore the ordinary shares are carried at cost as a proxy for fair value. The company was set up in 1999 to protect the interests of the authorities when disposing of the Humberside International Airport Ltd. This was achieved through a 999 year head lease that required the ownership of the airport property and operational land to revert back to the authorities free of charge within the first 10 years if it ceased to be used and promoted as a civil airport, and at market value within 10 to 50 years from the date of sale. The company has no trading function, and no realisable value. The deferred shares are therefore recognised at nil value. The Council has an investment of 1 ordinary share in Nite Direct Limited which represents a 100% shareholding; this is a wholly owned subsidiary of the Council. Further disclosures are included in the related party transactions Note 49. All local Council maintained schools are considered to be entities controlled by the Council. A dispensation in the Code allows the income, expenditure, assets and liabilities of these schools to be recognised within the single entity statements rather than requiring preparation of group accounts. An accounting policy is included at section XXVIII above. There are several categories of maintained school: • Community • Voluntary Aided • Voluntary Controlled
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ACCOUNTING POLICIES • Trust/Foundation Income, expenditure, assets (excepting some non-current assets detailed further below), liabilities, reserves and cash flows of maintained schools are required to be recognised in the Council’s single entity statements. The Council’s financial statements report the balances and transactions for all maintained schools with the exception of land and buildings owned by voluntary aided, voluntary controlled and foundation schools. Non-Current Assets In accordance with the Code, non-current assets are recognised in the balance sheet where the Council directly owns the assets or where the school/governing body own the assets or have had rights to use the assets transferred to them. The Council completed an assessment of the schools to determine the arrangements in place and the accounting treatment required: Community schools are owned by the Council therefore the land and buildings are included in the balance sheet. Voluntary aided and voluntary controlled schools are owned by religious bodies with no formal rights to use the assets passed to the school or governing bodies. As a result, these schools are not recognised on the balance sheet. Where ownership of trust/foundation schools’ non-current assets is with a charitable trust/religious body, the assets are not recognised on the Council’s balance sheet. Where ownership of the assets lies with the school/governing body they are recognised on the Council’s balance sheet. Three of the four local authority maintained foundation schools are owned by religious bodies with no formal rights to use the assets passed to the school or governing bodies. As a result, these schools are not recognised on the balance sheet. Wold Newton Foundation School non-current assets are owned by the school governing body which is controlled by the school and thus the Council. The assets are therefore included in the Council’s balance sheet. Disclosures relating to the Council’s interests in schools can be found at Note 51. When a school that is held on the Council’s balance sheet becomes an academy, any property, plant and equipment except land is written out of the balance sheet with nil consideration on the date the school coverts. Land is leased to the academy on a 125 year lease, however on conversion it is revalued to a deminimis value (to show the Council’s remaining interest) and consequently written out of the balance sheet. Judgement is required to determine whether the Council can be reasonably assured that the conditions of grant and contribution monies received have been met before recognising them as income in the comprehensive income and expenditure statement. Where conditions require specified expenditure to have taken place, the grant monies will not be recognised until this happens. Equally, where conditions specify that a grant or contribution must be repaid in the event of non-expenditure, the income is not recognised until the expenditure is incurred. The valuation and estates department is required to exercise professional judgement in determining the carrying value of land and buildings on the Council’s balance sheet. The Council owns a large and diverse range of property assets. Being a largely rural area, the commercial property market in the East Riding has always been relatively subdued and it is considered that property prices in this area are generally less volatile than in other more urbanised parts of the country. An annual category based review is undertaken and from this it has been possible to come to firm professional opinions that there have been no material changes in the value of the Council’s property assets from the current carrying values on the balance sheet at 31 March 2019. When a review for impairment is conducted, the recoverable amount is determined based on value in use calculations prepared on the basis of the valuers’ assumptions and estimates. Judgement is required in determining the significant components of property, plant and equipment assets and their related useful lives for accurate depreciation purposes. The Council’s quantity surveyors, valuers and accountants work together to determine this. It has been judged that the useful lives of the Council’s council dwellings as they currently stand provide a depreciation charge that is an accurate proxy for component accounting purposes. The calculation of the Council’s net pension liability consists of a number of complex judgements. Professional actuarial firm Hymans Robertson are contracted by the Council to calculate this net liability. The judgements used by the firm as detailed in Note 27f.
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ACCOUNTING POLICIES
XXXI. ASSUMPTIONS MADE ABOUT THE FUTURE AND OTHER MAJOR SOURCES OF ESTIMATION UNCERTAINTY The statement of accounts contains estimated figures that are based on assumptions made by the Council 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 items in the Council’s balance sheet at 31 March 2019 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows: a) Pensions Liability Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. Hymans Robertson as actuaries are contracted to provide the Council with their professional opinion on the estimate of the net pension liability. The effects on the net pension liability of changes in individual assumptions can be measured and a sensitivity analysis is included in Pensions Note 27. During 2018/19 the Council’s actuary has advised that the net pensions liability is £465.0m. b) Accruals and provisions The accounts of the Council are prepared on an accruals basis meaning that the sums due to or from the Council during the year are included in the accounts, whether or not the cash has actually been received or paid in the year in question. Accruals may be made on exact amounts where invoices, although not received in time to be processed in the correct year, are received in time to inform the amount provided for. Where it is known that amounts are due to or from the Council relating to the current year, but no exact information is available to inform this, an estimate has to be made. If the amount estimated is different to the eventual invoice amount, the value of debtor and creditor balances included in the balance sheet will not have been correct and there will be a knock on effect of under or over provision in the following years’ comprehensive income and expenditure statement as the balances are written out. Many of the Council’s accruals are based on invoiced amounts. A liability that becomes apparent in the financial year as a result of a past event and it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation, results in a provision being made rather than an accrual. Provisions are different to accruals in that they are of uncertain timing or amount as to when they will be discharged, but a charge is still made to the comprehensive income and expenditure statement in the year. Depending on the certainty of the amount provided for, there is a risk that it may be insufficient and further amounts may need to be charged when the actual payment is made. Conversely, if the actual payment is less, the over provided amount is credited back to the comprehensive income and expenditure statement in the year the liability is discharged. The provisions total £9.2m at 31 March 2019. The best estimate amounts provided for are based on the professional opinion of the officer best placed to make it. If the outflow of resources is only possible rather than probable, then no estimated charge is made to the accounts until the circumstances change, only narrative disclosure is made in the Contingent Liabilities Note 39. The estimates of contingent liability amounts are based on information from the insurance companies involved, otherwise on the best estimate by the legal team of the maximum amount that could be payable. c) Valuations and depreciation charges Professional opinions of the values of land and buildings are made by the valuation and estates team and estimates of the useful lives of property, plant and equipment are made by the relevant officers who have knowledge of such issues based on their professional judgement e.g. useful lives of properties are provided by in-house RICS qualified valuers in consultation with the Council's quantity surveyors based on the Council's current maintenance and investment policies. The present pressure on public sector expenditure could potentially have implications for the useful economic lives of the Council's property due to reduced spending on repairs leading to a decline in the condition of its buildings. There is no evidence that the estimated economic lives are being materially affected at this time, but this issue will be monitored. These values and useful lives impact on the depreciation, impairment and revaluation charges that are made to services for usage of the assets in question as well as the carrying value of the assets. Depreciation and impairment charged totalled £47.0m and net revaluation losses charged were £1.6m in 2018/19. These charges do not impact on the general fund balance as they are reversed out under statutory mitigation provisions. d) Fair Value Measurements The fair value of surplus assets cannot be measured based on quoted prices in active markets (i.e. Level 1 inputs), therefore fair value would be based on significant observable inputs (i.e. Level 2) or significant unobservable inputs (i.e. Level 3).
East Riding of Yorkshire Council 32 Statement of Accounts 2018/19 ACCOUNTING POLICIES Where possible, the inputs to these valuation techniques are based on observable data, but where this is not possible the Council employs the expertise of the in-house RICS qualified valuers to identify the most appropriate technique to determine fair value. These judgements typically include considerations such as uncertainty and risk. Changes in the assumptions used could affect the fair value of the Council’s assets and liabilities. Information about the valuation techniques and inputs used in determining the fair value of the Council’s assets and liabilities is disclosed in Notes 17 and 40.
East Riding of Yorkshire Council 33 Statement of Accounts 2018/19 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
2. EXPENDITURE AND FUNDING ANALYSIS
The objective of the expenditure and funding analysis is to demonstrate to council tax and rent payers how the funding available to the Council (i.e. government grants, rents, council tax and business rates) for the year has been used in providing services in comparison with those resources consumed or earned by authorities in accordance with generally accepted accounting practices. The expenditure and funding analysis also shows how this expenditure is allocated for decision making purposes between the Council’s directorates. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the comprehensive income and expenditure statement on page 18.
2018/19 Current Year Difference between Outturn and Net Net Expenditure Adjustments Outturn Expenditure charged Chargeable to the between Funding Net Reported to to General Fund and General Fund and & Accounting Expenditure in Management HRA Balances HRA Balances Basis CI&E £000 £000 £000 £000 £000 Chief Executive 557 -1 556 40 596 Corporate Resources 26,587 -212 26,375 756 27,131 Adults, Health & Customer Services 77,984 -52 77,932 11,311 89,243 Children, Family & Schools (exc. Schools) 49,305 -48 49,257 5,310 54,567 Environment & Neighbourhood Services 34,772 1,875 36,647 9,151 45,798 Planning & Economic Regeneration 31,504 31 31,535 15,842 47,377 Local Authority Housing (HRA) -377 -28,855 -29,232 9,311 -19,921 Children, Family & Schools (Schools Budget) 7 -1,878 -1,871 24,467 22,596 Net Cost of Services 220,339 -29,140 191,199 76,188 267,387 Other Income & Expenditure -222,211 20,236 -201,975 -63,135 -265,110 Surplus (-) or Deficit on the Provision of Services -1,872 -8,904 -10,776 13,053 2,277
Opening General Fund & HRA Balance at 31 March 2018 -168,355 Add Surplus on General Fund and HRA Balance in Year -10,776 Closing General Fund & HRA Balance at 31 March 2019* -179,131
*The split of this balance between the general fund, earmarked reserves and the HRA can be found in the movement in reserves statement on page 19. An analysis of the adjustments between the outturn reported to management, expenditure chargeable to the general fund and HRA and expenditure in the comprehensive income and expenditure statement can be found in Note 3.
East Riding of Yorkshire Council 34 Statement of Accounts 2018/19 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
2017/18 Prior Year Restated Difference between Outturn and Net Net Expenditure Outturn Expenditure charged to Chargeable to the Adjustments between Reported to General Fund and HRA General Fund and Funding & Net Expenditure Management Balance s HRA Balances Accountin g Basis in CI&E £000 £000 £000 £000 £000 Chief Executive 850 -1 849 38 887 Corporate Resources 26,788 1 26,789 3,708 30,497 Corporate Strategy & Commissioning 80,816 -60 80,756 11,489 92,245 (now Adults, Health & Customer Services ) Children, Family & Schools (exc. Schools) 44,472 0 44,472 4,028 48,500 Environment & Nei ghbourhood Services 33,858 1,933 35,791 9,27 8 45,069 Planning & Economic Regeneration 29,354 125 29,479 14,583 44,062 Local Authority Housing (HRA) -340 -30,438 -30,778 18,340 -12,438 Children, Family & Schools (Schools Budget) 593 -1,266 -673 22,275 21,602 Net Cost of Services 216,391 -29,706 186,685 83,739 270,424 Other Income & Expenditure -219,837 20,438 -199,399 -49,218 -248,617 Surplus (-) or Deficit on the Provision of Services -3,446 -9,268 -12,714 34,521 21,807
Opening General Fund & HRA Balance at 31 March 2016 -155,641 Add Surplus on General Fund and HRA Balance in Year -12,714 Closing General Fund & HRA Balance at 31 March 2017 -168,355
East Riding of Yorkshire Council 35 Statement of Accounts 2018/19 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
3. ANALYSIS OF ADJUSTMENTS WITHIN THE EXPENDITURE AND FUNDING ANALYSIS
The tables below provide a reconciliation of the main adjustments required within the expenditure and funding analysis to arrive at the expenditure within the comprehensive income and expenditure statement from the outturn reported to management. a) Reconciliation between Outturn Reported to Management and Expenditure Chargeable to the General Fund and HRA
2017/18 Restated 2018/19 HRA Trading and Use of HRA Trading and Use of Adjustments from Outturn to arrive at Net Expenditure Presentational Holding Reserves in Other Total Presentational Holding Reserves in Other Total Differences Accounts Outturn Di fferences Adjustments Charged to the General Fund and HRA Differences Accounts Outturn Differences Adjustments £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 000-1-1Chief Executive 0 0 0 -1 -1 0001 1Corporate Resources 0 0 0 -212 -212 0 -59 0 -1 -60 Adults, Health & Customer Services 0 -23 0 -29 -52 0000 0Children, Family & Schools (exc. Schools) 0 0 0 -48 -48 0 1,204 0 729 1,933 Environment & Neighbourhood Services 0 1,102 0 773 1,875 0 -177 0 302 125 Planning & Economic Regeneration 0 -210 0 241 31 -30,438 0 0 0 -30,438 Local Authority Housing (HRA) -28,855 0 0 0 -28,855 0 0 0 -1,266 -1,266 Children, Family & Schools (Schools Budget) 0 0 0 -1,878 -1,878
-30,438 968 0 -236 -29,706 Net Cost of Services -28,855 869 0 -1,154 -29,140 30,438 -969 -9,078 47 20,438 Other Income and Expenditure 28,855 -869 -8,910 1,160 20,236 plus or Deficit 0 0 -8,910 6 -8,904 0 -1 -9,078 -189 -9,268 Difference between Outturn and General Fund Sur HRA Presentational Differences – This consists of year end housing revenue account (HRA) transactions, including capital expenditure charged to the HRA, transfers to the major repairs reserve and interest on loans under the Item 8 Debit and Credit determinations. These transactions are reported within the revenue outturn report under ‘Local Authority Housing’, but are included within ‘Other Income and Expenditure’ under net expenditure chargeable to the general fund and HRA balances. Trading and Holding Accounts – Some trading and holding accounts are reported within the revenue outturn report under the specific directorate they operate within. Within the comprehensive income and expenditure statement, they are all reported under financing and investment income which is part of other income and expenditure within the expenditure and funding analysis. Use of Reserves in Outturn – The surplus or deficit reported within the revenue outturn report includes the use of reserves (general fund, HRA and earmarked). This is not comparable to the surplus or deficit reported within the comprehensive income and expenditure statement, which shows the position before the funding from reserves. This results in a £8.9m difference between the surplus or deficit figures within the accounts. Other Differences – Consists of other minor presentational differences, including PFI and Finance Lease adjustments, direct revenue financing, and CRC allowance transactions which are presented in different lines within the Outturn Report, compared to the Net Expenditure charged to the General Fund and HRA balances.
East Riding of Yorkshire Council 36 Statement of Accounts 2018/19 NOTES TO THE MOVEMENT IN RESERVES STATEMENT b) Reconciliation between Expenditure Chargeable to the General Fund and HRA and Expenditure included within the Comprehensive Income and Expenditure Statement
2017/18 Restated 2018/19 Net Change for Adjustments Net Change for Adjustmentsthe Pensions for Other Total Adjustments from General Fund to arrive at the Comprehensive for Capital the Pensions Other Total pital Pur poses Ca Ad justment Di fferences Ad justments Income & Expenditure Statement amounts Pur poses Ad justment Differences Adjustments £000 £000 £000 £000 £000 £000 £000 £000 037138Chief Executive 039140 8,565 -4,867 10 3,708 Corporate Resources 1,766 -1,022 12 756 4,708 6,426 355 11,489 Adults, Health & Customer Services 4,618 6,586 107 11,311 526 3,473 29 4,028 Children, Family & Schools (exc. Schools) 1,719 3,521 70 5,310 4,053 5,204 21 9,278 Environment & Neighbourhood Services 3,852 5,233 66 9,151 12,266 2,310 7 14,583 Planning & Economic Regeneration 13,413 2,388 41 15,842 17,668 670 2 18,340 Local Authority Housing (HRA) 8,639 667 5 9,311 13,558 10,507 -1,790 22,275 Children, Family & Schools (Schools Budget) 13,462 10,051 954 24,467 61,344 23,760 -1,365 83,739 Net Cost of Services 47,469 27,463 1,256 76,188 -62,463 11,934 1,311 -49,218 Other Income and Expenditure -75,209 11,354 720 -63,135 Difference between General Fund Surplus or Deficit and Comprehensive -1,119 35,694 -54 34,521 -27,740 38,817 1,976 13,053 Adjustments for Capital Purposes – include Incomethe charge and Expenditure to services Statement for Surplusdepreciation, or Deficit impairment and revaluation losses. The addition of capital grants and contributions applied from in-year income and removal of capital expenditure charged to the general Fund and HRA balance. Also, adjustments for disposals of non-current assets with a transfer of income on disposal of assets and the amounts written off for those assets. Net Change for the Pensions Adjustments – includes the removal of the employer pension contributions made by the council as allowed by statute and the replacement with current service costs and past service costs, alongside the net interest on the defined benefit liability charged within other income & expenditure. Other Differences – includes the addition of accumulated absences charges as required by IAS19 to services and adjustments involving the amount by which council tax and NNDR income credited to the comprehensive income and expenditure statement is different from the amount calculated in accordance with statutory requirements.
A detailed breakdown of the main adjustments included within the above table can be found in Note 5.
East Riding of Yorkshire Council 37 Statement of Accounts 2018/19 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
4. SEGMENTAL INCOME
The following segmental analysis shows revenues from external customers included within the Net Expenditure chargeable to the General Fund and HRA Balances in the Expenditure and Funding Analysis on page 34.
2017/18 Restated 2018/19 £000 £000 -19 Chief Executive -10 -1,198 Corporate Resources -1,055 -47,249 Adults, Health & Customer Services -58,357 -781 Children, Family & Schools (exc. Schools) -888 -6,225 Environment & Neighbourhood Services -6,444 -10,079 Planning & Economic Regeneration -10,993 -49,177 Local Authority Housing (HRA) -48,578 -7,298 Children, Family & Schools (Schools Budget) -7,011 -122,026 Revenues from External Customers -133,336
East Riding of Yorkshire Council 38 Statement of Accounts 2018/19 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
5. ADJUSTMENTS BETWEEN ACCOUNTING BASIS AND FUNDING BASIS UNDER REGULATIONS
This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure. Capital General Housing Earmarked Major Usable Grant Total Fund Revenue General Fund Repairs Capital Unapplied Reversal of items debited or credited to the Comprehensive Income Usable Unusable 2018/19 Balance Account Reserves Reserve Recei pts Account Reserves Reserves and Expenditure Statement £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 Adjustments involving the Capital Adjustment Account
Charge for depreciation -33,041 -9,073 0 0 0 0 -42,114 42,114 Charge for impairment -4,279 0 0 0 0 -4,279 4,279 Revaluation losses on Property, Plant and Equipment -5,215 -13,319 0 0 0 0 -18,534 18,534 Reversal of past impairment and revaluation losses 3,147 13,783 0 0 0 0 16,930 -16,930 Amortisation of intangible assets -610 -30 0 0 0 0 -640 640 Capital grants and contributions applied from in-year income 54,251 939 0 0 0 0 55,190 -55,190 Donated asset 5,945 0 0 0 0 0 5,945 -5,945 Non-current asset written out in gain or loss on disposal/sale of non-current assets -35,008 -3,973 0 0 0 0 -38,981 38,981 AdditionsRevenue expenditureof items not funded debited from or creditedcapital under to the statute Comprehensive -8,236 0 0 0 0 0 -8,236 8,236 IncomeGrant funded and Expenditure revenue expenditure Statement funded from capital understatute 8,219 0 0 0 0 0 8,219 -8,219
Provision for repayment of debt 12,065 0 0 0 0 0 12,065 -12,065 Contribution to provision for repayment of debt -2,273 0 0 0 2,273 0 00 TransferCapital expenditure of sale proceeds charged credited to General as part Fund of disposal/sale and HRA balance of 14,936 7,962 0 0 0 0 22,898 -22,898 non-current assets 3,932 5,403 0 0 -9,335 0 00 Adjustments involving the Capital Receipts Reserve Usable Capital Receipts financing new capital expenditure 0 0 0 0 966 0 966 -966 Contribution from Capital Receipts Reserve towards administrative costs of non-current asset disposals 0 -104 0 0 104 0 00 Contribution from Capital Receipts Reserve to finance the payments to the Government Capital Receipt Pool -1,312 0 0 0 1,312 0 00 New Finance Lease Out within year 0 0 0 0 0 0 00 Other Income 0350 0-350 00
Sub-total of adjustment to carry forward to next page 12,521 1,623 0 0 -4,715 0 9,429 -9,429
East Riding of Yorkshire Council 39 Statement of Accounts 2018/19 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
Capital General Housing Earmarked Major Usable Grant Total Fund Revenue General Fund Repairs Capital Unapplied Usable Unusable 2018/19 Balance Account Reserves Reserve Recei pts Account Reserves Reserves £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 Adjustment carried over from previous page 12,521 1,623 0 0 -4,715 0 9,429 -9,429 Adjustments involving the Major Repairs Reserve Additional transfer to MRR in excess of depreciation 0 4,494 0 -4,494 0 0 00 Reversal of the Major Repairs Allowance credited to HRA 0 0 0 0 0 00 Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 11,288 0 0 11,288 -11,288 Repayment of Self-Financing Debt 0 0 0 0 0 00 Additional transfer to the MRR (to be credited with HRA depreciation) 0 9,104 0 -9,104 0 0 00 Adjustments involving the Capital Grants Unapplied Account Reserve Capital grants and contributions unapplied credited to CI&ES 0 0 0 0 0 0 00 Application of grants and contributions to capital financing 0 0 0 0 0 65 65 -65 Adjustments involving the Financial Instrument Adjustment Account Replacing soft loan effective interest with actual interest 4 0 0 0 0 0 4-4 Soft loan fair value adjustments 0 0 0 0 0 0 00 Adjustments involving the Pensions Reserve Reversal of items relating to retirement benefits debited or credited to -67,801 -1,537 0 0 0 0 -69,338 69,338 the comprehensive income and expenditure account Employer's contributions payable to the East Riding Pension Fund 29,862 658 0 0 0 0 30,520 -30,520 Adjustments involving the Collection Fund Adjustment Account Amount by which council tax and non-domestic rating income credited -679 0 0 0 0 0 -679 679 to the Comprehensive income and expenditure account is different from the amount calculated in accordance with statutory requirements Adjustments involving Deferred Capital Receipts Finance lease statutory adjustment 0 0 0 0 0 0 00 Deferred capital receipts received - transferred to Usable Capital Receipts 0 0 0 0 -5 0 -5 5 Adjustments involving the Accumulating Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements -1,297 -5 0 0 0 0 -1,302 1,302 Total adjustments between accounting basis and funding basis -27,390 14,337 0 -2,310 -4,720 65 -20,018 20,018 under regulations Transfer between reserves - Voluntary 00 Total Adjustments between accounting basis and funding -27,390 14,337 0 -2,310 -4,720 65 -20,018 20,018
East Riding of Yorkshire Council 40 Statement of Accounts 2018/19 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
Capital General Housing Earmarked Major Usable Grant Total Fund Revenue General Fund Repairs Capital Unapplied Usable Unusable 2017/18 Comparatives Balance Account Reserves Reserve Recei pts Account Reserves Reserves Reversal of items debited or credited to the Comprehensive Income £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 and Expenditure Statement Adjustments involving the Capital Adjustment Account
Charge for depreciation -33,107 -8,709 0 0 0 0 -41,81 6 41,81 6 Charge for impairment -6,461 -48 0 0 0 0 -6,50 9 6,50 9 Revaluation losses on Property, Plant and Equipment -4,770 -16,634 0 0 0 0 -21,40 4 21,40 4 Reversal of past impairment and revaluation losses 918 7,753 0 0 0 0 8,67 1 -8,67 1 Amortisation of intangible assets -604 -30 0 0 0 0 -63 4 63 4 Capital grants and contributions applied from in-year income 51,552 1,66 2 000 0 53,21 4 -53,21 4 Donated asset 69 0 0 0 0 0 69 -6 9 Non-current asset written out in gain or loss on disposal/sale of non-current assets -35,664 -3,459 0 0 0 0 -39,12 3 39,12 3 Revenue expenditure funded from capital under statute -7,88 5 00000 -7,88 5 7,88 5 Grant funded revenue expenditure funded from capital understatute 7,164 0 0 0 0 0 7,16 4 -7,16 4 Additions of items not debited or credited to the Comprehensive Income and Expenditure Statement Provision for repayment of debt 11,211 0 0 0 0 0 11,21 1 -11,21 1 Contribution to provision for repayment of debt -1,870 0 0 0 1,870 0 0 0 Capital expenditure charged to General Fund and HRA balance 10,656 8,864 0 0 0 0 19,52 0 -19,52 0 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of disposal/sale of non-current assets 3,066 4,490 0 0 -7,556 0 0 0 Usable Capital Receipts financing new capital expenditure 0 0 0 0 1,431 0 1,43 1 -1,43 1 Contribution from Capital Receipts Reserve towards administrative costs of non-current asset dis posals 0 -88 0 0 88 0 0 0 Contribution from Capital Receipts Reserve to finance the payments to the Government Ca pital Recei pt Pool -1,31 2 0001,3120 0 0 New Finance Lease Out within year 00 0 00 0 0 0 Other Income 20 2 24 0 0 -226 0 0 0 Sub-total of adjustment to carry forward to next page -6,83 5 -6,17 5 0 0 -3,08 1 0 -16,09 1 16,09 1
East Riding of Yorkshire Council 41 Statement of Accounts 2018/19 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
Capital General Housing Earmarked Major Usable Grant Total Fund Revenue General Fund Repairs Capital Unapplied Usable Unusable 2017/18 Comparatives Balance Account Reserves Reserve Recei pts Account Reserves Reserves £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000 Adjustment carried over from previous page -6,83 5 -6,17 5 0 0 -3,08 1 0 -16,09 1 16,09 1 Adjustments involving the Major Repairs Reserve Additional transfer to MRR in excess of depreciation 05,390 0-5,3900 0 00 Reversal of the Major Repairs Allowance credited to HRA 00 0 00 0 0 0 Use of the Major Repairs Reserve to finance new capital expenditure 0 0 11,838 0 0 11,83 8 -11,83 8 Repayment of Self-Financing Debt 00 0 00 0 0 0 Additional transfer to the MRR (to be credited with HRA depreciation) 08,738 0-8,7380 0 0 0 Adjustments involving the Capital Grants Unapplied Account Reserve Capital grants and contributions unapplied credited to CI&ES 00 0 00 0 0 0 Application of grants and contributions to capital financing 00 0 00 34 34 -3 4 Adjustments involving the Financial Instrument Adjustment Account Replacing soft loan effective interest with actual interest 40 0 00 0 4 -4 Soft loan fair value adjustments 00 0 00 0 0 0 Adjustments involving the Pensions Reserve Reversal of items relating to retirement benefits debited or credited to -63,326 -1,498 0 0 0 0 -64,82 4 64,82 4 the comprehensive income and expenditure account Employer's contributions payable to the East Riding Pension Fund 28,523 607 0 0 0 0 29,13 0 -29,13 0 Adjustments involving the Collection Fund Adjustment Account Amount by which council tax and non-domestic rating income credited -1,326 0 0 0 0 0 -1,32 6 1,32 6 to the Comprehensive income and expenditure account is different from the amount calculated in accordance with statutory requirements Adjustments involving Deferred Capital Receipts Finance lease statutory adjustment -285 0 0 0 0 0 -28 5 28 5 Deferred capital receipts received - transferred to Usable Capital Receipts 00 0 0-30 -3 3 Adjustments involving the Accumulating Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements 1,664 - 2 000 0 1,66 2 -1,66 2 Adjustments between accounting basis and funding basis -41,58 1 7,06 0 0 -2,29 0 -3,08 4 34 -39,86 1 39,86 1 under regulations Transfer between reserves - Voluntary 12,024 0 -12,02 4 0 0 0 0 0 Total Adjustments between accounting basis and funding -29,55 7 7,06 0 -12,02 4 -2,29 0 -3,08 4 34 -39,86 1 39,86 1
East Riding of Yorkshire Council 42 Statement of Accounts 2018/19 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
6. NATURE OF EXPENSES
The following is a subjective analysis of the surplus or deficit on the provision of services within the comprehensive income and expenditure statement on page 18.
2017/18 2018/19 £000 £000 -130,031 Fees, charges and other service income -141,912 -879 Interest and investment income -1,436 -206,271 I n co m e fro m co u n cil tax an d n o n -d o m es tic rates -222,724 -382,297 Government grants -381,646 -52,068 Other grants, reimbursements and contributions -50,931 -384 Payments due from academies -40 -28,150 Interest income on plan assets -31,073 -800,080 Total Income -829,762 315,302 Employee benefit expenses 323,602 353,267 Other service expenses 366,339 61,693 Depreciation, amortisation and impairment 48,638 39 Other capital charges 77 31,709 Loss on disposal of fixed assets 29,819 12,788 Interest payments 12,188 0 Expenditure re council tax and non-domestic rates 1,631 7,407 Precepts and Levies 7,604 1,312 Payments to housing capital receipts pool 1,312 176 Payments to academies 305 38,194 Pension interest cost 40,524 821,887 Total Expenditure 832,039 21,807 Surplus or Deficit on the Provision of Services 2,277
East Riding of Yorkshire Council 43 Statement of Accounts 2018/19 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
7. COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT LINE NOTES a) Other operating expenditure
2017/18 Note 2018/19 £000 £000
7,407 Precepts and levies 49 7,604 1,312 Amounts payable into the housing capital receipts pool 1,312 -226 Other income / expenditure -35 -447 Gains (-) and losses on disposal of non current assets 13 -925 32,156 Loss on transfer of schools assets to academies * 13 30,744 40,202 38,700
*Following the Academies Act 2010, the following schools formerly under the control of the Council, converted to academy status during 2018/19: Airmyn Park Primary– 1 May 2018 Melbourne Community Primary – 1 September 2018 Howden School – 1 September 2018 South Holderness Technology College – 1 October 2018
The following voluntary controlled schools also converted: Hook C of E VC Primary – 1 June 2018 Riston C of E VC Primary – 1 September 2018 The following treatment was applied to the academy conversions in 2018/19: Convertor academies are regarded as ‘continuing’ schools therefore they retain any surplus/deficit balance on their conversion. The Council has four months from the date of transfer to calculate the financial position including any debtors or creditors. The transfer of schools balances can include items such as outstanding debtors, creditors, insurance claims and reserve balances. Following the adoption of new accounting standards on groups, all Local Authority maintained schools are considered entities controlled by the Council – they are effectively subsidiaries of the Council. Transactions and balances owned and controlled by the schools are deemed to be Financing Investment Income and Expenditure – see note 7b below. For 2018/19, the balances transferred totalled £0.265m (2017/18 £0.208m). This balance is comprised of £0.305m owed to academies and £0.040m owed from academies to the Council on conversion. The transfer of the property, plant and equipment owned by the Council to the new academy for nil proceeds is treated as a loss on disposal, as part of the Other Operating Expenditure Gain or Loss on Disposal of Non-Current Assets. In 2018/19, a total of £30.744m of property, plant and equipment was transferred to the new academies listed above. Net expenditure of £12.9m for the schools that converted to academies in 2018/19 was included in the Comprehensive Income and Expenditure Statement - Children, Family and Schools (Schools Budget) line in 2017/18, and £5.8m in 2018/19 up to the point of conversion. b) Financing and Investment Income and Expenditure
2017/18 Note 2018/19 £000 £000 10,044 Net interest on the net defined benefit liability (asset) 27b 9,451 12,620 Interest payable on PWLB borrowing 44 12,023 168 Other interest payable and similar charges 44 164 1,834 Deficit / (Surplus) of trading operations not allocated back to services 2,392 -879 Interest and investment income 44 -1,436 Payments relating to academy school conversions: 176 Balances paid to schools converting to academy status * 305 -384 Balances received from schools converting to academy status * -40 23,579 22,859
*See Note 7a narrative.
East Riding of Yorkshire Council 44 Statement of Accounts 2018/19 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT c) Taxation and Non-Specific Grant Income and Expenditure
2017/18 Note 2018/19 £000 £000
155,779 Precept demanded from the Collection Fund Page 107 167,421 49,118 Retained Business Rates Page 107 51,536 General Government Grants 20,177 Revenue Support Grant 12,494 4,731 New Homes Bonus 3,509 13,450 Business Rate Top-Up 14,074 953 Education Services Grant 0 5,545 S.31 Business Rate Re-imbursement Grants 5,862 1,497 Rural Services Delivery Grant 1,866 915 Housing and Council Tax Benefit Subsidy Administration Grant 838 940 Independent Living Grant 910 819 Troubled Families Grant 779 760 Transition Grant 0 1,452 Adult Social Care Grant 904 0 Levy Account Surplus Grant 804 1,605 Other General Government Grants 2,400 Capital Grants and Contributions 26,622 Local Transport Scheme Funding 18,303 11,760 Coastal Protection and Flood Alleviation funding 15,036 7,160 Department for Education Capital Grants 7,105 3,981 Brough Relief Road Contributions 0 1,662 Homes & Communities Agency 810 741 Regional and Local Growth Funds 11,251 1,288 Other Capital Grants and Contributions 2,685 69 Donated Assets 5,945 3,122 Transfer from the Collection Fund in respect of surpluses/deficit (-) Council Tax 2,661 -1,748 Transfer from the Collection Fund in respect of surpluses/deficit (-) Business Rates -524 312,398 326,669
East Riding of Yorkshire Council 45 Statement of Accounts 2018/19 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
8. GOVERNMENT GRANTS, CONTRIBUTIONS AND DONATED ASSETS
The following specific grants and contributions were included in the Comprehensive Income and Expenditure Statement. Non-specific grants are shown in Note 7c above. An analysis of grants and contributions still held as liabilities on the Balance Sheet, as the conditions preventing them from being recognised are not yet met, is shown at Note 27.
2017/18 2018/19 £000 £000 £000 Department for Work and Pensions (DWP) Grants for Benefits 34,288 Rent allowances 31,879 26,442 HRA Rent Rebates 24,533 3 DWP New Burdens Grant 1,323 57,735 Other Government Grants 161,167 Dedicated Schools Grant 158,441 11,043 Public Health Grant 10,759 7,998 Pupil Premuim Grant 7,956 4,534 Sixth Form Grant 3,465 3,270 Universal Infant Free School Meals Grant 3,355 5,763 Regional Growth Fund 7,286 1,509 Support for Adult Education 1,895 1,275 Bridlington Schools Private Finance Initiative 1,346 1,534 Primary & PE Sports Grant 1,791 1,330 Disabled Facility Grant 2,489 859 DfE Capital Grants 697 5,907 Improved Better Care Fund 8,094 514 Bus Service Operator Department for Transport Grant 514 2,403 Broadband Delivery Grant 2,087 0 Winter Pressures Grant 1,446 0 Teachers Pay Grant 646 6,315 Other Revenue Government Grants 5,984 218,251 Other Grants and Contributions 34,631 Section 256 CCG Contributions 36,322 1,762 Contributions from other Local Authorities & Other Public Bodies 2,225 1,097 Education Music Tuition & other Parental Contributions 113 797 Other Education Grants 699 1,699 Other Grants and Contributions 3,153 42,512 316,140 Total Grants & Contributions credited to Cost of Services 318,498
East Riding of Yorkshire Council 46 Statement of Accounts 2018/19 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
9. AUDIT FEES
This note discloses, in accordance with the Code, the fees payable to the auditors appointed under the Local Audit and Accountability Act 2014 for work carried out relating to the 2018/19 year of account.
2017/18 2018/19 £000 £000 138 External audit services 107 14 Certification of grant claims and returns 14 7 Other services provided 7 -21 Rebate for fee reductions 0 138 128
10. SIGNIFICANT ITEMS
There are no items of significance in the Comprehensive Income and Expenditure Statement in 2018/19 requiring separate disclosure. In 2017/18, the size of the revaluation loss on HRA assets at £8.617m was significant in relation to the HRA gross expenditure and is therefore shown separately on the face of the statement. See HRA Note 5 for further information.
11. OPERATING LEASES
(a) Council as lessor The Council leases out property for the following purposes aligned with its statutory and discretionary responsibilities and corporate objectives - 1) economic development purposes e.g. business units which provide suitable, affordable accommodation for new and small businesses in the area is a provision not met by the private sector and the grant funding was received from European Government and Government Office to pay for their construction on this basis. This supports the corporate priority Maximising our Potential , or
2) to retain estate management control over the assets for the benefit of the development of the East Riding as an area – in line with the corporate priority Valuing our Environment, or
3) for the provision of community services, in partnership with third party organisations, such as sports facilities, tourism services and community centres.
East Riding of Yorkshire Council 47 Statement of Accounts 2018/19 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT The Council has future minimum lease payments receivable under non-cancellable operating leases as set out below. The Council leases out property but not vehicles, plant, furniture and equipment under operating leases.
31 March 2018 31 March 2019 £000 £000 Minimum lease rentals receivable: 1,320 Within one year 1,518 2,706 One to five years 2,947 9,396 After five years 12,214 13,422 16,679
Minimum lease payments do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2018/19 £0.421m contingent rentals were receivable by the Council (2017/18 £0.493m).
12. OFFICERS’ REMUNERATION a) Officers’ remuneration by band (excluding Senior Officers) Detailed below is the number of employees, in the accounting period to which the accounts relate, whose remuneration, excluding employer’s pension contributions fell in each bracket of a scale in multiples of £5,000, starting from £50,000. Senior Officers are not included in the analysis as their remuneration is disclosed separately in Note 12b.
2017/18 (restated) 2018/19 Teachers Other Total Teachers Other Total Employees Employees Remuneration Band 47 41 88 £50,000 to £54,999 47 42 89 33 18 51 £55,000 to £59,999 29 19 48 32 5 37 £60,000 to £64,999 39 5 44 17 3 20 £65,000 to £69,999 15 1 16 7310£70,000 to £74,999 7 0 7 066£75,000 to £79,999 2 1 3 336£80,000 to £84,999 0 6 6 505£85,000 to £89,999 5 3 8 358£90,000 to £94,999 3 2 5 000£95,000 to £99,999 1 4 5 011£100,000 to £104,999 0 0 0 011£105,000 to £109,999 0 1 1 000£110,000 to £114,999 1 0 1 147 86 233 149 84 233 2017/18 has been restated following re-analysis of the cost elements included Individuals employed at Voluntary Aided and Foundation Schools are not employees of the Council, but of the governing body of the school. However, for group accounts purposes the transactions relating to these schools are included in the Council’s Comprehensive Income and Expenditure Account. The number of employees at these schools remunerated above £50,000 is as follows:
2017/18 2018/19 Teachers Other Total Teachers Other Total Employees Employees Remuneration Band 101£50,000 to £54,999 1 0 1 202£55,000 to £59,999 1 0 1 303£60,000 to £64,999 1 0 1 101£65,000 to £69,999 1 0 1 000£70,000 to £74,999 1 0 1 707 505 b) Senior Officers’ remuneration Statutory regulations require the separate disclosure by name of individual remuneration details for senior local government employees earning over £150,000, and for all other ‘senior’ employees for each financial year by post
East Riding of Yorkshire Council 48 Statement of Accounts 2018/19 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT title. Senior officers are individuals earning over £150,000 per year, or individuals whose salary is more than £50,000 per year (pro-rata) and hold defined ‘senior’ positions.
Total Remuneration Salary, Compensation excluding Employers' Fees & Expense for Loss of Benefits Pension Pension Total 2018/19 Allowances Allowances Employment in Kind Contributions Contributions Remuneration £000 £000 £000 £000 £000 £000 £000 Chief Executive Caroline Lacey 163 5 0 0 168 25 193 Director of Planning and Economic Regeneration 134 5 0 0 139 0 139 Corporate Resources 121 5 0 0 126 19 145 Environment & Neighbourhood Services 121 5 0 0 126 19 145 Public Health 116 116 17 133 Children, Family & Schools 126 5 0 1 132 19 151 Adults, Health and Customer Services 121 5 0 0 126 19 145 Head of Finance 91 4 0 0 95 14 109
Total 993 34 0 1 1,028 132 1,160
Total Remuneration Salary, Compensation excluding Employers' Fees & Expense for Loss of Benefits Pension Pension Total 2017/18 (restated) Allowances Allowances Employment in Kind Contributions Contributions Remuneration £000 £000 £000 £000 £000 £000 £000 Chief Executive Caroline Lacey 160 5 0 0 165 24 189 Director of Planning and Economic Regeneration 132 5 0 0 137 0 137 Corporate Resources 119 4 0 0 123 18 141 Environment & Neighbourhood Services (started 10/05/2017) 106 3 0 0 109 16 125 Environment & Neighbourhood Services (left 03/05/2017) 21 0 21 0 42 0 42 Public Health 133 0 0 0 133 17 150 Children, Family & Schools 123 4 0 5 132 19 151 Adults, Health and Customer Services 119 5 0 0 124 18 142 Head of Finance 88 4 92 14 106 Total 1,001 30 21 5 1,057 126 1,183 2017/18 has been restated to include the Head of Finance who was designated Section 151 Officer from 1 April 2017
The salary, fees and allowance figures are shown before the deduction of contributions made to the Pension Fund. All employees who are members of the Local Government Pension Scheme pay individual contributions deducted from salary.
13. GAINS AND LOSSES ON THE DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT
The net loss on the disposal of property, plant and equipment during the year was £29.819m (2017/18 £31.709m loss). This comprised a £1.407m gain for disposals from Assets Held for Sale (2017/18 £1.617m gain), a ‘loss’ for the transfer of Academy assets from the Council to the individual schools of £30.744m (2017/18 £32.156m loss) and £0.482m loss (2017/18 £1.170m loss) for the disposal of other property, plant and equipment.
East Riding of Yorkshire Council 49 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
14. MOVEMENT OF PROPERTY, PLANT AND EQUIPMENT a) Movements of property, plant and equipment during the year are shown below. These are the values of assets included in the Balance Sheet.
2018/19 Council Other Vehicles, Infra- Comm- Surplus Assets under Total Dwellings land and plant, structure unity assets construction buildings furniture and assets assets equipment £000 £000 £000 £000 £000 £000 £000 £000 Cost or Valuation 1 April 2018 435,439 774,574 38,221 442,348 349 19,084 6,399 1,716,414 Additions / Enhancement 15,455 25,406 4,541 50,008 73 159 10,226 105,868 Donated / Other Additions 0 5,945 0 0 0 0 0 5,945 Revaluation increases / (decreases) to RR -4,797 7,338 0 0 0 4,355 0 6,896 Revaluation losses to SDPS -13,043 -4,575 0 0 -67 -754 0 -18,439 Revaluation loss reversals to SDPS 13,446 3,394 0 0 0 86 0 16,926 Derecognition - Disposals -137 -1,820 -71 0 0 0 0 -2,028 Derecognition - Academy Transfers 0 -35,409 0 0 0 0 0 -35,409 Derecognition - Other 0 -14 -3,377 -7,329 0 -257 0 -10,977 Reclassification (to) / from Held for Sale -3,546 0 0 0 0 -2,693 0 -6,239 Other movements 6,565 -5,051 0 -31,371 0 2,719 27,138 0 At 31 March 2019 449,382 769,788 39,314 453,656 355 22,699 43,763 1,778,957 Depreciation and Impairment 1 April 2018 8,372 71,351 18,737 100,840 0 0 1,278 200,578 Charge for the year 8,634 17,254 5,362 10,825 0 39 0 42,114 Depreciation written out to the RR -8,363 -4,858 0 0 0 -180 0 -13,401 Depreciation written out to the SDPS 00 0000 0 0 Impairment losses to RR -48 2,503 0 0 0 0 0 2,455 Impairment losses to SDPS 0 4,279 0 0 0 0 0 4,279 Impairment losses reversed to SDPS 00 0000 0 0 Derecognition - Disposals -2 -1,790 -40 0 0 0 0 -1,832 Derecognition - Academy Transfers 0 -4,666 0 0 0 0 0 -4,666 Derecognition - Other 0 0 -3,313 -7,321 0 -57 0 -10,691 Reclassification (to) / from Held for Sale 00 0000 0 0 Other movements -2 -196 0 -682 0 198 682 0 At 31 March 2019 8,591 83,877 20,746 103,662 0 0 1,960 218,836 Net Book Value At 1 April 2018 427,067 703,223 19,484 341,508 349 19,084 5,121 1,515,836 At 31 March 2019 440,791 685,911 18,568 349,994 355 22,699 41,803 1,560,121
RR = Revaluation Reserve SDPS = Surplus or deficit on the Provision of Services
As well as the revaluation loss to SDPS shown in the above table, £0.096m was charged in relation to Assets Held for Sale, giving a total revaluation loss charge of £18.535m. Also, as well as the revaluation loss reversals to SDPS shown in the above table, £0.004m was credited in relation to Assets Held for Sale, giving a total revaluation loss reversal of £16.930m.
East Riding of Yorkshire Council 50 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
2017/18 Movement of property, plant and equipment
2017/18 Council Other land Vehicles, plant, Infra- Comm- Surplus Assets under Total Dwellings and furniture and structure unity assets construction buildings equipment assets assets
£000 £000 £000 £000 £000 £000 £000 £000 Cost or Valuation 1 April 2017 431,262 785,912 35,766 399,688 349 10,896 22,736 1,686,609 Additions / Enhancement 14,910 18,322 7,047 43,128 0 967 9,133 93,507 Donated / Other Additions 0 69 0 0 0 0 69 Revaluation increases / (decreases) to RR -6,891 13,944 0 0 0 -4,997 0 2,056 Revaluation losses to SDPS -16,363 -4,003 0 0 0 -962 0 -21,328 Revaluation loss reversals to SDPS 7,746 894 0 0 0 31 0 8,671 Derecognition - Disposals 0 -1,124 -195 0 0 0 0 -1,319 Derecognition - Academy Transfers 0 -33,435 -32 0 0 0 0 -33,467 Derecognition - Other 0 -100 -4,432 -510 0 0 -5,917 -10,959 Reclassification (to) / from Held for Sale -2,981 0 0 0 0 -4,444 0 -7,425 Other movements 7,756 -5,836 -2 42 0 17,593 -19,553 0 At 31 March 2018 435,439 774,574 38,221 442,348 349 19,084 6,399 1,716,414 Depreciation and Impairment 1 April 2017 8,198 67,149 18,126 91,030 0 0 7,195 191,698 Charge for the year 8,356 17,988 5,132 10,319 0 21 0 41,816 Depreciation written out to the RR -8,234 -10,135 0 0 0 -11,806 0 -30,175 Depreciation written out to the SDPS 0 0 0 0 0 0 0 0 Impairment losses to RR 0 0 0 0 0 3,148 0 3,148 Impairment losses to SDPS 48 0 0 0 0 6,461 0 6,509 Impairment losses reversed to SDPS 0 0 0 0 0 0 0 0 Derecognition - Disposals 0 -133 -137 0 0 0 0 -270 Derecognition - Academy Transfers 0 -1,288 -24 0 0 0 0 -1,312 Derecognition - Other 0 -52 -4,359 -509 0 0 -5,917 -10,837 Reclassification (to) / from Held for Sale 0 0 0 000 0 0 Other movements 4 -2,178 -1 0 0 2,176 0 1 At 31 March 2018 8,372 71,351 18,737 100,840 0 0 1,278 200,578 Net Book Value At 1 April 2017 423,064 718,763 17,640 308,658 349 10,896 15,541 1,494,911 At 31 March 2018 427,067 703,223 19,484 341,508 349 19,084 5,121 1,515,836
RR = Revaluation Reserve SDPS = Surplus or deficit on the Provision of Services As well as the revaluation loss to SDPS shown in the above table, £0.076m was charged in relation to Assets Held for Sale, giving a total revaluation loss charge of £21.404m.
East Riding of Yorkshire Council 51 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
b) The net property, plant and equipment at 31 March analysed by fund and nature of the asset is shown below.
31 March 2019 Council Other Vehicles, Infra- Comm- Surplus Assets under Total Dwellings land and plant, structure unity assets construction buildings furniture and assets assets equipment £000 £000 £000 £000 £000 £000 £000 £000 General Fund 0 682,057 18,565 348,779 355 22,182 35,002 1,106,940 HRA 440,791 3,854 3 1,215 0 517 6,801 453,181 Total 440,791 685,911 18,568 349,994 355 22,699 41,803 1,560,121
31 March 2018 Council Other land Vehicles, plant, Infra- Comm- Surplus Assets under Total Dwellings and furniture and structure unity assets construction buildings equipment assets assets £000 £000 £000 £000 £000 £000 £000 £000 General Fund 0 698,699 19,480 340,548 349 18,854 2,485 1,080,415 HRA 427,067 4,524 4 960 0 230 2,636 435,421 Total 427,067 703,223 19,484 341,508 349 19,084 5,121 1,515,836
The Council does not have any investment properties as it does not hold property solely to earn rentals or for capital appreciation purposes or both, which the Code, in adapting IAS 40 Investment Property, requires in order to classify land and buildings under this category.
East Riding of Yorkshire Council 52 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
c) Within the movement of property, plant and equipment are buildings, vehicles, plant and equipment recognised under finance leases and Private Finance Initiative school and library assets as follows:
2018/19 Finance Leased Other Vehicles, plant, PFI Owned Total land and furniture and assets assets buildings equipment
£000 £000 £000 £000 £000 Cost or Valuation 1 April 2018 404 49 58,386 1,657,575 1,716,414 Additions / Enhancement 0 0 222 105,646 105,868 Donated / Other Additions 0 0 5,945 5,945 Revaluation increases / (decreases) to RR -15 0 0 6,911 6,896 Revaluation losses to SDPS 0 0 0 -18,439 -18,439 Revaluation losses reversals to SDPS 0 0 0 16,926 16,926 Derecognition - Disposals 0 0 0 -2,028 -2,028 Derecognition - Academy Transfers 0 0 0 -35,409 -35,409 Derecognition - Other 0 -49 0 -10,928 -10,977 Reclassification (to) / from Held for Sale 0 0 0 -6,239 -6,239 Other movements 00000
At 31 March 2019 389 0 58,608 1,719,960 1,778,957
Depreciation and Impairment 1 April 2018 112 49 5,222 195,195 200,578 Charge for the year 22 0 1,333 40,759 42,114 Depreciation written out to the RR -112 0 0 -13,289 -13,401 Depreciation written out to the SDPS 00000 Impairment losses to RR 0 0 0 2,455 2,455 Impairment losses to SDPS 0 0 0 4,279 4,279 Impairment losses reversed to SDPS 00000 Derecognition - Disposals 0 0 0 -1,832 -1,832 Derecognition - Academy Transfers 0 0 0 -4,666 -4,666 Derecognition - Other 0 -49 0 -10,642 -10,691 Reclassification (to) / from Held for Sale 00000 Other movements 00000
At 31 March 2019 22 0 6,555 212,259 218,836
Net Book Value
At 1 April 2018 292 0 53,164 1,462,380 1,515,836
At 31 March 2019 367 0 52,053 1,507,701 1,560,121
RR = Revaluation Reserve SDPS = Surplus or Deficit on the Provision of Services
East Riding of Yorkshire Council 53 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
2017/18 (Restated) Finance Leased Other land Vehicles, plant, PFI assets Owned Total and furniture and assets buildings equipment
£000 £000 £000 £000 £000 Cost or Valuation 1 April 2017 404 1,330 54,017 1,630,858 1,686,609 Additions / Enhancement 0 0 231 93,276 93,507 Donated / Other Additions 0 0 0 69 69 Revaluation increases / (decreases) to RR 0 0 4,138 -2,082 2,056 Revaluation losses to SDPS 0 0 0 -21,328 -21,328 Revaluation losses reversals to SDPS 0 0 0 8,671 8,671 Derecognition - Disposals 0 0 0 -1,319 -1,319 Derecognition - Academy Transfers 0 0 0 -33,467 -33,467 Derecognition - Other 0 -65 0 -10,894 -10,959 Reclassification (to) / from Held for Sale 0 0 0 -7,425 -7,425 Other movements 0 -1,216 0 1,216 0
At 31 March 2018 404 49 58,386 1,657,575 1,716,414
Depreciation and Impairment 1 April 2017 90 1,218 5,939 184,451 191,698 Charge for the year 22 112 1,336 40,346 41,816 Depreciation written out to the RR 0 0 -2,053 -28,122 -30,175 Depreciation written out to the SDPS 0 0 0 0 0 Impairment losses to RR 0 0 0 3,148 3,148 Impairment losses to SDPS 0 0 0 6,509 6,509 Impairment losses reversed to SDPS 0 0 0 0 0 Derecognition - Disposals 0 0 0 -270 -270 Derecognition - Academy Transfers 0 0 0 -1,312 -1,312 Derecognition - Other 0 -65 0 -10,772 -10,837 Reclassification (to) / from Held for Sale 0 0 0 0 0 Other movements 0 -1,216 0 1,217 1
At 31 March 2018 112 49 5,222 195,195 200,578
Net Book Value
At 1 April 2017 314 112 48,078 1,446,407 1,494,911
At 31 March 2018 292 0 53,164 1,462,380 1,515,836
RR = Revaluation Reserve SDPS = Surplus or Deficit on the Provision of Services
East Riding of Yorkshire Council 54 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
15. DATES AND AMOUNTS OF VALUATIONS OF PROPERTY, PLANT AND EQUIPMENT
Council Other Vehicles, Infra- Comm- Surplus Assets under Total Dwellings land and plant, structure unity assets construction buildings furniture and assets assets 2018/19 equipment £000 £000 £000 £000 £000 £000 £000 £000 Year of revaluation: 2018/19 440,791 120,967 0 0 0 22,699 0 584,457 2017/18 0 214,565 0 0 0 0 0 214,565 2016/17 0 57,602 0 0 0 0 0 57,602 2015/16 0 210,060 0 0 0 0 0 210,060 2014/15 0 82,717 0 0 0 0 0 82,717 Valued at historical cost 0 0 18,568 349,994 355 0 41,803 410,720 Total 440,791 685,911 18,568 349,994 355 22,699 41,803 1,560,121
Council Other land Vehicles, plant, Infra- Comm- Surplus Assets under Total Dwellings and furniture and structure unity assets construction buildings equipment assets assets 2017/18 £000 £000 £000 £000 £000 £000 £000 £000 Year of revaluation: 2017/18 427,067 241,774 0 0 0 19,084 0 687,925 2016/17 0 76,923 0 0 0 0 0 76,923 2015/16 0 224,595 0 0 0 0 0 224,595 2014/15 0 88,736 0 0 0 0 0 88,736 2013/14 0 71,195 0 0 0 0 0 71,195 Valued at historical cost 0 0 19,484 341,508 349 0 5,121 366,462 Total 427,067 703,223 19,484 341,508 349 19,084 5,121 1,515,836
East Riding of Yorkshire Council 55 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
16. INFORMATION ON ASSETS HELD Property, plant and equipment held on the Council’s balance sheet includes the following:
31 March 2018 31 March 2019 Number of Assets Number of Assets Intangible Assets 9 Purchased Software 7 5 Internally Generated 9 Council Dwellings 11,349 Operational 11,314 Other Land and Buildings 3 Adult Education Centres 4 8 Cemeteries 8 16 Children's Centres 16 4 Corporate Offices and Accomodation Buildings 4 8 Customer Service Centres and Citizen Links 7 10 Depots 10 3 Gypsy Sites 3 10 Ho u s eh o ld W as te Recyclin g Sit es 10 300 HRA - non-dwellings 297 196 Industrial and Commercial Units 196 11 Libraries 11 8 Multi Service Centres 8 5 Museums 5 32 Public Conveniences 32 8 Registrars Offices 6 82 Schools 78 6 School Houses 6 11 Sports and Leisure Centres 11 16 Social Services Establishments 16 65 Surface Car Parks 64 138 Smallholding Leases 134 0 Youth Centres and External Youth Organisations 0 19 Other Offices 18 106 Other 104 179 Assets Under Construction 195 32 Surplus 32 Vehicles, Plant and Equipment 35 IT Equipment 32 675 Vehicles and Plant 727 Infrastructure Assets 940 Bridges 960 3,551 Highways (km) 3,365 Community Assets 4 Parks and Open Spaces 5 Heritage Assets 11 Civic Regalia (items) 11 52 Works of Art (items) 52
East Riding of Yorkshire Council 56 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
17. PROPERTY, PLANT AND EQUIPMENT VALUATION a) Intangible Assets Intangible assets comprise software licences and website development costs and are valued at historical cost as a proxy for current value. Software is not a physical asset and it is therefore only recorded when the work has been capitalised and when the cost is material. A de minimis limit of £100,000 has been set to exclude items valued below this level on the grounds of materiality. b) Land and Buildings Land and buildings are valued in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation Professional Standards (the ‘Red Book’) and the Code of Practice on Local Authority Accounting (the ‘Code’). The Council operates a five-year rolling programme for the revaluation of land and buildings and ensures that all of the land and buildings on the balance sheet are valued at least once every five years. To comply with the requirements of the Red Book, a valuation date of 1 April is adopted, but a review is undertaken to ensure that the valuations reported are accurate at the effective date for revaluations of 31 March. Land and buildings are valued at Current Value as defined in the Code. The basis of valuation for Current Value under the Code is Existing Use Value (EUV) for non-specialised operational properties. The Depreciated Replacement Cost (DRC) instant build method is the basis of valuation for specialised operational properties. Internal valuers employed by East Riding of Yorkshire Council are qualified as either members (MRICS) or fellows (FRICS) of the RICS have overseen and approved the valuations of all land and buildings (except HRA dwellings). The Council’s Valuation and Estates Department and its valuers are registered with the RICS Valuation Registration Scheme for the purposes of carrying out Red Book valuations. These valuers are listed below: Employed John Read FRICS Richard Holmes MRICS Neil Archbutt MRICS Chris Mills MRICS Rebecca Valentine MRICS Nina Mitchell MRICS Jenny Myers MRICS EUV is in summary the amount that would be paid for the asset in an arm’s length transaction in its existing use disregarding other potential uses. It is the least cost of replacing the remaining service potential of the asset. DRC is a specified method of establishing the Current Value where there is no market evidence. It is the current cost of replacing an asset with its modern equivalent less deductions for physical deterioration and all relevant forms of obsolescence and optimisation. The Instant Build assumption means that no allowance is made in the valuation for finance costs that would be incurred during the notional course of construction of the replacement modern equivalent property. Following valuation by the Council’s valuers, assets are assessed under the Council’s componentisation policy. A £10,000 de minimis level is adopted for land and buildings, on the grounds of materiality. c) HRA Dwellings, Land and Buildings Council dwelling stock valuations were undertaken in accordance with Government guidance by the Valuation Office, which is an executive agency of HM Revenue and Customs, specialising in property valuation. The beacon principle has been used to value the HRA council housing stock. A sample property, ‘the beacon’, is selected from a group of properties that are of similar design, age, type or construction, and a detailed valuation carried out. This valuation is then applied to all properties in that group with appropriate adjustments. The basis of valuation is existing use value for social housing (EUV–SH). EUV-SH uses the vacant possession value of the dwellings as a starting point, on the assumption that each property is to be used as residential accommodation that will be occupied by a secure tenant. This is then amended by a regional adjustment factor to reflect the fact that sitting tenants enjoy lower than open market rents and rights including Right to Buy. HRA non-dwelling properties use the EUV basis of valuation for non-specialised operational properties and the DRC instant build method for specialised operational properties.
A £10,000 de minimis level is adopted for HRA Dwellings, Land and Buildings, on the grounds of materiality.
East Riding of Yorkshire Council 57 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET d) Vehicles, Plant, Furniture and Equipment The vehicles, plant, furniture and equipment recognised were either purchased outright and are all valued at historical cost as a proxy for current value, or leased in as finance leases under sale and leaseback arrangements and included at the present value of the minimum lease payments. A de minimis limit of £10,000 for vehicles, plant, furniture and equipment has been set to exclude items valued at below this level on the grounds of materiality, unless they are purchased via prudential borrowing. If assets are financed through prudential borrowing, they are added to the asset register at cost, even if below the de minimis. e) Infrastructure Infrastructure assets include roads and bridges. Outstanding debt was initially used as a proxy to establish the historical cost of assets brought forward from the former authorities at 1 April 1996 however, since then, any new assets or improvements are recognised at historical cost. f) Community Assets Community assets include parks and open spaces and are valued on a historical cost basis. Community assets are intended to be held in perpetuity and have no determinable useful life. As such, no depreciation has been applied except to buildings in parks and open spaces, which are depreciated over their estimated useful economic life and classified as operational buildings. A £10,000 de minimis level is adopted for Community Assets, on the grounds of materiality. g) Surplus Assets Surplus assets are not used for direct service provision but do not yet meet the strict criteria to be classified as assets held for sale. They are valued at fair value, based on the price that would be received to sell an asset in its highest and best use in an orderly transaction between market participants at the measurement date. A £10,000 de minimis level is adopted for surplus assets, on the grounds of materiality. h) Assets under Construction Assets under construction are valued at accumulated historical cost. Depreciation is charged over the asset’s estimated useful economic life from the point at which the asset is reclassified as operational and brought into use. i) Depreciation and amortisation Depreciation or amortisation (intangible assets), where charged, is always on a straight-line basis against gross book value, except for assets held at current value which are depreciated against carrying value, less any estimated residual value, over the asset’s estimated useful economic life. Depreciation is charged on an asset from the point it is brought into use until the point of derecognition or it becomes an asset held for sale. Intangible assets are amortised in the same way. Land is considered to have an infinite life and is therefore not depreciated. The useful economic lives for the different asset categories are: HRA dwellings, land and other buildings 10 – 50 years Other land and buildings 1 – 100 years Intangible assets 5 – 18 years Vehicles, plant, furniture and equipment 2 – 30 years Infrastructure assets 1 – 120 years Surplus assets 10 – 50 years Due to componentisation of some assets the useful lives have been revised. When asset lives are revised, the carrying value of the asset at that point is depreciated over the remaining useful life. If an asset is retained beyond its original useful economic life, its current value and expected remaining useful economic life are reassessed. The results are reflected with appropriate amendments to the non current asset accounting records and respective depreciation calculations. j) Asset Values A review has been carried out by the Council’s Valuation & Estates department across all categories of the Council’s property assets. This is to ascertain whether there were any material differences in asset values at 31 March 2019 from those stated on the Balance Sheet, due to general economic/market factors or specific impairment. The assets have been reviewed using a wide range of information including independent research carried out by local and national property agents. It has also been the experience of the Council’s professional staff over the last 12 months, despite the vote to leave the European Union, that the markets for the property types which the Council holds have generally remained stable with no significant or abnormal movements in value.
East Riding of Yorkshire Council 58 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
In respect of council dwellings, it is the opinion of the Valuation Office that general market conditions have, looking at the portfolio as a whole, been broadly stable over the last year. In summary, the Valuation & Estates department considers that, in general, having regard to the nature of many of the Council’s property assets and the general lack of market volatility in this largely rural area, it is considered that there have been no material changes in the valuation of the Council’s property assets from the current carrying values on the Balance Sheet.
18. FAIR VALUE OF SURPLUS ASSETS IFRS 13 Fair Value Measurement requires surplus assets to be valued at their “highest and best use from a market participant’s perspective”. a) Details of the Council's surplus assets and information about the fair value hierarchy are as follows:
Significant Other significant unobservable 2018/19 observable inputs inputs Fair Value as at Recurring fair value measurements (Level 2) (Level 3) 31 March 2019 using: £000 £000 £000 Redevelopment Properties 21,821 0 21,821 Other Property 527 0 527 Bridlington Regeneration Properties 351 0 351 22,699 0 22,699
Other significant Significant 2017/18 observable inputs unobservable inputs Fair Value as at Recurring fair value measurements using: (Level 2) (Level 3) 31 March 2017 £000 £000 £000 Redevelopment Properties 17,877 0 17,877 Other Property 370 0 370 Bridlington Regeneration Properties 837 0 837 19,084 0 19,084
b) Transfers between levels of the Fair Value Hierarchy There have been no transfers between levels during the year. c) Valuation Techniques used to determine Level 2 The fair values have primarily been arrived at by using the Comparative Valuation Method. This is the most common valuation method and involves using evidence from the sale and marketing of appropriate comparable properties to estimate the amount for which the asset should exchange on the valuation between a willing buyer and willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. Significant Observable Inputs – Level 2 The principal observable inputs are market information on current and recent sales and marketing of comparable properties in the local area. This market information is derived from reliable sources including Land Registry records and sales, or agreed terms for the disposal of Council properties. These observable inputs are adjusted as appropriate, for example to take account of the different physical size of the comparable in relation to the subject property.
East Riding of Yorkshire Council 59 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET d) Highest and Best Use In estimating the fair value of the Council’s surplus assets, the highest and best use of the assets is: Redevelopment Properties - the highest and best use is considered to be for redevelopment in a form that would be in accordance with planning policy. Typically, this is for residential or industrial development. Other Property & Other Land - the highest and best use of these properties is considered to be for continued use in their existing purpose. Bridlington Regeneration Properties - the highest and best use for these properties at the valuation date is considered to be for continued use as mixed retail and residential premises. e) Valuation Techniques There has been no change in the valuation techniques used during the year for surplus assets. f) Valuation Process for Surplus Assets The fair value of the Council’s surplus assets is measured annually at each reporting date. All valuations are carried out internally according with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. The Council’s valuation experts work closely with finance officers reporting directly to the chief financial officer.
19. ASSETS RECOGNISED UNDER PFI AND SIMILAR ARRANGEMENTS Bridlington Schools and Library PFI On 20 December 2000, a contract was signed with Bridlington Schools Services Limited (BSSL) for the building and refurbishment of six schools and a community library in Bridlington, and payments under this contract commenced on 29 April 2003, after the building works were complete. The scheme is accounted for in a manner that is consistent with the adaptation of IFRIC 12 Service Concession Arrangements contained in the Government’s Financial Reporting Manual (FReM). In accordance with IFRIC 12, the schools and the library are included on the Council’s Balance Sheet and a corresponding liability recognised for the requirement to pay BSSL for the construction and enhancement work they undertook. An amount equal to this is included in the Minimum Revenue Provision in the Movement in Reserves Statement to recognise the annual repayment in the General Fund. The schools and library are depreciated and revalued in the same way as all other assets on the Council’s Balance Sheet. The payment for the facilities management services that BSSL provides, e.g. cleaning, grounds maintenance and caretaking, are included in the Children, Family and Schools (Schools Budget) line of the Comprehensive Income and Expenditure Statement Cost of Services, but the interest element of the contract payment is recognised in Financing and Investment Income and Expenditure. At 5 yearly intervals, the facilities management services are benchmarked or market tested to ensure value for money is being achieved. The results of value testing exercises can result in an increase or decrease in the cost of the service(s) to the Council. The next value testing exercise is due in 2023/24. Utility payments are adjusted each year for indexation, and consumption reviewed against notional volumes, which may be adjusted if consumption changes by more than plus or minus 5% and depending on the cause of the change in volume following review. The Council has opted to include energy supplies to the PFI schools in its corporate contract. This arrangement is considered more likely to result in competitive energy prices through the aggregation of demand. The PFI contract is an agreement to receive services, where the responsibility for making available the property, plant and equipment assets needed to provide the services passes to the PFI contractor. The nature and standard of the services provided are set out in the contract output specifications. The payment mechanism incentivises the PFI contractor to perform these services and to ensure that the facilities are available for use. The Project Agreement sets out the rights of the Council, the governing bodies, school staff, libraries staff, registered pupils and visitors to use the project facilities. A “Core Time Specification” is included in the Agreement setting out the Council’s user requirements. Third party use of the schools and the library is encouraged but educational and community use is given priority in terms of access to facilities. At the end of the concession period, the Council has the option to receive the assets at nil value. The Council is also able to consider a number of other renewal and termination options on expiry or otherwise as set out in the Project Agreement. There are provisions within the contract to ensure that BSSL maintains the assets in accordance with their obligations. This includes an independent final survey before the expiry date of the concession. The Lifecycle Programme is intended to ensure that the buildings and their components are maintained and replaced in order that the schools and the library meet the criteria at all times as set out in the contract output specifications. The PFI contractor is entitled to receive income derived from “third-party” use of the project facilities outside of core time up to an index linked amount set out in the Project Agreement. Any third party income generated above this amount is shared equally between the PFI contractor and the Council.
East Riding of Yorkshire Council 60 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
In 2014/15 Quay Primary, one of the schools covered by the PFI agreement, converted to an academy. The Council continues to manage the PFI agreement on behalf of the academy and therefore the liability still remains with the Council. The receipts from Quay Primary during 2018/19 have been set against the revenue service charges relating to the agreement. An analysis of the movement in the values of assets recognised under the PFI scheme is included in Note 14c. An analysis of the movement in the value of the liability for the scheme is shown below.
2017/18 2018/19 £000 £000 14,364 Opening liability 1 April 13,546 -818 Principal Repaid -868 13,546 Closing Liability 31 March 12,678
At the Balance Sheet date, the amount of payments (at Balance Sheet date prices) due to be made under the PFI and scheme, separated into repayment of liability, interest and service charges, is as follows.
31 March 2018 31 March 2019 £000 £000 Principal Repayable: 868 Within one year 934 4,187 In two to five years 4,780 8,309 In six to ten years 6,964 182 In eleven to fifteen years 0 13,546 12,678 Interest Repayable: 1,299 Within one year 1,210 4,273 In two to five years 3,834 2,213 In six to ten years 1,444 2 In eleven to fifteen years 0 7,787 6,488 Service Charges Payable: 3,308 Within one year 3,354 13,382 In two to five years 13,383 16,783 In six to ten years 13,941 247 In eleven to fifteen years 0 33,720 30,678 Total Amount payable: 5,475 Within one year 5,498 21,842 In two to five years 21,997 27,305 In six to ten years 22,349 431 In eleven to fifteen years 0 55,053 49,844
The principal liability payable within one year of £0.934m for the PFI contract is classified as a short term liability in the Balance Sheet and is not included in the Deferred Liabilities disclosure Note 25 as this shows long term liabilities only.
East Riding of Yorkshire Council 61 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
20. CAPITAL EXPENDITURE AND FINANCING The following table illustrates capital expenditure analysed by asset type. All such expenditure is funded firstly through the utilisation of external resources (e.g. grants and contributions) and, where these are insufficient, by internal resources such as revenue and usable capital receipts.
2017/18 2018/19 £000 Note £000 474,206 Opening Capital Financing Requirement 471,926 Capital Investment 93,514 Property, Plant and Equipment 14a 105,970 733 Intangible Assets 1,047 7,885 REFCUS 8,236 Sources of Finance -1,431 Capital Receipts 31 -966 -60,413 Government Grants and Other Contributions 36 -63,474 Sums set aside from revenue: -12,234 Direct Revenue Contributions 36 -11,560 -19,123 Earmarked Reserves 36 -22,626 -11,211 Minimum Revenue Provision (MRP) 36 -12,065 471,926 Closing Capital Financing Requirement 476,488 -2,280 Movement in Capital Financing Requirement 4,562 Explanation of Movements in Year -4,931 Increase / Decrease (-) in Supported Borrowing -4,922 2,651 Increase in Unsupported Borrowing 9,484 -2,280 Decrease in Capital Financing Requirement 4,562
21. CAPITAL COMMITMENTS The Council has entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment in 2018/19 and future years. The values below represent the remaining value of the contracts that were signed in 2018/19 that will be discharged in 2019/20. The major commitments are:
£000 Hornsea Leisure Centre Remodelling and MSC 7,145 Anlaby & East Ella Flood Alleviation Scheme 5,914 Cottingham & Orchard Park Flood Alleviation Scheme 4,998 South Cliff Caravan Park 3,908 Jocks Lodge Improvement Scheme 3,462 Pocklington Flood Alleviation Scheme 3,117 A164 Great Gutter Lane Junction Improvements 3,097 S106 Wellington Grange 2,150 Shiptonthorpe Roundabout 2,096 Bridlington Town Hall Alterations 1,692 Housing - Chantry Lane Beverley 1-4-1 1,522 Meadow Road Phase 2 - Shared Ownership 870 S106 Aspect Anlaby 629 Anlaby & East Ella Flood Alleviation Scheme - 2017/18 534
East Riding of Yorkshire Council 62 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
22. SHORT-TERM DEBTORS The debtors have been disclosed by type of debt.
31 March 2018 31 March 2019 £000 £000 £000 Collection Fund 7,778 Council Tax 8,813 -2,743 Impairment allowance for Council Tax -3,228 1,610 Business Rates 1,436 -899 Impairment allowance for Business Rates -857 6,164 Other Debtors 19,336 Sundry debtors 20,925 10,861 Grant applied in advance 12,742 6,556 Payment in advance 4,919 6,980 Y ear-en d accru als 11,847 2,628 HM Revenue and Customs 5,689 3,664 Housing benefits 3,745 -464 Impairment allowance for housing benefits -493 2,097 Housing rents 2,366 -1,491 Impairment allowance for housing rents -1,819 245 Car loans 320 -2,752 Impairment of other loans & receivables -2,879 57,362 53,406 63,526
East Riding of Yorkshire Council 63 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
23. SHORT-TERM INVESTMENTS
31 March 2018 31 March 2019 £000 £000 10,032 Certificates of deposit greater than 3 months 5,039 97,317 Fixed maturity greater than 3 months 99,499 107,349 104,538
24. SHORT-TERM CREDITORS & GRANT RECEIPTS IN ADVANCE
The creditors have been disclosed by the different types of amounts the Council owes.
31 March 2018 Note 31 March 2019 £000 £000 £000 42,949 Year-end accruals 44,937 15,146 Sundry creditors 12,466 5,592 Collection Fund 6,043 4,619 HM Revenue & Customs 4,589 4,007 Cash received in advance 4,130 880 Finance lease and PFI liabilities 946 73,111 Revenue Grants Receipts in Advance: 17,232 Other Grants Received in Advance 26 14,482 7,875 Earmarked Developer Contributions 26 7,678 22,160 98,300 95,271 16,619 Capital Grant Receipts in Advance 26 20,275 114,919 Total Creditors 115,546
25. DEFERRED LIABILITIES
Deferred liabilities relate to the finance lease elements of the PFI arrangements (Note 20), finance leased Property, Plant and Equipment, and CPO monies held.
31 March 2018 31 March 2019 £000 £000 12,679 PFI service concession arrangement 11,745 284 CPO monies held 284 78 Finance lease outstanding obligation 74 13,041 12,103
East Riding of Yorkshire Council 64 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET 26. GRANT AND CONTRIBUTION RECEIPTS IN ADVANCE
The Council has received a number of grants, contributions and donations 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 provider if not utilised for the specific purpose. The balances at the year-end are included in the Balance Sheet as follows.
2017/18 Note 2018/19 £000 £000 Current Liabilities Capital Grants 4,192 Schools Capital Grants 5,570 1,699 Coast Protection Grant 3,984 4,091 LTP Settlement 8,786 1,980 Community Housing Fund 4,657 Other Grants & Contributions Unapplied 1,935 16,619 24 20,275 Revenue Grants 10,117 Regional Growth Fund 390 7,875 Developer Contributions (including S106) 7,678 7 Central Heating Fund Grant 78 Springboard Young Persons Programme Community Housing Fund 1,856 0 BT Open Reach 3,006 1,137 Department of Work and Pensions Benefits Grant 11 421 Schools Capital Grants (REFCUS) 931 651 Coast Protection Grant 328 4,821 Other Grants & Contributions Unapplied 7,960 25,107 24 22,160 Long Term Liabilities Capital Grants 114 Other Developers Contributions 115 0 Other Grants and Contributions 0 114 115 Revenue Grants 0 Regional Growth Fund 1,795 1,651 Other Developers Contributions 0 1,651 1,795 43,491 44,345
27. PENSION ASSETS AND LIABILITIES a) Scheme Details As part of the terms and conditions of employment of its officers and other employees, the Council offers retirement benefits. Although these will not actually be payable until employees retire, the Council has a commitment to make the payments, and this needs to be disclosed at the time that employees earn their future entitlement. The Council participates in three pension schemes: The Local Government Pension Scheme (LGPS) - this is a funded defined benefits scheme, meaning that the Council and its employees pay contributions into a fund, calculated at a level estimated to balance the pensions liabilities with investment assets. East Riding of Yorkshire Council is an employer in the East Riding Pension Fund which the Council administers on behalf of 256 employers and 65 Community Admission Bodies. The Teachers Pension Scheme - this is an unfunded defined benefits scheme, meaning that there are no investment assets built up to meet the pension liabilities, and cash has to be generated to meet actual pension payments as they eventually fall due. This Scheme is administered by Teachers’ Pensions (under contract to Capita Business Services Ltd) on behalf of the Department for Education and provides teachers with specified benefits upon their retirement. The scheme is not the direct responsibility of the Council although it contributes together with teachers towards the costs by making contributions based on a percentage of members’ pensionable salaries.
East Riding of Yorkshire Council 65 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET The arrangements for the teachers’ scheme mean that liabilities for these benefits cannot be identified to the Council. The scheme is therefore accounted for as if it were a defined contribution scheme – no liability for future payments of benefits is recognised in the Balance Sheet and the Children’s and Education service revenue account is charged with the employer’s contributions payable to Teachers’ Pensions in the year. The Council has granted discretionary additional pensions to some of its former teachers for which it is directly responsible and, under the IAS 19 guidelines, these discretionary pensions are required to be treated as a defined benefit scheme. The NHS Pension Scheme (NHSPS) – From the 1st April 2013, NHS staff transferred to the Council as part of the transfer of responsibilities for delivering Public Health. The NHSPS is a defined public service pension scheme, which operates on a pay as you go basis. The NHSPS is administered by the NHS Business Service Council. The scheme is not the responsibility of the Council although it contributes together with public health staff towards the cost of making contributions based on a percentage of members’ pensionable salaries. The award of discretionary post-retirement benefits is an unfunded defined benefit arrangement under which liabilities are recognised when awards are made. No investment assets are built up to meet these pension liabilities and cash is generated to meet the actual pension payments as they are due. b) IAS 19 Disclosure Post employment benefits are accounted for in accordance with International Accounting Standard 19 (IAS 19). The actuary – Hymans Robertson LLP – carried out an actuarial valuation of the East Riding Pension Fund as at 31 March 2016, and this was reported to the East Riding – Pension Fund in a report dated March 2017. The valuation is made on a number of assumptions which fall in to two main categories: Demographic assumptions – try to forecast when benefits will become payable and what form they will take, e.g. when members will retire (at their normal retirement age or earlier), how long they will live and whether a dependants pension will be paid. Financial assumptions – try to anticipate the size of the benefits. For example, how large members’ final salaries will be at retirement and how their pensions will increase over time. In addition, the financial assumptions also help us to estimate how much all these benefits will cost the Fund in today’s money by making an assumption about the return on the Fund’s investments in the future. More details on the results of the Pension Fund valuation are shown in Pension Fund section of these accounts. The Council is the administering authority for the East Riding Pension Fund, whose members are listed in the Pension Fund Section of these accounts. The following notes relate solely to the East Riding of Yorkshire Council’s share of the East Riding Pension Fund. IAS 19 (Employee Benefits) is based on a simple principle – that an organisation should account for employment and post-employment benefits when employees earn them and the council is committed to providing them, even if the actual provision might be many years in the future. The IAS19 principles give a better reflection of the economic reality of the relationship between an employer and their employees (and with pension funds) than might be appreciated from cash flows. The following notes provide more information on the post – employment benefits of the Council. Six schools which converted to academies were transferred out of the scheme during 2018/19 (Hook Primary School, Airmyn Park Primary School, Riston Primary School, Melbourne Primary School, South Holderness Technology College and Howden Secondary School). In addition, staff transferred out of the scheme from Mellors Catering at South Holderness. Transactions Relating to Post-employment Benefits The cost of retirement benefits is reported in the cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. The charge the Council makes against council tax is based on the cash payable in the year, so the real cost of post employment/retirement benefits, as determined by the actuary, is reversed out of the General Fund and HRA 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.
East Riding of Yorkshire Council 66 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET Transactions within the Comprehensive Income and Expenditure Statement
2017/18 2018/19 £000 £000 58,175 Current service cost 58,876 271 Past service cost (including curtailments) 2,717 -3,666 (Gain)/loss from settlements -1,706 54,780 Total Service Cost 59,887 Financing and Investment Income and Expenditure -28,150 Interest income on plan assets -31,073 38,194 Interest cost on defined benefit obligation 40,524 10,044 Net interest on the net defined benefit liability (asset) 9,451 Total Post-employment Benefits charged to the Surplus or Deficit 64,824 on the Provision of Services 69,338 Remeasurement of the net defined benefit liability comprising -7,186 Return on plan assets (excluding the amount included in net interest -47,641 expense) 0 Actuarial (gains)/losses arising from changes in 0 demographic assumptions -28,849 Actuarial (gains)/losses arising from changes in 127,626 financial assumptions 668 Other (if applicable) 190 -35,367 Total remeasurements recognised in Other Comprehensive Income 80,175 Total Post-Employment Benefits charged to the Comprehensive Income 29,457 and Expenditure Statement 149,513 Movement in Reserves Statement -64,824 Reversal of net charges made to the Surplus or Deficit on the Provision -69,338 of Services for post employment benefits 29,130 Employers' Contributions Payable to the Scheme 30,520
Current service cost has increased in line with the actuaries forecast due to a decline in market conditions. This amount differs from what the Council is paying in cash contributions which is based on certified rates from the last formal valuation. In 2017-18, the Council prepaid three years of employer contributions for non- school based staff, as agreed with the actuary, with the intention that the Council will receive a discount to recognise that the Pension Fund has received an up-front payment of £58.612m. The employers contributions shown above recognise one year of employer contributions, whilst the table below (scheme assets) shows the contributions relating to those employees which were not part of the prepayment. The remeasurement of the net defined liability reflects the change in market conditions since 31 March 2018. As at the end of March 2019, the net discount rate is 2.4%, a decrease of 0.3% compared to the previous year. This has led to a slight increase in the value placed on liabilities that has been offset in part by the increase in assets which is mainly due to the increase in employer contributions being recognised on cash basis within the report. c) Pension Assets and Liabilities Recognised in the Balance Sheet The amount included in the Balance Sheet arising from the Council’s obligation in respect of its defined benefit plans is as follows:
31 March 2018 31 March 2019 £000 £000 1,164,835 Fair value of plan assets (LGPS) 1,218,003 -1,457,462 Present value of defined benefit obligation (LGPS) -1,651,471 -33,048 Present value of unfunded liabilities (LGPS & Teachers) -31,534 -325,675 Net Pension Liability -465,002
East Riding of Yorkshire Council 67 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET The Council’s Balance Sheet includes a pension liability of £465.002m at 31 March 2019 (£325.675m 31 March 2018) and pension reserve of £483.812 as at 31 March 2019 (364.819m at 31 March 2018). The pension liability reflects the fair value of future pension liabilities that have been incurred less the assets that have already been set aside to fund them. This liability has increased by £139.327m since last year. This is principally due to the fact that the plan obligation has increased by £192.495 and plan assets have also increased by £53.168m. The net pension liability takes into account the McCloud ruling regarding age discrimination arising from public sector pension scheme transition arrangements (estimated at £2.6m). The net pension liabilities decreases the overall level of reserves, however this does not represent an increase in cash reserves and does not impact on Council Tax levels. Whilst the pension liability suggests a shortfall between the forecast cost of future pensions and the current level of assets built up in the Pension Fund, these figures are a snapshot at a point in time and the Pension Fund assets are subject to fluctuations in value depending on the current state of the stock market. Therefore, this information needs to be considered with the long-term view provided by the triennial actuarial valuation. d) Reconciliation of the Movements in the Fair Value of the Scheme Reconciliation of present value of the scheme assets (defined benefit obligation):
2017/18 2018/19 £000 £000 1,097,086 Opening fair value of scheme assets as at 1 April 1,164,835 28,150 Interest income 31,073 Remeasurement gain/(loss): 7,186 The return on plan assets (excluding the amount 47,641 included in net interest expense) Other (if applicable) 68,274 Contributions from employer 10,186 8,731 Contributions from employees 9,074 -37,426 Benefits paid -39,717 -7,171 Effect of Settlements -4,861 0 Effect of business combinations and disposals 0 5 Other (if applicable) -228 1,164,835 Balance as at 31 March 1,218,003
Reconciliation of present value of the scheme liabilities (defined benefit obligation):
2017/18 2018/19 £000 £000 1,461,578 Opening fair value of scheme liabilities as at 1 April 1,490,510 58,175 Current Service Cost 58,876 38,194 Interest Cost 40,524 8,731 Contributions from scheme participants 9,074 Remeasurement gain/(loss): 0 Actuarial (gains)/losses arising from changes in 0 demographic assumptions -28,849 Actuarial (gains)/losses arising from changes in 127,626 financial assumptions 673 Other (if applicable) -38 271 Past Service Cost 2,717 -37,426 Benefits paid -39,717 -10,837 Effect of settlements -6,567 0 Effect of business combinations and disposals 0 1,490,510 Balance as at 31 March 1,683,005
East Riding of Yorkshire Council 68 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET e) Local Government Pension Scheme assets The Authorities assets consist of the following categories, further analysed by those that have a quoted market price in an active market and those that do not. The assets detailed below are at bid value as required under IAS19. As shown, 77.30% of the assets are quoted in an active market and 22.70% are in unquoted markets. By definition, the investments in unquoted markets are not publicly quoted and the valuation depends on estimation techniques and non-marketable observable inputs. Therefore there is a higher risk that the valuations for £276.429m –22.7% (unquoted markets) are either over or under stated. This is mitigated by the level of assets in unquoted markets and the expertise of the actuary appointed to undertake the valuation.
31 March 2018 Asset Type Quoted in an Unquoted 31 March 2019 £000 Active market £000 Equity Securities 110,580.4 Consumer 27,017.3 27,017.3 64,822.6 Manufacturing 26,244.5 26,244.5 61,356.2 Energy & Utilities 5,630.0 5,630.0 51,182.8 Financial Institutions 18,192.6 18,192.6 62,754.0 Health & Care 11,057.5 11,057.5 44,035.7 Information Technology 12,025.0 12,025.0 0 Other 612.0 612.0 394,731.7 100,778.9 0.0 100,778.9 Debt Securities 15,861.3 Corporate Bonds (Investment Grade) 16,108.1 16,108.1 62,404.3 Corporate Bonds (Non -Investment 18,216.3 57,676.5 75,892.8 Grade) 45,589.0 UK Government 53,424.1 53,424.1 29,832.0 Other 32,965.8 32,965.8 153,686.6 120,714.3 57,676.5 178,390.8 Private Equity 52,050.8 All 25,243.9 36,582.4 61,826.3 Real Estate 131,788.7 UK Property 42,446.1 101,263.4 143,709.5 Investment Funds and Unit Trusts 302,657.0 Equities 570,763.9 570,763.9 46,449.8 Infrastructure 13,036.4 45,997.9 59,034.3 50,529.1 Other 20,434.2 34,908.9 55,343.1 399,635.9 604,234.5 80,906.8 685,141.3 32,941.3 Cash and Cash Equivalents 48,156.1 48,156.1 1,164,835.0 941,573.8 276,429.1 1,218,002.9
The Council does not have any financial instruments held as scheme assets nor does it occupy or use any of the property assets included above. f) Basis for Estimating Assets and Liabilities Assets The administering authority does not account for each employer’s assets separately. Instead, the Fund’s actuary is required to apportion the assets of the whole Fund between the employers, at each triennial valuation. This apportionment uses the income and expenditure figures provided for certain cash flows for each employer. This process adjusts for transfers of liabilities between employers participating in the Fund, but does make a number of simplifying assumptions. The split is calculated using an actuarial technique known as “analysis of surplus”. The methodology adopted means that there will inevitably be some difference between the asset shares calculated for individual employers and those that would have resulted had they participated in their own ring-fenced section of the Fund. The administering authority recognises the limitations in the process, but it considers that the Fund actuary’s approach addresses the risks of employer cross-subsidisation to an acceptable degree.
East Riding of Yorkshire Council 69 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET Liabilities IAS19 states that the discount rate used to place a value on the liabilities should be ‘determined by reference to market yields on high quality corporate bonds at the reporting date’. In addition, ‘the currency and term of the high quality corporate bonds used to set the discount rate shall be consistent with the currency and terms of the liabilities’. The approach to setting the recommended discount rate as at 31 March 2019 follows the same principles to those adopted at 31 March 2018. At 31 March 2017, the “Hymans Robertson” corporate bond yield curve was constructed based on the constituents of the iBoxx AA corporate bond index. To improve accuracy, the actuary has determined that a separate discount rate should be calculated for individual employers, dependent on their own weighted average duration. This Council has been classified as having a weighted average duration between 17 and 23 years which is in the ‘medium’ discount rate category. The main demographic assumption to which the valuation results are most sensitive is that relating to the longevity of the Fund’s members. As a member of Club Vita, the baseline longevity assumptions that have been adopted are a bespoke set of Vitacureves specifically tailored to fit the membership profile of the Fund. The actuary has not changed their demographic assumptions since 31 March 2017 and therefore no remeasurement has been made. In the short term the actuary has assumed that increases in life expectancy observed up to 2010 will start to tail off immediately, resulting in life expectancy increasing less rapidly than has been seen over the last decade or two. This could be described as an assumption that improvements have ‘peaked’. Other demographic assumptions include assumptions for ill health retirements, family details, and commutation of pension. The recommended retail price index (RPI) inflation assumption is based on the use of a market implied inflation curve over a range of maturities. The pension increase assumption is set in line with the actuaries default consumer price index (CPI) assumption. As a market in CPI linked bonds does not exist, the actuary estimates the long term gap between the RPI and CPI in order to derive a CPI assumption for accounting purposes. Our default assumed RPI-CPI gap will be 1.0% p.a. (unchanged from the 2018 accounting exercise). As at 31 March 2017, the long term pay growth assumption is RPI minus 0.8%. This reflects both short term pay constraints and the belief that general economic growth and hence pay growth may be at a lower level than historically experienced for a prolonged period of time. This assumption is made in respect of general level of salary increases (as a result of inflation and other macroeconomic factors). A separate allowance for expected pay rises granted in the future as a result of promotion.
31 March 2018 31 March 2019 % p.a % p.a Mortality Assumptions: Longevity at 65 for current pensioners: 21.7 years Men 21.7 years 24.2 years Women 24.2 years Longevity at 65 for future pensioners: 23.7 years Men 23.7 years 26.4 years Women 26.4 years 2.4 Pensions increase rate (CPI) 2.5 2.6 Rate of increase in salaries 2.7 2.7 Rate for discounting scheme liabilities 2.4 Take-up of option to convert annual pension into lump sum 60.0% Pre April 2008 service 60.0% 80.0% Post April 2008 service 80.0%
East Riding of Yorkshire Council 70 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
The estimation of the defined benefit obligations are sensitive to the actuarial assumptions as set out in the table above. The actuary has determined sensitivity analyses as detailed below:
Approximate Approximate % increase to monetary Employer Liability amount %£000
0.5% decrease in Real Discount Rate 10 176,712 1 year increase in member life expectancy 3-5 0.5% increase in the Salary Increase Rate 2 25,281 0.5% increase in the Pension Increase Rate 9 148,536
The costs of a pension arrangement require estimates regarding future experience. The assumptions used are largely prescribed at any point and reflect market conditions at the reporting date. Changes in market conditions that result in changes in the net discount rate can have a significant effect on the value of the liabilities reported. A reduction in the net discount rate will increase the assessed value of liabilities as a higher value is placed on benefits paid in the future. A rise in the net discount rate will have an opposite effect of similar magnitude. The longevity assumptions (member life expectancy) are in line with the Club Vita analysis which was used by the actuary at the formal funding valuation as at 31 March 2016. For sensitivity purposes, the actuary has estimated that a one year increase in life expectancy would approximately increase the Employer’s Defined Benefit Obligation by around 3-5%. In practice, the actual cost of a one year increase in life expectancy will depend on the structure of the revised assumption (i.e. if improvements to survival rates predominantly apply at younger or older ages). The salary increase assumption has been set to consistent with the most recent formal valuation which has assumed the long term pay assumption of RPI -0.8%. The sensitivity analysis shows the impact of an additional salary increase of 0.5% which would increase the employer liability by 2%. Pension increase assumptions are based on CPI which is calculating as RPI less 1.0% p.a. An additional 0.5% increase in the pension rate would increase the employer liability by 9%. The approach taken in preparing the sensitivity analysis shown is consistent with that adopted in the previous year. Asset and Liability Matching Strategy The Fund does not have a formal Asset and Liability Matching Strategy, but it does select investments that are expected to meet the payment of liabilities over the long term and this is set out in its Investment Strategy. The Fund’s primary long term risk is that the Fund’s assets do not meet its liabilities, i.e. the benefits payable to its members. Therefore, the aim of the Fund’s investment management is to achieve the long term expected rate of return with an acceptable level of risk. The Fund achieves this through setting the strategic asset allocation on a triennial basis, following the latest actuarial valuation, which is expected to achieve the target rate of return over the long term. The Fund’s appetite for risk will vary depending on market conditions and the types of investments available to it but will be commensurate with meeting the long term target investment rate of return. The Fund has a dedicated strategic risk register which identifies the key risks inherent in the Pension Fund, an estimate of the severity of each risk, and the risk controls that are in place to mitigate these risks. The risk register is reviewed by the Pensions Committee on a semi-annual basis. In addition, a risk management schedule is reviewed by the Pensions Committee on a quarterly basis which considers issues such as performance, regulation and compliance, and personnel. The Pension Fund section of the accounts provides further details on the how risk is managed and the investments in place. Impact on the Council’s Cash flows One of the main objectives of the scheme is to maintain a relatively stable employer contribution rate. The Council’s contribution rate is determined by the actuary and is currently set at 15.3% of pensionable pay as a result of the 31 March 2016 valuation. The rate was 15.3% in the previous valuation and will remain at 15.3% until 31 March 2020. Past service deficit lump sums from 1 April 2017 will be £4.179m annually until 31 March 2020. However, in 2017- 18, the Council prepaid three years of employer contributions for non- school based staff, as agreed with the actuary, with the intention that the Council will receive a discount to recognise that the Pension Fund has received an up- front payment of £58.612m. Staff that are based in schools but are part of the LGPS have a different rate of 19.3% as per the 31 March 2016 valuation from 1 April 2017 to 31 March 2020 and the rate includes a contribution to the past service deficit. The latest triennial valuation was completed as at 31 March 2016, with the next valuation due as at 31 March 2019. The scheme will take account of the national changes to the scheme under the Public Pensions Act 2013. Under the Act, the Local Government Pension Scheme in England and Wales and the other main existing public service schemes may not provide benefits in relation to service after 31 March 2014 (or service after 31 March 2015 for other existing public service pension schemes in England and Wales). The Act provides the scheme regulations to be East Riding of Yorkshire Council 71 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET made within a common framework to establish new career average revalued earnings schemes to pay pensions and other benefits to certain public servants. The total contributions expected which relate to the LGPS by the Council in the year to 31 March 2020 is £32.450m. This excludes contributions deducted and paid across from employee members of the scheme. g) Pension Schemes Accounted for as a Defined Contribution Schemes The Teachers Pension Scheme The Council pays an employer’s contribution to the Department for Education in respect of teachers’ pension costs based on a percentage of members’ pensionable salary. The Scheme provides teachers with specified benefits upon their retirement. In addition, the Council is responsible for all pension payments relating to added years awarded, together with the related increases. The Scheme is an unfunded statutory public service pension scheme with the benefits underwritten by the Government. The Scheme is financed by payments from the employer and from those current employees who are members of the Scheme, who pay contributions at different rates which depend on their salaries. The Scheme is a multi employer scheme; therefore the Council is not able to identify its share of the underlying financial position and performance of the scheme with sufficient reliability for accounting purposes. The Scheme Actuary completed an actuarial valuation of the Scheme as at 31 March 2012 (report issued June 2014). The actuary valuation recommended an increase to the employers contribution rate from 14.1% to 16.4% and this will be effective from 1 September 2015 to 31 March 2019. For the purposes of these accounts, the scheme is accounted for as a defined contribution scheme. As a proportion of the total contributions into the Teachers’ Pension Scheme during 2018/19, the Council’s own contributions equate to 16.48% (16.48% in 2017/18). In 2018/19, the Council paid £9.971m (£10.581m in 2017/18) to the Teachers Pensions Agency. A balance of contributions of £0.800m is owed to the Teachers Pension Agency as at 31 March 2019. The contributions expected to be paid in the next financial year are £9.143m. The Council is responsible for the costs of any additional benefits awarded upon early retirement outside of the teachers pension scheme. These are accounted for on a defined benefit basis and are included in the assets and liabilities detailed above (amounts are shown separately for information below). The discretionary pensions funded on an ongoing basis were awarded in previous years; no new benefits have been awarded in 2017/18 or 2018/19.
2017/18 2018/19 £000 £000
Teachers 10,581 Employer primary contributions 9,971 1,482 Discretionary pensions funded on an ongoing basis 1,473
The NHS Pension Scheme (NHSPS) The Council pays an employer’s contribution to the Department of Health in respect of NHS staff pension costs, based on a percentage of members’ pensionable salary. The Scheme provides NHS staff with specified benefits upon their retirement. The Scheme provides pensions to employees who have worked in the National Health Service. The Scheme is an unfunded statutory public service pension scheme with the benefits underwritten by the Government. The Scheme is financed by payments from the employer and from those current employees who are members of the Scheme, who pay contributions at different rates based on pay and as specified in the regulations. The rate of employer contributions is typically set following an actuarial valuation. An actuarial valuation of the scheme was carried as at 31 March 2012, with the recommendations becoming effective as at 1 April 2015. This resulted in an increase to the employer contribution rate to 14.38% (14.3% in 2016/17) that is payable from 1 April 2017. For the purposes of these accounts the scheme is accounted for as a defined contribution scheme. As a proportion of the total contributions into the NHSPS during 2018/19 the Council’s own contributions equate to 14.38%. In 2018/19 the Council paid £0.062m to the NHSPS. There are contributions remaining payable to the NHSPS of £0.008m as at 31 March 2019 which relate to 2018/19. The contributions expected to be paid in the next financial year are £0.079m. The Council is responsible for the costs of any additional benefits awarded upon early retirement outside of the scheme and this would be funded from the Public Health ring fenced grant. There were no additional benefits awarded in 2017/18 or 2018/19.
East Riding of Yorkshire Council 72 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
28. USABLE RESERVES
The Council keeps a number of reserves in the Balance Sheet. Some are required to be held for statutory reasons, some have been set up voluntarily to earmark resources for future spending plans and others are needed to comply with proper accounting practice. Usable reserves are those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use, for example the Usable Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt.
Balance Net Balance Net Balance 31 March Movement 31 March Movement 31 March Further Detail 2017 in-year 2018 in-year 2019 of Movements £000 £000 £000 £000 £000 Usable Reserves 14,830 346 General Fund 15,176 -2,206 12,970 MiRS page 19 3,944 341 Housing Revenue Account 4,285 377 4,662 MiRS page 19 710 -34 Capital Grant Unapplied Account 676 -65 611 Note 30 below 136,867 12,027 Earmarked Reserves 148,894 12,605 161,499 Note 31 below 14,595 3,084 Usable Capital Receipts 17,679 4,720 22,399 Note 32 below 41,662 2,290 Major Repairs Reserve 43,952 2,310 46,262 HRA note 7c 212,608 18,054 230,662 17,741 248,403
29. CAPITAL GRANTS UNAPPLIED ACCOUNT RESERVE
These reserves hold capital grants and contributions recognised through the Comprehensive Income and Expenditure Statement as income, but which have not yet been applied to fund expenditure. When the expenditure is eventually incurred, the relevant grant or contribution is transferred to the Capital Adjustment Account. As these transactions are in advance of the actual expenditure, it may become apparent that the income is to be used for revenue rather than capital purposes or vice versa, hence the transfer between revenue reserves and the General Fund, also made within this account.
East Riding of Yorkshire Council 73 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET 30. EARMARKED REVENUE RESERVES
31 March Total 2017 Movement in- 31 March Movement Expenditur 31 March Restated year restated 2018 in-year Income e 2019 £000 £000 £000 £000 £000 £000 £000
00A164 Jocks Lodge Reserve 0 10,018 10,450 -433 10,018 13,851 2,277 Adult Services Reserve 16,128 2,520 5,799 -3,279 18,648 1,738 208 Bridlington Schools PFI Reserve 1,946 105 352 -247 2,051 4,131 1,000 Business Rates Reserve 5,131 0 0 0 5,131 00Culture & Customer Service Development & Renewal 0 2,153 2,231 -78 2,153 65 -27 Calibration Test Centre Reserve 38 2 2 0 40 5,127 990 Capital Investment Fund 6,117 4,891 7,812 -2,921 11,008 5,360 -1,462 Children's Services Reserve 3,898 -1,220 0 -1,220 2,678 765 1,000 Debt Management Reserve 1,765 500 500 0 2,265 411 92 Development Control Reserve 503 39 197 -157 542 41,750 3,393 Economic Development & Bridlington Regeneration Reserve 45,143 -9,711 6,868 -16,579 35,432 238 53 Employment, Education & Skills 291 -190 0 -190 101 15,177 -379 Efficiency Fund 14,798 2,637 4,190 -1,553 17,435 687 0 Election Reserve 687 -82 0 -82 605 81 6 Emergency Planning Reserve 87 136 141 -5 223 22 -13 Extended Schools Reserve 9 1 3 -2 10 1,254 0 Financial Systems Development and Replacement Reserve 1,254 551 816 -265 1,805 00Home to School Transport Reserve 0 125 125 0 125 2,386 707 Highways & Flooding Reserve 3,093 180 1,531 -1,351 3,273 3,581 2,892 ICT Replacement & Investment Fund 6,473 2,168 7,693 -5,525 8,641 8,837 -752 Individual Schools Budget * 8,085 241 747 -506 8,326 218 0 Local Public Service Agreeement (LPSA) Reserve 218 -218 0 -218 0 298 0 Procurement and Supplies Reserve 298 0 0 0 298 10,050 -928 Property Services Reserve 9,122 -2,863 1,532 -4,395 6,259 1,674 355 Public Health Reserve 2,029 80 161 -80 2,109 0120Refurbishment Reserve 120 40 80 -40 160 100 -22 Regional Growth Fund 78 -31 0 -31 47 2,797 -255 Revenue Grant and Contributions Unapplied Reserves 2,542 847 2,289 -1,443 3,389 269 0 Safety Camera Reserve 269 0 0 0 269 1,352 -441 School Improvement Reserve 911 -44 404 -448 867 9,366 2 Self Insurance Reserve 9,368 0 0 0 9,368 1,076 430 Service Development and Renewals Reserve 1,506 -883 375 -1,257 623 663 2,468 Vehicle Renewals Reserve 3,132 547 2,362 -1,815 3,679 3,398 158 Waste Management Reserve 3,556 47 590 -543 3,603 145 154 Yorhub Reserve 299 20 19 0 319 136,867 12,026 148,894 12,606 57,269 -44,663 161,499 * Individual Schools Budget consists of: 12,114 -1,210 Unspent schools' budget 10,904 664 11,568 -3,862 868 Overspent schools' balances -2,994 -322 -3,316 585 -410 Centrally managed services 175 -101 74 8,837 -752 8,085 241 8,326
A164 Jocks Lodge Reserve – this reserve has been set up for the Council’s contribution to the A164 and Jocks Lodge Junction Improvement Scheme. The Department for Transport will contribute over £40m to the scheme. Adult Services Reserve - this reserve has been created to assist the management of anticipated future pressures resulting from the increasing cost and demand for adult social care. Bridlington Schools PFI Reserve - the Bridlington PFI scheme is a 25 year contract due to finish in 2028. As part of the scheme, unitary charge payments are paid to the PFI provider, offset by government grant and contributions from schools. Business Rates Reserve - this reserve has been established to manage the risk of fluctuations in the business rates yield. Culture & Customer Services Development & Renewal – this reserve is used to fund services development works, including site refurbishment of plant and equipment costs, and unplanned pressures, such as income risk within Culture and Customer Services. Calibration Test Centre Reserve - this reserve is used to carry forward any surplus made by the Calibration Test Centre, which operates as a partnership between the four Humber Authorities, with East Riding as the host partner. The CTC provides Metrology and Calibration services in the area. The partners plan to build-up a sufficient balance to allow for renewal of specialist equipment should the need arise. Capital Investment Fund - this reserve holds budgeted revenue funding of the capital programme which has not yet been applied to schemes, either because the scheme spend has been reprofiled into later years or to allow greater flexibility in funding future service investment.
East Riding of Yorkshire Council 74 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET Children’s Services Reserve - this reserve has been earmarked to fund areas of improvement following service inspections, and to ensure that child protection services are sound. In addition, the reserve was used in 2018/19 to balance the Children’s Services budget to the budget targets in the financial plan and to fund the outturn overspend. No use of the reserve was initially available in 2019/20 due to the projected overall pressures on the Children, Families and Schools budget during the 2018/19 financial year. The reserve is also used to set aside temporary funding for the troubled families programme approved by Cabinet and other temporary funding set aside for Children’s Service’s budgets in future years. Debt Management Reserve - this reserve includes amounts set aside to cover unforeseen exceptional debt write offs that were previously covered by a subjective bad debt provision and may not be provided for when debts are objectively impaired. The benefit of such a reserve, should it be called upon, would be to prevent significant variations between years. The reserve is also available to manage potential fluctuations in housing benefit subsidy entitlement, debt management costs and fluctuations in interest receipts. Development Control Reserve - this reserve is earmarked to fund future service developments, including backscanning. Economic Development & Bridlington Regeneration Reserve - the purpose of the reserve is to provide match funding for regeneration projects and take advantage of economic development and regeneration opportunities across the East Riding area including funding for approved capital projects for the regeneration of Bridlington in accordance with the Area Action Plan. Efficiency Fund - this reserve has been created from revenue budget savings. It will be used to mitigate the impact of the Government’s cuts to local government funding, to provide pump priming investment for projects that are expected to improve services and generate efficiency savings, and to support other one-off pressures arising from savings initiatives, such as redundancy costs. Election Reserve - elections of councillors within the East Riding of Yorkshire Council and all the town and parish councils within its area take place every four years. The costs of these elections are borne by the Council although those costs that relate to town and parish councils are subsequently recharged to them. In order to avoid a significant budget pressure every fourth year, it has been the Election department’s practice to make contributions to the Election Reserve when appropriate, which will then be used to cover these costs. In light of legislative changes this reserve may also be required to cover any costs arising from additional elections or local referendums. Emergency Planning Reserve - this reserve holds planned savings made by Humber Emergency Planning Service (HEPS) as a contingency for the HEPS function, as agreed by the Unitary Finance Officers for emergency planning. HEPS is a joint arrangement between the four local authorities in the Humber region. Employment, Education & Skills Reserve - this reserve contains the balance of specific funding which is for use on the Employment, Education & Skills Service. The reserve is, in part, held to manage resources that are received on an academic year basis but spent within financial years. Extended Schools Reserve - this reserve holds balances ring-fenced to schools, relating to the support services they are required to provide to the community under the Every Child Matters Agenda. Financial Systems Development and Replacement Reserve - this reserve is to fund Finance Service developments including, the integration of the ledger with other systems, Procure to Pay, systems implementation, enhancement, upgrades and other associated costs. The financial system is integral to the financial standing of the Council and the effective stewardship of public funds. Highways & Flooding Reserve - this reserve has been established to help manage the impact of weather events in the area’s infrastructure. Home to School Transport Reserve - the home to school transport budget is significantly affected each year by the fluctuating number of school days in each financial year, which is dependent on the timing of the Easter holidays. This reserve was created to reduce the impact of these fluctuations by allowing transfers to and from the reserve, according to the actual number of school days in a financial year. ICT Replacement and Investment Fund - this reserve has been established to ensure that the ICT infrastructure is sustainable and will continue to meet the increased demands of the Council to deliver front line services.
East Riding of Yorkshire Council 75 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET Individual Schools Budget Reserve - this reserve represents balances held by schools under delegated schemes, committed to be spent on the education service. The reserve also includes any balance on those centrally managed school budgets that are funded by the Dedicated Schools Grant. Local Public Service Agreement (LPSA) Reserve - this reserve held the remaining balance of the Performance Reward Grant received from the Government for achieving a wide range of agreed service improvement targets from two separate local public service agreements, LPSA1 and LPSA2. This was being used to fund a range of East Riding and partner organisation initiatives over a number of financial years. Local Safeguarding Children Board Reserve - planned developments in response to national policy change predict equal if not additional demands and obligations on local strategic safeguarding partnerships. The transition to new arrangements whilst continuing to deliver against current expectations, creates additional workload and financial pressure for all safeguarding boards and this reserve is used to meet these demands. Procurement and Supplies Reserve - this reserve was created to fund ongoing procurement transformation project work in order to improve value for money and best practice. Funds can also be used to offset against future downturns in trading, especially with academies and for service developments. Property Services Reserve - planned savings on property revenue budgets are set-aside in this reserve to undertake specific major planned maintenance schemes and for contributions to the replacement of buildings where significant investment is planned as part of the capital programme. This enables the avoidance of future maintenance burdens, achievement of value for money through the use of major contracts, and improvement in the condition and suitability of Council assets extending their potential life. Public Health Reserve - the unused ring-fenced Public Health grant has been transferred to the Public Health reserve to be used to manage and cushion the effect of Public Health pressures and commissioning changes in future years. Refurbishment Reserve - a proportion of rent income is set-aside for future maintenance of pitches and sites. Regional Growth Fund - the reserve is earmarked to fund management costs relating to the Green Port Growth, Regional Growth Fund grant. Revenue Grants and Contributions Unapplied Reserve - this reserve is for grants and contributions received with no condition attached as to their repayment, e.g. no condition to repay to the providing body if not spent by a certain date, but whereas restriction has been placed upon the future use of the grant, either by the awarding body or through an internal decision. The grants and contributions in this reserve will be transferred to the Comprehensive Income and Expenditure Statement to match them to relevant expenditure when it occurs in future financial years. Safer Roads Humber Reserve – Safer Roads Humber is a joint arrangement between East Riding of Yorkshire, Hull City Council, North East Lincolnshire Council, North Lincolnshire Council, Humberside Police and Humberside Fire and Rescue Service. It is responsible for the management and operation of safety cameras and speed awareness courses across the Humber region. The balance on the reserve represents the Council’s share of the amount set-aside for the partnership being dissolved and a risk assessed amount to manage a reduction in income from speed seminars. School Improvement Reserve - the reserve is used to support schools that are currently judged by Ofsted to be satisfactory or require improvement, to attain a good or better Ofsted outcome within 3 years. Self-Insurance Reserve - the Council self funds a proportion of liability, property and motor claims. This includes insurances delegated to schools. Service Development and Renewals Reserve - this reserve is used to fund service development works and unplanned pressures, including site refurbishment and plant and equipment costs within the Environment and Neighbourhood Services Directorate. Vehicle Renewals Reserve - this reserve is required to maintain the replacement and renewal of vehicles which are critical to the delivery of the Council’s services. Waste Management Reserve - this reserve is earmarked to address waste management issues resulting from the requirement to send less waste to landfill and encourage recycling. Yorhub Reserve - this reserve has been set up to hold the Council’s element of the YorHub partnership balance, as at 31 March 2019. It is committed to fund set up costs of future frameworks, involving various procurement exercises and framework initiatives on behalf of the partner authorities in 2019, including the re-procurement of the YORbuild and YORcivils framework and the YORhub Shared Apprentice Programme.
East Riding of Yorkshire Council 76 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET 31. USABLE CAPITAL RECEIPTS
The Usable Capital Receipts Reserve holds the proceeds from the disposal of assets which are restricted by statute from being used for anything other than to fund new capital expenditure or to be set aside to finance historical capital expenditure. The balance on this reserve represents resources that have yet to be applied for these purposes at the year end.
2017/18 2018/19 £000 Note £000 Movements in Realised Capital Resources (Usable Capital Receipts) 5 7,786 Amounts received 9,375 -1,431 Amounts applied to finance new capital investment -966 -1,312 Contribution of housing capital receipts to government pool -1,312 -1,870 Receipts set-aside to repay debt -2,273 -88 To fund disposal costs -104 3,085 Total Increase in Realised Capital Resources in Year 4,720
14,595 Balance as at 1 April 17,680 3,085 In year activity 4,720 17,680 Balance as at 31 March 22,400
32. UNUSABLE RESERVES
Unusable reserves are those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’. This is expenditure incurred but not yet funded. It will however have to be funded in the future, either from taxation or from usable reserves. The purpose of each reserve is explained in the individual notes.
Balance Net Balance Net Balance 1 April Movement 1 April Movement 31 March Further Detail 2017 in-year 2018 in-year 2019 of Movements £000 £000 £000 £000 £000 Unusable Reserves -59 6 Financial Instruments -53 1 -52 Adjustment Account 280,563 1,296 Revaluation Reserve 281,859 -1,104 280,755 Note 34 below -6,427 1,662 Accumulated Absences Account -4,765 -1,302 -6,067 3-15Available-for-sale Reserve -12 12 0 -364,492 -327 Pensions Reserve -364,819 -118,993 -483,812 Note 35 below 745,899 23,601 Capital Adjustment Account 769,500 39,733 809,233 Note 36 below 2,903 -1,325 Collection Fund Adjustment 1,578 -680 898 Account 1,245 -288 Deferred Capital Receipts Reserve 957 -5 952 659,635 24,610 684,245 -82,338 601,907
33. FINANCIAL INSTRUMENT ADJUSTMENT ACCOUNT
The Financial Instrument 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. The Council uses the account to manage the issuing of soft loans, which are loans that are made at less than the market rate in order to achieve a specific service objective. The adjustment account is used to charge the interest foregone over the lifetime of the loan, rather than all in the year of issue. It also ensures that the effective interest credited to the Comprehensive Income and Expenditure Statement, as required by the Code, is replaced with the actual interest received in the General Fund Balance.
East Riding of Yorkshire Council 77 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET 34. REVALUATION RESERVE
The Revaluation Reserve records increases in the valuation of any property, plant or equipment asset above its historical cost since 1 April 2007, the date the Reserve was created. Accumulated gains arising before that date are consolidated into the Capital Adjustment Account. The total balance on the Revaluation Reserve is the sum of individual balances for each asset. Any subsequent reductions in the value of assets with a Revaluation Reserve balance due to either impairment or revaluation losses, is reversed out of this account, and with any further reduction in value below historical cost charged to the Comprehensive Income & Expenditure Statement. Individual asset values in the Reserve are written out to the Capital Adjustment Account when the asset is sold or scrapped.
2017/18 2018/19 £000 Note £000 £000 280,563 Balance as at 1 April 281,859 42,302 Upward revaluation of non-current assets 24,006 Downward revaluation and impairment losses not charged to the -13,186 Surplus/Deficit on the Provision of Services -6,157 Surplus or Deficit (-) on revaluation of non-current assets posted 29,116 to the Comprehensive Income and Expenditure Statement Pg 18 17,849 -4,028 Difference between fair value depreciation and historical cost depreciation 36 -3,857 -23,792 Balance of reserve removed for assets sold or scrapped 36 -15,096 -27,820 Amount written off to the Capital Adjustment Account -18,953 1,296 Total Movement in Year -1,104 281,859 Balance as at 31 March 280,755
35. PENSIONS 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 Council accounts for post-employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to the Pension Funds, or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits fall to be paid. The difference between the pension reserve and the net assets and liabilities reflects the remaining year of the payment made to the Pension Fund of £18.8m.
2017/18 2018/19 £000 Note £000 -364,492 Balance as at 1 April -364,819
35,367 Actuarial gains and losses on pension assets and liabilities Page 18 -80,175 Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive -64,824 Income and Expenditure Statement 5 / 27b -69,338 Employer's pension contributions and direct payments to pensions 29,130 payable in the year 5 / 27b 30,520 -327 Total Increase in the account in year -118,993 -364,819 Balance as at 31 March -483,812
East Riding of Yorkshire Council 78 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
36. 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 enhancement as depreciation, impairment losses and amortisation are charged to the Comprehensive Income and Expenditure Statement (with reconciling amounts from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement (the minimum revenue provision). The Account contains gains recognised on donated assets that have yet to be consumed by the Council and also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 5 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.
2017/18 2018/19 £000 Note £000 £000 745,899 Balance as at 1 April 769,500 Reversal of items relating to capital expenditure either debited or credited to the Comprehensive Income and Expenditure Statement -7,885 Revenue expenditure funded from capital under statute 5 -8,236 -8,787 Housing Revenue Account depreciation / amortisation and impairment -9,104 -40,172 General Fund depreciation / amortisation and impairment -37,929 -21,404 Revaluation losses on Property, Plant & Equipment -18,535 8,671 Reversal of past impairment and revaluation losses 16,930 69 Donated assets received 5,945 Amounts of non-current assets written off on sale or scrapped as part of the -39,123 gain/loss on disposal in the Comprehensive Income and Expenditure Statement -38,981 -108,631 -89,910 Amounts written off from the Revaluation Reserve 34 4,028 Additional depreciation for revaluation above historic cost 3,857 23,792 Transfer from Revaluation Reserve for disposals 15,096 27,820 18,953 -80,811 Net amount written out of the cost of non current assets consumed in the year -70,957 Capital financing applied in the year 20 / 5 1,431 Usable receipts applied 966 12,234 Capital expenditure financed from revenue 11,560 7,286 Capital expenditure financed from earmarked reserves 11,338 11,838 Capital expenditure financed from Major Repairs Allowance 11,288 Capital grants and contributions credited to the Comprehensive Income 53,214 and Expenditure Statement that have been applied to capital financing 55,190 Application of grants to capital financing from the Capital Grants 34 Unapplied Account 64 7,164 Grant funded revenue expenditure funded from capital under statute 8,219 Provision for financing of capital investment charged against the 11,211 General Fund (MRP) 12,065 0 Repayment of HRA self-financing debt 104,412 110,690 23,601 Total in-year activity 39,733 769,500 Balance as at 31 March 809,233
East Riding of Yorkshire Council 79 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
37. COLLECTION FUND ADJUSTMENT ACCOUNT
The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax and non-domestic rates income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers and business rate payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.
38. DEFERRED CAPITAL RECEIPTS RESERVE
The Deferred Capital Receipts Reserve holds the gains recognised on the disposal of non-current assets but for which cash settlement has yet to take place. Under statutory arrangements, the Council does not treat these gains as usable for financing new capital expenditure until they are backed by cash receipts. When the deferred cash settlement eventually takes place, amounts are transferred to the Capital Receipts Reserve. Deferred capital receipts include mortgages advanced by the former authorities to former tenants to purchase their council houses and soft loans made to external organisations. Due to statutory mitigation granted under the transition to IFRS, the deferred capital receipts for finance leases entered into before 31 March 2010 continue to be treated as revenue income receivable, with the receipt transferred from deferred capital receipts to the Movement in Reserves Statement. Leases entered into after this time are done so in the full knowledge of the IFRS requirement, therefore deferred capital receipts received from 1 April 2010 become usable capital receipts, i.e. capital not revenue income.
39. CONTINGENT LIABILITIES (a) Business rate appeals The Local Government Finance Act 2012 introduced a business rates retention scheme that enabled local authorities to retain a proportion of the business rates generated in their area. The new arrangements for the business rates came into effect on 1 April 2013. The Council as a Billing Council acts as agents on behalf of Humberside Fire and Rescue Services (1%), Central Government (50%) and ourselves (49%). Under this scheme the Council will assume their share of the liability for refunding ratepayers who have successfully appealed against the rateable value of their properties. The Council has estimated the total provision for appeals in the Collection Fund to be £8.7m and this Council’s share of these appeals at 49% is £4.3m. Appeals received by the valuation office on or after 1 April 2017 relating to the 2010 valuation list cannot be backdated before that date. The valuation office will continue to alter rating assessments if new information comes to light indicating that a valuation is inaccurate – this can only be backdated to 1 April 2015. Consequently, there is potential for any business property’s historical rates liability to change which could result in a further business rates liability or refund being issued by the Council as billing authority, but the timing, amount and probability of these changes are unknown. (b) Beverley Southern Relief Road The council has received over 100 claims under the Land Compensation Act for noise nuisance and other physical factors following the completion of the Beverley Southern Relief road. The value of the claims is currently around £5m. Noise surveys have been undertaken to help assess the validity of claim and any successful claims will be subject to negotiation. The likelihood of success of these claims is unknown and actual costs cannot be reliably determined at this time. (c) Municipal Mutual Insurance (MMI) In addition to the amounts paid to date and the closing provision for outstanding claims there is a potential that further payments could be required under this scheme. Administrators have indicated that this could amount to 28% of claims paid and outstanding, the amount levied by the administrators to date represents 25% of claims paid. Currently, the value, timing and likelihood of further payments cannot be predicted with any certainty. (d) Public Liability Claim The Council has received a public liability claim and the Council’s insurers, at the time, have informed the Council that they are applying a full reservation of rights. As a consequence, there is potential for the Council to have an unknown liability in relation to the claim. Investigations are currently underway and there is a significant uncertainty over the outcome and any potential Council liability, therefore the value, timing and likelihood cannot be predicted with any certainty.
East Riding of Yorkshire Council 80 Statement of Accounts 2018/19 NOTES TO THE BALANCE SHEET
The following notes 40 to 45 comply with International Accounting Standard IAS 32 and International Financial Reporting Standards IFRS 7, 9 and 13 concerning financial instruments. 40. CARRYING AMOUNT OF CATEGORIES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The financial assets and liabilities disclosed in the Balance Sheet are made up of the following categories of financial instrument.
8 Restated 31 March 201 31 March 2019 Total Total T otal T otal Carrying Long Fair Carrying Fair Lon g ter m Current Valu e e Note term Current Valu Value Value £000 £000 £000 £000 £000 £000 £000 £000 Category of Financial Instrument 171 0 171 171 Investments at amortised cost 137 0 137 137 16 0 16 16 Equities designated FVTOCI 1601616 187 0 187 187 Total Included in Long-Term Investments 153 0 153 153 1,271 0 1,271 1,488 Soft loans 1,510 0 1,510 1,532 297 0 297 297 Finance lease receivable 257 0 257 257 133 0 133 133 Other assets at amortised cost 5005050 1,701 0 1,701 1,918 Total Included in Long-Term Debtors 1,817 0 1,817 1,839 0 107,348 107,348 107,348 Investments at amortised cost 0 104,538 104,538 104,538 0 14,243 14,243 14,243 Investments at FVTPL 0 23,101 23,101 23,101 0 186 186 186 Soft loans 0 320 320 320 0212121Finance lease receiveables 0212121 0 24,774 24,774 24,774 Other assets at amortised cost 0 31,204 31,204 31,204 0 146,572 146,572 146,572 Total Included in Current Assets 0 159,184 159,184 159,184 -318,375 -10,421 -328,796 -358,164 Financial liabilities at amortised cost Page 17 -307,816 -10,874 -318,690 -344,291 -318,375 -10,421 -328,796 -358,164 Total Borrowings -307,816 -10,874 -318,690 -344,291 0 -879 -879 -879 PFI and Finance Lease Liabilities 0 -945 -945 -945 0 -26,976 -26,976 -26,976 Financial liabilities carried at contract amount 0 -21,056 -21,056 -21,056 0 -27,855 -27,855 -27,855 Total included in Current Liabilities 0 -22,001 -22,001 -22,001 -12,757 0 -12,757 -11,218 PFI and Finance Lease Liabilities 26 -11,819 0 -11,819 -10,578
-12,757 0 -12,757 -11,218 Total included in Deferred Liabilites -11,819 0 -11,819 -10,578 -136 0 -136 -136 Financial liabilities carried at contract amounts -1360-136-136 -136 0 -136 -136 Total included in Long Term Liabilities -136 0 -136 -136
East Riding of Yorkshire Council -329,380 108,296 -221,084 -248,696 Total Financial81 Instruments -317,801 126,309 -191,492 Statement -215,830 of Accounts 2018/19 1,136,034 Non-financial Instrument Assets and Liabilities 1,041,802 914,950 Net Assets less Total Liabilities Page 17 850,310 NOTES TO THE BALANCE SHEET
Fair Value Financial liabilities and financial assets taking the form of a basic lending arrangement are carried on the Balance Sheet at amortised cost. Their fair value can be assessed by calculating the present value of cash flows that will take place over the remaining terms of the instruments. Disclosure of fair value is not required where the carrying amount is thought to be a reasonable approximation of fair value, such as when the interest rate remains the same for the life of the instrument. The carrying amount for Council House Mortgages is used as a materially accurate estimate of fair value. The interest rate of the mortgages/loans is recalculated every six months in accordance with the Housing Act 1985 S438 Schedule 16. Similarly, prior to 9 January 2017 the loan rate for car loans to employees was reviewed annually in line with the PWLB 5-year annuity rate on 1 April 2016 and presently, the fair value and carrying value are not materially different. Car loans from 9 January 2017 were issued at a below market APR of Bank Rate + 1% qualifying as soft loans. However, as they are below the £30,000 de-minimis level, these are held at par.
Financial Assets Measured At Fair Value
Recurring fair value Input level in fair Valuation technique used As at As at measurements value hierarchy to measure fair value 31/03/2018 31/03/2019 £000 £000
Investments in equity instruments designated at fair value through other comprehensive income Level 3 At cost, method described below 16 16
Investments in LVNAV money market funds classified as fair value Unadjusted quoted prices in active markets through profit and loss Level 1 for identical financial instruments 14,243 23,101
Total 14,259 23,117
Equity instruments that do not have a quoted market price
The Council has three investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be measured reliably, where cost has been used as the best estimate of fair value. These have been classified as equity instruments designated to fair value through other comprehensive income, but as they are held at cost there are no gains or losses to be recognised: An investment of 199 shares, representing a 19.9% shareholding in arvato government services limited, a private limited company, is carried at the nominal value of £199. The remaining shares are held by arvato Limited, the Holding Company of arvato government services (ERYC) limited. The fair value of the shareholding cannot be measured reliably due to restrictions in the contract. The shares were sold back to arvato Limited for £1 per share on 10/04/2019. An investment of 1,693,380 ordinary shares issued, valued at £16,933.80 representing a 39% shareholding in Correct Compliance Ltd a private limited company wholly owned by the four Humber Unitary Authorities. The value of the Authorities fully paid up shares at 31/3/19 is £16,145.40. The Council was granted 1,792,522 deferred shares (47% shareholding) recognised at nil value. The fair value of the shares cannot be determined as they do not have a quoted market price in an active market; therefore the ordinary shares are carried at cost as a proxy for fair value. The company was set up in 1999 to protect the interests of the Authorities when disposing of the Humberside International Airport Ltd. This was achieved through a 999 year head lease that required the ownership of the airport property and operational land to revert back to the Authorities free of charge within the first 10 years if it ceased to be used and promoted as a civil airport, and at market value within 10 to 50 years from the date of sale. The company has no trading function, and no realisable value. The deferred shares are therefore recognised at nil value and the ordinary shares are carried at cost which is deemed to be the best estimate of their fair value. The Council has no intention of disposing of the shares in the near future. An investment of 1 ordinary share, representing a 100% shareholding in Nite Direct Limited, a private limited company, is carried at a nominal value of £1. The company has a year-end date of 30 June. The audited accounts as at 30 June 2018 show a loss of £0.014m and net liabilities of £0.014m. Management accounts as at 31 December 2018 currently show a profit of £0.004m and net liabilities of £0.010m. It is expected that the company will break even and net assets will be nil at 30 June 2019. Therefore the fair value of the shares are deemed to be £1. The Council has no intention of disposing of the shares in the near future.
East Riding of Yorkshire Council 82 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
Transfers Between Levels Of The Fair Value Hierarchy There were no transfers between input levels during the year.
Changes in Valuation Technique With the introduction of IFRS 9 the CIPFA Code removed the Available for Sale classification of financial assets. The Council held certificates of deposit and shares in LVNAV money market funds under this category, both valued at marked-to-market prices. Under the new Code certificates of deposit are now classified and valued at amortised cost. Shares in LVNAV money market funds continue to be valued at marked-to-market prices but are now classified as fair value through profit & loss.
Fair Values of Financial Assets and Liabilities Not Measured at Fair Value
Input level in fair Valuation technique used 31 March 2018 31 Marchyg 2019 value hierarchy to measure fair value Carrying Value Value Value Fair Value £000 £000 £000 £000 Financial Assets Soft loans Level 2 Discounted cash flow 1,271 1,488 1,830 1,852
Total 1,271 1,488 1,830 1,852
Financial Liabilities Financial liabilities at amortised cost PWLB Loans Level 2 Discounted cash flow -328,797 -358,164 -318,690 -344,291 PFI and Liabilities Level 2 Discounted cash flow -13,636 -12,097 -12,764 -11,522
Total -342,433 -370,261 -331,454 -355,813
The fair value of soft loans was determined by calculating the present value of all future cash receipts for each loan using the prevailing market rate of interest for a similar instrument in an organisation with a similar credit rating. Where no such comparison existed, a rate based on the council’s borrowing cost plus an allowance for the risk that the loan will not be repaid, was used. The interest rate estimates used range from 1.5% to 6.88%. The difference between the fair value and carrying amount represents the interest foregone from issuing the loans at below the market rate of interest. The fair value of Public Works Loan Board (PWLB) loans of £344.291m measures the economic effect of the terms agreed with the PWLB compared with estimates of the terms that would be offered for market transactions undertaken at the Balance Sheet date. The difference between the carrying amount and the fair value measure the additional interest that the council will pay over the remaining terms of the loans under the agreements with the PWLB, against what would be paid if the loans were at prevailing market rates ranging between 2.08% and 3.00%. The range of interest rates at 31 March 2019 for PWLB loans was between 2.40% and 9.25%. However, the council has a continuing ability to borrow at concessionary rates from the PWLB rather than from the markets. A supplementary measure of the additional interest that the council will pay as a result of its PWLB commitments for fixed rate loans is to compare the terms of these loans with the new borrowing rates available from the PWLB. If a value is calculated on this basis, the carrying amount of £318.690m would be valued at £368.530m. But, if the council were to seek to realise the projected gain by repaying the loans to the PWLB, the PWLB would raise a penalty charge for early redemption in addition to charging a premium for the additional interest that will not now be paid. The exit price for the PWLB loans including the penalty charge would be £405.323m. The fair value of the Council’s PFI scheme of £11.522m measures the economic effect of the terms agreed with the operator compared with estimates of the terms that would be offered for market transactions undertaken at the Balance Sheet date. The difference between the carrying amount and the fair value measure the reduced interest that the council will pay over the remaining terms of the PFI scheme under the agreement with the operator, against what would be paid if an equivalent loan was taken out at the prevailing market rate on the balance sheet date.
41. MOVEMENTS IN INVESTMENTS AND BORROWINGS
With the removal of the Available for Sale classification of financial assets, certificates of deposit are now classified as Amortised Cost. Shares in LVNAV money market funds are now classified as fair value through profit & loss. The Council’s three investments in equity instruments have been designated to fair value through other comprehensive income. There has been no derecognition of financial assets. The following shows the impact of this change on the balances at 31 March 2018.
East Riding of Yorkshire Council 83 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
Reclassification of Financial Assets
As at Restated as at Previous Classification 31/03/2018 New Classification 31/03/2018 £000 £000 Investment Loans & Receivables 171 Investment assets at Amortised Cost 171 Investment assets designated at Fair Value Unquoted equity investment at cost 6 Through Other Comprehensive Income 6 Long-Term 177 Long-Term 177 Investment Loans & Receivables 97,316 Investment assets at Amortised Cost 107,348 Investment assets at Fair Value Through Available for Sale 24,263 Profit & Loss 14,243 Current 121,579 Current 121,591
42. DEFAULTS AND BREACHES
There have been no defaults of loans payable as at 31 March 2019.
43. COLLATERAL
(a) Collateral pledged The Council has not pledged any financial assets as collateral for liabilities or contingent liabilities in 2018/19 as this is not permitted under Section 13 of the Local Government Act 2003.
(b) Collateral held Where the Council is permitted to sell or re-pledge collateral in the absence of default by the owner of the collateral, the Code requires its fair value to be disclosed. At 31 March this was £15.084m (2017/18 £14.185m), including £9.610m for Right-to-Buy discounts and £1.990m for housing grants which may or may not be repayable depending on certain time-expiring conditions. The figures exclude collateral held for council tax and non-domestic rates as required by the Code. The Council holds collateral by way of security on property for Right-to-Buy discounts, Social Services Residential Charges, legal charges for grants and loans, mortgages held by the Council, and general credit debts. The Council chooses not to sell or re-pledge the collateral it holds on the basis of the vulnerability of many of the parties concerned, the time-expiry of the discounts, loans and grants, and the considered opinion that the categories are thought to be of such little commercial value that it is unlikely that they would be an attractive proposition for a third party.
(c) Collateral obtained The Council has not taken possession of any collateral during this accounting period.
44. FINANCIAL INSTRUMENT GAINS/LOSSES
The gains and losses recognised in the Comprehensive Income and Expenditure Statement in relation to financial instruments are made up as follows:
East Riding of Yorkshire Council 84 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
Financial Liabilities Financial Assets Liabilities Balances Held Measured at Measured Total Measured at Finance on Behalf of Amortised Measured at Note Amortised Cost Leases Others Cost at FVTPL FVTOCI At 31 March 2019 (contracted amounts) £000 £000 £000 £000 £000 £000 £000 Net Cost of Services Fee expenses 53 11 0 85 10 0 159 53 11 0 85 10 0 159 Financing and Investment Income and Expenditure Interest payable on PWLB borrowing 12,023 0 0 0 0 0 12,023 Interest payable on other borrowing 0 0 0 0 0 0 0 Other interest payable 0 8 156 0 0 0 164 Impairment losses 0 0 0 92 0 0 92 Total Expense in Surplus/Deficit on the Provision of Services 12,279 Interest and investment income 0 -21 -28 -1,242 -145 0 -1,436 Net Financing and Investment Income and Expenditure 7b 12,023 -13 128 -1,150 -145 0 10,843 Other Comprehensive Income and Expenditure Gains on revaluation 0 0 Losses on revaluation 0 0 Amounts recycled to the surplus or deficit on the provision of services after impairment 0 0 Net (Gain)/Losses for the Year 12,076 -2 128 -1,065 -135 0 11,002
Financial Liabilities Financial Assets Liabilities Available- Total Measured at Finance Balances Held on Loans and for-sale Note Amortised Cost Leases Behalf of Others Receivables Assets At 31 March 2018 (contracted amounts) £000 £000 £000 £000 £000 £000 Net Cost of Services Impairment losses 0 0 0 542 0 542 Fee expenses 52 10 0 84 9 155 52 10 0 626 9 697 Financing and Investment Income and Expenditure Interest payable on PWLB borrowing 12,620 0 0 0 0 12,620 Interest payable on other borrowing 0 0 0 0 0 0 Other interest payable 0 9 159 0 0 168 Total Interest Payable 12,788 Interest and investment income 0 -38 -11 -750 -80 -879 Net Interest and Investment Income 12,620 -29 148 -750 -80 11,909 Other Comprehensive Income and Expenditure Gains on revaluation 00 Losses on revaluation 12 12 Amounts reecycled to the surplus or deficit on the provision of services after impairment 00 Net (Gain)/Losses for the Year 12,672 -19 148 -124 -59 12,618
45. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Council is a local authority as defined by the Local Government Act 1972, and primarily provides statutory services to its population on a not-for-profit basis. As such, few financial instruments are used by way of commercial business. However, the funding mechanism means that, during the year, the Council may hold substantial assets and liabilities. The Council uses financial instruments to manage the risks arising from holding assets and liabilities; it does not undertake financial instruments for trading or speculative purposes. Instruments commonly used to hedge financial and treasury type risks include derivative securities, such as an option, future or swap, of which the criteria and value are determined by those of an underlying asset. The Council has not used any derivative financial instruments. The Council has adopted the CIPFA Code of Practice for Treasury Management in Public Services. It maintains and operates a Treasury Management Policy comprising an overview of the principles and practices to which the activity will comply. Alongside this Policy, the Department for Communities and Local Government has issued guidance under section 15(1) (a) of the Local Government Act 2003, to which local authorities must have regard. Annually, the Council approves a Treasury Management Strategy for the forthcoming year. Taken together, these documents form the structure for managing risk. The main financial risks arising from the Council’s activities are credit risk, liquidity risk and interest rate risk. The way these risks are managed is summarised below. Other risks include insurance risk, price risk and foreign exchange risk, although the Council has limited exposure to those instruments.
East Riding of Yorkshire Council 85 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
(a) Credit risk Credit risk is the probability that other parties might fail to pay amounts due to the Council. Appropriate credit limits have been established by the Council for individual counterparties for treasury management purposes. As a statutory service provider, the Council is not able to apply normal commercial principles to credit risk for all its counterparties. The Council’s Treasury Management Policy specifies the following framework for credit limits:
Actual at Maximum Actual at 31/03/18 Limit 31/03/19 £000 £000 £000 Specified Investments (limit per counterparty) 0 UK Government Unlimited 0 8,300 Institutions or funds with a minimum rating of AAA/A1 20,000 4,710 5,000 Institutions with a minimum rating of AA-/A2 15,000 10,000 10,000 Institutions with a minimum rating of A-/A2 10,000 10,000 5,000 Local Authorities 20,000 7,000 0 Building Societies - assets greater than £5,000 million 5,000 0 0 Building Socieites - assets greater than £1,000 million 2,500 0 0 Building Societies - assets greater than £250 million 1,000 0 Non-Specified Investments (limit per counterparty) 0 Other non-specified investments 5,000 0 0 Investments with any institution for more than 365 days 5,000 0 Loans (limit per counterparty) 0 Other Public Bodies and Educational Establishments 5,000 0 197 Wholly Owned Companies or Associates 5,000 166 0 Partnership Arrangements 5,000 0 Other Limits (on day of investment) 10,000 10% of the portfolio with a single institution 13,225 10,000 14,000 15% of the portfolio with a group with common ownership 19,837 10,000 5,000 25% of the portfolio in Asia 33,061 10,000 10,000 25% of the portfolio in Australia & New Zealand 33,061 10,000 25,050 25% of the portfolio in non-UK Europe 33,061 15,000 0 25% of the portfolio in Middle East 33,061 0 10,000 25% of the portfolio in North America (including Canada) 33,061 25,000 8,300 20% of the portfolio with individual funds 26,449 4,710 0 Aggregate value of Non-specified Investments 30,000 0 197 Aggregate value of Loans 30,000 166
The aggregate value of loans will not exceed £30 million at any one time. There was one such investment: a £0.166 million loan to Nite Direct Marketing Ltd. at 31 March 2019 (£0.197m at 31 March 2018). The above table shows the maximum credit risk associated with an individual counterparty, rather than separate investments. Investments with the Council’s own bank are permitted to exceed the institutional and portfolio limits on an overnight basis when unexpected income is received. Treasury credit risk has been managed dynamically during the year, responding to national and international events in financial markets. Security of principal sums invested continues to be the prime objective. The duration of investments is limited to a maximum of twelve months to enable a reasonable exit strategy to be implemented if necessary. The Council makes use of Low Volatility Net Asset Value (LVNAV) Money Market Funds which are instant access funds whose objectives match those of the Council, being security of principal and diversification of investments. Total credit risk associated with all investments, including accrued interest, is as follows:
East Riding of Yorkshire Council 86 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
Actual at Actual at 31/03/18 31/03/19 £000 £000 Specified Investments 14,243 Institutions or funds with a minimum rating of AAA/A1 23,101 25,141 Institutions with a minimum rating of AA-/A2 35,180 59,182 Institutions with a minimum rating of A-/A2 50,237 23,031 Local Authorities 24,092 Loans 203 Wholly Owned Companies or Associates 170 121,800 132,780
Expected Credit Losses
The Council has assessed its short and long term investments at amortised cost, using average cumulative credit loss rates published by the Moody’s credit rating agency for those with credit ratings. The total expected credit loss calculated was below £10,000, therefore not material and no impairment allowances have been made.
All sundry debtors past due are assessed for expected credit loss and the level of impairment allowance has been calculated with changes in loss allowances accounted for against Financing Investment Income and Expenditure in the surplus or deficit on the provision of service. The approach taken is to individually assess those over £10,000 and to do so collectively for the others based on an aged debt analysis using historical default rates. Debt over 6 years old are impaired at 100%.
Finance Lease receivables have been assessed and there was no evidence to suggest an impairment allowance is required. (b) Liquidity risk Liquidity risk is the risk that the Council is not able to meet its financial obligations as they fall due or can do so only at an excessive cost. The Council’s policy is to maintain sufficient funds in a liquid form at all times to ensure that it can cover all fluctuations in cash flow and to meet its financial obligations. This is achieved by holding a prudent level of assets in short-term wholesale funds together with undrawn, committed borrowing facilities. Local authorities also have ready access to borrowing from the Public Works Loans Board. Refinancing risk is managed by limiting the amount of borrowing that matures within any specified period. The table below analyses the Balance Sheet by significant class of asset and liability into relevant maturity bands based on the remaining period at the balance sheet date to the contractual maturity date. The figures are analysed gross to better reflect the purpose of the disclosure, therefore there is no obvious link comparing net assets to total equity unless the balance sheet figures are considered in the same manner.
Not more More No than 3 3 - 12 than 5 specific At 31 March 2019 months months 1 -5 years years maturity Total Note £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,564,099 1,564,099 Cash & cash equivalents 32,547 0 0 0 0 32,547 46 Other assets 98,518 72,182 1,259 610 3,962 176,531 Total Assets 131,065 72,182 1,259 610 1,568,061 1,773,177 Page 17 Liabilities Borrowing 0 10,874 55,080 252,736 0 318,690 40 Other liabilities 93,689 24,790 10,751 472,755 2,192 604,177 Usable reserves 1,840 5,839 10,018 0 230,707 248,404 28 Unusable reserves -6,066 2 0 -482,913 1,090,883 601,906 32 Total Liabilities 89,463 41,505 75,849 242,578 1,323,782 1,773,177 Page 17 Liquidity Surplus/(Gap) 41,602 30,677 -74,590 -241,968 244,279 0
East Riding of Yorkshire Council 87 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
Not more than 3 3 - 12 More than No specific At 31 March 2018 months months 1 -5 years 5 years maturity Total Note £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,520,659 1,520,659 16 Cash & cash equivalents 16,558 0 0 0 0 16,558 54 Other assets 130,876 72,026 1,138 706 4,906 209,652 Total Assets 147,434 72,026 1,138 706 1,525,565 1,746,869 Page 17 Liabilities Borrowing 0 10,422 58,132 260,243 0 328,797 48 Other liabilities 97,065 19,906 10,062 334,779 2,210 464,022 Usable reserves 1,294 4,512 0 0 224,859 230,665 33 Unusable reserves -4,776 3 0 -324,772 1,052,930 723,385 37 Total Liabilities 93,583 34,843 68,194 270,250 1,279,999 1,746,869 Page 17 Liquidity Surplus/(Gap) 53,851 37,183 -67,056 -269,544 245,566 0
(c) Interest Rate risk The Council is exposed to movements in interest rates reflecting the mismatch between the dates on which interest receivable on assets and interest payable on liabilities are next reset to market rates or, if earlier, the dates on which the instruments mature. The Council manages this exposure by borrowing mainly at fixed rates and on a principal repayment basis for longer dated liabilities, thus maintaining a stable charge to Financing and Investment Income and Expenditure in the Comprehensive Income and Expenditure Statement. The table below analyses the Balance Sheet by asset and liability class and summarises interest rate sensitivity exposure as at 31 March 2019. Items are allocated to time bands by reference to the earlier of the next interest rate repricing date and the maturity date.
Not more More than 3 3 - 12 than 5 Non- At 31 March 2019 months months 1 -5 years years Interest Total Note £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,564,099 1,564,099 Cash & cash equivalents 25,802 0 0 0 6,745 32,547 46 Other assets 35,329 70,031 1,190 412 69,569 176,531 Total Assets 61,131 70,031 1,190 412 1,640,413 1,773,177 Page 17 Liabilities Borrowing 0 10,874 55,080 252,736 0 318,690 40 Other liabilities 1,782 3,140 0 11,819 587,436 604,177 Usable reserves 0 55,385 0 0 193,019 248,404 28 Unusable reserves 0 2 0 -483,812 1,085,716 601,906 32 Total Liabilities 1,782 69,401 55,080 -219,257 1,866,171 1,773,177 Page 17 Interest Rate Surplus/(Gap) 59,349 630 -53,890 219,669 -225,758 0
Not more than 3 3 - 12 More than Non- At 31 March 2018 months months 1 -5 years 5 years Interest Total Note £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,520,658 1,520,658 16 Cash & cash equivalents 12,081 0 0 0 4,477 16,558 54 Other assets 38,217 69,944 612 907 99,973 209,653 Total Assets 50,298 69,944 612 907 1,625,108 1,746,869 Page 17 Liabilities Borrowing 0 10,422 58,132 260,243 0 328,797 48 Other liabilities 11,515 2,883 0 12,757 436,867 464,022 Usable reserves 0 51,531 0 0 179,134 230,665 33 Unusable reserves -12 3 0 -325,675 1,049,069 723,385 37 Total Liabilities 11,503 64,839 58,132 -52,675 1,665,070 1,746,869 Page 17 Interest Rate Surplus/(Gap) 38,795 5,105 -57,520 53,582 -39,962 0
East Riding of Yorkshire Council 88 Statement of Accounts 2018/19
NOTES TO THE BALANCE SHEET
If interest rates had been 0.5% higher throughout the year, based on the transactions undertaken in the year and all other variables constant, the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement would have benefited by £0.815m, comprising £0.815m additional interest income on investments. There would be no additional interest charges as the borrowing portfolio is fixed, and no additional borrowing has been taken in year. A 0.5% fall in interest rates would have resulted in a decrease to interest rate receipts of £0.815m. There would be no material impact on the Balance Sheet and Other Comprehensive Income and Expenditure since the carrying amount of the respective assets and liabilities is a reasonable approximation of fair value.
East Riding of Yorkshire Council 89 Statement of Accounts 2018/19 NOTES TO THE CASH FLOW STATEMENT
46. CASH AND CASH EQUIVALENTS
The balance of cash and cash equivalents is made up of the following elements:
2017/18 2018/19 £000 £000 3,001 School bank balances 4,007 26 Petty cas h im p rest acco u n ts 24 40 Cash floats 42 14,294 Cash equivalents 28,105 -803 Cash at bank 369 16,558 Cash and cash equivalents Page 17 32,547
47. ADJUSTMENT TO NET SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES FOR NON CASH MOVEMENTS
2017/18 2018/19 £000 Note £000 -41,816 Depreciation 5 -42,114 -19,242 Impairment and downwards valuation 5 -5,883 -634 Amortisation 5 -640 0 Increase (-) / decrease in impairment provision for bad debts 0 -195 Increase (-) / decrease in creditors 5,438 40,768 Increase / decrease (-) in debtors -8,785 1,053 Increase / decrease (-) in inventories -934 -35,694 Pension liability 5 -38,818 -39,123 Carrying amount of non-current assets (and those held for sale) sold 5 -38,981 -1,482 Other non-cash items charged to the Surplus or Deficit 4,972 -96,365 Total non-cash movements in surplus or deficit on the provision of services -125,745
48. ITEMS INCLUDED IN OPERATING ACTIVITIES AND ADJUSTMENT FOR ITEMS INCLUDED IN THE NET SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES THAT ARE INVESTING AND FINANCING ACTIVITIES
2017/18 2018/19 £000 £000 7,698 Proceeds from non current assets sold 9,267 53,214 Capital grants credited to surplus or deficit on the provision of services 55,190 60,912 Investing and Financing Activities included in net surplus or deficit on 64,457 the provision of services -1,236 Interest received -1,364 12,819 Interest paid 1,210 11,583 Items included in operating activities -154
East Riding of Yorkshire Council 90 Statement of Accounts 2018/19 OTHER NOTES TO THE FINANCIAL STATEMENTS
49. RELATED PARTY TRANSACTIONS
The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council 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 Council. a) Central Government UK Central government has significant influence over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in the analysis Notes 7c, 8 and 26. Transactions outstanding at 31 March 2019 are shown in Note 24. b) Members Members of the Council have direct control over the Council’s financial and operating policies. Information on Members’ remuneration is published on the Council’s website. Many of the Council’s Councillors are Town and Parish Councillors and sit on Internal Drainage Boards. However the Council has satisfied itself that all the transactions entered into have been concluded in accordance with its procedures for preventing undue influence. Councillor Birmingham works for family owned care homes which provide residential services to the Council. The contract was entered into in full compliance with the Council’s Standing Orders and payments totalled £0.461m in 2018/19 (£0.373m for 2017/18.) The Members’ Register of Interest is open to public inspection at County Hall during office hours or on the Council’s website (address shown on page 1). c) Officers Officers that might be in a position to influence significantly the policies of the Council are considered to be members of the Corporate Management Team as disclosed in Note 13b. There were no declarable transactions between any of these officers and the Council on a personal basis. d) Pension Fund The Head of Finance is S151 Officer for East Riding of Yorkshire Council and the East Riding Pension Fund, as the Council is the administering authority for the Fund. Ten Members of the Council sit on the Pensions Committee, which is responsible for the administration of the Pension Fund. Under legislation introduced in 2003/04, Councillors were entitled to join the Pension Scheme. The LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 removed this entitlement for Councillors from the later of 1 April 2014 or the end of their current term in office (or to age 75 if earlier). None of the members of the Pensions Committee received pension benefits from the Fund during the financial year and none made contributions to the Fund during the financial year, because all contributions ceased after re-election in May 2015. As the benefits received by pensioners from the Fund are determined by statute, the officers or councillors are unable to gain any advantage to the benefits they receive as pensioners from being advisors to the Fund or members of the Committee. As administering authority, the summarised accounts of the Pension Fund are included in these accounts from page 110 including a list of admitted bodies many of which are subject to the same common control as the Council by central government. The key management personnel of the Pension Fund for 2018/19 were the Director of Corporate Resources and the Head of Finance. Details regarding the remuneration of the Director of Corporate Resources and the Head of Finance these are included in Note 13b. e) Assisted Organisations A review has been under taken and no entities have been identified as assisted organisations f) Group relationships The Council is the major shareholder in Correct Compliance Limited, a company formed between this Council, Kingston Upon Hull City Council, North Lincolnshire Council and North East Lincolnshire Council on the disposal of their interest in Humberside Airport. The Chief Executive is a Director and the Secretary to this company, which is an associate of the Council but is dormant and there were no transactions between the Company and the Council during 2018/19 (2017/18 £nil). The Council also owns Nite Direct Limited a wholly owned subsidiary of the Council. The directors of the company are the Chief Executive, Director of Planning and Economic Regeneration and the Head of Legal & Democratic East Riding of Yorkshire Council 91 Statement of Accounts 2018/19 OTHER NOTES TO THE FINANCIAL STATEMENTS Services (as at 31 March 2019). During the year 2018/19 the Council received £0.026m (2017/18 £0.034m) and paid out £0.201m (2017/18 £0.070m) to the company. The Council granted a loan to the company of £0.300m, to be repaid over 10 years of which £0.166m remains outstanding at the 31 March 2019. Information in respect of material transactions with related parties, not disclosed elsewhere in this Statement of Accounts, is presented below.
Precepts 2018/19 and Other Levies Payments Receipts Debtors Creditors Levying & Precepting Bodies £000 £000 £000 £000 £000
Humberside Police & Crime Commissioner 19,109 2,577 610 216 4,028 Humberside Fire and Rescue Service 8,708 293 116 37 176 27,817 Town & Parish Councils 5,612 399 323 21 - Internal Drainage Boards 1,498 3 12 - - North Eastern Inshore Fisheries and Conservation Authority 267 252 142 - - Environment Agency - Yorkshire & Severn Trent Region 192 199 5 - - Hull & Goole Port Health Authority 34 35 - - - 7,603
Payments Receipts Debtors Creditors Other Organisations £000 £000 £000 £000 Bishop Burton College 438 22 0 3 Brough Manor Care Home 124 2 0 - East Riding College 342 81 2 - Glenfields Care Home 166 2 1 - Hull & East Yorkshire MIND 151 144 - - Humber Bridge Board 3 75 6 - Humber NHS Foundation Trust 6,974 153 27 143 Local Government Association 86 - - - NHS East Riding of Yorkshire CCG 1,980 31,860 - 938 TCAT (the consortium academy trust) 86 109 - - The Old Vicarage Care Home Ltd 171 2 - - University of Hull 3,582 153 10 15 Yorkshire Water 1,801 183 4 -
East Riding of Yorkshire Council 92 Statement of Accounts 2018/19 OTHER NOTES TO THE FINANCIAL STATEMENTS
50. DISCLOSURE OF DEPLOYMENT OF DEDICATED SCHOOLS GRANT
The Council's expenditure on schools is funded primarily by grant monies provided by the Department for Education, the Dedicated Schools Grant (DSG). DSG is ringfenced and can only be applied to meet expenditure properly included in the Schools Budget, as defined in the School and Early Years Finance (England) Regulations 2018. The Schools Budget includes elements for a range of educational services provided on an council-wide basis and for the Individual Schools Budget, which is divided into a budget share for each maintained school. Details of the use of DSG receivable for 2018/19 are as follows:
Central Individual Expenditure Schools Budget Total £000 £000 £000 Final DSG for 2018/19 before Academy recoupment 221,654 Less Academy figure recouped for 2018/19 -63,119 Total DSG after Academy recoupment for 2018/19 158,535 Plus Brought Forward from 2017/18 175 Less Carry Forward to 2019/20 agreed in advance Agreed initial budgeted distribution in 2018/19 22,698 136,012 158,710 In year adjustments -94 -94 Final budgeted distribution for 2018/19 22,698 135,918 158,616 Less Actual Central Expenditure -22,624 -22,624 Less Actual ISB deployed to schools -135,918 -135,918 Plus Local Authority contribution for 2018/19 0 Carry Forward to 2019/20 74 0 74
The actual carry forward reported on the Dedicated Schools Grant note is a surplus of £0.74m. This relates purely to the balance of central expenditure (surplus of £0.76m) less a shortfall in DSG of £0.002m. The ISB as funded through DSG has an over spend in 2018/19 of £0.342m and cumulative carry forward of £8.252m, which is reported separately under schools reserves.
51. DISCLOSURE OF INTERESTS IN SCHOOLS
All local authority maintained schools are considered to be entities controlled by the Council. Their income, expenditure, assets (excepting some non-current assets), liabilities, reserves and cash flows are required to be recognised in the Council’s single entity statements. The Council’s financial statements report the balances and transactions for all maintained schools with the exception of non-current assets (land and buildings) owned by Voluntary Aided, Voluntary Controlled and Foundation Schools. The Council’s accounting policies on accounting for schools and the judgements made in applying the policy are on page 31. The Council completed an assessment of all maintained schools to determine the arrangements in place and the accounting treatment required. The categories of schools that were assessed are included in the table below:
2017/18 2018/19 Secondary Primary Special Total Secondary Primary Special Total 864375Community Schools 6 62 4 72 135036Voluntary Controlled 1 33 0 34 0707Voluntary Aided 0 7 0 7 0404Foundation 0 4 0 4 91103122 7 106 4 117
The reduction in schools in 2018/19 is as a result of six schools converting to an academy and the inclusion of The Hub School (Pupil Referral Unit).
East Riding of Yorkshire Council 93 Statement of Accounts 2018/19 OTHER NOTES TO THE FINANCIAL STATEMENTS
The non-current assets of all Voluntary Aided and Controlled Schools and three of the Foundation Schools are owned by religious bodies and are therefore not included on the Council’s balance sheet. The table below shows the income and expenditure and the resulting surplus or deficit for each category of school:
2018/19 Secondary Primary Special Surplus/ Surplus/ Surplus/ Expenditure Income (Deficit) Expenditure Income (Deficit) Expenditure Income (Deficit) £000 £000 £000 £000 £000 £000 £000 £000 £000 Community Schools 34,656 -35,236 580 72,394 -72,791 397 10,177 -9,791 -386 Voluntary Controlled 6,972 -7,023 51 26,485 -26,689 204 0 Voluntary Aided 0 0 0 4,831 -4,791 -40 0 Foundation 0 0 0 2,668 -2,739 71 0 41,628 -42,259 631 106,378 -107,010 632 10,177 -9,791 -386
2017/18 Secondary Primary Special Surplus/( Surplus/( Surplus/( Expenditure Income Deficit) Expenditure Income Deficit) Expenditure Income Deficit) £000 £000 £000 £000 £000 £000 £000 £000 £000 Community Schools 42,945 -42,630 -315 71,938 -71,698 -240 8,063 -8,246 183 Voluntary Controlled 6,895 -6,693 -202 26,808 -26,683 -125 0 0 0 Voluntary Aided 0 0 0 4,747 -4,766 19 0 0 0 Foundation 0 0 0 2,513 -2,490 -23 0 0 0 49,840 -49,323 -517 106,006 -105,637 -369 8,063 -8,246 183
Note 7a includes the financial consequences of the transfer of schools to academy status. In 2018/19 four primary schools and two secondary schools transferred to an academy.
52. EVENTS AFTER THE REPORTING PERIOD
This note considers events that arise after the balance sheet date, which concerns conditions that did not exist at that time and are of such materiality that their disclosure is required for the fair presentation of the final statements. Events after the balance sheet date are reflected up to the date when the Statement of Accounts was authorised by the Head of Finance as Section 151 Officer on 31 May 2019. At the date of signing there has been no adjusting or non-adjusting events after the reporting period.
East Riding of Yorkshire Council 94 Statement of Accounts 2018/19 OTHER NOTES TO THE FINANCIAL STATEMENTS
53. POOLED BUDGETS FOR HEALTH AND SOCIAL CARE
The Better Care Fund is a government plan to integrate health and social care by 2020, which is implemented via a Section 75 pooled budget arrangement. This Council is a partner within the pooled budget hosted by the East Riding of Yorkshire CCG (ERYCCG), which also includes the Vale of York CCG (VOYCCG). The Section 75 arrangement allocates budgets across schemes including; Community Services, Reablement and Rehablilitation, Home and Residential Care, Avoidable Admissions and Social Care. The performance of each of these schemes is monitored and reported to the Local Health & Wellbeing Board and NHS England on a quarterly basis. Details of the pooled income and expenditure are as follows:
Spend from the Pooled Budget 2018/19 ERYCCG VoYCCG ERYC Total £000 £000 £000 £000 Contributions to the Pooled Budget: East Riding of Yorkshire Clinical Commissioning Group (ERYCCG) 13,275 0 6,549 19,824 Vale of York Clinical Commissioning Group (VoYCCG) 0 845 444 1,289 East Riding of Yorkshire Council (ERYC) 0 0 11,438 11,438 13,275 845 18,431 32,551
Spend from the Pooled Budget 2017/18 ERYCCG VoYCCG ERYC Total £000 £000 £000 £000 Contributions to the Pooled Budget: East Riding of Yorkshire Clinical Commissioning Group (ERYCCG) 13,027 0 6,427 19,454 Vale of York Clinical Commissioning Group (VoYCCG) 0 829 436 1,265 East Riding of Yorkshire Council (ERYC) 0 0 7,335 7,335 13,027 829 14,198 28,054
East Riding of Yorkshire Council 95 Statement of Accounts 2018/19 HOUSING REVENUE ACCOUNT
HOUSING REVENUE ACCOUNT INCOME AND EXPENDITURE STATEMENT The HRA Income and Expenditure Statement shows the economic cost in the year of providing housing services in accordance with generally accepted accounting practices, rather than the amount to be funded from rents and government grants. Authorities charge rents to cover expenditure in accordance with the legislative framework; this may be different from the accounting cost. The increase or decrease in the year, on the basis on which rents are raised, is shown in the Movement on the Housing Revenue Account Statement.
2017/18 Note 2018/19 £000 £000 Expenditure Supervision and management 5,936 General 6,309 2,831 Special 2,770 318 Rents, rates, taxes and other charges 367 9,307 Repairs and maintenance 10,030 176 Contribution to Supporting People - Transitional Protection 176 529 Increase in provision for bad / doubtful debts 530 8,617 Revaluation loss on council dwellings 5c -403 195 Revaluation loss on non-dwellings 5c -134 8,356 Depreciation on council dwellings 5c 8,634 48 Impairment on council dwellings 5c 0 377 Depreciation on non-dwellings 5c 464 80 Debt management costs 81 36,770 Total Expenditure 28,824 Income -46,899 Dwelling rents -46,399 -428 Non-dwelling rents -446 -205 Charges for services and facilities -238 -116 Contributions towards expenditure -265 -1,298 Contributions towards welfare warden service -1,211 -359 Photovoltaic cells income -286 -49,305 Total income -48,845 -12,535 Net Cost of HRA Services as included in the whole authority -20,021 Comprehensive Income and Expenditure Statement 22 Service share of Corporate and Democratic Core 22 Service share of Non Distributed Costs (NDC) 70 Non-operational revaluation loss on Assets Held for Sale/Surplus 71 5 Non-operational depreciation on non-dwellings 6 -12,438 Net Expenditure of HRA Services -19,922 HRA share of the operating income and expenditure included in the whole authority Comprehensive Income and Expenditure Statement 3,547 Gain on sale of HRA non current assets 4,077 -4,490 Usab le cap ital receip ts - s ale p ro ceed s 7b -5,403 220 Net interest on the net defined benefit liability (asset) 8 212 7,723 Interest payable on positive credit ceiling 7,734 -277 Interest receivable 6 -438 -24 Other Income (Right To Buy (RTB) Discounts repaid) 7b -35 -1,662 Capital grants and contributions relating to fixed assets 7a -939 -7,401 Surplus (-) / deficit for the Year on HRA services -14,714
East Riding of Yorkshire Council 96 Statement of Accounts 2018/19 NOTES TO THE HOUSING REVENUE ACCOUNT
MOVEMENT ON THE HOUSING REVENUE ACCOUNT STATEMENT
2017/18 Note 2018/19 £000 £000 3,944 Balance at 1 April brought forward 4,284 Movement in reserves during 2018/19 7,401 Surplus / deficit (-) on HRA Income and Expenditure Statement 14,714 Adjustments between accounting basis and funding basis under -7,061 the legislative framework 2 -14,339 340 Net Increase / (Decrease) before Transfers to / from Reserves 375 0 Transfers to / (from) Earmarked Reserves 0 340 Increase / (decrease) in year on the HRA 375 4,284 Balance at 31 March carried forward 4,659
1. HOUSING REVENUE ACCOUNT RECONCILIATION The increase for the year on the Statutory HRA balance was £0.375m. This was £14.339m less than the HRA Income and Expenditure Account surplus of £14.714m. This is explained as follows. The HRA reflects a statutory obligation to maintain a revenue account for local authority housing provision in accordance with Part 6 of the Local Government Housing Act 1989, which also sets out the framework for ring- fencing the HRA, preventing subsidisation of rents from the General Fund income of the authority and vice versa. Information to be disclosed in the notes is prescribed in The Housing Revenue Account (Accounting Practices) Directions 2011 as issued by the Department for Communities and Local Government in May 2011. The HRA includes the credit and debit items, which are taken into account in determining the surplus or deficit on the HRA for the year. The amounts included in the HRA differ from the amounts in respect of HRA services included in the Comprehensive Income and Expenditure Statement for the Council as a whole, which includes income and expenditure in accordance with the Accounting Code of Practice rather than statute and non-statutory proper practices. For this reason the HRA statement has two parts: HRA Income and Expenditure Statement – shows in more detail the income and expenditure on HRA services included in the whole Council Comprehensive Income and Expenditure Statement; and Movement on the Housing Revenue Account Statement – shows how the HRA Income and Expenditure Statement surplus or deficit for the year reconciles to the movement on the HRA Balance for the year. The surplus or deficit on the Income and Expenditure Statement is a measure of the Council’s operating financial performance for the year for HRA services. The statutory surplus or deficit on the Statutory HRA indicates whether the Council has added to or drawn on the brought forward balance on its statutory HRA Reserve during the year. This in turn affects the amount of the balance on the HRA that the Council can take into account when determining its spending plans on HRA services for the following year. Note 3 summarises the movements on the two separate sections of the account.
East Riding of Yorkshire Council 97 Statement of Accounts 2018/19
NOTES TO THE HOUSING REVENUE ACCOUNT
2. ADJUSTMENT BETWEEN ACCOUNTING BASIS AND FUNDING BASIS UNDER REGULATIONS
Housing Major Earmarked Usable Total Revenue Repairs Revenue Capital Usable Unusable 2018/19 Note Account Reserve Reserves Receipts Reserves Reserves £000 £000 £000 £000 £000 £000 Reversal of items debited or credited to the HRA Income and Expenditure Statement Adjustments involving the Capital Adjustment Account Item 8 determination to reverse impairment losses -13,000 0 0 0 -13,000 13,000 Item 8 determination to reverse impairment losses (previous year adjustments) 13,466 0 0 0 13,466 -13,466 Non-current asset written out in gain or loss on disposal/sale of non-current assets -3,972 0 0 0 -3,972 3,972 Capital grant/contributions to finance fixed assets from in-year income 939 0 0 0 939 -939 Reverse depreciation to CAA -9,104 0 0 0 -9,104 9,104 Addition of items not debited or credited to the HRA Income and Expenditure Statement Capital expenditure charged to HRA balance 7a 7,962 0 0 0 7,962 -7,962 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of disposal/sale of non-current assets 7b 5,403 0 0 -5,403 0 0 Contribution from Capital Receipts Reserve towards administrative costs of non current asset disposals 7b -1040010400 Other income (RTB Discounts) 7b 3500-3500 Deferred capital receipts received (Mortgage repayments) 7b 00 0-1-11 Adjustments involving the Major Repairs Reserve Additional transfer to MRR for Depreciation 7c 9,104-9,1040000 Additional transfer to MRR in excess of depreciation 7c 00 0 0 00 Use of the Major Repairs Reserve to finance new capital expenditure 7c 0 11,288 0 0 11,288 -11,288 Use of the Major Repairs Reserve to repay debt 7c 00 0 0 00 Transfer to MRR - Debt Repayment 3,582 -3,582 0 0 0 0 Transfer to MRR - New Build 912 -912 0 0 0 0 Adjustments involving the Pensions Reserve Net charges made for retirement benefits in accordance with IAS 19 8 -1,537 0 0 0 -1,537 1,537 Employer's contributions payable to the East Riding Pension Fund 8 658 0 0 0 658 -658 Adjustments involving the Accumulating Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargable in the year in accordance with statutory requirement -5 0 0 0 -5 5 Total adjustments between accounting basis and funding basis under regulations 14,339 -2,310 0 -5,335 6,694 -6,694 Transfer to or from earmarked reserves - voluntary 0 0 0 0 0 0 Net additional amount required to be credited to the HRA balance for the year 14,339 -2,310 0 -5,335 6,694 -6,694 East Riding of Yorkshire Council 98 Statement of Accounts 2018/19 NOTES TO THE HOUSING REVENUE ACCOUNT
Housing Major Earmarked Usable Total Revenue Repairs Revenue Capital Usable Unusable 2017/18 Account Reserve Reserves Receipts Reserves Reserves £000 £000 £000 £000 £000 £000 Reversal of items debited or credited to the HRA Income and Expenditure Statement Adjustments involving the Capital Adjustment Account Item 8 determination to reverse impairment losses -16,682 0 0 0 -16,682 16,682 Item 8 determination to reverse impairment losses (previous year adjustments) 7,753 0 0 0 7,753 -7,753 Non-current asset written out in gain or loss on disposal/sale of non-current assets -3,459 0 0 0 -3,459 3,459 Capital grant/contributions to finance fixed assets from in-year income 1,662 0 0 0 1,662 -1,662 Reverse depreciation to CAA -8,738 0 0 0 -8,738 8,738 Addition of items not debited or credited to the HRA Income and Expenditure Statement Capital expenditure charged to HRA balance 8,864 0 0 0 8,864 -8,864 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of disposal/sale of non-current assets 4,490 0 0 -4,490 0 0 Contribution from Capital Receipts Reserve towards administrative costs of non current asset disposals -88 0 0 88 0 0 Other income (RTB Discounts) 24 0 0 -24 0 0 Deferred capital receipts received (Mortgage repayments) 00 0-1-11 Adjustments involving the Major Repairs Reserve Additional transfer to MRR for Depreciation 8,738 -8,738 0 0 0 0 Additional transfer of MRR in excess of depreciation 00 0 0 00 Use of the Major Repairs Reserve to finance new capital expenditure 0 11,838 0 0 11,838 -11,838 Use of the Major Repairs Reserve to repay debt 00 0 0 00 Transfer to MRR - Debt Repayment 5,390 -5,390 0 0 0 0 Transfer to MRR - New Build 00 0 0 00 Adjustments involving the Pensions Reserve Net charges made for retirement benefits in accordance with IAS 19 -1,498 0 0 0 -1,498 1,498 Employer's contributions payable to the East Riding Pension Fund 607 0 0 0 607 -607 Adjustments involving the Accumulating Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargable in the year in accordance with statutory requirement -2 0 0 0 -2 2 Total adjustments between accounting basis and funding basis under regulations 7,061 -2,290 0 -4,427 344 -344 Transfer to or from earmarked reserves - voluntary 00 0 0 00 Net additional amount required to be credited to the HRA balance for the year 7,061 -2,290 0 -4,427 344 -344
East Riding of Yorkshire Council 99 Statement of Accounts 2018/19
NOTES TO THE HOUSING REVENUE ACCOUNT
3. SUMMARY OF 2018/19 Following abolition by the Government of HRA subsidy in 2011/12, the HRA now operates on a self-financing basis, resourced from the rent it receives. This required the Council taking on additional debt of £208.082m, as calculated by a Government formula. Adequate rent income is required as a first call to meet the cost of servicing the debt, followed by maintaining the Decent Home Standard on all dwellings, with any remaining income, set aside for future major investment in new/existing stock. The HRA Income and Expenditure Statement showed a surplus on HRA services of £14.714m. After applying the Movement on the HRA Statement, the net increase to the HRA was £0.375m, giving a balance on the account to be carried forward of £4.659m. The 2018/19 surplus of £0.375m was £0.819m overspent against the £1.196m budgeted surplus. This increase is mainly due to a £0.483m overspend on depreciation charge to the HRA, which in turn increases the year-end transfer into the Major Repairs Reserve to fund capital investment in existing stock. Overall, all HRA reserves stand at £50.921m, which includes the general reserve and monies set aside for debt repayment and investment in new stock and repairs.
4. RENT ACCOUNT The specific provision for the possible non-collection of all rent related charges at 31 March is £1.819m, which represents 77% of the total outstanding arrears. The calculation assesses the potential for future impairment based on an analysis of arrears with and without arrangements with current and former tenants. These are then further analysed on an age outstanding basis and provisions made on established percentages, relating to the age of debt outstanding. The provision has been increased in recent years to reflect the non-collection of rent due to the reduction in rebates from the removal of the spare room subsidy.
Rent Arrears
2017/18 2018/19 £000 £000 Arrears by tenant 1,193 Current tenants 1,365 904 Former tenants 1,001 2,097 Total arrears 2,366
Assistance towards payment of rent is available under the Housing Benefits Scheme for those on low incomes. In 2018/19 £24.788m (52%) of the £47.306m gross rent was rebated and 55.25% of the Council’s tenants receive some help with the cost of their rent, resulting in an average rent rebate caseload in 2018/19 of 6,137.
East Riding of Yorkshire Council 100 Statement of Accounts 2018/19 NOTES TO THE HOUSING REVENUE ACCOUNT
5. HOUSING ASSETS
(a) Housing Stock The Council was responsible for managing the following operational dwellings in 2018/19. Flats or maisonettes sold under the Right to Buy Scheme are sold as long leasehold. This allows the purchaser and their successors to live in it for a fixed time, usually 125 years. The block is still owned by the Council, which is responsible for the upkeep of the building as a whole and for any communal areas or facilities. Leaseholders have to pay a nominal ground rent of £10 per year and a reasonable share of the costs for works, services and management of the block as incurred by the Council. The Council also has a number of Shared Ownership properties (where tenants can purchase a proportion of the property and pay rent on the remainder). The in-year movements are categorised below:
2017/18 2018/19 Shared Houses Flats Ownership** Total Operational Dwellings 11,345 As at 1 April 7,646 3,703 0 11,349 -69 Sales -74 -7 -81 95 Acquisitions 41 6 2 49 0 Newly built dwellings 11 0 0 11 -3 Surplus to requirements -4 -17 0 -21 -19 Reclassificatio n 0-18 7 11,349 As at 31 March 7,620 3,684 10 11,314 Leasehold Dwellings 229 As at 1 April 0 227 227 6 Additions 07 7 -8 Removal* 0-9 -9 227 As at 31 March 0 225 225
*nine leasehold dwellings have been repurchased, five of which have been brought back into the HRA as operational dwellings, the remainder are still assets under construction. **This is the total number of properties in which the Council holds an equity stake - the retained proportion of each property will vary from this.
(b) The Vacant Possession Value of Council Dwellings In accordance with Government guidance, the basis of valuation for the Council’s housing stock in the balance sheet is its existing use value for social housing (EUV-SH). To arrive at EUV-SH, the vacant possession value of the dwellings is used as a base on the assumption that each property is used as residential accommodation that will be occupied by a secure tenant. At 1 April 2018, following revaluation, this value was £1,039.0m. This value is then adjusted by a regional adjustment factor, in this case 41%, to arrive at the value for inclusion in the Balance Sheet. At 1 April 2018 this was £426.0m. The difference between the vacant possession value and balance sheet value of dwellings shows the economic cost of providing council housing at less than open market rents.
East Riding of Yorkshire Council 101 Statement of Accounts 2018/19 NOTES TO THE HOUSING REVENUE ACCOUNT
(c) Movement of Property, Plant & Equipment
2018/19 Council Other Vehicles, Infra- Surplus Assets under Total Dwellings land and plant, structure assets construction buildings furniture and equipment £000 £000 £000 £000 £000 £000 £000 Cost or Valuation 1 April 2018 435,439 4,698 5 1,162 230 2,636 444,170 Additions / Enhancement 15,455 3 0 282 0 10,189 25,929 Revaluation increases / (decreases) to RR -4,797 1 0 0 124 0 -4,672 Revaluation increases / (decreases) to SDPS -13,043 -8 0 0 -1 0 -13,052 Revaluation loss reversal to SDPS 13,446 21 0 0 20 0 13,487 Derecognition - Other -137 0 0 0 0 0 -137 Reclassification (to) / from Held for Sale -3,546 0 0 0 0 0 -3,546 Other movements 6,565 -668 0 0 144 -6,024 17 At 31 March 2019 449,382 4,047 5 1,444 517 6,801 462,196 Depreciation and Impairment 1 April 2018 8,372 174 1 202 0 0 8,749 Charge for the year 8,634 75 1 27 6 0 8,743 Depreciation written out to the RR -8,363 -56 0 0 -9 0 -8,428 Impairment losses to RR -48 0 0 0 0 0 -48 Impairment losses to SDPS 00 000 00 Derecognition - Other -2 0 0 0 0 0 -2 Reclassification (to) / from Held for Sale 00 000 00 Other movements -2 0 0 0 3 0 1 At 31 March 2019 8,591 193 2 229 0 0 9,015 Net Book Value At 1 April 2018 427,067 4,524 4 960 230 2,636 435,421 At 31 March 2019 440,791 3,854 3 1,215 517 6,801 453,181
SDPS = Surplus or Deficit on the Provision of Services RR = Revaluation Reserve
The £13.043m revaluation loss on Council Dwellings includes a £1.804m loss on the 47 dwellings acquired, £0.929m on the 11 newly built dwellings and £0.709m on the 10 shared ownership properties. In addition to the revaluation loss shown in the above table, the HRA was also charged a net £0.090m in relation to the revaluation of Council Dwellings reclassified to Current Assets Held for Sale. The HRA was also charged £0.030m amortisation in relation to an intangible asset and £0.331m depreciation and a net revaluation loss of -£0.121m, (£0.171m revaluation loss and -£0.292m revaluation loss reversal) for the use of general fund assets (depots, fleet vehicles and equipment). In addition to the capital expenditure of £25.929 shown in the above table, the HRA spent £0.139m on three General Fund assets awaiting appropriation into the HRA, resulting in total capital expenditure of £26.068m.
East Riding of Yorkshire Council 102 Statement of Accounts 2018/19
NOTES TO THE HOUSING REVENUE ACCOUNT
2017/18 Council Other land Vehicles, plant, Infra- Surplus Assets under Total Dwellings and furniture and structure assets construction buildings equipment
£000 £000 £000 £000 £000 £000 £000 Cost or Valuation 1 April 2017 431,262 3,730 5 907 172 2,576 438,652 Additions / Enhancement 14,910 690 0 385 0 8,437 24,422 Revaluation increases / (decreases) to RR -6,891 -35 0 0 295 0 -6,631 Revaluation increases / (decreases) to SDPS -16,363 -195 0 0 0 0 -16,558 Revaluation loss reversal to SDPS 7,746 0 0 0 7 0 7,753 Derecognition - Other 0 0 0 0 0 0 0 Reclassification (to) / from Held for Sale -2,981 0 0 0 -358 0 -3,339 Other movements 7,756 508 0 -130 114 -8,377 -129 At 31 March 2018 435,439 4,698 5 1,162 230 2,636 444,170 Depreciation and Impairment 1 April 2017 8,198 146 0 182 0 0 8,526 Charge for the year 8,356 76 1 20 5 0 8,458 Depreciation written out to the RR -8,234 -42 0 0 -7 0 -8,283 Impairment losses to RR 0 0 0 0 0 0 0 Impairment losses to SDPS 48 0 0 0 0 0 48 Derecognition - Other 0 0 0 0 0 0 0 Reclassification (to) / from Held for Sale 0 0 0 0 0 0 0 Other movements 4 -6 0 0 2 0 0 At 31 March 2018 8,372 174 1 202 0 0 8,749 Net Book Value At 1 April 2017 423,064 3,584 5 725 172 2,576 430,126 At 31 March 2018 427,067 4,524 4 960 230 2,636 435,421
SDPS = Surplus or Deficit on the Provision of Services RR = Revaluation Reserve
The £16.363m revaluation loss on Council Dwellings includes a £3.508m loss on the 95 dwellings acquired. In addition to the revaluation loss shown in the above table, the HRA was also charged £0.076m in relation to the revaluation of Council Dwellings reclassified to Current Assets Held for Sale. The £0.048m impairment charge on Council Dwellings relates to fire damage of one house. The HRA was also charged £0.030m amortisation in relation to an intangible asset and £0.251m depreciation for the use of fleet vehicles/equipment (these are non-HRA assets).
East Riding of Yorkshire Council 103 Statement of Accounts 2018/19
NOTES TO THE HOUSING REVENUE ACCOUNT
6. CAPITAL FINANCING CHARGES Charges and credits to the Housing Revenue Account, as determined by the Government, contain the following amounts calculated in accordance with the prescribed ‘Item 8 Debit and Credit’ determinations. The impairment charges are mainly due to the revaluation of new builds and newly acquired dwellings to existing use value for social housing (EUV-SH).
2017/18 2018/19 £000 £000 £000 Revaluation loss / Impairment 8,665 Council dwellings -403 264 Other HRA assets / NDCs -63 -466 0 Revenue expenditure funded from capital under statute (REFCUS) 0 Depreciation 8,356 Council dwellings 8,634 382 Other HRA assets / NDCs 470 9,104 17,667 8,638 80 Debt management expenses 81 0 Capital asset charge accounting adjustment (REFCUS) 0 Transfer to the MRR 0 - amounts in excess of depreciation 0 0 - investment in new major schemes 912 5,390 - loan debt repayment provision 3,582 4,494 7,723 Interest on loans 7,734 30,860 Item 8 Debit 20,947 -277 Interest on cash balances -438 0 Mortgage interest 0-438 -8,930 Reversal of impairment on dwellings 466 Transfer from the MRR 0 - self financing debt repayment 0 -9,207 Item 8 Credit 28 21,653 Net Debit 20,975
7. SUMMARY OF CAPITAL EXPENDITURE AND FINANCING
(a) Financing of Capital Expenditure Details of capital expenditure within the HRA and the financing of that expenditure are set out below.
2017/18 2018/19 Vehicles, General Land & Infra- Plant & Assets under Fund Total Dwellings Buildings structure Equipment construction Surplus Total £000 Capital Investment £000 £000 £000 £000 £000 £000 £000 24,422 Non-current assets 15,455 3 282 0 10,226 102 26,068
Financing 416 Capital Receipts 0 0 0 0 502 0 502 1,662 Grants/contributions 102 0 0 0 837 0 939 8,864 Revenue contributions 7,669 2 282 0 9 0 7,962 3,100 Investment Reserve 0 0 0 0 2,184 0 2,184 8,738 Major Repairs Reserve 7,352 1 0 0 1,649 102 9,104 1,642 Borrowing 332 0 0 0 5,045 0 5,377 24,422 15,455 3 282 0 10,226 102 26,068
East Riding of Yorkshire Council 104 Statement of Accounts 2018/19
NOTES TO THE HOUSING REVENUE ACCOUNT The total capital expenditure of £26.068m above includes £0.102m on two General Fund surplus assets and £0.037m on a General Fund asset under construction, all awaiting appropriation into the HRA. (b) Capital Receipts Capital receipts in respect of the HRA received during the year are as follows:
2017/18 2018/19 Council Land/ Total Dwellings Other Total £000 £000 £000 £000 4,490 Sales proceeds* 5,388 15 5,403 -88 Less administrative costs -104 0 -104 4,402 Net proceeds 5,284 15 5,299 24 Right to buy discount repaid 35 0 35 1 Mortgage principal repaid 10 1 4,427 5,320 15 5,335
*includes 11 surplus dwellings at £0.350m and the part-sale of 5 shared ownership properties at £0.328m in 2018/19.
(c) Major Repairs Reserve The following is an analysis of the movement on the Major Repairs Reserve.
2017/18 2018/19 £000 £000 41,662 As at 1 April 43,952 Improvements to Existing Stock Amount transferred from HRA to reserve during the year 8,738 Depreciation 9,104 0 Additional transfer in excess of Depreciation 0 Amount transferred from reserve during the year -8,738 Capital expenditure on existing stock -9,104 Amount transferred between reserves during the year 0 Transfer to Investment in New Build Reserve Investment in New Build Programmes 0 Transfer from HRA to reserve during the year 912 0 Transfer from Improvements to Existing Stock Reserve 0 -3,100 Capital Expenditure Funded from reserve -2,184 Debt Repayment 5,390 Transfer from HRA to reserve during the year 3,582 0 Used to Repay Debt 0 43,952 As at 31 March 46,262 Balances on each reserve at 31 March 0 Improvements to existing stock 0 26,170 Investment in New Build Programmes 24,898 17,782 Debt Repayment 21,364 43,952 46,262
The reserve allows for spending on HRA capital expenditure only, including repayment of HRA debt, with the flexibility of carrying over any unspent funds from one year to another. No restrictions, other than demolition works, are imposed on what types of capital works the funds can be used for and, as with other capital resources, the council will determine stock investment and major maintenance priorities as part of its business planning process.
East Riding of Yorkshire Council 105 Statement of Accounts 2018/19
NOTES TO THE HOUSING REVENUE ACCOUNT
8. PENSION COSTS The charges in the HRA relating to the defined benefit scheme, accounted for in accordance with IAS 19 are shown below. These costs have been apportioned to the HRA on the basis of pensionable pay.
2017/18 2018/19 £000 £000 1,278 Current service cost 1,325 0 Past service cost 1,278 Operating Charges 1,325 220 Interest on pension scheme liabilities 212 220 Amount Debited to Other Operating Costs 212 1,498 Net Housing Revenue Account Cost 1,537 -607 Employer contributions -658 891 Appropriation from the Pension Reserve 879
East Riding of Yorkshire Council 106 Statement of Accounts 2018/19
COLLECTION FUND
The Collection Fund is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority in relation to the collection from taxpayers and distribution to local authorities and the Government of council tax and non-domestic rates.
2017/18 2018/19 Business Council Business Council Rates Tax Total Rates Tax Total £000 £000 £000 £000 Income -190,764 -190,764 Council taxpayers -204,252 -204,252 -105,653 -105,653 Business ratepayers -109,684 -109,684
-105,653 -190,764 -296,417 Total Income -109,684 -204,252 -313,936 Expenditure Apportionment of previous years surplus/ deficit -835 -835 Central Government -898 -898 -819 2,916 2,097 East Riding of Yorkshire Council -880 3,767 2,887 409 409 Humberside Police and Crime Commissioner 513 513 -17 176 159 Humberside Fire and Rescue Service -18 220 202
-1,671 3,501 1,830 -1,796 4,500 2,704 Precepts 45,339 45,339 Central Government 47,589 47,589 49,118 155,779 204,897 East Riding of Yorkshire Council 51,536 167,421 218,957 21,218 21,218 Humberside Police & Crime Commissioner 22,931 22,931 911 9,078 9,989 Humberside Fire and Rescue Service 955 9,492 10,447
95,368 186,075 281,443 100,080 199,844 299,924 Charges to Collection Fund 432 432 Costs of Collection 434 434 10,402 10,402 Transitional protection payments payable 7,585 7,585 -71 -71 Renewables and Enterprize zones balance -144 -144 650 377 1,027 Increase / Decrease (-) in Bad Debt Provision 394 579 973 0 582 582 Write-offs of uncollectable amounts 0649649 2,294 2,294 Increase / Decrease (-) in Provision for Appeals 2,112 2,112
13,707 959 14,666 10,381 1,228 11,609
107,404 190,535 297,939 Total Expenditure 108,665 205,572 314,237
1,751 -229 1,522 Surplus (-)/Deficit arising during the Year -1,019 1,320 301
-1,351 3,559 2,208 Surplus / Deficit (-) b/fwd 1 April -3,102 3,788 686 -1,751 229 -1,522 Surplus / Deficit (-) for the Year 1,019 -1,320 -301
-3,102 3,788 686 Surplus / Deficit (-) c/fwd 31 March -2,083 2,468 385
East Riding of Yorkshire Council 107 Statement of Accounts 2018/19
COLLECTION FUND
1. COUNCIL TAX Council tax is charged on a series of property valuation bands. The number of chargeable dwellings in each band (adjusted for exemptions and discounts), the calculation of the council tax base, and the average council tax chargeable in each band are shown in the table below:
2017/18 2018/19 Number of Band D Average Council Tax Band Number of Band D Average Chargeable Equivalent Council (ratio to Band D) Chargeable Equivalent Council Dwellings Dwellings Tax Dwellings Dwellings Tax £ £ 26,877 17,918 1,095.21 A (6/9) 26,733 17,822 1,158.04 28,871 22,456 1,277.75 B (7/9) 28,917 22,491 1,351.05 26,014 23,124 1,460.28 C (8/9) 26,151 23,245 1,544.05 21,625 21,625 1,642.82 D (9/9) 21,788 21,788 1,737.06 13,927 17,022 2,007.89 E (11/9) 14,120 17,258 2,123.07 6,313 9,119 2,372.96 F (13/9) 6,414 9,265 2,509.09 2,873 4,788 2,738.03 G (15/9) 2,962 4,937 2,895.10 203 406 3,285.64 H (18/9) 206 411 3,474.12 126,703 116,458 Total 127,291 117,217 -3,192 Adjustment* -2,171 113,266 Council Tax Base 115,046 * For anticipated collection rate and Ministry of Defence properties
The average council tax chargeable in each band includes charges from East Riding of Yorkshire Council, the Humberside Police and Crime Commissioner, Humberside Fire and Rescue Service, and town and parish councils. The estimated council tax collectable is calculated by multiplying the tax base by the Band D average council tax. The estimated council tax collectable in 2018/19 was £199.841m (2017/18 £186.075m) when the council tax base was set by the billing authority prior to the start of the financial year. This corresponds with the council tax precepts set by East Riding of Yorkshire Council (including town and parish councils), the Humberside Police and Crime Commissioner, and Humberside Fire and Rescue Service, as shown in the Collection Fund Statement. The actual amount collectable from council taxpayers is subject to changes during the year to the number of properties eligible to be charged and individual taxpayers’ circumstances, as well as the collection rate. The actual amount collectable during 2018/19 is £204.252m (2017/18 £190.764m), as shown in the income section of the Collection Fund Statement.
2. NON - DOMESTIC RATES (BUSINESS RATES) Non-Domestic ratepayers contribute to local services based on a nationally agreed rate poundage levied by the Government. This poundage is multiplied by the rateable value of their business premises and paid to the council. The total amount collected is distributed to the Government (50%), the Council (49%), and Humberside Fire and Rescue (1%) after making allowable deductions e.g. losses in collection. The total business rateable value for East Riding at 31 March 2019 was £254.829m (2017/18 £250.041m), of which £30.982m (2017/18 £29.932m) related to small businesses. The poundage for 2018/19 was 49.3p (2017/18 47.9p) and 48.0p for small businesses (2017/18 46.6p). This gives a gross collectable figure at 31 March 2019 of £125.228m (£119.381m at 31 March 2018). The collectable amount is adjusted for several mandatory and discretionary reliefs (i.e. discounts), such as those applied to premises occupied by charities or those that are empty in order to derive the business rates income figure shown in the Collection Fund Statement.
East Riding of Yorkshire Council 108 Statement of Accounts 2018/19
PENSION FUND
1. FOREWORD The Fund was created on the reorganisation of local government in 1974 and East Riding of Yorkshire Council became the Administering Authority on 1 April 1996. At 31 March 2019 the Fund was valued at £5.058bn, having paid out £197.2m during the year for the benefit of Scheme members. This is an increase in the Fund value of £272m from 31 March 2018, due to some capital appreciation in the major equity markets resulting from continued loose monetary policy, ongoing strength in corporate earnings and a further improvement in investor risk sentiment. The strongest returns were seen in the Alternatives Sector, in particular Infrastructure and Private Equity. In addition, sterling returns from overseas investments received a significant boost due to the depreciation of the currency in the aftermath of the EU referendum. The Fund also benefitted from the strong performance of the internal manager and the recently appointed pooling partner, Border to Coast Pensions Partnership (Border to Coast). At 31 March 2019 the number of employers in the Fund was 321 (31 March 2018: 300). The increase during the year was due mainly to the continued conversion of schools to academy status. All employees, other than teachers, of the Administering Authority and the majority of the Scheme Employers are entitled to participate in the Scheme. Employees of Scheme Employers classed as designating bodies, such as town and parish councils, and employees of the 65 Admission Bodies may be nominated for membership by their employer. Teachers, police officers and firefighters have separate pension arrangements. Although membership is not compulsory, it is automatic for all employees who have a contract of employment that is for at least 3 months and who are under the age of 75. Employees have freedom of choice to leave the Scheme and make alternative pension arrangements. At 31 March 2019 the total membership records administered by the East Riding Pension Fund was 114,882, an increase of 1.8% in the year (2018: 112,882). For active members, each separate employment contract is classed as a record where an individual has multiple employments, and the number of active member records has increased by 0.5% to 40,234 (2018: 40,043). For pensioner members each pension entitlement is classed as a record where an individual is in receipt of more than one pension and the number of pensioner member records, including the pensions paid to spouses and dependants of the former scheme members, has increased by 6.3% to 31,470 (2018: 29,611). All the membership figures are based on the up to date position recorded on the pension administration system, with all previous years restated on a consistent basis. The average pension payment is £4,531.78 per annum, equivalent to a weekly payment of £86.91. The Fund generated a return of 6.8% for the year to 31 March 2019 compared to the strategic benchmark return of 6.4%. Over the three years to 31 March 2019 the Fund returned 10.4% per annum, compared to the strategic benchmark return of 9.7% per annum and the long term investment objective of 6.0% per annum. The Fund continues to be managed in a cost effective manner with total pension administration, investment management, and oversight and governance costs equating to just 0.14% (2018: 0.13%) of funds under management. The key challenges for the Fund in the year ahead is to maintain the strong investment performance in a lower return environment whilst continuing to manage the transition of assets to Border to Coast, the Fund’s chosen entity to satisfy the Government’s requirement for pooling of investments. The Fund is participating fully in the pooling process and will ensure that there is appropriate governance oversight of the activities of our pooling partner.
2. REPORT OF THE PENSIONS COMMITTEE The Pensions Committee is responsible for the administration of the East Riding Pension Fund in accordance with Statutory Regulations, under delegation contained in the Constitution of East Riding of Yorkshire Council. During the past year the Committee consisted of ten Members of East Riding of Yorkshire Council. In addition, a Member from each of the other three unitary Councils and four trade union representatives attend Committee meetings to ensure that the views of the other major employers and individual members of the scheme are taken into account. The Committee met quarterly to consider investment reports from the Director of Corporate Resources, the external managers and the independent advisor. The Committee also met on four further occasions to consider pension administration issues and to receive training as part of the member training programme.
East Riding of Yorkshire Council 109 Statement of Accounts 2018/19 PENSION FUND
During the year the Committee: Approved the Investment Strategy Statement (ISS) which sets out in detail how the Fund is managed and the Governance Policy Statement which sets out in detail how the Fund is governed; Approved the proposed amendments to the Fund’s Communication Policy; Approved the Annual Report and Accounts 2017/18; Reviewed the management of the Fund and analysed the performance of the Fund and individual investment managers; Reviewed the current status of the Fund’s outstanding UK and Overseas Withholding Tax reclaims; Reviewed the Fund’s Treasury Management policy and treasury activity during the year; Reviewed the Fund’s corporate governance and voting activity; Reviewed the audit and assurance reports of the Fund’s investment managers and the global custodian; Reviewed the Fund’s expenditure against budget for the 2017/18 financial year and approved the budget for the 2018/19 financial year; Reviewed the Fund’s strategic risk register; Reviewed a number of the Fund’s pension administration policies; Reviewed the Government Actuary Department’s (GAD) Section 13 report with regards to the 2016 actuarial valuation; Received training as part of the Member training programme; Received a number of reports on the development of Border to Coast, the pool selected by the Pension Fund to meet its requirements of the Government’s LGPS reform process; and Approved the legal documentation relating to the creation of Border to Coast. For the year ended 31 March 2019, the Fund generated a return of 6.8%, compared to the strategic benchmark return of 6.4% and the Retail Price Index, which was 2.4% over the period. Significant capital appreciation in the majority of equity markets, the positive impact of currency depreciation on the sterling returns from overseas investments, and strong stock selection from the Fund’s internal manager and Border to Coast in the majority of asset classes were the main contributors to performance. Over the three years to 31 March 2019, the Fund has generated a return of 10.4% per annum, compared to the strategic benchmark return of 9.7% per annum and the long term investment objective of 6.0% per annum. Strong stock selection from the Fund’s investment managers has been the main contributor to performance over this period. The Government issued a consultation document in November 2015 which required LGPS funds to enter into pooling arrangements with other LGPS funds in order to generate economies of scale and facilitate investment in infrastructure. The Pension Fund is actively participating in the Border to Coast, a pool of 12 LGPS funds with c. £48bn in assets. Border to Coast became fully operational in July 2018 and is an alternative investment manager, authorised and regulated by the Financial Conduct Authority (FCA). It is wholly owned by the twelve LGPS administering authorities including East Riding of Yorkshire Council. During the year some £1.767bn of internally managed equities were successfully transitioned to Border to Coast. Other asset classes such as Alternatives and Fixed Income are expected to transition during the next two years. It is important to note that this only relates to the pooling of assets and the associated management arrangements. The Pensions Committee will still be responsible for determining the Pension Fund’s strategic and tactical asset allocation and pension administration responsibilities will remain with East Riding of Yorkshire Council. It is anticipated that there will continue to be significant changes to the Local Government Pension Scheme in the next few years which will represent a considerable challenge to the Pension Fund. The Pensions Committee will strive to ensure the long term sustainability of the Pension Fund in the light of any proposed changes and ensure members are aware of their potential impact.
East Riding of Yorkshire Council 110 Statement of Accounts 2018/19
PENSION FUND 4. FUND MEMBERSHIP The 321 employers, including East Riding of Yorkshire Council, with an interest in the Fund are listed below: a) Administering Authority
East Riding of Yorkshire Council b) Schedule 2 Employers (255)
Adelaide Primary Academy Epworth Town Council Ainthorpe Primary Academy Estcourt Primary Academy Airmyn Park Primary School Fairfield Academy Alderman Cogan Primary Academy Francis Askew Primary School Anlaby Common Parish Council Franklin College Appleton Primary Academy Frederick Holmes Academy Archbishop Sentamu Academy Ganton School Ashwell Academy Gilberdyke Academy Aspire Academy Goole High School Barrow upon Humber Parish Council Goole Town Council Barton upon Humber Town Council Great Coates Primary Academy Beacon Academy Griffin Primary Academy Beverley and North Holderness Internal Drainage Board Grimsby Institute of Further & Higher Education Bellfield Academy Hall Road Academy Beverley Grammar School Havelock Academy Beverley Town Council Healing Primary School Biggin Hill Primary Academy Healing Science Academy Limited Bishop Burton College Hedon Town Council Bottesford Town Council Hessle Community Academy Bricknell Primary Academy Hessle Town Council Bridgeview School Hibaldstow Academy Bridlington Town Council Highlands Primary Academy Brigg Town Council Holderness Academy and Sixth Form College Broadacre Primary Academy Hook C of E Primary School Broughton Town Council Hornsea Town Council Buckingham Primary Academy Howden School Bude Park Primary Academy Hull College Bursar Primary Academy Hull Culture and Leisure Limited Burton upon Stather Parish Council Hull Trinity House Academy Cambridge Park Academy Humber Bridge Board Canon Peter Hall Academy Humber University Technical College Chiltern Primary School Humberside Fire Authority Christopher Pickering Primary School Humberside Magistrates’ Courts Committee Cleethorpes Academy Humberston Academy Cleeve Primary Academy Humberston Cloverfields Academy Clifton Primary School Humberston Park Academy Collingwood Academy Hunsley Primary School Compass Academy Huntcliff Academy Coritani Academy ICT 4 Collaboration Cottingham Croxby Primary Academy Immingham Town Council Cottingham High School Ings Primary School Craven Primary Academy John Leggott College Crowle Academy John Whitgift Academy Dorchester Primary Academy Kelvin Hall School Driffield School Kingston upon Hull City Council Driffield Town Council Kingstown Works Limited Dunswell Primary Academy Kingswood Academy Easington CE Primary Academy Kingswood Parks Primary Academy East Ravendale Academy Kirk Ella and West Ella Parish Council East Riding College Kirton in Lindsey Town Council Eastfield Primary Academy (Immingham) Laceby Acres Eastfield Academy (Hull) Lisle Marsden Academy Edward Heneage Academy Littlecoates Primary Academy Elliston Primary Academy Longhill Primary Academy Elloughton cum Brough Parish Council Macaulay Academy Emergency Services Fleet Management (Humberside) Limited Malet Lambert Academy Endike Primary School Marfleet Primary Academy Endsleigh Holy Child VC Academy Market Weighton Town Council Enfield Academy of New Waltham Maybury Primary Academy Epworth Academy Melbourne Community Academy
East Riding of Yorkshire Council 112 Statement of Accounts 2018/19 PENSION FUND
Melior Community College Academy Signhills Academy Mersey Academy Signhills Infants Academy Middlethorpe Academy Sirius Academy North Mountbatten Academy Sirius Academy West Neasden Primary Academy South Axholme Academy New Waltham Academy South Hunsley School and Sixth Form College Newbald Parish Council Southcoates Primary Academy Newington Academy Spring Cottage Academy Newland School for Girls Springfield Primary Academy Newland St John’s CE Academy Sproatley Endowed Primary Academy North Cave Parish Council Stamford Bridge School North East Lincolnshire Council Stepney Primary Academy North Eastern Inshore Fisheries and Conservation Authority Stockwell Academy North Ferriby Parish Council Stoneferry Primary School North Lincolnshire Council Strand Academy North Lindsey College Sullivan Centre Oasis Academy Henderson Avenue Sutton Park Primary Academy Oasis Academy Immingham Swanland Parish Council Oasis Academy Nunsthorpe Swanland Primary School Academy Trust Oasis Academy Parkwood Thanet Primary Academy Oasis Academy Wintringham The Axholme Academy Old Clee Primary Academy The Boulevard Academy Ormiston Maritime Academy The Boulevard Centre Ormiston South Parade Academy The Chief Constable of Humberside Police Ouse and Humber Drainage Board The Green Way Academy Outwood Academy Brumby The Marvell College Outwood Academy Foxhills The Parks Academy Outwood Junior Academy Brumby The Police and Crime Commissioner for Humberside Paisley Primary Academy The St Lawrence Academy Parkstone Primary Academy The Snaith School Patrington CE Primary Academy The Vale Academy Pearson Primary School Thoresby Academy PHASE Thorpepark Academy Phoenix House PRU Thrunscoe Primary Academy Pilgrim Academy Tollbar Academy Limited Pocklington Junior School Tweendykes Academy Pocklington Town Council Ulceby St Nicholas Primary School Priory Primary Academy University of Lincoln Quay Academy Waltham Leas Primary Academy Reynolds Primary Academy Wansbeck Academy Rise Academy Weelsby Primary Academy Riston Primary Academy Welholme Primary Academy Rokeby Park Academy Welton Parish Council Ron Dearing UTC Westcott Primary Academy Rowley Parish Council Westwoodside Academy St Anthonys Primary Academy Wheeler Academy St Augustine Webster Academy Whitehouse Pupil Referral Unit St Bede’s Academy Wilberforce College St Bernadette’s Academy William Barcroft Junior Academy St Charles RC Primary Academy Willoughby Road Primary Academy St George’s Primary Academy Willows Academy St James’ CE Academy Winifred Holtby Academy St Joseph’s Academy Winterton Academy St Mary Queen of Martyrs VC Academy Winterton Town Council St Mary’s Academy Withernsea Primary Academy St Mary’s Catholic Academy Withernsea Town Council St Mary's College Wold Academy St Nicholas Primary Academy Woldgate School and Sixth Form College St Norbert’s Academy Wolfreton School and Sixth Form College St Peter’s CE Primary Academy Woodland Primary Academy St Richards RC Primary School Woodlands Primary Academy St Thomas More Academy Workforce Skills Limited St Vincents VC Academy Worlaby Academy Scartho Junior Academy Wybers Wood Academy Scawby Academy Wyke College Sevenhills Academy Yarborough Primary Academy Sidmouth Primary Academy Yorkshire and Humberside Grid for Learning Sigglesthorne Primary Academy
East Riding of Yorkshire Council 113 Statement of Accounts 2018/19 PENSION FUND c) Admission Bodies (65)
Aspens Services Ltd (Pilgrim Tollbar) ISS Facility Services PFI Aspens Services Ltd (Tollbar MAT) KGB Cleaning Services Ltd Barnardo’s Lincolnshire Partnership NHS Foundation Trust Bulloughs Cleaning Services Limited Lincs Inspire Limited City Health Care Partnership CIC Mellors Catering Services Limited Civica UK Limited Mellors Catering Services Limited (Cottingham) Compass Contract Services UK Ltd (Delta MAT) Mellors Catering Services Limited (South Holderness College) Compass Contract Services UK Ltd (East Ravendale) Mountain Healthcare Ltd Compass Contract Services (UK) Ltd (Hessle Academy Community Trust) North East Lincolnshire Clinical Commissioning Group Compass Contract Services UK Ltd (Howden School) NPS Humber Limited Compass Contract Services UK Ltd (Humberston Academy) Ongo Homes Limited Compass Contract Services UK Ltd (Lisle Marsden) Pickering and Ferens Homes Compass Contract Services UK Ltd (Old Clee) Pinnacle Housing Ltd Compass Contract Services (UK) Limited (The Vale) Pocklington School Compass Contract Services (UK) Ltd (Waltham Leas) Robertson Facilities Management Limited Compass Contract Services UK Ltd (Winterton Community Academy) Robertsons Facilities Management Limited PFI Compass Contract Services UK Ltd (Winterton Junior School) Sewell Facilities Management Limited Compass Contract Services UK Ltd (Wolds Learning Partnership) Shoreline Housing Partnership Limited Compass Contract Services UK Ltd (Wolfreton) Sodexo Limited ENGIE Services Limited Sodexo Ltd (Beacon Academy) Havelok Housing Association Limited Sodexo Limited Nunsthorpe Hull and Goole Port Health Authority Sodexo Limited (Oasis Community Learning) Hull Charterhouse Trustees T(n)S Catering Management Ltd (Isle Education Trust) Hull Resettlement Project Limited T(n)S Catering Management Ltd (Delta - Melior) Humber NHS Foundation Trust (Hull) T(n)S Catering Management Ltd (Delta – Willoughby Road) Humber NHS Foundation Trust (ERYC) Taylor Shaw Limited Humbercare Limited Taylor Shaw Ltd (Frederick Gough) Humberside Independent Care Association Taylor Shaw Ltd (The St Lawrence Academy) Independent Cleaning Services Limited (Chiltern) The Deep (EMIH) Limited Independent Cleaning Services Limited (Driffield) The Riverside Group Limited Independent Cleaning Services Ltd (Hessle Trust) University of Lincoln Students’ Union Independent Cleaning Services Limited (Wolfreton) University of York Interserve (Facilities Management) Ltd
East Riding of Yorkshire Council 114 Statement of Accounts 2018/19 PENSION FUND
5. LEGAL FRAMEWORK The Local Government Pension Scheme (LGPS) has been in existence since 1922 and has developed into a comprehensive scheme providing pensions for all members and their spouses, civil partners or eligible cohabitating partners and eligible children. The current scheme, LGPS 2014, is a Career Average Revalued Earnings (CARE) scheme. The scheme rules for LGPS 2014 are contained within the LGPS Regulations 2013 (Statutory Instrument Number 2013 No. 2356) and subsequent amendments and the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 (Statutory Instrument Number 2014 No 525). Amendments to LGPS 2014 are made under the Public Service Pensions Act 2013. Details of the main provisions of LGPS 2014 can be found at http://lgpsregs.org/schemeregs/lgpsregs2013.php. The Regulations specify the type and amounts of pension and other benefits payable in respect of scheme members who leave, retire or die, and also fix the member contributions rates payable on an ongoing basis. Employees have freedom to opt-out and make their own pension provision. Employer contribution rates are set by the Fund’s Actuary every three years following the valuation of the Fund, in order to maintain the solvency of the Fund. New rates were set by the Actuary from 1 April 2017 to 31 March 2020 following the 2016 Actuarial Valuation. Whilst the Regulations are fixed on a national basis, the LGPS is managed by a designated Administering Authority, and throughout England and Wales there are 89 such authorities. East Riding of Yorkshire Council is responsible for administering “The East Riding Pension Fund” for the benefit of its own employees and the employees of the scheme employers and admission bodies. Full details of the employers participating within the Fund are shown on pages 113 to 115. Teachers, Police Officers and Firefighters are excluded from the LGPS, as they are members of separate statutory pension schemes. The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 make the provision in relation to the management and investment of pension funds held by administering authorities required to maintain pension funds by the Local Government Pension Scheme Regulations 2013. HM Revenues and Customs has granted the LGPS ‘exempt approval’ for the purposes of the Income and Corporation Taxes Act 1988. Since April 2006, the LGPS has been classified as a registered public service pension scheme under Part 4 of Chapter 2 of the Finance Act 2004. It complies with the relevant provisions of the Pension Schemes Act 1993, the Pensions Act 1995, the Pensions Act 2004 and meets the Government’s new standards under the automatic enrolment provisions of the Pensions Act 2008. The East Riding Pension Fund Local Pension Board As required under section 5 of the Public Service Pensions Act 2013 and regulation 106 of the LGPS Regulations 2013 (as amended), the East Riding Pension Fund Local Pension Board (ERPFLPB) was established on 25 February 2015 and is made up of three employer representatives and three member representatives. The ERPFLPB is responsible for assisting East Riding of Yorkshire Council (as administering authority) in securing compliance with the LGPS regulations, overriding legislation and guidance from the Pensions Regulator. Details of the activities of the ERPFLPB can be found on the East Riding Pension Fund website at http://erpf.eastriding.gov.uk/local-pension-board/.
East Riding of Yorkshire Council 115 Statement of Accounts 2018/19 PENSION FUND
6. ACTUARIAL VALUATION Legislation requires an actuarial valuation of the Fund every three years. The purpose of the valuation is to establish that the Fund is able to meet its liabilities to past and present contributors. The valuation is carried out in accordance with Regulation 62 of the Local Government Pension Scheme 2013 and the most recent valuation was carried out as at 31 March 2016 and resulted in a funding level of 88.0% (2013 78.2%). The next triennial valuation is due as at 31 March 2019 and any change in employers’ contribution rates as a result of that valuation will take effect from 1 April 2020. The results of the 2013 and 2016 valuations are set out in the tables below:
2013 2016 £m £m Past Service Liabilities - Employees 1,559 1,538 - Deferred pensioners 739 835 - Pensioners 1,640 1,853 Total Past Service liabilities 3,938 4,226 Assets 3,078 3,714 Deficit -860 -512
The past service adjustment assumes that the deficit will be funded over a 20 year period. The improvement in the funding position in the three years to 31 March 2016 is mainly due to strong investment performance over the period. The liabilities have also increased due to a reduction in the future expected investment return, although this has been partially offset by lower than expected pay and benefit growth.
East Riding of Yorkshire Council 116 Statement of Accounts 2018/19 PENSION FUND
7. REPORT OF THE ACTUARY This statement has been prepared in accordance with Regulation 57(1)(d) of the Local Government Pension Scheme (Administration) Regulations 2013. Description of Funding Policy The funding policy is set out in the East Riding of Yorkshire Council Funding Strategy Statement (FSS) dated March 2017. In summary, the key funding principles are as follows: to ensure the long-term solvency of the Fund using a prudent long term view. This will ensure that sufficient funds are available to meet all members / dependents benefits as they fall due for payment; to ensure that employer contribution rates are reasonably stable where appropriate; to minimise the long-term cash contributions which employers need to pay to the Fund, by recognising the link between assets and liabilities and adopting an investment strategy that balances risk and return (NB this will also minimise the costs to be borne by Council Tax payers); to reflect the different characteristics of different employers in determining contribution rates. This involves the Fund having a clear and transparent funding strategy to demonstrate how each employer can best meet its own liabilities over future years; and to use reasonable measures to reduce the risk to other employers and ultimately to the Council Tax payer from an employer defaulting on its pension obligations. The FSS sets out how the Administering Authority seeks to balance the conflicting aims of securing the solvency of the Fund and keeping employer contributions stable. For employers whose covenant was considered by the Administering Authority to be sufficiently strong, contributions have been stabilised to return their portion of the Fund to full funding over 20 years if the valuation assumptions are borne out. Asset-liability modelling has been carried out which demonstrates that if these contribution rates are paid and future contribution changes are constrained as set out in the FSS, there is still around a 66% chance that the Fund will return to full funding over 20 years. Funding Position as at the last formal funding valuation The most recent actuarial valuation carried out under Regulation 62 of the Local Government Pension Scheme Regulations 2013 was as at 31 March 2016. This valuation revealed that the Fund’s assets, which at 31 March 2016 were valued at £3,714 million, were sufficient to meet 88% of the liabilities (i.e. the present value of promised retirement benefits) accrued up to that date. The resulting deficit at the 2016 valuation was £512 million. Each employer had contribution requirements set at the valuation, with the aim of achieving full funding within a time horizon and probability measure as per the FSS. Individual employers’ contributions for the period 1 April 2017 to 31 March 2020 were set in accordance with the Fund’s funding policy as set out in its FSS.
Principal Actuarial Assumptions and Method used to value the liabilities Full details of the methods and assumptions used are described in the 2016 valuation report, available on the Funds website. Method The liabilities were assessed using an accrued benefits method which takes into account pensionable membership up to the valuation date, and makes an allowance for expected future salary growth to retirement or expected earlier date of leaving pensionable membership. Assumptions A market-related approach was taken to valuing the liabilities, for consistency with the valuation of the Fund assets at their market value.
East Riding of Yorkshire Council 117 Statement of Accounts 2018/19 PENSION FUND
The key financial assumptions adopted for the 2016 valuation were as follows:
Financial Assumptions 31 March 2016 % p.a. Discount Rate 4.0 Salary increase assumption 2.3 Benefit increase assumption (CPI) 2.1
The key demographic assumption was the allowance made for longevity. The life expectancy assumptions are based on the Fund’s VitaCurves with improvements in line with the CMI 2013 model, assuming the current rate of improvements has reached a peak and will converge to long term rate of 1.25% p.a. Based on the assumptions, the average future life expectancies at age 65 are as follows:
Females Males Current Pensioners 24.2 21.7 Future Pensioners * 26.4 23.7
* currently aged 45 Copies of the 2016 valuation report and Funding Strategy Statement are available on request from East Riding of Yorkshire Council, the administering authority to the Fund. Experience over the period since 31 March 2016 Since the last formal valuation, real bond yields have fallen placing a higher value on the liabilities but there have been strong asset returns over the three years. Both events are of broadly similar magnitude with regards to the impact on the funding position. The next actuarial valuation will be carried out as at 31 March 2019. The Funding Strategy Statement will also be reviewed at that time.
Douglas Green Hymans Robertson Fellow of the Institute and Faculty of Actuaries 20 Waterloo Street For and on behalf of Hymans Robertson LLP GLASGOW G2 6BD 18 April 2019
East Riding of Yorkshire Council 118 Statement of Accounts 2018/19 PENSION FUND
8. FUND ACCOUNT
2017/18 Note 2018/19 £000 £000 £000 Dealings with Members and Employers Contributions 256,939 Contributions receivable 10g 119,882 9,927 Individual transfer values receivable 8,348 524 Group transfer values receivable 524 128,754 267,390 128,754 Benefits -150,459 Benefits payable 10h -159,232 -15,814 Payment to and on account of leavers 10i -37,935 Net Additions / Withdrawals from dealings 101,117 with Members -68,413
-6,350 Management Expenses 10j -7,258
Net Additions / Withdrawals (-) including 94,767 Fund Management Expenses -75,671 Returns on Investments 165,655 Investment income 10k 134,724 -693 Taxes on income 10l -829 -8,546 Profit and losses on disposal of investment and 10m 213,690 changes in the market value of investments 156,416 Net Return on Investments 347,585
Net Increase in the Net Assets Available 251,183 for Benefits during the Year 271,914
2017/18 2018/19 £000 £000 Net Assets of the Fund 4,534,622 Opening Net Assets as at 1 April 4,785,805 251,183 Surplus on the pension fund for the year 271,914 4,785,805 Closing Net Assets as at 31 March 5,057,719
East Riding of Yorkshire Council 119 Statement of Accounts 2018/19 PENSION FUND
9. NET ASSETS STATEMENT
31 March 2018 Note 31 March 2019 £000 £000 0 Long Term Investments 10m 833 4,778,510 Investment Assets 10m 5,056,306 4,778,510 5,057,139 -6,928 Investment Liabilities -13,340 4,771,582 Total Net Investments 5,043,799 16,731 Current Assets 10n 15,475 4,788,313 5,059,274 -2,508 Current Liabilities 10o -1,555 Net Assets of the Scheme Available to Fund 4,785,805 Benefits at 31 March 5,057,719
The Accounts summarise the transactions and deals with the net assets of the Fund and do not take into account liabilities to pay pensions and other benefits in the future. The above Net Assets Statement should be read in conjunction with the Actuarial Certificate (page 117).
East Riding of Yorkshire Council 120 Statement of Accounts 2018/19 PENSION FUND
10. NOTES TO THE ACCOUNTS a) Fund Status The Fund is a funded defined benefits scheme. b) Audit of the East Riding Pension Fund Accounts These accounts are subject to external audit. c) Accounting Policies 1. General These Accounts have been prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2018/19 based on International Financial Reporting Standards, which requires that the Fund’s Accounts comply with IAS 26 Accounting and Reporting by Retirement Benefit Plans, subject to the interpretations and adaptations detailed in the Code and the Statement of Recommended Practice on Financial Reports of Pension Schemes (the SORP). The accounts do not take account of liabilities to pay pensions and other benefits in the future. The accounts have been prepared on a going concern basis. 2. Changes in Accounting Policies 2.1 Previously, the Code required the disclosure of an analysis of debtors and creditors across public sector organisations. This is no longer a requirement. 3. Income a) Contributions income Normal contributions are accounted for on an accruals basis as follows: o Employee contribution rates are set in accordance with LGPS regulations, using common percentage rates for all schemes which rise according to pensionable pay. Any amounts due but not received are shown in the Net Asset Statement as a current asset; o Employer contributions are set at the percentage rate recommended by the Fund Actuary for the period to which they relate. Employers’ pensions strain contributions are accounted for in the period in which liability arises. Employers’ contributions are based on a percentage of employees’ pensionable pay as recommended by the Actuary of the Fund in his valuation of 31 March 2016 effective from 1 April 2017. Further information regarding the Actuary’s Report and Actuarial Valuation, as at 31 March 2016, effective from 1 April 2017, can be found on pages 117 to 119 of these accounts. Employer deficit funding contributions are accounted for on the due dates on which they are payable under the schedule of scheme contributions set by the scheme Actuary or on receipt if earlier than the due date. Deficit funding payments are payable over a maximum of 20 years. b) Transfer values receivable Transfer values receivable relate to amounts received for members joining the Fund during the financial year and are accounted for in the year of receipt. Transfer values are disclosed as individual transfers and group transfers. c) Investment income i) Dividend income Dividend income is accounted for on an accruals basis and any outstanding amount is included in the Net Asset Statement as an investment asset. Dividend income is recognised on the date the asset is quoted ex-dividend. ii) Interest income Interest income is accounted for on an accruals basis using the effective interest rate of the financial instrument as at the date of origination. Accrued interest income is shown in the Net Assets Statement as an investment asset. iii) Stock lending income Stock lending income is accounted for on an accrual basis and any outstanding amount is included in the Net Asset Statement as an investment asset.
East Riding of Yorkshire Council 121 Statement of Accounts 2018/19 PENSION FUND
iv) Distributions from pooled investment assets Distributions from pooled investment vehicles are recognised at the date of issue. Distribution income is accounted for on an accruals basis and any outstanding amount is included in the Net Asset Statement as an investment asset. v) Movement in the net market value of investments Changes in the net market value of investments, including all realised and unrealised profits/losses are shown as returns on investments. vi) Currency conversion Investment income received in overseas currency is converted at the appropriate exchange rate quoted in the Financial Times on the date of receipt. 4. Expenditure a) Benefits payable Pensions and lump sum benefits payable include all amounts known to be due as at the end of the financial year. Any amounts due but unpaid are shown in the Net Assets Statement as current liabilities. b) Transfer values payable Transfer values payable relate to amounts paid relating to members leaving the Fund during the financial year and are accounted for in the year of payment. 5. Expenses Expenses are accrued appropriately to ensure charges are incurred within the relevant accounting period. 6. Valuation of Assets Investments are included in the Net Assets Statement at their fair value. Investments made through the UK Stock Exchanges are valued at bid market price at the close of business on 31 March 2019. Investments made on overseas stock exchanges are valued at bid price or last trade price. Cash comprises cash in hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to minimal risk of changes in value. Unquoted investments are inherently difficult to value and rely, to a certain extent, on estimation techniques and non-market observable inputs; where market values are available at the date of the Statement these are used as above. Fair value is calculated as the net asset value as at the date of the Statement in accordance with recognised valuation standards e.g. Royal Institution of Chartered Surveyors (RICS). Where the net asset value at the date of the Statement is not available, fair value is calculated based on the last available set of audited financial statements, adjusted for subsequent cash flows. Where there has been a material reduction in the valuation of the investment since the date of the last available set of audited statements, the Fund will consider writing down the value of the investment. 7. Future Liabilities The Accounts summarise the transactions and net assets of the Fund and do not take into account liabilities to pay pensions and other benefits in the future. The adequacy of the Fund’s investments and contributions in relation to its overall obligations is dealt with in the report by the Actuary on pages 125 and 126 of these accounts and should be read in conjunction with the report. The Actuarial information disclosed on pages 117 to 118 complies with the accounting requirements of International Accounting Standard 19 Employee Benefits. 8. Taxation The scheme is a Registered Pension Scheme in accordance with Paragraph 1 (1) of Schedule 36 to the Finance Act 2004 and for UK taxation purposes is wholly exempt from income tax and capital gains tax. Income from overseas investments suffers withholding tax in the country of origin, unless exemption is permitted. Irrecoverable tax is accounted for as a fund expense as it arises.
East Riding of Yorkshire Council 122 Statement of Accounts 2018/19 PENSION FUND 9. Value Added Tax The Fund is reimbursed VAT by HM Revenue and Customs and the accounts are shown exclusive of VAT. 10. Management Expenses All pension administration expenses are accounted for on an accruals basis. All employee costs of the pension administration section are charged direct to the Fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the Fund. All investment management expenses, including external management and custody, are accounted for on an accruals basis. All employee costs of the investment section are charged directly to the Fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the Fund. The external manager’s (Schroder Investment Management) fee is based on the market value of funds under management at the end of each quarter and is calculated on a sliding scale, where percentage fee diminishes on marginal value. External manager Border to Coast fee is based on an agreed budget. Custody fees are agreed in the mandate for the provision of custodian services. All oversight and governance costs are accounted for on an accruals basis. All staff costs associated with governance and oversight are charged directly to the Fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the Fund. Investment management costs for the Fund's unquoted pooled investments are obtained using financial information from the relevant investment manager. However, it should be noted that the accounting period to which this relates may differ from the Fund's accounting period and, therefore, the costs incurred may not be directly comparable. 11. Currency Conversion Rates Overseas investments have been converted at the exchange rate quoted in the Financial Times at close of business on 31 March 2019 to arrive at sterling values in the Net Asset Statement. 12. Additional Voluntary Contributions An additional voluntary contribution (AVC) scheme is provided for members of the Fund by Prudential. Contributions are paid to Prudential by scheme members and are specifically for providing additional benefits for individual contributors. AVC’s do not form part of the Fund accounts in accordance with the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 see note u. 13. Actuarial Present Value of Promised Retirement Benefits The actuarial present value of promised retirement benefits is based on the triennial valuation of the Fund by the Actuary, with liabilities at 31 March 2019 being projected using a roll forward approximation from the latest formal funding valuation as at 31 March 2016. The Fund has opted to disclose the actuarial present value of promised retirement benefits as a note to the accounts, see note w.
14. Policy for Funding the Promised Retirement Benefits The funding policy is set out in the Funding Strategy Statement. Fund liabilities were assessed by the Actuary using an accrual benefits method which takes into account pensionable membership up to the valuation date and makes an allowance for expected future salary growth to retirement or expected earlier date of leaving pensionable membership. A market-related approach was taken to valuing the liabilities for consistency with the valuation of the Fund assets at their market value. The key financial assumptions adopted for were as follows:
Financial Assumptions 31 March 2016 % p.a. Discount Rate 4.0 Salary increase assumption 2.3 Benefit increase assumption (CPI) 2.1
East Riding of Yorkshire Council 123 Statement of Accounts 2018/19 PENSION FUND The key demographic assumption was the allowance made for longevity. The life expectancy assumptions are based on the Fund’s VitaCurves with improvements in line with the CMI 2010 model, assuming the current rate of improvements has reached a peak and will converge to long term rate of 1.25% p.a. Based on these assumptions, the average future life expectancies at age 65 are as follows:
Females Males Current Pensioners 24.2 21.7 Future Pensioners * 26.4 23.7
*currently aged 45 15. Derivatives The Pension Fund has entered into a series of derivative transactions which are designed to protect the value of the Fund’s UK and US equity portfolios from a fall in market prices. This is managed by River and Mercantile and the basis of valuing the over the counter derivatives is the Black-Scholes model. 16. Critical Judgements in Applying Accounting Policies Pension Fund Liability The Fund liability is calculated every three years by the Fund’s Actuary with the purpose of the valuation being to establish that the Fund is able to meet its liabilities to past and present contributors. The valuation is carried out in accordance with Regulation 62 of the Local Government Pension Scheme Regulations 2013 and complies with IAS 19. The principal actuarial assumptions and method used to value the liabilities are shown in the Report of the Actuary which can be found on pages 117 and 119. 17. Assumptions Made About the Future and Other Major Source of Estimation Uncertainty The Statement of Accounts includes estimated figures that are based on assumptions and estimates, which take into account historical experience, current trends and other relevant factors. Therefore these estimated figures cannot be determined with certainty and actual results could be materially different from the assumptions and estimates. The items in the Statement of Accounts for which there is a significant risk of material adjustment in the forthcoming financial year are as follows: Actuarial present value of promised retirement benefits The calculation of the actuarial present value of promised retirement benefits is undertaken by the Actuary and is projected using a roll forward approximation from the latest formal funding valuation as at 31 March 2016. Estimates and assumptions are made in a number of judgements including discount rate, salary increases, inflation, pensions increase rate, longevity of current and future pensioners, type of member in scheme and commutation sums. Any variance in the estimates and assumptions in any of the elements used to calculate the actuarial present value of promised retirement benefits would impact on the quoted figure. For example a 0.5% decrease in the discount rate used would result in an increase in the pension liability of 11%, equivalent to £767m, a 0.5% increase in the salary increase rate used would increase the value of liabilities by 2% or £116m, and a 0.5% increase in the pensions increase rate used would increase the pension liability by 9% or £604m. A one year increase in life expectancy would approximately increase the liabilities by around 3% to 5%. Unquoted Investments By definition these investments are not publicly quoted and the valuation depends on estimation techniques and non-marketable observable inputs. Unquoted investments are stated at market value where available, otherwise fair value is used. Unquoted investments are valued at £1.1bn in the financial statements and a 10% variance in the valuation risks these investments being under or overstated in the accounts by up to £11m. 18. Contingent Assets and Contingent Liabilities A contingent asset arises where an event has taken place giving rise to a possible asset whose existence will only be confirmed by the occurrence of future events. A contingent liability arises where an event has taken place prior to the year-end giving rise to a possible financial obligation whose existence will only be confirmed or otherwise by the occurrence of future events. Contingent liabilities can also arise in circumstances where a provision would be made, except that it is not possible at the balance sheet date to measure the value of the financial obligation reliably. Contingent assets and liabilities are not recognised in the net asset statement but are disclosed in the notes.
East Riding of Yorkshire Council 124 Statement of Accounts 2018/19 PENSION FUND d) Concentration of Investments The Code require disclosure where there is a concentration of investment which exceeds 5% of the total value of the net assets of the scheme.
2017/18 2018/19 Number Value % of Net Value % of Net of Units £000 Assets Number of Units £000 Assets
28,868,024.470 343,667 7.2 Schroder North American Equity Fund 22,954,247.123 285,728 5.6 0.000 0 0.0 Border to Coast PE UK Listed Equity A 1,565,628,704.780 1,553,416 30.7 e) Stock Lending State Street, the Fund’s Custodian has authorisation to release stock to third parties as determined by the contract between State Street and the Fund. During the year to 31 March 2019 stock lending income of £0.247m (2018 £0.550m) was raised against expenditure for the activity of £0.068m (2018 £0.162m). At 31 March 2019 the total value of securities on loan was £61.5m (2018 £200.7m) and are analysed by asset class as follows:
31 March 2018 31 March 2019 £000 £000
87,225 Equities - UK 0 83,857 UK Bonds - Public Sector 57,436 22,001 Equities - Overseas 58 7,650 Overseas Bonds - Public Sector 4,004 200,733 61,498
Against the stock on loan the Fund held collateral at 31 March 2019 of £63.4m (2018 £211.6m) analysed by asset class as follows:
31 March 2018 31 March 2019 £000 £000
93,815 Equities - UK 0 86,250 UK Bonds - Public Sector 59,239 23,459 Equities - Overseas 63 8,072 Overseas Bonds - Public Sector 4,087 211,596 63,389 f) Derivatives In June 2017 the Pension Fund entered into a contract with River and Mercantile to manage a derivatives portfolio. A derivative, which is a permitted investment under the LGPS Investment Regulations, is a contract between two or more parties whose value is derived from the performance of an underlying financial asset, for example an equity index such as FTSE 100 index. Derivatives can be used for a number of purposes, including the issuing against price movements ie hedging, increasing exposure to expected price movements, or getting access to otherwise hard to trade assets or markets. In a simple form the contract that the Fund has entered into will generate a return based on the current value of the index plus any increase in that index up to a certain point, irrespective of the actual value at the end of the contract term. The duration of the contract is between 2.75 and 3.25 years. Equities continue to be the largest asset class in the Pension Fund and as such the Fund needs to generate a suitable rate of return from the equity portfolio, over the long term, in order to meet the investment rate of return required to fund its liabilities. The long term total return from UK equities has been c9% however, the return profile has been very volatile with the potential for significant drawdowns in any one year. Therefore it was agreed in 2016 to implement an equity protection product to protect a proportion of the UK and US equity portfolios from an equity market correction whilst continuing to participate in some of the upside. However, there is obviously a cost to protecting the downside but this can be offset by sacrificing the upside potential beyond a certain point.
East Riding of Yorkshire Council 125 Statement of Accounts 2018/19 PENSION FUND The movement in the value of the derivative can be seen in note m, Reconciliation of Movements in Investments. At 31 March 2019 the value of the derivative holding was as follows:
Equity Option: Value at Value at 31 March 2018 Counterparty Maturity Date Notional 31 March 2019 £000 £000 2,615 Barclays 16 June 2020 £125m 1,935 2,833 Goldman Sachs 20 July 2020 £125m 2,089 1,150 Investec 20 July 2020 £50m 800 -4,174 Investec 10 August 2020 $130m -5,495 2,424 -671 Collateral: 58,975 UK Bonds 59,572 6,000 Cash 6,000 64,975 65,572
67,399 64,901
g) Contributions Receivable
2017/18 2018/19 Restated £000 £000 £000 Employers 65,613 Normal 71,575 154,496 Deficit Reco very 11,588 83,163 36,830 Employees 36,719 256,939 119,882 From 74,379 Administering Authority 16,248 173,257 Scheme Employers 94,261 9,303 Transferee Admission Bodies 9,373 256,939 119,882
2017/18 has been restated to separately identify deficit recovery. h) Benefits Payable
2017/18 2018/19 £000 £000 119,510 Pensions 126,515 27,373 Commutations, compounded and lump sum retirement benefits 29,023 3,576 Lump sum death benefits 3,694 150,459 159,232 Paid to 26,536 Administering Authority 27,496 112,471 Scheme 2 Employers 120,218 11,452 Transferee Admission Bodies 11,518 150,459 159,232
East Riding of Yorkshire Council 126 Statement of Accounts 2018/19 PENSION FUND i) Payments to and on account of leavers
2017/18 2018/19 £000 £000 398 Refunds to Members leaving service 452 15,416 Individual transfer values payable 11,565 0 Group transfer values payable 25,918 15,814 37,935
j) Pension, Investment Management and Oversight and Governance Expenses
2017/18 2018/19 £000 £000
1,796 Pensions Administration 1,629 3,919 Investment Management 4,991 635 Oversight and Governance 638 6,350 7,258
Of the Investment Management expenses in 2018/19, a total of £0.087m was in respect of performance related fees paid to the Fund’s internal investment manager (2017/18 £0.061m).
Of the Oversight and Governance expenses in 2018/19, the external audit fee payable to Mazars LLP is £0.033m (2017/18 £0.032m). Externally managed funds are managed by Schroder Investment Management Ltd and Border to Coast. It should be noted that the Net Asset Statement and any performance data disclosed in the Annual Report are disclosed net of all costs incurred.
East Riding of Yorkshire Council 127 Statement of Accounts 2018/19 PENSION FUND k) Investment Income
2017/18 2018/19 £000 £000 £000
Bonds 2,239 United Kingdom 2,232 1,828 Overseas 1,720 748 Corporate 901 1,362 Multi Asset Credit - quoted 1,446 9,791 Multi Asset Credit - unquoted 15,235 21,534 Index-Linked 12 United Kingdom 13 21 Overseas 32 53 Corporate 58 103 Equities 48,574 United Kingdom 16,872 11,948 Overseas 11,279 28,151 Managed Funds 31,056 Equities 38,974 5,161 Property - quoted 7,757 17,238 Property - unquoted 10,695 8,464 Private equity - quoted 1,642 233 Private equity - unquoted 2,805 2,114 Infrastructure - quoted 2,639 4,115 Infrastructure - unquoted 5,130 3,909 Other investments - quoted 4,574 4,689 Other investments - unquoted 4,700 78,916 709 Derivatives 934 10,038 Accrued interest on Ex-dividend Investments 3962 164,302 133,600 10 Underwriting 12 -192 Currency Loss (-) / gain -393 550 Stock lending 248 985 Cash deposits 1,257 1,353 1,124
165,655 134,724
l) Taxes on Income
2017/18 2018/19 £000 £000 Withholding Tax 693 Overseas Equities 829 693 829
East Riding of Yorkshire Council 128 Statement of Accounts 2018/19 PENSION FUND m) Reconciliation of Movements in Investments
Restated Change in Value at Reclassified Value Purchases at Sales Market Value at 2018/19 01/04/2018 01/04/18 01/04/18 Cost Proceeds Value 31/03/2019 Investment Assets £000 £000 £000 £000 £000 £000 £000 Bonds UK - Public Sector 125,491 0 125,491 1,834 0 2,375 129,700 UK - Other Quoted 59,254 0 59,254 00-7759,177 Overseas - Public Sector 67,240 0 67,240 0 0 3,612 70,852 Overseas - Corporate 43,102 0 43,102 0 0 3,181 46,283 Multi Asset Credit - quoted 70,217 0 70,217 0 0 3,873 74,090 Multi Asset Credit - unquoted 197,246 0 197,246 69,812 -34,348 1,007 233,717 562,550 0 562,550 71,646 -34,348 13,971 613,819 Equities UK 1,411,721 0 1,411,721 3,874 -1,487,798 108,311 36,108 BCPP Share Capital 000833 0 0 833 Overseas 507,856 0 507,856 382,397 -465,038 -13,665 411,550 1,919,577 0 1,919,577 387,104 -1,952,836 94,646 448,491 Derivatives UK Treasury 58,975 0 58,975 1,138 0 -541 59,572 Cash 6,000 0 6,000 0006,000 Derivatives Option 2,424 0 2,424 00-3,095-671 67,399 0 67,399 1,138 0 -3,636 64,901 Index-Linked Bonds UK - Public Sector 15,294 0 15,294 0096716,261 UK Corporate 6,702 0 6,702 003547,056 Overseas - Public Sector 11,888 0 11,888 0 0 1,294 13,182 33,884 0 33,884 0 0 2,615 36,499 Pooled Investment Vehicles Managed Funds 885,484 0 885,484 1,805,415 -260,081 26,097 2,456,915 Property - Quoted 159,656 0 159,656 13,001 0 3,033 175,690 Property - Unquoted 384,242 0 384,242 63,372 -60,623 17,922 404,913 Private Equity - Quoted 97,700 0 97,700 0 -1,938 11,196 106,958 Private Equity - Unquoted 122,154 0 122,154 37,689 -33,928 13,207 139,122 Infrastructure - Quoted 41,542 0 41,542 15,315 -8,421 6,217 54,653 Infrastructure - Unquoted 152,610 0 152,610 28,978 -23,901 18,620 176,307 Other Investments - Quoted 71,497 0 71,497 10,641 -2,876 -3,338 75,924 Other Investments - Unquoted 132,503 0 132,503 32,038 -47,877 13,049 129,713 2,047,388 0 2,047,388 2,006,449 -439,645 106,003 3,720,195 4,630,798 0 4,630,798 2,466,337 -2,426,829 213,599 4,883,905 Investment Cash Sterling 116,334 0 116,334 685,219 -667,300 0 134,253 Euros 382 0 382 10,628 -9,049 1 1,962 US Dollar 1,092 0 1,092 17,148 -18,187 90 143 117,808 0 117,808 712,995 -694,536 91 136,358 4,748,606 0 4,748,606 3,179,332 -3,121,365 213,690 5,020,263
Net Gains and Losses on Financial Instruments All net gains and losses on financial assets are fair value through profit and loss.
Further analysis of Multi Asset Credit, Derivatives Option and Managed Funds
Value at 1 April 2018 Value at 31 March 2019 UK Overseas Total UK Overseas Total £000 £000 £000 £000 £000 £000 Multi Asset Credit - quoted 27,436 42,781 70,217 26,428 47,662 74,090 Multi Asset Credit - unquoted 54,788 142,458 197,246 72,147 161,570 233,717 Derivatives Option 6,598 -4,174 2,424 4,824 -5,495 -671 Managed Funds 277,436 608,048 885,484 1,940,470 516,445 2,456,915
Derivatives - Two UK Treasury bonds 1.5% 22 July 2047 totalling £1.834m were purchased during the financial year.
East Riding of Yorkshire Council 129 Statement of Accounts 2018/19 PENSION FUND Reconciliation to Net Asset Statement
2018/19 £000
Net Asset Statement Long term Investments 833 Investment Assets 5,056,306 5,057,139 Less Cash -155,171 Other Investment balances -12,568 Investment Liability -5,495 Value 31/03/19 Reconciliation of Movements in Investments 4,883,905
Fair Value Restated Change in Value at Revaluation Value Purchases at Market Value at 2017/18 01/04/2017 01/04/17 01/04/17 Cost Sales Proceeds Value 31/03/2018
Investment Assets £000 £000 £000 £000 £000 £000 £000 Bonds UK - Public Sector 122,066 0 122,066 14,188 -8,520 -2,243 125,491 UK - Other Quoted 54,113 0 54,113 14,054 -8,567 -346 59,254 Overseas - Public Sector 74,990 0 74,990 2,293 -5,311 -4,732 67,240 Overseas - Corporate 45,198 0 45,198 17,448 -15,267 -4,277 43,102 Multi Asset Credit - quoted 0 74,275 74,275 0 0 -4,058 70,217 Multi Asset Credit - unquoted 0 142,710 142,710 72,322 -17,038 -748 197,246 Global High Yield - quoted 45,235 -45,235 0 0 0 0 0 Global High Yield - unquoted 88,676 -88,676 0 0 0 0 0 Emerging Market Government 14,259 -14,259 0 0 0 0 0 444,537 68,815 513,352 120,305 -54,703 -16,404 562,550 Equities UK 1,421,788 0 1,421,788 24,186 -7,182 -27,071 1,411,721 Overseas 473,485 0 473,485 156,182 -151,479 29,668 507,856 1,895,273 0 1,895,273 180,368 -158,661 2,597 1,919,577 Derivatives UK Treasury 0 0 0 60,709 0 -1,734 58,975 Cash 0 0 0 6,000 0 0 6,000 Derivatives Option 0 0 0 0 0 2,424 2,424 0 0 0 66,709 0 690 67,399 Index-Linked Bonds UK - Public Sector 18,580 0 18,580 0 -3,371 85 15,294 UK Corporate 4,865 0 4,865 1,955 0 -118 6,702 Overseas - Public Sector 11,032 0 11,032 7,453 -5,182 -1,415 11,888 34,477 0 34,477 9,408 -8,553 -1,448 33,884 Pooled Investment Vehicles Managed Funds 848,194 0 848,194 19,788 0 17,502 885,484 Property - Quoted 109,546 0 109,546 68,655 -7,672 -10,873 159,656 Property - Unquoted 389,921 0 389,921 53,994 -64,161 4,488 384,242 Private Equity - Quoted 97,921 0 97,921 501 -3,626 2,904 97,700 Private Equity - Unquoted 106,207 0 106,207 33,692 -22,819 5,074 122,154 Infrastructure - Quoted 42,178 0 42,178 3,171 0 -3,807 41,542 Infrastructure - Unquoted 122,987 0 122,987 33,134 -8,846 5,335 152,610 Other Investments - Quoted 81,536 -14,781 66,755 14,900 -7,696 -2,462 71,497 Other Investments - Unquoted 202,831 -54,034 148,797 42,213 -46,360 -12,147 132,503 2,001,321 -68,815 1,932,506 270,048 -161,180 6,014 2,047,388 4,375,608 0 4,375,608 646,838 -383,097 -8,551 4,630,798 Investment Cash Sterling 122,623 0 122,623 808,732 -815,021 0 116,334 Euros 6 0 6 10,594 -10,181 -37 382 US Dollar 0 0 0 28,792 -27,742 42 1,092 122,629 0 122,629 848,118 -852,944 5 117,808 4,498,237 0 4,498,237 1,494,956 -1,236,041 -8,546 4,748,606
East Riding of Yorkshire Council 130 Statement of Accounts 2018/19 PENSION FUND n) Current Assets
31 March 2018 31 March 2019 £000 £000 £000 Current Assets Contributions due 5,402 Employers 5,242 2,018 Employees 2,165 7,407 719 Recharge of Pensions increase and 864 supplementary allowance 6,786 East Riding of Yorkshire Council 4,642 1,806 Other Debtors 2,562 16,731 15,475
o) Current Liabilities
31 March 2018 31 March 2019 £000 £000 Current Liabilities 1,116 East Riding of Yorkshire Council 118 860 Overdaim of Recharges 671 532 Other creditors 766 2,508 1,555
p) Managerial Arrangements of Assets
31 March 2018 31 March 2019 £000 % £000 % 3,687,409 77 Internally managed 2,197,382 43 1,098,396 23 Externally managed (Schroder Investment Management Limited) 1,092,977 22 00Externally managed (Border to Coast Pensions Partnership) 1,767,360 35 4,785,805 100 5,057,719 100
q) Contingent Liabilities and Contractual Commitments At 31 March 2019 the Fund had commitments to the purchase of investments of £570.653m (2018 £506.080m) analysed as follows:
2017/18 2018/19 Foreign Foreign Currency £000 Currency £000 0 200,771 Sterling Denominated ( £ ) 0 211,374 294,553 209,975 US Dollar Denominated ( $ ) 296,180 226,316 108,738 95,334 Euro Denominated ( € ) 154,304 132,963 506,080 570,653
In two separate Employment Tribunal cases involving members of the Judiciary and Firefighter pensions’ schemes, there are appeals in respect of possible age discrimination in the transitional arrangements to new pension schemes. HM Government is appealing in both cases and it is unclear what the impact of any decision will be on similar transitional arrangements across public sector pension schemes. The Local Government Pension Scheme (LGPS) have commissioned the Government Actuarial Department (GAD) to prepare an assessment of the potential impact on a LGPS scheme wide basis. Initial estimates place the potential impact in the region of ½% to 1% of total liabilities. r) Members’ Allowances Following modernisation of the Committee structures, allowances are not paid to Members directly in respect of Pensions Committee attendance. The Chairman of the Pensions Committee is paid a special responsibility allowance. However, allowances are not cumulative, and only the highest allowance for any committee responsibility is paid to the Member. Payments to Members are disclosed on the Council’s website.
East Riding of Yorkshire Council 131 Statement of Accounts 2018/19 PENSION FUND s) Related Party Transactions In accordance with International Accounting Standard (IAS) 24 and International Public Sector Accounting Standard (IPSAS) 20 ‘Related Party Disclosures’, material transactions with related parties not disclosed elsewhere are detailed below. The officer responsible for the proper administration of the financial affairs of the East Riding Pension Fund (the Section 151 officer) is also the Section 151 officer of East Riding of Yorkshire Council. The East Riding Pension Fund is administered by East Riding of Yorkshire Council. During the financial year the Council incurred costs of £7.2580m (2018 £6.350m) comprising pensions administration costs of £1.629m (2018 £1.796m), investment management costs of £4.991m (2018 £3.919m) and oversight and governance costs of £0.638m (2018 £0.635m). The Council was subsequently reimbursed by the Fund for these expenses. The Council is also the largest employer of members of the Pension Fund and, during the financial year, made contributions of £16.160m to the Fund (2018 £74.036m). £9.269m of this total sum is in respect of contributions paid by members of the Pension Fund. As at 31 March 2019 the Council was a net debtor to the Fund of £4.524m (2018 £5.782m). Under legislation introduced in 2003/04, Councillors were entitled to join the Pension Scheme. The LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 removed this entitlement for Councillors from the later of 1 April 2014 or the end of their current term in office (or to age 75 if earlier). Therefore, no members of the Pension Committee made contributions to the Fund during the financial year in their member capacity. No senior officers responsible for the administration of the Fund have entered into any contract, other than their contract of employment with the Council, for the supply of goods or services to the Fund. The key management personnel of the Pension Fund are the Director of Corporate Resources and the Head of Finance. The charge to the Pension Fund for these two posts in 2018/19 was £41,463. t) Currency Conversion Rates Overseas investments have been converted at the exchange rates quoted in the Financial Times at close of business on 31 March 2019 to arrive at the sterling values in the Net Assets Statement. The exchange rates used per £1 sterling were:
Australian Dollar 1.8344 Canadian Dollar 1.7408 Danish Krone 8.6635 Euro 1.1605 Japanese Yen 144.2281 New Zealand Dollar 1.9106 Norwegian Krona 11.2213 Swedish Krona 12.0862 Swiss Franc 1.2977 US Dollar 1.3031
u) Additional Voluntary Contributions The Fund’s approved Additional Voluntary Contribution (AVC) provider is Prudential and during the year to 31 March 2019 scheme members made contributions to this facility of £1.866m (2018 £1.584m). The total value of the funds invested by Prudential on behalf of members of the East Riding Pension Fund at 31 March 2019 is £18.609m (2018 £19.095m). AVC’s do not form part of the Pension Fund Accounts in accordance with the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016. v) Investment Strategy Statement The East Riding Pension Fund is required to maintain an Investment Strategy Statement (ISS) in accordance with the LGPS Regulations. Full details of the ISS for the Fund are set out within the East Riding Pension Fund Annual Report and Accounts. The Pensions Committee approved the ISS at its meeting on 16 March 2018, and it complies with the LGPS Regulations. The Fund is also required to maintain a Funding Strategy Statement (FSS) in accordance with the LGPS Regulations. The FSS for the Fund has been revised to take into account the results of the actuarial valuation, effective 31 March 2017. The FSS, which was approved by the Pensions Committee at its meeting on 16 March 2018, complies with these Regulations. In preparing the ISS and the FSS, the Pensions Committee has taken professional advice from its advisers and investment managers, whom it considers are suitably qualified and experienced in investment matters. The principal
East Riding of Yorkshire Council 132 Statement of Accounts 2018/19 PENSION FUND employers and trade unions are represented at the Pensions Committee, enabling their views to be taken into account. The investment managers and the investment advisers are required to adhere to the principles set out in the ISS. The Pensions Committee requires an annual, written statement from its investment managers confirming that they have adhered to the principles set out in the statement. The ISS of the Fund is reviewed by the Pensions Committee on an annual basis. w) The Actuarial Present Value of Promised Retirement Benefits The actuarial present value of promised retirement benefits at 31 March 2019 was £7.096bn (31 March 2018 £6.264bn). The value includes an allowance for the 'McCloud ruling', i.e. an estimate of the potential increase in past service benefits arising from a Supreme Court case affecting public sector pension schemes which concluded during June 2019. Liabilities have been projected using a roll forward approximation from the latest formal funding valuation as at 31 March 2016. The fund accounts do not take account of liabilities to pay pensions and other benefits in the future. The actuarial valuation carried out as at 31 March 2016 revealed that the Fund’s assets valued at £3.714bn were sufficient to meet 88% of the liabilities (ie the present value of promised retirement benefits) accrued up to that date. The resulting deficit at the 2016 valuation was £512m. The assumptions made by the Actuary can be found on page 124 note 17. Significant actuarial assumptions are shown below:
Year ended (% p.a.) 31 March 2019 31 March 2018 Pension Increase Rate 2.5% 2.4% Salary Increase Rate 2.7% 2.6% Discount Rate 2.4% 2.7% x) Disclosure Relating to Financial Instruments The accounting standards for financial instruments have changed between financial years. In 2017/18 the accounting standard was International Accounting Standard 39 (IAS39) and in 2018/19 the accounting standard is International Financial Reporting Standard 9. The change in accounting standards has not changed the treatment of the Fund’s financial instruments, but financial assets classified as loans and receivables under IAS39 are classified as financial instruments at amortised cost under IFRS9. The items in the Net Asset Statement are made up of the following categories of financial instrument.
31 March 2018 31 March 2019 £000 £000 £000 Financial Assets at fair value through profit or loss 562,550 Bonds 613,819 1,919,577 Equities 447,658 33,884 Index-Linked Bonds 36,499 2,047,388 Pooled Investment Vehicles 3,720,195 71,573 Derivatives 70,396 1,474 Foreign Currency 3,739 13,808 Other Investment Balances 12,568 4,650,254 Total Financial Assets 4,904,874 Financial Assets at cost 0 Long term investments 833 4,650,254 Total Financial Assets 4,905,707 Financial Assets at Amortised Cost 128,256 Cash Deposits - Sterling 151,432 16,731 Current Assets 15,475 144,987 Total Financial Assets at Amortised Cost 166,907 Financial Liabilities at fair value through profit or loss -6,928 Other Investment Balances -13,340 Financial Liabilities at Amortised Cost -2,508 Current liabilities -1,555 4,785,805 Net Financial Assets 5,057,719
NB Financial Assets at Amortised Cost entitled Loans and Receivables in 2017/18 financial statements.
East Riding of Yorkshire Council 133 Statement of Accounts 2018/19 PENSION FUND The methodology used for the valuation of investment assets is described in Note to the Accounts 6 Valuation of Assets. The Fund’s primary long term risk is that the Fund’s assets do not meet its liabilities i.e. the benefits payable to members. Therefore, the aim of the Fund’s investment management is to achieve the long term expected rate of return with an acceptable level of risk. The Fund achieves this by setting a strategic asset allocation on a triennial basis which is expected to achieve the target rate of return over the long term. The tactical asset allocation is determined by the Pensions Committee on a quarterly basis. The Fund has a dedicated strategic risk register which identifies the key risks within the Pension Fund and the risk controls that are in place to mitigate these risks. The risk register is reviewed by the Pensions Committee on a semi- annual basis. In addition, an investment risk management schedule is reviewed by the Pensions Committee on a quarterly basis which considers issues such as performance; regulation and compliance; and personnel and structure. The key risks inherent in the Pension Fund in relation to its financial assets are:
Market risk Market risk is the risk that the value of an investment decreases as a result of changing market conditions. The risk is mitigated by: An appropriate strategic asset allocation is determined on a triennial basis in conjunction with the actuarial valuation exercise. This aims to meet the target long term rate of return with an acceptable level of risk and includes an appropriate diversification of asset classes. The allocation is agreed by the Pensions Committee and the Fund’s advisers and investment managers. The strategic asset allocation is disclosed in the Fund’s Investment Strategy Statement including the permitted asset classes, their allocations, and the permitted ranges. Tactical asset allocation is determined on a quarterly basis by the Pensions Committee in light of financial market conditions and following advice from the Fund’s advisers and investment managers. The Pensions Committee regularly reviews the long term investment strategy to ensure that it remains appropriate. The investment policy of the East Riding Pension Fund does not permit any employer related investment, either in the assets, stock, land or property of the Principal Employers or the assets, stock, land or property of any associated employers. The Pensions Committee considers that employer related investments pose too great a risk to the security of the Fund. The Fund has adopted the CIPFA Code of Practice for Treasury Management in Public Services and maintains and operates a Treasury Management Policy comprising an overview of the principles and practices to which the activity will comply. The Treasury Management Policy is approved by the Pensions Committee on an annual basis and they also receive a half-yearly and annual report on treasury activity. The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 state the following regarding the use and investment of Pension Fund monies: an administering authority must invest any fund money that is not needed immediately to make payments from the fund; they may vary their investments; their investment policy must be formulated with a view to the advisability of investing fund money in a wide variety of investments and to the suitability of particular investments and types of investments; an administering authority must obtain proper advice at reasonable intervals about their investments; and the authority must consider such advice in taking any steps about their investments.
East Riding of Yorkshire Council 134 Statement of Accounts 2018/19 PENSION FUND The Fund has determined that the following movements in market price risk are possible for the 2018/19 reporting period:
Potential market movements (+/-)
Asset Type % Bonds 3.1 Index Linked Bonds 8.0 UK Equities 9.5 Overseas Equities 10.1 Pooled Property Investments 1.5 Other Pooled Investments 2.8 Private Equity 2.8 Cash 0.6
Had the market price of the fund investments increased or decreased in line with the above, the change in the net assets available to fund benefits would have been as follows:
Value as at the Potential value Potential value 31 March 2019 on increase on decrease Asset Type £000 £000 £000 Bonds 673,391 694,266 652,516 Index Linked Bonds 36,499 39,419 33,579 UK Equities 36,270 39,716 32,824 Overseas Equities 411,550 453,117 369,983 Pooled Property Investments 580,603 589,312 571,894 Other Pooled Ivestments 2,893,512 2,974,530 2,812,494 Private Equity 246,080 252,970 239,190 Cash 161,171 162,138 160,204 . Total 5,039,076 5,205,468 4,872,684
The Fund determined that the following movements in market price risk were possible for the 2017/18 reporting period:
Value as at the Potential value Potential value 31 March 2018 on increase on decrease Asset Type £000 £000 £000 Bonds 621,525 645,143 597,907 Index Linked Bonds 33,884 36,527 31,241 UK Equities 1,418,319 1,554,478 1,282,160 Overseas Equities 507,856 559,657 456,055 Pooled Property Investments 543,898 554,232 533,564 Other Pooled Ivestments 1,283,636 1,320,861 1,246,411 Private Equity 219,854 226,230 213,478 Cash 135,730 136,680 134,780 . Total 4,764,702 5,033,808 4,495,596
Performance risk Performance risk is the risk that the Fund’s investment managers fail to deliver returns in line with the underlying asset classes. This risk is mitigated by: Investment management responsibilities are split between the internal and external investment managers. Each investment manager has a robust investment process including detailed research and analysis. Analysis of market performance and investment managers’ performance relative to their index benchmark on a quarterly basis by an independent third party. Detailed analysis of investment managers’ performance on an annual basis.
East Riding of Yorkshire Council 135 Statement of Accounts 2018/19 PENSION FUND Valuation risk This is the risk that the valuations disclosed in the financial statements are not reflective of the value that could be achieved on disposal. The valuation of financial instruments has been classified into three levels, according to the quality and reliability of information used to determine fair values. Level 1 – Level 1 valuations are those derived from unadjusted quoted prices in active markets for identical assets or liabilities. Products classified as level 1 include quoted equities. Level 2 – Level 2 valuations are those where quoted market prices are not available. Products classified as level 2 include property funds, fixed interest securities, index linked securities and unit trusts. Level 3 – Level 3 valuations are those where at least one input which could have a significant effect on an instruments valuation is not based on observable market data. Products classified as level 3 include unquoted investments.
Level 1 Level 2 Level 3 Total Values at 31 March 2019 £000 £000 £000 £000 Financial Assets 2,903,226 958,151 1,022,023 4,883,400 Financial Assets at Amortised Cost 189,214 0 0 189,214 3,092,440 958,151 1,022,023 5,072,614 Financial Liabilities 14,895 0 0 14,895 14,895 0 0 14,895 3,077,545 958,151 1,022,023 5,057,719
Level 1 Level 2 Level 3 Total Values at 31 March 2018 £000 £000 £000 £000 Financial Assets 2,356,422 1,386,301 907,531 4,650,254 Loans and Receivables 144,987 0 0 144,987 2,501,409 1,386,301 907,531 4,795,241 Financial Liabilities 9,436 0 0 9,436 9,436 0 0 9,436 2,491,973 1,386,301 907,531 4,785,805
Level 3 Analysis Value at Change Value at 01/04/18 Purchases at Cost Sales Proceeds Market Value 31/03/19 £000 £000 £000 £000 £000 907,531 231,889 -200,677 83,280 1,022,023
Level 3 Analysis Value at Change Value at 01/04/17 Purchases at Cost Sales Proceeds Market Value 31/03/18 £000 £000 £000 £000 £000 830,258 236,255 -159,224 242 907,531
The main characteristic of Level 3 assets is the absence of any observable market data. The inputs used to determine the fair value of Level 3 assets includes audited and unaudited financial information from the underlying investment managers. No investment assets transferred between the levels of fair value hierarchy during the year.
East Riding of Yorkshire Council 136 Statement of Accounts 2018/19 PENSION FUND The table below shows the effect of potential market movements on those assets classified at Level 3.
Value at Potential market Potential value Potential value 31/03/2019 movements (+/-) on increase on decrease £000 % £000 £000 Multi Asset Credit 233,717 3.1 240,962 226,472 Property 351,537 1.5 356,810 346,264 Private Equity 139,122 2.8 143,017 135,227 Infrastructure 176,307 2.8 181,244 171,370 Other 121,340 2.8 124,738 117,942 1,022,023 1,046,770 997,275
Value at Potential market Potential value Potential value 31/03/2018 movements (+/-) on increase on decrease £000 % £000 £000 Multi Asset Credit 197,246 3.8 204,741 189,751 Property 303,018 1.9 308,775 297,261 Private Equity 122,154 2.9 125,696 118,612 Infrastructure 152,610 2.9 157,036 148,184 Other 132,503 2.9 136,346 128,660 907,531 932,594 882,468
Credit risk This is the risk that the Fund’s counterparties fail to pay amounts due. Appropriate credit limits have been established by the Fund for individual counterparties for Treasury Management purposes. The Pension Fund Treasury Management Policy specifies the following framework for credit limits for individual counterparties:
31 March 2018 Maximum 31 March 2019 Actual Limit Actual £000 £000 £000 0 UK Government No Limit 0 22,000 Institutions or Funds with a minimum rating of AAA/A2 25,000 25,000 15,000 Institutions with a minimum rating of AA/A2 20,000 15,000 5,000 Institutions with a minimum rating of A/A2 15,000 15,000 10,000 Local Authorities 10,000 10,000 5,000 Building Societies - top 15 ranked by asset value 10,000 0
The investment balances at the end of the financial year were:
31 March 2018 31 March 2019 £000 £000 0 UK Government 0 41,287 Institutions or Funds with a minimum rating of AAA/A2 52,153 35,000 Institutions with a minimum rating of AA/A2 15,000 3,521 Institutions with a minimum rating of A/A2 54,205 33,000 Local Authorities 15,000 5,000 Building Societies - top 15 ranked by asset value 0 117,808 136,358
Treasury credit risk has been managed dynamically during the year, responding to national and international events in financial markets. Security of principal sums invested continues to be the prime objective. The duration of investments is limited to a maximum of twelve months to enable a reasonable exit strategy to be implemented if necessary. The Pension Fund makes use of Money Market Funds which are instant access funds whose objectives match those of the Pension Fund, being security of principal and diversification of investments. The present restrictions within the approved Treasury Management Policy will continue until economic and market conditions normalise.
East Riding of Yorkshire Council 137 Statement of Accounts 2018/19 PENSION FUND Liquidity risk Liquidity risk is the risk that the Pension Fund is not able to meet its financial obligations as they fall due or can do so only at an excessive cost. The Pension Fund’s policy is to maintain sufficient funds in a liquid form at all times to ensure that it can cover all fluctuations in cash flow and meet its financial obligations. The accounts do not take into account liabilities to pay pensions and other benefits. The table below profiles investment assets by maturity date, however it should be noted that those investments in the 1 - 5 years and more than 5 years categories, i.e. bonds, can be liquidated at any given time.
Not more 3 - 12 1 - 5 More than No specific than 3 months months years 5 years maturity Total £000 £000 £000 £000 £000 £000 As at 31 March 2019 Assets Cash 45,000 25,000 0 0 91,171 161,171 Investments 0 0 134,986 267,097 4,481,317 4,883,400 Other investment balances 12,568 0 0 0 0 12,568 Current assets 15,475 0 0 0 0 15,475 Total assets 73,043 25,000 134,986 267,097 4,572,488 5,072,614 Liabilities Other investment balances 13,340 0 0 0 0 13,340 Current liabilities 1,555 0 0 0 0 1,555 Total liabilities 14,895 0 0 0 0 14,895 Liquidity Surplus 58,148 25,000 134,986 267,097 4,572,488 5,057,719
Not more than 3 3 - 12 1 - 5 More than 5 No specific months months years years maturity Total £000 £000 £000 £000 £000 £000 As at 31 March 2018 Assets Cash 46,000 30,000 0 0 53,730 129,730 Investments 0 0 99,674 285,850 4,249,448 4,634,972 Other investment balances 13,808 0 0 0 0 13,808 Current assets 16,731 0 0 0 0 16,731 Total assets 76,539 30,000 99,674 285,850 4,303,178 4,795,241 Liabilities Other investment balances 6,928 0 0 0 0 6,928 Current liabilities 2,508 0 0 0 0 2,508 Total liabilities 9,436 0 0 0 0 9,436 Liquidity Surplus 67,103 30,000 99,674 285,850 4,303,178 4,785,805
Interest rate risk Interest rate risk is the risk that a change in interest rates will result in a change in the valuation of an investment. The Fund’s direct exposure to changes in interest rates is as follows:
31 March 2018 31 March 2019 £000 £000 Asset Type Cash and cash equivalents 41,808 75,327 Fixed interest securities 596,434 650,318 638,242 725,645
East Riding of Yorkshire Council 138 Statement of Accounts 2018/19 PENSION FUND The table below shows the effect in the year on assets exposed to interest rate changes of a + / - 100 basis points in interest rates:
Asset exposed to Value as at Potential movement on Value on Value on interest rate risk 31 March 2019 1% change in interest rates Increase Decrease £000 £000 £000 £000
Cash and cash equivalents 75,327 753 76,080 74,574 Bonds 650,318 6,503 656,821 643,815
Total 725,645 7,256 732,901 718,389
Asset exposed to Value as at Potential movement on 1% Value on Value on interest rate risk 31 March 2018 change in interest rates Increase Decrease £000 £000 £000 £000
Cash and cash equivalents 41,808 418 42,226 41,390 Bonds 596,434 5,964 602,398 590,470
Total 638,242 6,382 644,624 631,860
The table below shows the impact on income exposed to interest rate changes of + / - 100 basis points change in interest rates:
Value as at Potential movement on Value on Value on Income exposed to 31 March 2019 1% change in interest rates Increase Decrease interest rate risk £000 £000 £000 £000
Cash and cash equivalents 1,257 13 1,270 1,244 Bonds 21,637 216 21,853 21,421
Total 22,894 229 23,123 22,665
Value as at Potential movement on 1% Value on Value on Income exposed to 31 March 2018 change in interest rates Increase Decrease interest rate risk £000 £000 £000 £000
Cash and cash equivalents 985 10 995 975 Bonds 16,054 161 16,215 15,893
Total 17,039 171 17,210 16,868
Foreign exchange risk Foreign exchange risk is the risk that an adverse movement in foreign exchange rates will impact on the value of the Fund’s investments denominated in foreign currencies. The following table summarises the Fund’s currency exposure:
USD EUR JPY CHF SEK DKK NOK AUD CAD Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 As at 31 March 2019
Bonds Overseas Public Sector 24,890 18,696 18,876 0 1,642 0 0 3,605 3,143 70,852 Multi Asset Credit - quoted 47,662 0 0 0 0 0 0 0 0 47,662 Multi Asset Credit - unquoted 68,518 93,052 0 0 0 0 0 0 0 161,570 Overseas Corporate 32,420 4,545 0 0 0 0 0 0 0 36,965
Equities Overseas -5,495 162,591 172,524 53,121 11,854 2,258 10,844 0 0 407,697
Index-Linked Bonds Overseas Public Sector 13,182 0 0 0 0 0 0 0 0 13,182
Pooled Investment Vehicles Managed Funds 516,444 0 0 0 0 0 0 0 0 516,444 Property - unquoted 20,513 54,214 0 0 0 0 0 0 0 74,727 Private Equity - quoted 11,392 0 0 0 0 0 0 0 0 11,392 Private Equity - unquoted 47,278 57,444 0 0 0 0 0 0 0 104,722 Infrastructure - unquoted 20,121 47,731 0 0 0 0 0 0 0 67,852 Other investments - unquoted 101,591 19,750 0 0 0 0 0 0 0 121,341 898,516 458,023 191,400 53,121 13,496 2,258 10,844 3,605 3,143 1,634,406 East Riding of Yorkshire Council 139 Statement of Accounts 2018/19 PENSION FUND
USD EUR JPY CHF SEK DKK NOK AUD CAD Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 As at 31 March 2018
Bonds Overseas Public Sector 22,588 18,537 18,158 0 1,684 0 2,911 3,363 2,162 69,403 Multi Asset Credit - quoted 42,781 0 0 0 0 0 0 0 0 42,781 Multi Asset Credit - unquoted 43,281 99,177 0 0 0 0 0 0 0 142,458 Global High Yield 000000000 0 Emerging Market Government000000000 0 Overseas Corporate 33,771 0 0 0 0 0 0 0 0 33,771
Equities Overseas 0 245,422 193,368 40,926 11,379 14,600 0 0 0 505,695
Index-Linked Bonds Overseas Public Sector 11,888 0 0 0 0 0 0 0 0 11,888
Pooled Investment Vehicles Managed Funds 583,328 24,720 0 0 0 0 0 0 0 608,048 Property - unquoted 16,796 34,294 0 0 0 0 0 0 0 51,090 Private Equity - quoted 20,848 0 0 0 0 0 0 0 0 20,848 Private Equity - unquoted 34,133 57,185 0 0 0 0 0 0 0 91,318 Infrastructure - unquoted 18,262 44,524 0 0 0 0 0 0 0 62,786 Other investments - unquoted 101,814 22,694 0 0 0 0 0 0 0 124,508 929,490 546,553 211,526 40,926 13,063 14,600 2,911 3,363 2,162 1,764,594
A percentage strengthening or weakening of sterling against the various currencies in which the Fund holds investments would, it has been calculated using the likely volatility associated with foreign exchange movements, increase or decrease the net assets available to fund benefits as follows:
Asset value Potential market Value on Value on Assets exposed to at 31 March 2019 movement Increase Decrease currency risk £000 £000 £000 £000 Overseas Public Sector Bonds 70,852 6,235 77,087 64,617 Multi Asset Credit - quoted 47,662 4,194 51,856 43,468 Multi Asset Credit - unquoted 161,570 14,218 175,788 147,352 Overseas Corporate 36,965 3,229 40,194 33,736 Overseas Public Sector I/L Bonds 13,182 1,160 14,342 12,022 Overseas Equities 407,697 35,877 443,574 371,820 Managed Funds 516,444 45,447 561,891 470,997 Property - unquoted 74,727 6,576 81,303 68,151 Private Equity - quoted 11,392 1,003 12,395 10,389 Private Equity - unquoted 104,722 9,216 113,938 95,506 Infrastructure - unquoted 67,852 5,971 73,823 61,881 Other investments - unquoted 121,341 10,678 132,019 110,663 Total 1,634,406 143,804 1,778,210 1,490,602
Asset value Potential market Value on Value on Assets exposed to at 31 March 2018 movement Increase Decrease currency risk £000 £000 £000 £000 Overseas Public Sector Bonds 69,403 7,688 76,765 61,389 Multi Asset Credit - quoted 42,781 4,150 46,931 38,631 Multi Asset Credit - unquoted 142,458 13,124 135,582 129,334 Overseas Corporate 33,771 3,276 37,047 30,495 Overseas Public Sector I/L Bonds 11,888 1,153 13,041 10,735 Overseas Equities 505,695 57,726 519,245 447,969 Managed Funds 608,048 58,808 666,856 553,690 Property - unquoted 51,090 4,716 55,806 46,374 Private Equity - quoted 20,848 2,022 22,870 18,826 Private Equity - unquoted 91,318 8,458 99,776 82,860 Infrastructure - unquoted 62,786 5,778 68,564 57,008 Other investments - unquoted 124,508 11,919 136,427 112,589 Total 1,764,594 178,818 1,878,910 1,589,900
y) Contingent assets As at 31 March 2019 the Fund had submitted claims totalling £8.23m relating to the reclaiming of UK and overseas withholding tax on investment income received, of which £1.10m has been received to date. Professional costs to date have totalled £0.68m.
East Riding of Yorkshire Council 140 Statement of Accounts 2018/19 PENSION FUND z) Accounting standards that have been issued but not yet adopted Accounting standards that have been issued before 1 January 2019 but not yet adopted by the Code relate to: IAS 40 Investment Property: Transfers of Investment Property provides further explanation of the instances in which a property can be reclassified as investment property. IFRIC 22 Foreign Currency Transactions and Advance Consideration clarifies the treatment of payments in a foreign currency made in advance of obtaining or delivering services or goods. IFRIC 23 Uncertainty over Income Tax Treatments provides additional guidance on income tax treatment where there is uncertainty. IFRS 9 Financial instruments: prepayment features with negative compensation amends IFRS9 to make clear that amortised cost should be used where prepayments are substantially lower than the unpaid principal and interest. The introduction of/amendments to the above accounting standards are not expected to have a material impact on the 2019/20 Pension Fund Accounts. aa) Events after Balance Sheet Date This note considers events that arise after the balance sheet date, which concerns conditions that did not exist at that time and are of such materiality that their disclosure is required for the fair presentation of the final statements. Events after the balance sheet date are reflected up to the date when the Statement of Accounts was authorised by the Head of Finance as Section 151 Officer on 31 May 2019. At the date of signing there has been no adjusting or non-adjusting events after the reporting period. ab) Scheme Registration Number The Fund’s scheme registration number with the Pensions Regulator is 10079121.
11. FURTHER DETAILS The complete Annual Report and Accounts of the East Riding Pension Fund can be found on the Fund’s website www.erpf.org.uk.
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A CHANGE IN ACCOUNTING An adjustment of the carrying amount of an asset or a liability, or ESTIMATE the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits/obligations. Changes in accounting estimates result from new information or new developments and, accordingly, are not correction of errors.
A PRINCIPLE MARKET The market with the greatest volume and level of activity for the asset or liability.
ACADEMIES Academies are publicly funded independent schools, no longer under Local Authority (LA) control. Their funding is received directly from the Education Funding Agency (EFA) rather than from the LA.
ACCOUNTING PERIOD The period of time covered by the accounts, normally a period of twelve months commencing on 1 April. The end of the accounting period is the balance sheet date.
ACCOUNTING POLICIES Specific principles, bases, conventions, rules and practices applied by an authority in preparing and presenting financial statements
ACCRUALS Sums included in the final accounts to recognise revenue and capital income and expenditure earned or incurred in the financial year, but for which actual payment had not been received or made as at 31 March.
ACCRUAL BASIS The authority recognises items as assets, liabilities, income and expenses when they satisfy the definitions and recognition criteria for those elements in the Code. Accrual accounting depicts the effects of transactions and other events and circumstances on an authority's economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period.
ACQUIRED OPERATION Services acquired by the authority during the accounting period as a consequence of legislation, e.g. a new statutory responsibility transferred from another entity
ACTIVE MARKET A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
ACTUARIAL GAINS AND LOSSES For a defined benefit pension scheme, the changes in actuarial surpluses or deficits that arise because: events have not coincided with the actuarial assumptions made for the last valuation (experience gains and losses); or the actuarial assumptions have changed.
AGENCY ARRANGEMENTS An arrangement between two organisations where one will act as an agent, collecting money on behalf of the other party, to whom the money is then paid over. An example of this is National Non Domestic Rate (NNDR) collections, where the Local Authority is acting as the billing agent for Central Government and Humberside Fire and Rescue Service, collecting money from tax payers and then paying it over.
AGENT This is where the authority is acting as an intermediary.
AMORTISATION The depreciable amount of an intangible asset with a finite useful life. It is amortised (depreciated) on a systematic basis over its
East Riding of Yorkshire Council 142 Statement of Accounts 2018/19 GLOSSARY OF TERMS useful life, beginning when the intangible asset is available for use.
ASSET CEILING The present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.
ASSETS A resource controlled by the authority, as a result of past events and from which future economic benefits or service potential are expected flow to the authority.
ASSETS HELD BY A LONG- Are assets (other than non-transferable financial instruments issued TERM EMPLOYEE BENEFIT by the reporting authority) that are either: FUND a) held by a fund that is separated within the reporting authority in accordance with Local Government Pension Scheme requirements and exists solely to pay or fund employee benefits, or b) held by an entity (a fund) that is legally separate from the reporting authority and exists solely to pay or fund employee benefits, and c) are available to be used only to pay or fund employee benefits, are not available to the reporting authority’s own creditors (even in bankruptcy), and cannot be returned to the reporting authority, unless either: i) the remaining assets of the fund are sufficient to meet all the related employee benefit obligations of the plan or the reporting authority, or ii) the assets are returned to the reporting authority to reimburse it for employee benefits already paid.
ASSOCIATE An entity over which an investor has significant influence.
AUDIT OF ACCOUNTS An independent examination of the Authority’s financial affairs.
AVAILABLE FOR SALE Those non-derivative financial assets that are not classified as loans FINANCIAL ASSETS and receivables or held-to-maturity investments or financial assets at fair value through profit or loss.
BALANCE SHEET A statement of the recorded assets, liabilities and other balances at the end of the accounting period.
BID Business Improvement District are projects for the benefit of a particular area that are financed (in whole or in part) by a BID levy paid by the non-domestic ratepayers, or a class of such ratepayers, in the BID area. There are two key participants - the billing authority for the area and the BID body.
BORROWING COST Interest and other costs that an authority incurs in connection with the borrowing of funds.
BRS Business Rate Supplements were introduced by the Business Rate Supplements Act 2009 and related regulations and statutory guidance. The Act confers powers on relevant local authorities " to impose a levy on non-domestic ratepayers to raise money for expenditure on projects expected to promote economic development".
BUDGET The forecast of net revenue and capital expenditure over the accounting period.
CAPITAL EXPENDITURE Expenditure on the acquisition of a non-current asset, which will be used in providing services beyond the current accounting period or expenditure that adds to, and not merely maintains, the value of an existing non-current asset.
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CAPITAL FINANCING Funds used to pay for capital expenditure. There are various methods of financing capital expenditure including borrowing, leasing, direct revenue financing, usable capital receipts, capital grants, capital contributions, revenue reserves and earmarked reserves.
CAPITAL PROGRAMME The capital schemes the Authority intends to carry out over a specified period of time.
CAPITAL RECEIPT The proceeds from the disposal of land or other non-current assets. Proportions of Housing capital receipts can be used to finance new capital expenditure, within rules set down by the Government, but they cannot be used to finance revenue expenditure except for Revenue Expenditure Funded from Capital under Statute.
CARRYING AMOUNT The amount at which an asset is recognised after deducting any accumulated depreciation and impairment losses.
CASH Cash on hand and demand deposits.
CASH EQUIVALENTS Short-term, highly liquid investments readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
CASH FLOW STATEMENT The financial statement that shows the changes in cash and cash equivalents of the authority during the reporting period.
CASHFLOWS Inflows and outflows of cash and cash equivalents.
CHANGE IN ACCOUNTING An adjustment of the carrying amount of an asset or a liability, or ESTIMATE the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not correction of errors.
CIL The Community Infrastructure Levy (CIL) is a discretionary charge which relevant local authorities are empowered to charge on new development in their area. CIL charges are based on a formula which relates the charge to the size of the development. The proceeds of the levy must be spent on infrastructure to support the development of the area.
CLASS OF PROPERTY, PLANT A grouping of assets of a similar nature and use in an authority's AND EQUIPMENT operations.
CLOSE MEMBERS OF THE These are those family members who may be expected to influence, FAMILY OF A PERSON or be influenced by, that person in their dealings with the entity and include: that person's children and spouse or domestic partner; children of that person's spouse or domestic partner and dependants of that person or that person's spouse or domestic partner.
COLLECTION FUND A separate fund that records the income and expenditure relating to council tax and non-domestic rates.
COMMENCEMENT OF THE The date from which the lessee is entitled to exercise its right to use LEASE TERM the leased asset. It is the date of initial recognition of the lease.
COMMUNITY ASSETS Non-current assets that the Authority intends to hold in perpetuity, that have no determinable useful life and that may have restrictions on their disposal. Examples of community assets are parks and historical buildings.
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COMPARABILITY Information about an authority is more useful if it can be compared with similar information about other authorities and entities and with similar information about the same authority for another period or another date.
COMPONENT A part of an asset requiring separating from the total (host) asset into an asset in its own right as it has a cost that is significant in relation to the total cost of the asset. If the components also has a significantly different depreciable life from the host, then it is depreciated separately.
COMPREHENSIVE INCOME Shows the accounting economic cost in the year of providing AND EXPENDITURE services in accordance with generally accepted accounting practices, STATEMENT rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.
CONDITIONS ON Stipulations that specify that the future economic benefits or service TRANSFERRED ASSETS potential embodied in the asset are required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor.
CONSISTENCY The concept that the accounting treatment of like items within an accounting period and from one period to the next are the same.
CONSTRUCTIVE OBLIGATION An obligation that derives from the Authority’s actions where: by an established pattern of past practice, published policies or a sufficiently specific current statement, the Authority has indicated to other parties that it will accept certain responsibilities; and as a result, the Authority has created a valid expectation on the part of those other parties that it will discharge those responsibilities.
CONTINGENT ASSET A possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Authority.
CONTINGENT LIABILITY A contingent liability is either: a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Authority, or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
CONTROL OF AN INVESTEE An investor controls an investee when the reporting authority is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
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CONSTRUCTION CONTRACT A contract, or a similar binding arrangement, specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. Construction contracts include contracts for the rendering of services which are directly related to the construction, destruction or restoration of assets, and the restoration of the environment following the demolition of assets.
CONTRACTOR An entity that performs construction work pursuant to a construction contract.
CORPORATE AND The corporate and democratic core comprises all activities that local DEMOCRATIC CORE authorities engage in specifically because they are elected, multi- purpose authorities. The cost of these activities are thus over and above those which would be incurred by a series of independent, single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services.
COST The amount of cash or cash equivalent paid or the fair value of the other consideration given to acquire an asset at the time of acquisition or construction
COST APPROACH A valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost).
COSTS TO SELL The incremental costs directly attributable to the disposal of an asset, excluding finance costs.
CRC The Carbon Reduction Commitment Energy Efficiency Scheme commenced in April 2010.
CREDITOR Amount owed by the Authority for works done, goods received or services rendered within the accounting period, but for which payment has not been made by the end of that accounting period.
CURRENT ASSET An item having value to the Authority in monetary terms. A current asset will be consumed or cease to have material value within the next financial year (e.g. cash and inventories).
CURRENT REPLACEMENT The cost the authority would incur to acquire the asset on the COST reporting date.
CURRENT SERVICE COST The increase in the present value of a defined benefit pension (PENSIONS) scheme’s liabilities, expected to arise from employee service in the current period.
CURRENT VALUE Measurements reflect the economic environment prevailing for the service or function the asset is supporting at the reporting date.
DEBTOR Amount owed to the Authority for works done, goods received or services rendered within the accounting period, but for which payment has not been received by the end of that accounting period.
DECISION MAKER An entity with decision-making rights that is either a principal or an agent for other parties.
DEFINED BENEFIT PENSION Pension schemes in which the benefits received by the participants SCHEME are independent of the contributions paid and are not directly related to the investments of the scheme.
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DEFINED CONTRIBUTION Post-employment benefit plans under which an authority pays fixed PLANS contributions into a separate entity and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient asset to pay all employee benefits relating to employee service in the current and prior periods.
DEPRECIATION(TANGIBLES)/ The measure of the cost of the wearing out, consumption or other AMORTISATION reduction in the useful economic life of the Authority’s non-current (INTANGIBLES) assets during the accounting period, whether from use, the passage of time, or obsolescence through technological or other changes.
DEPRECIATED REPLACEMENT (DRC) is a method of valuation which provides the current cost of COST replacing an asset with its modern equivalent asset less deductions for all physical deterioration and all relevant forms of obsolescence and optimisation.
DERECOGNITION The removal of a previously recognised financial asset or financial liability from an authority's Balance Sheet.
DERIVATIVE A financial instrument with all three of the following characteristics: its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of anon-financial variable that the variable is not specific to a party to the contract; it requires no initial net investment or an initial investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; it is settled at a future date.
DISCONTINUED OPERATION Activity of an authority that must cease completely; that is, responsibilities transferred from one part of the public sector to another are not discontinued operations.
DISCRETIONARY BENEFITS Retirement benefits which the employer has no legal, contractual or (PENSIONS) constructive obligation to award and are awarded under the Authority’s discretionary powers such as The Local Government (Discretionary Payments) Regulations 1996.
DISPOSAL GROUP A group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.
DONATED ASSETS Assets (including heritage assets) transferred at nil value or acquired at less than fair value.
DRC Depreciated replacement cost is a method of valuation which provides the current cost of replacing an asset with its modern equivalent asset less deductions for all physical deterioration and all relevant forms of obsolescence and optimisation.
ECONOMIC COST Economic cost incorporates the total cost of everything involved in providing a service in accordance with accounting standards i.e. includes non-cash charges such as depreciation and the employee benefit accrual. These are then adjusted in the Movement in Reserves Statement in accordance with statute to produce the General Fund balance. Statute always takes precedence over accounting standard treatment.
EFFECTIVE INTEREST RATE This is the rate of interest necessary to discount the estimated stream of principal and interest cash flows through the expected life of a financial instrument to equal the amount at initial recognition.
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EMPLOYEE BENEFITS All forms of consideration given by an authority in exchange for service rendered by employees or for the termination of employment.
ENTRY PRICE The price paid to acquire an asset or received to assume a liability in an exchange transaction.
EQUITY INSTRUMENT Any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
EQUITY METHOD A method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor's share of net assets of the investee. The reporting authority's Surplus or Deficit on the Provision of Services includes its share of the investee's profit or loss and the reporting authority's Other Comprehensive Income and Expenditure includes its share of the investee's Other Comprehensive Income and Expenditure
EVENTS AFTER THE Events after the reporting period are those events, favourable or REPORTING PERIOD unfavourable, that occur between the balance sheet date and the date when the Statement of Accounts is authorised for issue.
EXCHANGE TRANSACTIONS Transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange.
EXECUTORY CONTRACTS Contracts under which neither party has performed any of its obligation or both parties have partially performed their obligations to an equal extent.
EXISTING USE VALUE (EUV) The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the property required by the business and disregarding potential alternative uses and any other characteristics of the property that would cause its market value to differ from that needed to replace the remaining service potential at least cost. Under IFRS this is the same as Fair Value.
EXISTING USE VALUE-SOCIAL The estimated amount for which a property should exchange, on HOUSING (EUV-SH) the date of valuation, between a willing buyer and a willing seller, in an arm’s-length transaction, after proper marketing where in the parties had each acted knowledgeably, prudently and without compulsion, subject to the following further assumptions that:, the property will continue to be let by a body and used for social housing at the valuation date, any regulatory body, in applying its criteria for approval, would not unreasonably better the vendor’s ability to dispose of the property to organisations intending to manage their housing stock in accordance with that regulatory body’s requirements properties temporarily vacant pending re- letting should be valued, if there is a letting demand, on the basis that the prospective purchaser intends to re-let them, rather than with vacant possession. Any subsequent sale would be subject to all of the above assumptions.
EXPECTED RETURN ON For a funded defined benefit scheme, this is the average rate of PENSION ASSETS return, including both income and changes in fair value but net of scheme expenses, which is expected over the remaining life of the
related obligation on the actual assets held by the scheme.
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The Expenditure and Funding Analysis takes the net expenditure EXPENDITURE AND FUNDING ANALYSIS that is chargeable to taxation and rents and reconciles it to the Comprehensive Income and Expenditure Statement. The Expenditure and Funding Analysis promotes accountability and stewardship by providing a direct link with the annual decision making process of the authority and its budget i.e. the General Fund.
Decreases in economic benefits or service potential during the EXPENSES reporting period in the form of outflows or consumption of assets or increases of liabilities that result in decreases in reserves.
FAIR VALUE The amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction. Under IFRS there is no consistent definition of Fair Value; different definitions apply in different circumstances.
FAITHFUL REPRESENTATION To be useful, financial information must not only represent relevant phenomena, but it must also faithfully represent the phenomena that it purports to represent. To be a perfectly faithful representation, a depiction would have three characteristics. It would be complete, neutral and free from error.
FINANCIAL ASSET OR A financial asset or financial liability that meets the following FINANCIAL LIABILITY AT FAIR conditions. It’s is classified as held for trading VALUE THROUGH PROFIT OR LOSS
FINANCIAL INSTRUMENT Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another. The term covers both financial assets and financial liabilities, from straightforward trade receivables (invoices owing) and trade payables (invoices owed) to complex derivatives and embedded derivatives. FINANCE LEASE A lease that transfers substantially all the risks and rewards of ownership of an asset to the lessee (even though title to the property may not be transferred). The asset is recorded on the Balance Sheet of the lessee.
FINANCING ACTIVITIES Activities that result in changes in the size and composition of the principal, received from or repaid to external providers of finance.
FReM Financial Reporting Manual.
FUND ACCOUNT A fund account disclosing changes in net assets available for benefits.
GAAP Generally Accepted Accounting Practice.
GENERAL FUND This is the main revenue fund of the Authority and includes the net cost of all services financed by local taxpayers and Government grants (excluding the Housing Revenue Account).
GOING CONCERN The concept that the Statement of Accounts are prepared on the assumption that the Authority will continue in operational existence for the foreseeable future.
GOVERNMENT This refers to government, government agencies and similar bodies whether local, national or international.
GOVERNMENT – RELATED An entity that is controlled, jointly controlled or significantly ENTITY influenced by a government
East Riding of Yorkshire Council 149 Statement of Accounts 2018/19 GLOSSARY OF TERMS GOVERNMENT GRANTS Grants made by the Government towards either revenue or capital expenditure in return for past or future compliance with certain stipulations relating to the activities of the Authority. Grants may be specific to a particular scheme or may support the revenue or capital spend (respectively) of the Authority in general.
GRANTOR Is the authority that grants the right to use the service concession asset to the operator.
GRANTS AND CONTRIBUTIONS Assistance in the form of transfers of resources to an authority in return for past or future compliance with certain conditions relating to the operation of activities. They exclude those forms of assistance which cannot reasonably have a value placed upon them and transactions with organisations which cannot be distinguished from the normal service transactions of the authority.
GROSS INVESTMENT IN THE This is the aggregate of (a) the minimum lease payments receivable LEASE by the lessor under a finance lease, and (b) any unguaranteed residual value accruing to the lessor.
GROUP A parent and all its subsidiaries
GROUP ACCOUNTS The financial statements of a group in which the assets, liabilities, reserves, income, expenses and cash flows of the parents (reporting authority) and its subsidiaries plus the investments in associates and interests in joint ventures are presented as those of a single economic entity
HELD FOR SALE Property Plant and Equipment assets held by the Authority pending sale. Assets must meet strict criteria before being classified as Held for Sale.
HELD TO MATURITY Non-derivative financial assets with fixed or determinable payments INVESTMENTS and fixed maturity that an authority has the positive intention and ability to hold to maturity.
HERITAGE ASSETS An asset with historic, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture and this purpose is central to the objectives of the entity holding it.
HISTORICAL COST The carrying amount of an asset as at 1 April 2007 or at the date of acquisition, whichever is the later, and adjusted for subsequent depreciation or impairment (if applicable).
HOUSING BENEFITS A system of financial assistance to individuals towards certain housing costs administered by authorities and subsidised by Central Government.
HOUSING REVENUE ACCOUNT A separate account to the General Fund that includes the (HRA) expenditure and income arising from the provision of housing accommodation by the Authority.
IASB International Accounting Standards Board.
IDB Internal Drainage Boards
IFRIC INTERPRETATION IFRS Interpretations Committee
IFRS International Financial Reporting Standards
IMPAIRMENT A reduction in the value of a non-current asset to below its carrying amount on the Balance Sheet. Impairment is caused by a consumption of economic benefit, such as obsolescence or physical damage of an asset.
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IMPAIRMENT LOSS The amount by which the carrying amount of an asset exceeds its recoverable amount.
IMPRACTICABLE Applying a requirement is impracticable when the authority cannot apply it after making every reasonable effort to do so.
INCEPTION OF THE LEASE The earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease.
INCOME Amounts that the Authority receives or expects to receive from any source, including fees, charges, sales and grants.
INCOME APPROACH Is a valuation technique that converts future amounts (e.g. cash flows or income and expenses) to a single current (i.e. discounted) amount. The fair value measurement is determined on the basis of the value indicated by current market expectations about those future amounts.
INCOME FROM A Recurring and non-recurring fees, interest, dividends, gains or losses STRUCTURED ENTITY on the re-measurement or de-recognition of interests in structured entities and gains or losses from the transfer of assets and liabilities to the structured entity.
INFRASTRUCTURE ASSETS Non-current assets belonging to the Authority that cannot be transferred or sold, on which expenditure is only recoverable by continued use of the asset created. Examples are highways, footpaths and bridges.
INPUT TAX VAT charged on purchases
INSTANT BUILD A method of valuation which provides the current cost of replacing DEPRECIATED REPLACEMENT an asset with its modern equivalent asset less deductions for all COST (DRC) physical deterioration and all relevant forms of obsolescence and optimisation. The ‘instant build’ element reflects the fact that the valuation is prepared excluding an allowance for borrowing costs incurred over an assets construction period i.e. the asset is assumed to be replaced immediately.
INTANGIBLE ASSETS An intangible (non-physical) item may be defined as an identifiable non-monetary asset when it is probable that the expected future economic benefits attributable to the asset will flow to the entity, and its cost can be measured reliably. An asset meets the identifiability criterion when it: (a) is separable, i.e. capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, asset or liability; or (b) arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
INTEREST COST (PENSIONS) For a defined benefit scheme, the expected increase during the period in the present value of the scheme liabilities because the benefits are one period closer to settlement.
INTEREST IN ANOTHER This refers to contractual and non-contractual involvement that ENTITY exposes a reporting authority to variability of returns from the performance of the other entity. An interest in another entity can be evidenced by, but not limited to, the holding of equity or debt instruments as well as other forms of involvement such as the provision of funding, liquidity support, credit enhancement and guarantees. it includes the means by which an entity has control or joint control of, or significant influence over, another entity. a reporting authority does not necessarily have an interest in another entity solely because of a typical customer-supplier relationship.
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INVENTORIES Items of raw materials and stores an authority has procured and holds in expectation of future use. Examples are consumable stores, raw materials and products and services in intermediate stages of completion (work in progress).
INVESTING ACTIVITIES The acquisition and disposal of long-term assets and other investments not included in cash equivalents.
INVESTMENT PROPERTY Property (land, building) held solely to earn rentals or for capital appreciation or both, rather than for: 1) use in the production or supply of goods or services or for administrative purposes or 2) sale in the ordinary course of operations.
INVESTMENTS (PENSION The investments of the Pension Fund will be accounted for in the FUND) statements of that fund. However, authorities are also required to disclose, as part of the disclosures relating to retirement benefits, the attributable share of pension scheme assets associated with their underlying obligations.
IPSAS International Public Sector Accounting Standards.
JOINT ARRANGEMENT An arrangement of which two or more parties have joint control.
JOINTLY CONTROLLED The operation of some joint ventures involves the use of the assets OPERATIONS and other resources of the ventures rather than the establishment of a corporation, partnership or other entity, or a financial structure that is separate from the ventures themselves. Each venture uses its own property, plant and equipment and carries its own inventories. It also incurs its own expenses and liabilities and raises its own finance, which represent its own obligations. The joint venture activities may be carried out by the venture’s employees alongside the venture’s similar activities. The joint venture agreement usually provides a means by which the revenue from the sale of the joint product/service and any expenses incurred in common are shared among the ventures.
JOINT VENTURE This is a contractual or binding arrangement whereby two or more parties are committed to undertake an activity that is subject to joint control. The contractual or binding arrangement is usually in writing.
KEY MANAGEMENT These are all chief officers, elected members, chief executive of the PERSONNEL authority and other persons having the authority and responsibility for planning, directing and controlling the activities of the authority, including the oversight of these activities.
LEASE An agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.
LEASE TERM The non-cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.
LEGAL OBLIGATION An obligation that derives from: a contract (through its explicit or implicit terms), legislation or other operation of law
East Riding of Yorkshire Council 152 Statement of Accounts 2018/19 GLOSSARY OF TERMS LIABILITY A liability is where the Authority owes payment to an individual or another organisation, arising from past events. A current liability is an amount which will become payable or could be called in within the next accounting period, e.g. creditors or cash overdrawn. A deferred liability is an amount which by arrangement is payable beyond the next year at some point in the future or to be paid off by an annual sum over a period of time.
LOANS AND RECEIVABLES Are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
LOBO Lender option borrower option loan debts.
LONG-TERM CONTRACT A contract entered into for the design, manufacture or construction of a single substantial asset or the provision of a service (or a combination of assets or services which together constitute a single project), where the time taken to substantially complete the contract is such that the contract activity falls into more than one accounting period.
MARKET APPROACH A valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (ie similar) assets, liabilities or a group of assets and liabilities, such as a business.
MARKET PARTICIPANTS Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics: a) They are independent of each other, i.e. they are not related parties, although the price in a related party transaction may be used as an input to a fair value measurement if the entity has evidence that the transaction was entered into at market terms. b) They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary. c) They are able to enter into a transaction for the asset or liability. d) They are willing to enter into a transaction for the asset or liability, i.e. they are motivated but not forced or otherwise compelled to do so.
MATERIAL Omissions or misstatements of items are material if they could, individually or collectively, influence the decisions or assessments of users made on the basis of the financial statements.
MATERIALITY The concept that the Statement of Accounts should include all amounts which, if omitted, or misstated, could be expected to lead to a distortion of the financial statements and ultimately mislead a user of the accounts.
MEASUREMENT Measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognised and carried in the Balance Sheet and Comprehensive Income and Expenditure Statement.
MINIMUM REVENUE The minimum amount, which must be charged to the revenue PROVISION (MRP) account each year in order to provide for the repayment of loans and other amounts borrowed by the Authority.
MINORITY INTEREST The equity in a subsidiary not attributable, directly or indirectly , to a parent.
MULTI-EMPLOYER PLANS Defined contribution plans (other than state plans) or defined benefit plans (other than state plans) that: a) pool the assets contributed by various entities that are not under
East Riding of Yorkshire Council 153 Statement of Accounts 2018/19 GLOSSARY OF TERMS common control, and b) use those assets to provide benefits to employees of more than one entity, on the basis that contribution and benefit levels are determined without regard to the identity of the entity that employs the employees.
NET ASSET STATEMENT A statement that shows the assets available for benefits at the year end.
NET BOOK VALUE (NBV) The amount at which non-current assets are included in the Balance Sheet, i.e. their historical costs or current value less the cumulative amounts provided for depreciation and impairment.
NET DEFINED BENEFIT The deficit or surplus, adjusted for any effect of limiting a net LIABILITY defined benefit asset to the asset ceiling.
NET INTEREST ON THE NET The change during the period in the net defined benefit liability that DEFINED BENEFIT LIABILITY arises from the passage of time.
NET INVESTMENT IN THE The gross investment in the lease discounted at the interest rate LEASE implicit in the lease.
NET REALISABLE VALUE The estimated selling price in the ordinary course of operations less the estimated costs of completion and the estimated costs necessary to make the sale, exchange or distribution.
NON CURRENT ASSET An item having value to the Authority in monetary terms. A non- current asset provides benefits to the Authority and to the services it provides for a period of more than one year and may be tangible e.g. a school building, or intangible, e.g. computer software licences.
NON-DISTRIBUTED COSTS These are overheads for which no user now benefits and as such are (NDC) not apportioned to services.
NON-DOMESTIC RATES (NDR) The Non-Domestic Rate is a levy on businesses, based on a national rate in the pound set by the Government and multiplied by the assessed rateable value of the premises they occupy. It is collected by the Authority on behalf of itself, Central Government and Humberside Fire and Rescue Service.
NON-EXCHANGE Transactions that are not exchange transactions. In a non-exchange TRANSACTIONS transaction, an authority either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange.
NOTES Contain information in addition to that presented in the Movement in Reserves Statement, Comprehensive Income and Expenditure Statement, Balance Sheet and Cash Flow Statement. Notes provide narrative descriptions or disaggregation of items presented in those statements and information about items that do not qualify for recognition in those statements.
OBLIGATING EVENT An event that creates a legal or constructive obligation that results in an authority having no realistic alternative to settling that obligation.
ONEROUS CONTRACT A contract for the exchange of assets or services in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits or service potential expected to be received under it
OPERATING ACTIVITIES The activities of the authority that are not investing or financing activities.
East Riding of Yorkshire Council 154 Statement of Accounts 2018/19 GLOSSARY OF TERMS OPERATING LEASE A lease other than a finance lease. The risks and rewards of ownership of a non-current asset that is leased remain with the lessor and on the lessor’s Balance Sheet. The lessee accounts for the rental payments as revenue income and expenditure.
OPERATOR Is the entity that uses the service concession asset to provide public services subject to the local authority's control of the asset.
ORDERLY TRANSACTION A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (e.g. a forced liquidation or distress sale).
OTHER COMPREHENSIVE Comprises items of expense and income (including reclassification INCOME AND EXPENDITURE adjustments) that are not recognised in the Surplus or Deficit on the Provision of Services as required or permitted by the Code. Examples include changes in revaluation surplus; actuarial gains and losses on defined benefit plans; and gains and losses on re- measuring available-for-sale financial assets.
OTHER LONG-TERM All employee benefits other than short-term employee benefits, EMPLOYEE BENEFITS post-employment benefits and termination benefits
OUTPUT TAX VAT charged in sales.
OVERSIGHT This means the supervision of the activities of an authority, with the authority and responsibility to control, or exercise significant influence over, the financial and operating decisions of the authority.
OWNER-OCCUPIED PROPERTY Property held for use in the delivery of services or production of goods or for administrative purposes.
PARENT An entity that has one or more subsidiaries.
PARTY TO A JOINT An entity that participates in a joint arrangement, regardless of ARRANGEMENT whether that entity has joint control of the arrangement.
PAST SERVICE COST The change in the present value of the defined benefit obligation for employee service in prior periods, resulting from a plan amendment or a curtailment and any gain or loss on settlement.
PAST SERVICE COST For a defined benefit pension scheme, the increase in the present (PENSIONS) value of the scheme liabilities related to employee service in prior periods arising in the current period as a result of the introduction of, or improvement to, retirement benefits.
PENSION SCHEME LIABILITIES The liabilities of a defined benefit scheme for outgoings due after the valuation date. Scheme liabilities measured using the projected unit method reflect the benefits that the employer is committed to provide for service up to the valuation date.
PFI Private finance initiative
PLAN ASSETS comprise: a) assets held by a long-term employee benefit fund, and b) qualifying insurance policies.
POST-EMPLOYMENT BENEFIT Formal or informal arrangements under which an authority PLANS provides post-employment benefits for one or more employees.
POST-EMPLOYMENT Employee benefits that are payable after the completion of BENEFITS employment.
East Riding of Yorkshire Council 155 Statement of Accounts 2018/19 GLOSSARY OF TERMS
POWER Existing rights that give the current ability to direct the relevant activities
PPP Public-private partnerships
PRECEPT The levy made by precepting authorities on billing authorities, requiring the latter to collect income from council taxpayers on their behalf.
PRESENT VALUE OF A The present value, without deducting any plan assets, of expected DEFINED BENEFIT future payments required to settle the obligation resulting from OBLIGATION employee service in the current and prior periods.
PRINCIPAL Where the authority is acting on its own behalf
PRIOR PERIOD ERRORS Omissions from and misstatements in, the authority's financial statement for one or more prior periods
PRIOR YEAR ADJUSTMENT Material adjustments applicable to prior years arising from changes in accounting policies or from the correction of material errors. This does not include normal recurring corrections or adjustments of accounting estimates made in prior years.
PRIVATE FINANCE INITIATIVE A contract between a public sector body and a private sector entity. (PFI) This typically involves the private sector entity constructing or enhancing property used in the provision of a public service, and operating and maintaining that property for a specified period of time on behalf of the public sector body. In return the public sector body pays for the use of the assets and associated services over the period of the arrangement through a unitary payment.
PROPERTY, PLANT AND Property, Plant and Equipment held and occupied, used or EQUIPMENT consumed by the Authority in the pursuit of its strategic objectives and in the direct delivery of those services for which it has either a statutory or discretionary responsibility.
PROSPECTIVE APPLICATION Applying new accounting policies to transactions, other events and conditions occurring after (not before) the date as at which the policy is changed and recognising the effect of the change in the accounting estimate in the current and future periods affected by the change.
PROTECTIVE RIGHTS Rights designed to protect the interest of the party holding those rights without giving that party power over the entity to which those rights relate.
PROVISION An amount put aside in the accounts for future liabilities or losses which are certain or very likely to occur as a result of a past event, but the amounts or dates of when they will arise are uncertain.
PUBLIC PRIVATE A joint venture in which a private sector partner agrees to provide PARTNERSHIPS (PPP) services to or on behalf of a public sector organisation. A Public Finance Initiative is a form of PPP.
PUBLIC WORKS LOAN BOARD A Central Government Agency, which provides loans for one year (PWLB) and above to authorities at interest rates only slightly higher than those at which the Government itself can borrow.
QUALIFIED VALUER A person conducting the valuations who holds a recognised and relevant professional qualification and having sufficient current local and national knowledge of the particular market, and the skills and understanding to undertake the valuation competently.
East Riding of Yorkshire Council 156 Statement of Accounts 2018/19 GLOSSARY OF TERMS QUALIFYING ASSET An asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
QUALIFYING INSURANCE An insurance policy issued by an insurer that is not a related party POLICY of the reporting authority, if the proceeds of the policy: a) can be used only to pay or fund employee benefits under a under a defined benefit plan and b) are not available to the reporting authority’s own creditors (even in bankruptcy) and cannot be paid to the reporting authority, unless either: i) the proceeds represent surplus assets that are not needed for the policy to meet all the related employee benefit obligations, or ii) the proceeds are returned to the reporting authority to reimburse it for employee benefits already paid.
RATEABLE VALUE The annual assumed rental value of a hereditament, which is used for Non Domestic Rate purposes.
RECLASSIFICATION Amounts reclassified to Surplus or Deficit on the Provision of ADJUSTMENTS Services in the current period that were recognised in Other Comprehensive Income and Expenditure in the current or previous periods.
RECOVERABLE AMOUNT An asset is the higher of fair value less costs to sell and its value in use.
REGULAR WAY PURCHASE OR Purchase or sale of a financial asset under a contract whose terms SALE require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.
RELATED PARTIES There is a detailed definition of related parties in IPSAS 20. For the Council’s purposes, related parties are deemed to include the Authority’s Members, the Chief Executive, its Directors and their close family and household members, partners, levying bodies, other public sector bodies, the Pension Fund and Assisted Organisations.
RELATED PARTY The Code requires the disclosure of any material transactions TRANSACTIONS between the Authority and related parties to ensure that stakeholders are aware when these transactions occur and the amount and implications of such.
RELEVANCE Relevant financial information is capable of making a difference in the decisions made by users. Information may be capable of making a difference in a decision even if some users choose not to take advantage of it or are already aware of it from other sources. financial information is capable of making a difference in decisions if it has predictive value, confirmatory value or both.
RELEVANT ACTIVITIES Activities of the investee that significantly affect the investee's returns.
REMUNERATION All sums paid to or receivable by an employee and sums due by way of expenses allowances (as far as those sums are chargeable to UK income tax) and the monetary value of any other benefits received other than in cash. Pension contributions payable by the employer are excluded.
East Riding of Yorkshire Council 157 Statement of Accounts 2018/19 GLOSSARY OF TERMS RESERVES The residual interest in the assets of the Authority after deducting all its liabilities. These are split into two categories, usable and unusable. Usable reserves are those reserves that contain resources that an authority can apply to fund expenditure of either a revenue or capital nature (as defined). Unusable reserves are those that an authority is not able to utilise to provide services. They hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences between expenditure being incurred and its financing e.g. Capital Adjustment Account.
RESIDUAL VALUE The net realisable value of an asset at the end of its useful life.
RESTRICTIONS ON Stipulations that limit or direct the purposes for which a transferred TRANSFERRED ASSETS asset may be used, but do not specify that future economic benefits or service potential are required to be returned to the transferor if not deployed as specified
RESTRUCTURING A programme that is planned and controlled by management, and materially changes either: the scope of an authority’s activities or the manner in which those activities are carried out
RETIREMENT BENEFITS All forms of consideration given by an employer in exchange for services rendered by employees that are payable after the completion of employment.
RETROSPECTIVE Applying a new accounting policy to transactions, other events and APPLICATION conditions as if that policy had always been applied. Opening balances and prior year income and expenditure comparatives must be adjusted.
RETROSPECTIVE Correcting the recognition, measurement and disclosure of amounts RESTATEMENT of elements of financial statements as if a prior period error had never occurred.
REVALUATION LOSS A reduction in the value of a non-current asset below its carrying amount on the Balance Sheet, caused by a general fall in prices across a whole class of assets.
REVENUE Gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net worth.
REVENUE EXPENDITURE The day-to-day expenses of providing services.
REVENUE EXPENDITURE Expenditure that is revenue in nature, which can be funded from FUNDED FROM CAPITAL capital resources in accordance with statutory direction. It does not UNDER STATUTE (REFCUS) result in the expenditure being carried on the Balance Sheet as a non-current asset. Examples of REFCUS are grants of a capital nature to voluntary organisations.
REVENUE SUPPORT GRANT A grant paid by Central Government to authorities, contributing towards the general cost of their services.
SALE AND LEASEBACK The Authority sells an asset and then leases the same asset back. The arrangement may be treated as finance lease or an operating lease depending on the circumstances and in accordance with the finance lease criteria.
SEPARATE VEHICLE Separately identifiable financial structure, including separate legal entities or entities recognised by statute, regardless of whether those entities have a legal personality.
East Riding of Yorkshire Council 158 Statement of Accounts 2018/19 GLOSSARY OF TERMS
SeRCOP Service Reporting Code of Practice
SETTLEMENT A transaction that eliminates all further legal or constructive obligations for part or all of the benefits provided under a defined benefit plan, other than a payment of benefits to, or on behalf of, employees that is set out in the terms of the plan and included in the actuarial assumptions.
SERVICE CONCESSION A contract is deemed to be a service concession arrangement if: ARRANGEMENT 1. The operator (usually a private sector entity) provides services to the grantor (usually a public sector body) and/or services to other parties on behalf of the grantor. The contract must involve the use of an infrastructure asset, such as roads or schools that are dedicated to providing the services under the arrangement. These typically involve the operator constructing or upgrading the infrastructure used to provide the public service and operating and maintaining it for a specified period of time. 2. The grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price; and 3. The grantor controls, through ownership, beneficial entitlement or otherwise, a significant residual interest in the infrastructure at the end of the term of the arrangement.
SERVICE CONCESSION ASSET An asset used to provide public services in a service concession arrangement that: a) is provided by the operator which: i) the operator constructs, develops, or acquires from a third party, or ii) is an existing asset of the operator, or b) is provided by the local authority which: i)is an existing asset of the local authority, or ii) is an upgrade to an existing asset of the local authority. Service concession assets include providing assets (and related services) for the direct use of a public sector entity where these services contribute to the provision of services to the public.
SHORT-TERM EMPLOYEE Employee benefits that are expected to be settled wholly before 12 BENEFITS months after the end of the annual reporting period in which the employees render the related service.
SIC The Standard Interpretations Committee
SIGNIFICANT INFLUENCE The power to participate in the financial and operating policy decisions of an authority, but not control those policies. Significant influence may be exercised in several ways, usually by representation on the board of directions or equivalent governing body but also by, for example, participation in the policy-making process, material transactions between entities within an economic entity, interchange of managerial personnel or dependence on technical information. significant influence may be gained by an ownership interest, statute or agreement.
SINGLE ENTITY FINANCIAL Statements presented by a parent or an investor with joint control, STATEMENTS or significant influence over, an investee, in which the investments are accounted for at cost
SOCIAL BENEFITS Goods, services and other benefits provided in th pursuit of the social policy objectives of an authority
East Riding of Yorkshire Council 159 Statement of Accounts 2018/19 GLOSSARY OF TERMS SOFT LOAN A loan made interest free or at a rate less than the market rate, usually for policy reasons. Such loans are often made to individuals or organisations that the authority considers benefits the local population.
STIPULATIONS ON Terms in laws or regulation, or a binding arrangement, imposed TRANSFERRED ASSETS upon the use of a transferred asset by entities external to the reporting authority.
STRUCTURED ENTITY An entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.
SUBSIDIARY An entity, including an unincorporated entity such as a partnership that is controlled by another entity
SURPLUS OR DEFICIT ON THE The total of income less expenses, excluding the components of PROVISION OF SERVICES Other Comprehensive Income and Expenditure
TEMPORARY BORROWING Money borrowed for a period of less than one year.
TERMINATION OF BENEFITS Employee benefits provided in exchange for the termination of an employee's employment.
THE CODE The Code of Practice on Local Authority Accounting in the United Kingdom.
THE EFFECTIVE INTEREST A method of calculating the amortised cost of a financial asset or a METHOD financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period.
THE RETURN ON PLAN ASSETS Interest, dividends and other income derived from the plan assets, together with realised and unrealised gains or losses on the plan assets, less any costs of managing plan assets and any tax payable by the plan itself, other than tax included in the actuarial assumptions used to measure the present value of the defined benefit obligation.
TIMELINESS This means having information available to decision-makers in time to be capable of influencing their decisions.
TOTAL COMPREHENSIVE Compresses all components of Surplus or Deficit on the Provision INCOME AND EXPENDITURE of Services and of Other Comprehensive Income and Expenditure.
TRANSACTION COSTS Are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability (see Appendix A, paragraph AG13).An incremental cost is one that would not have been incurred if the authority had not acquired, issued or disposed of the financial instrument.
TRUE AND FAIR VIEW The Statement of Accounts should be the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Code. Compliance with the Code is presumed to result in financial statements that achieve a true and fair presentation.
UNAUDITED ACCOUNTS The date on which the responsible financial officer certifies that the accounts give a true and fair view of the authority's financial position and financial performance in advance of approval.
East Riding of Yorkshire Council 160 Statement of Accounts 2018/19 GLOSSARY OF TERMS UNDERSTANDABILITY Classifying characterising and presenting information clearly and concisely makes it understandable.
USEFUL LIFE The period which an asset is expected to be available for use by an authority.
USEFUL ECONOMIC LIFE The period over which the Authority will derive benefits from the use of a non-current asset.
VALUE IN USE Non-cash generating asset is the expected present value of the asset’s remaining service potential. Value in use of a cash-generating asset is the present value of the future cash flows expected to be derived from an asset.
VAT An indirect tax levied on most business transactions and on many goods and some services.
VERIFIABILITY Verifiability means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation.
VESTING PERIOD The vesting period is the window of service when members can get a refund on their contributions if they leave the LGPS instead of having a small deferred pension in the LGPS until retirement.
WDA Waste Disposal Authorities.
East Riding of Yorkshire Council 161 Statement of Accounts 2018/19 ABBREVIATIONS
AGS Annual Governance Statement IPSAS International Public Sector Accounting Standards AVC Additional Voluntary Contribution ISB Individual Schools Budget BSSL Bridlington Schools Service Limited LAPFF Local Authority Pension Fund Forum CAA Capital Adjustment Account LASAAC Local Authority (Scotland) Accounts Advisory Committee CCG Clinical Commissioning Group LATS Landfill Allowance Trading Scheme CF&S Children, Family and Schools Directorate LEA Local Education Authority CFO Chief Finance Officer LGPS Local Government Pension Scheme CI&ES Comprehensive Income and Expenditure Statement LPSA Local Public Service Agreement CIPFA The Chartered Institute of Public Finance and Accountancy MiRS Movement in Reserves Statement CMT Corporate Management Team MMI Municipal Mutual Insurance CPI Consumer Prices Index MRA Major Repairs Allowance CRC Carbon Reduction Commitment MRICS Member of Royal Institution of Chartered Surveyors DCLG Department for Communities and Local Government MRP Minimum Revenue Provision DEFRA Department for Environment, Foods and Rural Affairs MRR Major Repairs Reserve DfE Department for Education NAV Net Asset Value DRC Depreciated Replacement Cost NBV Net Book Value DSG Dedicated Schools Grant NDC Non-Distributed Costs DWP Department for Work and Pensions NDR Non-Domestic Rates EDR Employee Development Review NHS National Health Service EFA Education Funding Agency NNDR National Non-Domestic Rates ERPF East Riding Pension Fund OEIC Open Ended Investment Company EUV Existing Use Value PFI Private Finance Initiative EUV-SH Existing Use Value - Social Housing PIRC Pensions Investment Research Consultants FMSiS Financial Management Standard in Schools PPP Public Private Partnership FReM Financial Reporting Manual PWLB Public Works Loan Board FRICS Fellow of Royal Institution of Chartered Surveyors REFCUS Revenue Expenditure Funded from Capital under Statute FRS Financial Reporting Standard RICS Royal Institution of Chartered Surveyors FSS Funding Strategy Statement RPI Retail Prices Index FUM Funds Under Management RR Revaluation Reserve HEPS Humber Emergency Planning Services RTB Right to Buy HMRC Her Majesty's Revenue and Customs SeRCOP Service Reporting Code of Practice HMU Housing Maintanance Unit SDPS Surplus or Deficit on the Provision of Services HR Human Resources SFVS Schools Financial Value Standard HRA Housing Revenue Account SIP Statement of Investment Principles HRAM Hymans Robertson Asset Model SLA Service Level Agreement I&F Infrastructure and Facilities SOLACE The Society of Local Authority Chief Executives and Senior Managers IAS International Accounting Standards SORP Statement of Recommended Practice IFRIC International Financial Reporting Interpretations Committee VAT Value Added Tax IFRS International Financial Reporting Standards VOA Valuation Office Agency
East Riding of Yorkshire Council 162 Statement of Accounts 2018/19
AI
Acco u n tin g Policies………………………………...…………. 21 Information on Assets Held………………….....…...……………… 56 Analysis of Adjustments between Accounting basis and Funding Interests in Schools….………………….....…...…………………… 93 basis under Regulations…………………….....………...…… 39 Analysis of Adjustments within the Expenditure and L Funding Analysis……...…………...…………….……….… 36 Audit Fees……………………………...……………………… 47 Levies…………………………………….…………………………… 92 Auditors' Report………………………...…………………… 13 M B Major Repairs Reserve…………………..………...………….……… 105 Balance Sheet…………………………………………………… 17 Movement in Reserves Statement………………...………………… 19 Movement in Property, Plant and Equipment…………...…...……… 50 C N Capital Expenditure and Financing……………………… 62 Narrative Report………...………….………….………...………….… 2 Adjustment Account……………………………… 79 Nature of Expenses……….………...………….…………….…….… 43 Grants Unapplied Account Reserve……………… 73 Net Surplus or Deficit on the Provision of Services Cash Flow Note… 90 Commitments…………………………………… 62 Non-Domestic Rates………………………………………………… 108 Cash and Cash Equivalents…………………………………… 90 Cash Flow Statement………………………………………… 20 O Collection Fund………………………………………………. 107 Collection Fund Adjustment Account………………..………. 80 Officers' Remuneration……………………………………………… 48 Comprehensive Income and Expenditure Statement………… 18 Operating Leases ………………………………….…..…..…….…… 47 Comprehensive Income and Expenditure Line Notes………… 44 Contingent Assets / Liabilities………………………………… 80 P Council Tax…………………………………………………… 108 Pension Fund………………………………………………………… 109 D Pension Assets and Liabilities………………………………………… 65 Pension Reserve……………………………………………………… 78 Debtors………………………………………………………. 63 Pooled Budgets for Health and Social Care…………………………… 95 Dedicated Schools Grant……………………………………… 93 Precepts……………………………………………………………… 92 Deferred Capital Receipts……………………………………… 80 Private Finance Initiative and Similar Contracts……………………… 60 Deferred Liabilities…………………………………………… 64 Property, Plant and Equipment - Valuation………………………… 57
ER
Earmarked Revenue Reserves…………….…………………… 74 Related Party Transactions…………………………………………… 91 Events After the Reporting Period…………………………… 94 Revaluation Reserve………………………………………………… 78 Expenditure and Funding Analysis…………………………… 34 S F Segmental Income…………………………………………………… 38 Fair Value of Surplus Assets…………………………………… 59 Short Term Creditors and Grant Receipts in Advance………………. 64 Financial Instruments Adjustment Account…………………… 77 Short Term Investments…………………………………………… 64 Financial Instruments Disclosure Note………………………… 81 Statement of Responsibilities for the Statement of Accounts………… 16 Significant Items……………………………………………………… 47 G T Gains and Losses on Assets Held for Sale or Sold…….……… 49 Glossary of Terms and Abbreviations…………………...…… 142 Taxation and Non-Specific Grant Income…………….……………… 45 Government Grants, Contributions and Donated Assets……… 46 Grant and Contribution Receipts in Advance………………… 65 U
H Usable Capital Receipts……………………………………………… 77 Unusable Reserves…………………………………………………… 77 Housing Assets………………………………………………… 101 Usable Reserves……………………………………………………… 73 Housing Rent Arrears………………………………………… 100 Housing Revenue Account…………………………………… 96 HRA - Capital Expenditure and Financing..……… 104 HRA - Capital Financing Charges………………… 104 HRA - Pension Costs………………..…………… 106
East Riding of Yorkshire Council 163 Statement of Accounts 2018/19