STATEMENT OF ACCOUNTS 2017/18 (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…………………………………………….…………………………………………………..104
Collection fund……………………………………………………...………………………………………………..115
Pension fund accounts……………………………...………………………………………………………………………………..117
Glossary of terms………………………………..…………………………………………………………………………………148
Abbreviations……………………………………..………………………………………………………………………………..168
Index…………………………………………………...………………………………………………………………169……………..
Copies of this and previous years’ accounts are available for viewing, along with other information on the authority’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 2017/18
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, with over half the population living in dispersed rural communities. • 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. 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. • 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. • 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 £40.3m of budget savings over the next four years.
OUR VALUES In these testing times, it is important that we do not lose sight of our values which drive the way we do things and shape our services. It is the responsibility of all our Members and staff to uphold the values of our organisation:
• We respect differences and put our customers first • We protect the vulnerable and promote independence • We communicate well • We value our employees • We work together • We find value for money ways to work
OUR CORPORATE PRIORITIES Despite the challenging financial climate, we continue to have high ambitions for the area and its significant opportunities and potential; we also continue to strive to remain one of the top councils in the country.
• Maximising our potential - 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 our environment – responding to climate change, developing our infrastructure and safeguarding our heritage • Supporting vulnerable people, reducing inequalities – supporting in times of need, protecting from harm and improving the quality of life • Promoting health, wellbeing and independence – helping people to stay healthy, strong and fit for the future
East Riding of Yorkshire Council 2 Statement of Accounts 2017/18
NARRATIVE REPORT
• Reducing costs, raising performance – developing our workforce and working with partners to provide excellent service, effective governance and value for money
COMMUNITY PLAN The Council is also a key partner in the development of the East Riding Community Plan 2016-2021. This plan for the area builds on previous community plans, and reflects the continued changes and challenges affecting the East Riding. Partner organisations, through the new East Riding 2020 Board and its reference groups, have been 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 • Regeneration transforms deprived areas and reduces health and other inequalities • The built and natural environment is protected through sustainable development and economic growth.
East Riding of Yorkshire Council 3 Statement of Accounts 2017/18
NARRATIVE REPORT
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 . Key performance outcomes are summarised in section 2 below.
2. OPERATIONAL PERFORMANCE We manage our performance very closely through a comprehensive performance management framework which operates across the council. This ensures that Members and council officers are able to make informed decisions that will drive service improvement. Key achievements in 2017/18 against the Council’s corporate priorities include: MAXIMISING OUR POTENTIAL • Ofsted have recognised the continued upward trend of good and outstanding schools in the East Riding. 86% of primary schools and 68% secondary schools have now been assessed as good or outstanding (up from 54% and 33% respectively in 2012). • A £9m Local Growth Fund has been secured to help deliver key economic growth related infrastructure schemes - £6m to ABP for the Paull Enterprise Zone site and £3m for Goole Intermodal Terminal Consortium, which must be committed and spent by March 2020. • The £25.7m Green Port Growth programme, now in its sixth year, is over-achieving on its key targets and has created over 1,300 new jobs in Hull and the East Riding. • A programme of larger transport schemes to improve connectivity and accommodate future planned development has been identified through the Local Plan and Local Transport Plan. Many of these have now been completed (such as the A1079/Holme Road roundabout at Market Weighton) or are on site (Bridlington Integrated Transport Plan phase 2). • Building on the success of the initial phase 1 campaign, superfast broadband take-up is continuing with over 48,000 residents benefitting. VALUING OUR ENVIRONMENT • The Council has continued its success in securing significant additional funding for transport schemes including: - £2.98m for an improvement scheme at the A164/Great Gutter Lane/Riplingham Road junction; - £1.992m for essential repairs/maintenance at Tickton Bridge, which carries the A1035 over the River Hull; - £0.7m towards the new £1.4m ‘Get Active East Riding’ project to support and encourage sustainable transport in our four principle towns; - Continued replacement of street lighting, over 35,000 luminaires replaced to date against the target of 38,000 and 9,800 columns replaced. This has seen a 39% reduction in the use of energy since 2010/11. - The Council has one of the largest flood and coastal risk management capital programmes of an local authority in England. Schemes range from minor culvert improvements to some of the most complex surface water flood alleviation schemes in the country. Through investment in flood alleviation schemes, the Council has reduced flooding risk for 9,000 properties and continued investment will increase this to 21,000 properties by 2021. - According to the latest Government figures, East Riding of Yorkshire Council recycles more household waste than any other council in England. The latest validated figures show the Council was able to recycle or compost 65.4% of all household rubbish. The national average for England was 45.1%. - The Council's Annual Environmental Statement received ISO14001:2015 certification, a globally recognised standard achieved by organisations that have implemented robust environmental management practices. SUPPORTING VULNERABLE PEOPLE, REDUCING INEQUALITIES • Direct payments provide independence, choice and control, by enabling people to commission their own care and support, in order to meet their eligible needs. In September 2017, 1265 direct payments were being paid in the East Riding, 509 being independently managed. • Through the Council’s commitment to assessing the housing needs of more vulnerable people in the community (and supporting the delivery of new housing and related support to meet such needs), a review of Homelessness in East Riding has been undertaken and a new Strategy developed. PROMOTING HEALTH, WELLBEING AND INDEPENDENCE • The Council has facilitated the introduction of a new ‘Health Optimisation’ scheme for East Riding CCG. This is an initial 1 year pilot provided by leisure services. It seeks to help patients achieve weight loss goals in preparation for selective surgery. • A ‘Social Prescribing and Asset Based Community Development Service’ is being piloted as part of the improved better care fund (iBCF) programme. • Community drug and alcohol services have now fully adopted a new model of delivery. Performance remains good and the integration of criminal justice and user and carer involvement services have been very successful.
East Riding of Yorkshire Council 4 Statement of Accounts 2017/18
NARRATIVE REPORT
• The Council has worked with partners from the health sector and voluntary & community sector to agree a spending programme for the Improved Better Care Fund, which allocated an additional £6.1m of funding to the Council in 2017/18, to change the way in which people access services, both in and out of hospital, with a reduction in acute hospital based activity and an increased use of home based and community interventions and support. These changes are delivering better integrated care services and improving experiences and outcomes for the East Riding population, as evidenced by a reduction in delayed transfers of care which occur when a patient is ready to leave a hospital or similar care provider but is still occupying a bed. REDUCING COSTS, RAISING PERFORMANCE • New functionality delivered through the corporate website represents another major step forward for the Council’s online offer. The major improvements to our online transactions and the supporting website content, combined with the new ‘My Account’ area of Contact360 have made the corporate website a one-stop-shop for customer self-service. • Work continues to progress in line with the planned programme for Asset Rationalisation and delivery of new Multi Service Centres. The new Cottingham Centre opened in November 2017 following completion of a £0.5m project moving the Library, Customer Services Centre and Registration Services under one roof. This will also facilitate the release, via community Asset Transfer, of the Cottingham Civic Hall in early 2018. • Planned reductions of the revenue budget to meet funding reductions and budget pressures in 2017/18 of £17.357m have been achieved in line with directorates’ budget reduction strategies and the Authority’s transformation strategy. The inherent risks have been successfully managed and spend in key areas maintained.
East Riding of Yorkshire Council 5 Statement of Accounts 2017/18
NARRATIVE REPORT
3. FINANCIAL PERFORMANCE GENERAL FUND
The 2017/18 financial position of the General Fund as reported to management is set out in the table below. Through successful implementation of budget reduction strategies and business transformation projects, a net General Fund underspend of £3.446m against budget has been achieved. The underspend reflects a planned approach to ensure that the delivery of a further £9.376m of budget savings in 2018/19 will be fully realised. .
Full year budget Outturn Variance £m £m £m Chief executive 0.897 0.850 -0.047 Corporate resources 24.252 23.008 -1.244 Corporate strategy and commissioning 86.176 82.478 -3.698 Children, families & schools (exc schools) 45.270 44.472 -0.798 Environment & neighbourhood services 36.492 35.976 -0.516 Planning & economic regeneration 29.475 29.354 -0.121 Total services excluding schools and HRA 222.562 216.138 -6.424 Children, families & schools (schools budget) 0.355 0.593 0.238 Housing revenue account 0.031 -0.340 -0.371 Net service expenditure 222.948 216.391 -6.557 Other items Levies & charges 2.719 2.697 -0.022 Debt charges 14.049 13.552 -0.497 Investment interest receipts -0.801 -0.543 0.258 Direct revenue financing of capital 10.982 10.059 -0.923 Carbon reduction scheme 0.320 0.311 -0.009 Contingency 0.641 0 -0.641 Use of (-) / contributions to (+) earmarked reserves 6.964 11.629 4.665 Use of (-) / contributions to (+) HRA reserve -0.031 0.340 0.371 Use of (-) / contributions to (+) general fund reserve -4.749 -3.096 1.653 Total other items 30.094 34.949 4.855 TOTAL REQUIREMENTS 253.042 251.340 -1.702 RESOURCES Revenue support grant -20.171 -20.177 -0.006 Top-up funding -13.450 -13.45 0.000 Business rates retention -50.594 -49.118 1.476 General grants -16.562 -19.027 -2.465 Collection fund -1.950 -2.699 -0.749 Council tax -150.315 -150.315 0.000 TOTAL RESOURCES -253.042 -254.786 -1.744 BUDGET SURPLUS (-) / DEFICIT 0.000 -3.446 -3.446
Planned reductions of the revenue budget to meet funding reductions and budget pressures in 2017/18 of £17.357m have been achieved in line with directorates’ budget reduction strategies and the Authority’s transformation strategy. The inherent risks have been successfully managed and spend in key areas maintained. The Expenditure and Funding Analysis on page 33 shows the movement from the outturn reported to management above, to the Comprehensive Income and Expenditure Statement on page 18.
East Riding of Yorkshire Council 6 Statement of Accounts 2017/18
NARRATIVE REPORT
CORE FUNDING AND BUSINESS RATES RETENTION The Council has seen a reduction in its funding settlement from Government in recent years. In 2017/18, the settlement funding assessment was £70m, a reduction of £11m from the amount received in 2016/17. The Council’s actual business rates demand on the collection fund for 2017/18 was £49.1m. Business Rates top-up grant of £13.45m was also received and section 31 grants of £5.5m were also receivable from Government to compensate for decisions made that affected the Council’s business rate income in 2017/18. The Government will move towards a funding system where local authorities retain 75% of business rates from 2020-21, and this system will incorporate funding allocations currently received through the Revenue Support Grant, Rural Services Delivery Grant and the Public Health Grant.
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 5% in 2017/18, including a social care precept. The social care precept was introduced by the Government in recognition of the challenges faced by local authorities with 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 2017/18 and increased council tax by 4.99%. The council tax charge on a band D equivalent property was £1,323.47. The Council’s council tax requirement was set at £149.9m in 2017/18.
SCHOOLS
The schools budget funded by dedicated schools grant (DSG) is overspent by £0.238m for the financial year. The overspend has been funded from Schools earmarked reserves and does not impact on council tax. The Authority continues to work with schools to help plan ahead to bring budgets back into balance through deficit reduction plans where needed. As at 31 March 2018, local authority maintained schools totalled 122 (2016/17 126). During the year, Gilberdyke, Cottingham and Sproatley primary schools and Wolfreton secondary school converted to academies. Further details on schools are disclosed in notes 7 and 59.
HOUSING REVENUE ACCOUNT
For 2017/18, the HRA outturned with an underspend of £0.371m against budget with an overall surplus on HRA services of £0.340m. Overall, HRA reserves stand at £48.237m (2016/17 £45.606m) which include general reserves and reserves earmarked for debt repayment and investment in new stock and repairs. The Authority owns and manages 11,349 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 ringfenced meaning that tenant rents cannot be used to subsidise other Authority services. The HRA business plan sets out the long term strategy for managing the Authority’s housing stock. Further details are disclosed from page 104.
CAPITAL
The Council successfully delivered its planned capital programme during 2017/18 amounting to investment of £102.132m across the various service areas. The outturn spend was £3.824m (3.6%) 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. As a result of the investment, during 2017/18, the authority: • Fixed or prevented 21,646 potholes. • Completed the Hull and Holderness flood alleviation scheme, providing a reduction in flood risk to over 600 properties. • Replaced dilapidated groynes and carried out rebuild works on the Seathorne revetment at Withernsea. • Replaced 620 external doors, 626 kitchens, 297 bathrooms and 1,078 boilers in the Council’s housing stock and fully rewired 1932 homes, along with disabled adaptations and extensions to properties.
East Riding of Yorkshire Council 7 Statement of Accounts 2017/18
NARRATIVE REPORT
The programme for 2017/18 was funded by loans of £8.930m, capital grants and contributions of £60.413m, capital receipts of £1.431m, direct revenue financing of £12.234m (including £2.775m general direct revenue financing, £0.595m relating to schools (inc. the Bridlington Public Finance Iinitiative) and £8.864m relating to the housing revenue account), and earmarked reserves of £19.124m (including £8.738m relating to the housing major repairs reserve and £3.099m relating to the housing major repairs reserve). Further details are shown at Note 23.
SUMMARY OF PENSION FUND ACTIVITY FOR 2017/18
At 31 March 2018, the Fund was valued at £4,786m, having paid out £166.3m during the year for the benefit of Scheme members. This is an increase in the Fund value of £251m from 31 March 2017, due to some capital appreciation in all the major equity markets following the confirmation of a major tax reform package in the United States, ongoing strength in economic data and corporate earnings and a further improvement in investor risk sentiment. Private equity and Infrastructure returns were strong as investor appetite for Limited Partnerships enabled managers to complete fund raising in relatively short order. However, sterling returns from overseas investments were lower due to the appreciation (+11%) of the currency during the year. Concerns over the terms of the exit from the European Union remain and there may be further volatility in financial markets in the medium term. The Fund continues to benefit from the strong performance of its internal and external investment managers. As at 31 March 2018, the total membership records administered by the pension fund was 112,882, an increase of 2.9% in the year. The Fund generated a return of 3.9% for the year to 31 March 2018 compared to the strategic benchmark return of 3.3%. Over the three years to 31 March 2018 the Fund returned 8.1% per annum, compared to the strategic benchmark return of 7.4% 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 0.09% (2017 0.09%). The average pension payment is £4,798.26 per annum, equivalent to a weekly payment of £92.02. Further details are disclosed from page 117.
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: • 29.6% of WTE having part time contracts. • 64% of the Council’s workforce are female • Turnover is currently 11% • 27.9% of the workforce is over 55 • 6.3% of the workforce is under 25 • 5.4% of the workforce consider themselves to have a disability • non-white British employees represent 2.6% of the workforce The Council is a progressive authority with a strong commitment to its workforce. We are currently developing a new internal standard “Valuing our People” to measure and develop the people management practices in the Council. We recognise the need for clear and appropriate corporate values, which are understood and modelled by our leaders and the workforce. Over the next three years, a programme of activities is proposed to develop the environment and assess performance as part of this. Valuing our employees remains a top priority for the Council. This is equally true for the organisation’s leaders. Leadership takes place at all levels across the Council and is a vital part in the success of the organisation and for East Riding as a place. The Chief Executive and Corporate Management Team remain committed to a strong, progressive and supportive package of opportunities to support our leaders who are key to the organisation’s future success. Our new model of leadership development builds on our past strong track record of success and offers opportunities at all levels of leadership, building our reputation as a learning and development organisation.
East Riding of Yorkshire Council 8 Statement of Accounts 2017/18
NARRATIVE REPORT
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 Authority 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 a period of ongoing Financial strategy reductions to local government funding combined with • Business Plan increasing cost pressures, and face significant financial • Adequate reserves uncertainty in the medium term due to a fundamental • Capital Investment Strategy review of the local government funding system which is • Asset management plans due to be implemented in 2020. These funding • Governance framework for financial decision pressures and uncertainty have a direct impact on the making and regular monitoring of the financial plan Authority’s ability to deliver a balanced medium term • Engagement with the Government and national financial plan fully aligned to the achievement of the forums on future funding arrangements business plan, and a balanced and sustainable long term capital investment programme which allows the Authority to maximise the potential of its assets. • Local authorities are experiencing significant and Contract arrangements and supplier relationships continuing increases in demand for social care services • Professional expertise which can impact on the Authority’s ability to provide • Governance arrangements the required and relevant services to adults and children • Care identification and market intelligence & young people. • Workforce development and multi agency training • Inspections • Partnership arrangements • The fragile UK economy and the impact of the Brexit Business continuity plans process may impact on the sustainability of partners and • Contract arrangements and supplier relationships key suppliers, which could impact on the continuity of • Market intelligence and monitoring the Authority’s services. • 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 Authority must be prepared to respond in an • National contingency plans appropriate manner to a potential man made or natural • Staff training disaster. • Awareness and monitoring of potential emergency events • Exercises to test plans A copy of the Council’s Annual Governance Statement 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, 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 reductions and pressures on annual revenue budgets and increasing service demand (particularly from an ageing population).
East Riding of Yorkshire Council 9 Statement of Accounts 2017/18
NARRATIVE REPORT
As a consequence of the Government’s austerity measures, the Council’s funding has reduced by £60.5m during the 2010- 11 to 2017-18 period. A further £20.3m of funding cuts are projected for the 2018-19 to 2021-22 period, bringing the total funding reduction to £80.8m. Since the austerity measures began in 2010, the Council has made savings of £158.3m to meet funding shortfalls as a result of Government funding cuts and service pressures. It is projected that savings will total £198.6m by 2021-22. Over the financial planning period 2018-19 to 2021-22, it is estimated that service budgets will increase by £12.2m. Budget pressures are projected to total £52.5m over this same period, meaning that a total of £40.3m of base budget savings will need to be made from service budgets over the period. Savings totalling £30.1m have been identified for the period 2018/19 to 2021/22 with savings of a further £10.2m 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. • 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. • 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.
A key priority for the Council is to work more closely with NHS partners to collaborate better together and improve outcomes for our residents. Prevention is a strong current theme across the health system to help with demand management and support people to lead independent fulfilling lives.
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. Protecting vulnerable people is a core priority for the Council and underspends have been set aside in reserves whenever possible so that universal provision of these services can be maintained during this period of austerity. However, social care budgets continue to receive significant support from earmarked reserves which are forecast to be exhausted in 2020-21. The financial plan currently includes a budget shortfall of £10.190m by 2021-22 mainly due to the pressures on social care spending. The Government remains committed to closer working across Health and Adult Social Care and recognises that there remains base funding pressures that need to be addressed. The Council will continue to actively explore closer working with NHS partners, particularly the East Riding Clinical Commissioning Group. It is hoped that the Government will address the base budget funding gap in Adult Social Care when it launches its green paper on Social Care in Summer 2018.
There are a number of income generating opportunities that have contributed to the successful increase in income across directorates and income growth of £1.8m is projected over the financial planning period.
The Council’s business transformation projects aim to deliver £39.150m of savings by 2021-22. Projects were started early in the recognition that business transformation cannot take place overnight with many projects having a 12-18 month lead- in time. To date, £30.236m of savings have been identified, of which £28.813m have already been delivered. Savings from the business transformation projects that will be achieved during the 2018-19 to 2021-22 period total £6.338m.
The Council has been using reserves to support the financial plan over the last eight years to mitigate the impact of funding reductions, in particular in priority areas including adults and children’s social care. Reserves have also been used to improve the Council’s assets and infrastructure to increase income and reduce ongoing costs. This strategy will continue over the next four years with reserves being utilised to: • manage key financial risks and service risks • mitigate the impact of further funding reductions and maintain services • 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 becomes more certain. • continue investment both to increase prosperity in the local area and attract business, and to maximise the Council’s income and reduce costs. A significant proportion of the current balance of reserves is earmarked to fund investment in capital schemes and economic regeneration. The forecast utilisation of earmarked reserves over the financial planning period will reduce the current level of General Fund reserves by 59%.
East Riding of Yorkshire Council 10 Statement of Accounts 2017/18
NARRATIVE REPORT
The Council’s planned strategic approach to managing the reductions in Government funding and service pressures is enabling the Council to continue to meet the objectives and priorities in the Community Plan and the Council’s own policies and priorities without imposing blanket cuts to services.
The approved Asset Management and Capital Investment Strategy (AMCIS) 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 the Council would otherwise not receive. The AMCIS 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 must be 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 2018/19 and future years totals £329m. Significant investment is planned within the Council's Housing Revenue Account (HRA) on both investment in its current housing stock but also delivering new build housing to assist in addressing identified housing need. The key financial investment points within the HRA Business Plan over the next four years are:
• £57m to spend on new investment including remodelling, replacement and new builds. • £64m 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. • £38m 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:
2018/19 2019/20 2020/21 Later Total £000 £000 £000 £000 £000 Sources of Funding Grants & Contributions 75,990 56,345 30,938 1,632 164,905 Revenue & Reserves 49,056 35,239 6,427 3,200 93,922 Borrowing 17,907 20,702 6,270 5,456 50,335 Capital Receipts 8,267 6,988 3,286 1,300 19,841 151,220 119,274 46,921 11,588 329,003
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. £43.3bn assets as at 31 March 2017. These authorities will begin to transition their LGPS assets to Border to Coast during 2018/19 and this process is expected to take two years to transition all transferable assets. The Pensions Committees of each of the twelve 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. The East Riding Pension Fund expects to transfer the majority of its assets to Border to Coast, valued at £4.786m as at 31 March 2018.
East Riding of Yorkshire Council 11 Statement of Accounts 2017/18
NARRATIVE REPORT
7. THE ACCOUNTS This statement of accounts summarises the financial performance of East Riding of Yorkshire Council (the Authority) for the year ended 31 March 2018. The pension fund accounts for the year ended 31 March 2018 are included at pages 117 to 147.
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 Authority’s financial affairs and sets out theirs and the Authority’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 authority as at 31 March 2018. The balance sheet shows the value of the assets and liabilities recognised by the Authority at the balance sheet date. The Comprehensive Income and Expenditure Statement (page 18) identifies the income and expenditure on all services the Authority provides except the pension fund (see below) and brings together all the recognised gains and losses of the Authority during the period 1 April 2017 to 31 March 2018. 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 Authority 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 Authority during the reporting period. The Housing Revenue Account (page 104) summarises the income and expenditure in respect of the provision of local authority housing accommodation. The Collection Fund (page 115) shows the level of non-domestic rates and council tax that have been received by the Authority during the period and the distribution of these funds. The Pension Fund Accounts (page 117) 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 300 employers and 112,882 members. The pension fund accounts show the operation of the pension fund administered by the Authority 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 Authority are complex. The Authority 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 2017/18 (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 148.
East Riding of Yorkshire Council 12 Statement of Accounts 2017/18
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EAST RIDING OF YORKSHIRE COUNCIL
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
We have audited the financial statements of East Riding of Yorkshire Council (‘the Council’) for the year ended 31 March 2018 which comprise the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Movement in Reserves Statement, the Cash Flow Statement, the Housing Revenue Account Income and Expenditure Statement, the Movement on the Housing Revenue Account Statement, the Collection Fund, the Fund Account and Net Assets Statement for the East Riding Pension Fund and the related notes, including the accounting policies in note 1 and the Pension Fund accounting policies in note 10c to the Pension Fund accounts.
In our opinion the financial statements:
• give a true and fair view of the financial position of the Council as at 31 March 2018 and of the Council’s expenditure and income for the year then ended; • give a true and fair view of the financial transactions of the East Riding Pension Fund during the year ended 31 March 2018 and the amount and disposition of the Fund's assets and liabilities as at 31 March 2018 other than liabilities to pay pensions and other benefits after the end of the scheme year; and • have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2017/18. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Council in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
Going concern
We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects. Other information published with the financial statements
The Head of Finance is responsible for the other information published with the Statement of Accounts, including the Narrative Statement and the Annual Governance Statement. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. In our opinion the other information published with the Statement of Accounts for the financial year is consistent with the financial statements. Head of Finance responsibilities
As explained more fully in the statement set out on page 16, the Head of Finance is responsible for: the preparation of the Council’s Statement of Accounts (which includes the 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 2017/18; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Council’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting on the assumption that the functions of the Council will continue in operational existence for the foreseeable future.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s
report. Reasonable assurance is a high level of assurance, but does not 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities
REPORT ON OTHER LEGAL AND REGULATORY MATTERS
Report on the Council’s arrangements for securing economy, efficiency and effectiveness in its use of resources
Conclusion
On the basis of our work, having regard to the guidance issued by the Comptroller and Auditor General in November 2017, we are satisfied that, in all significant respects, East Riding of Yorkshire Council put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2018.
Respective responsibilities in respect of our review of arrangements for securing economy, efficiency and effectiveness in the use of resources
The Council is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to review regularly the adequacy and effectiveness of these arrangements.
We are required under Section 20(1) (c) of the Local Audit and Accountability Act 2014 to satisfy ourselves that the Council has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. We report if significant matters have come to our attention which prevent us from concluding that the Council has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. We are not required to consider, nor have we considered, whether all aspects of the Council’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively.
We have undertaken our review in accordance with the Code of Audit Practice, having regard to the guidance on the specified criterion issued by the Comptroller and Auditor General in November 2017, as to whether East Riding of Yorkshire Council had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people. The Comptroller and Auditor General determined this criterion as that necessary for us to consider under the Code of Audit Practice in satisfying ourselves whether East Riding of Yorkshire Council put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2018.
Statutory reporting matters
The Code of Audit Practice requires us to report to you if:
• any matters have been reported in the public interest under Section 24 of the Local Audit and Accountability Act 2014 in the course of, or at the conclusion of, the audit;
• any recommendations have been made under Section 24 of the Local Audit and Accountability Act 2014;
• an application has been made to the court for a declaration that an item of account is contrary to law under Section 28 of the Local Audit and Accountability Act 2014;
• an advisory notice has been issued under Section 29 of the Local Audit and Accountability Act 2014; or
• an application for judicial review has been made under Section 31 of the Local Audit and Accountability Act 2014. We have nothing to report in these respects
THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES
This report is made solely to the members of the Council, as a body, in accordance with Part 5 of the Local Audit and Accountability Act 2014. Our audit work has been undertaken so that we might state to the members of the Council, as a body, those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the members of the Council, as a body, for our audit work, for this report, or for the opinions we have formed.
DELAY IN CERTIFICATION OF COMPLETION OF THE AUDIT Due to work on the WGA Return not being completed by the date of the audit report
We cannot formally conclude the audit and issue an audit certificate until we have completed the work necessary to issue our assurance statement in respect of the Council’s Whole of Government Accounts consolidation pack. We are satisfied that this work does not have a material effect on the financial statements or on our value for money conclusion.
Due to the Pension Fund Annual Report not being prepared by date of the audit report
We are required to give an opinion on the consistency of the financial statements of the pension fund included in the Pension Fund Annual Report of East Riding Pension Fund, with the pension fund accounts included in the financial statements of East Riding of Yorkshire Council. The Local Government Pension Scheme (Administration) Regulations 2008 require authorities to publish the Pension Fund Annual Report by 1 December following the end of the relevant financial year. As the Council has not yet prepared the Pension Fund Annual Report we have not issued our report on the financial statements included in the Pension Fund Annual Report. Until we have done so, we are unable to certify that we have completed the audit of the accounts in accordance with the requirements of the Local Audit and Accountability Act 2014 and the Code of Audit Practice.
Rashpal Khangura for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 1 Sovereign Square Sovereign Street Leeds LS1 4DA
25 July 2018
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. 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.
2016/17 Note 2017/18
Gross Gross Net Gross Gross Net expenditure income expenditure expenditure income expenditure £000 £000 £000 £000 £000 £000 Service expenditure 892 -10 882 Chief executive 906 -19 887 89,714 -69,264 20,450 Corporate resources 93,102 -67,512 25,590 164,618 -76,705 87,913 Corporate strategy & commissioning 174,102 -85,219 88,883 49,578 -3,065 46,513 Children, families and schools (exc. schools) 51,902 -3,402 48,500 72,149 -23,446 48,703 Environment & neighbourhood services 78,171 -24,833 53,338 68,241 -21,589 46,652 Planning & economic regeneration 66,516 -22,454 44,062 27,045 -49,741 -22,696 Housing revenue account Pg 104 28,250 -49,305 -21,055 -83,509 0 -83,509 Significant item - local authority housing (HRA) revaluation loss/reversal HRA 5c 8,617 0 8,617 226,686 -208,320 18,366 Children, families and schools (schools budget) 213,949 -192,347 21,602 615,414 -452,140 163,274 Total continuing services - cost of services 715,515 -445,091 270,424 51,031 -437 50,594 Other operating expenditure 7a 40,428 -226 40,202 71,987 -46,204 25,783 Financing and investment income and expenditure 7b 65,944 -42,365 23,579 0 -299,179 -299,179 Taxation and non-specific grant income and expenditure 7c -312,398 -312,398 738,432 -797,960 -59,528 Surplus (-) or deficit on the provision of services 821,887 -800,080 21,807 -43,197 Surplus (-) / deficit on revaluation of non-current assets 39 -25,968 631 Impairment loss taken to revaluation reserve 39 -3,148 -3 Surplus (-) / deficit on revaluation of available-for-sale financial assets 12 -4,306 Remeasurement of the pension net defined benefit liability (asset) 32b -35,367 -46,875 Other comprehensive income and expenditure MIRS -64,471 -106,403 Total comprehensive income and expenditure -42,664
East Riding of Yorkshire Council 18 Statement of Accounts 2017/18 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 Authority, 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 Authority’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 receipts account reserves reserves reserves £000 £000 £000 £000 £000 £000 £000 £000 Balance at 31 March 2016 79 / 83 146,569 7,388 47,405 10,015 446 211,823 554,017 765,840 Movement in reserves during 2016/17
Total comprehensive income and expenditure -40,579 59,528 0 100,107 0 46,875 0 106,403 Adjustments between accounting basis and funding basis under regulations 40 / 100 45,707 -103,551 -5,743 4,580 264 -58,743 58,743 0
Increase/decrease (-) in year 5,128 -3,444 -5,743 4,580 264 785 105,618 106,403 Balance at 31 March 2017 carried forward 17 / 79 / 83 151,697 3,944 41,662 14,595 710 212,608 659,635 872,243
Movement in reserves during 2017/18
Total comprehensive income and expenditure -29,208401 7, 0 0 0 -21,807 64,471 42,664
Adjustments between accounting basis and funding basis under regulations 38/ 100 41,581 -7,060 2,290 3,084 -34 39,861 -39,861 0
Increase/decrease (-) in year 79 / 83 12,373 341 2,290 3,084 -34 18,054 24,610 42,664 Balance at 31 March 2018 carried forward 17 164,070 4,285 43,952 17,679 676 230,662 684,245 914,907
General and earmarked balances consist of £15.176m general fund (£14.830m 2016/17) and £148.894m of earmarked general fund reserves (£136.867m 2016/17). A detailed analysis of the movements in earmarked reserves can be found in note 35.
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 2017/18 CORE FINANCIAL STATEMENTS
CASH FLOW STATEMENT The cash flow statement shows the changes in cash and cash equivalents of the Authority during the reporting period. The statement shows how the Authority 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 Authority are funded by way of taxation and grant income or from the recipients of services provided by the Authority. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Authority’s future service delivery.
2016/17 Note 2017/18 £000 £000 £000 -59,528 Net (surplus) or deficit on the provision of services Pg 18 21,807 Adjust net surplus or deficit on the provision of services for -26,199 non cash movements 55 -96,365 Adjustments for items included in the net surplus or deficit on the 45,935 provision of services that are investing and financing activities 56 60,912 -39,792 Net cash flows from operating activities -13,646 Investment activities 78,327 Purchase of property, plant & equipment and intangible assets 90,744 169,916 Purchase of short-term and long-term investments 185,027 4 Other payments for investing activities 0 Proceeds from the sale of property, plant & equipment, intangible -8,784 assets and non-current assets held for sale -7,698 -201,720 Proceeds from short-term and long-term investments -195,860 -45,094 Capital grants received -55,793 -58 Other capital cash receipts -20 -7,409 Net cash flows from investing activities 16,400 Financing activities 0 Cash receipts of short-term and long-term borrowing Pg 6 0 0 Net (inflow)/outflow council tax financing activities 0 5,894 Net (inflow)/outflow NNDR financing activities -869 0 Other receipts from financing activities 0 951 Principal element of finance leases and on balance sheet PFI contracts 821 23,109 Repayment of short-term and long-term borrowing Pg 6 11,368 29,954 Net cash flows from financing activities 11,320 -17,247 Net decrease in cash and cash equivalents 14,074 13,385 Cash and cash equivalents at 1 April 54 30,632 30,632 Cash and cash equivalents at 31 March 54 16,558
East Riding of Yorkshire Council 20 Statement of Accounts 2017/18 ACCOUNTING POLICIES
1. ACCOUNTING POLICIES
I. GENERAL The statement of accounts summarises the Authority’s transactions for the 2017/18 financial year and its position at the year-end of 31 March 2018. The Authority 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 2017/18 (the Code), the 2017/18 Code update and the Service Reporting Code of Practice 2017/18, 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 Authority’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. In 2017/18 there are no prior period adjustments.
III. INTERESTS IN COMPANIES AND OTHER ENTITIES The Authority 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 Authority’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 Authority 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 Authority are prepared on an accruals basis. This means that the sums due to or from the Authority 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 Authority 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 Authority’s financial performance.
VI. REVENUE RECOGNITION The revenue recognition policy covers the sale of goods (produced by the Authority for the purpose of sale or purchased for resale), the rendering of services (excluding services directly related to construction contracts), interest, royalties 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.
East Riding of Yorkshire Council 21 Statement of Accounts 2017/18 ACCOUNTING POLICIES Revenue is recognised and measured at the fair value of the consideration receivable. 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 Authority 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 Authority 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 Authority 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 available for sale 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 Authority, corporate and support services operate and are managed separately throughout the financial year and therefore are 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 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.
East Riding of Yorkshire Council 22 Statement of Accounts 2017/18 ACCOUNTING POLICIES 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 Authority’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 Authority 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 Authority at the end of the contracts for no additional charge, the Authority carries the property, plant and equipment assets used in the contracts on the balance sheet. The Authority’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 Authority. 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 Authority 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 Authority. 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. The Authority 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.
East Riding of Yorkshire Council 23 Statement of Accounts 2017/18 ACCOUNTING POLICIES b) Termination benefits Termination benefits are amounts payable as a result of a decision by the Authority 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 Authority can no longer withdraw the offer of those benefits or when the Authority recognises costs for a restructuring.
c) Post employment benefits The Authority 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 Authority’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 Authority. 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 Authority 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 2.7%, 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 Authority 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 Authority – 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. • 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.
East Riding of Yorkshire Council 24 Statement of Accounts 2017/18 ACCOUNTING POLICIES In relation to retirement benefits, statutory provisions require the general fund balance to be charged with the amount payable by the Authority 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 Authority 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 Authority 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 Authority 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 20 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 Authority 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 recognised. This is not the case for a revaluation loss as it is implicit that a revaluation gain reverses a previous revaluation loss.
East Riding of Yorkshire Council 25 Statement of Accounts 2017/18 ACCOUNTING POLICIES 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 derecognition 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 derecognition 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 Authority, the use of the capital allowance calculation for this non-RTB category, will reduce the poolable 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 Authority’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 derecognition 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 Authority 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. Provisions are charged as an expense to the appropriate service line in the comprehensive income and expenditure statement in the year that the Authority 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.
East Riding of Yorkshire Council 26 Statement of Accounts 2017/18 ACCOUNTING POLICIES 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 Authority 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 Authority 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 Authority has chosen to carry excesses in respect of claims made under various insurance policies. The amounts set aside from the Authority’s services to cover the uninsured risks at 31 March 2018 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 Authority are classified into two types: • Loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market • Available-for-Sale assets – assets that have a quoted market price and/or do not have fixed or determinable payments Loans and receivables are initially measured at fair value and carried at their amortised cost. Annual credits to the financing and investment income and expenditure line in the comprehensive income and expenditure statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the Authority has made, this means that the amount presented in the balance sheet is the outstanding principal receivable and interest credited to the comprehensive income and expenditure statement is the amount receivable for the year in the loan agreement. However, the Authority 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. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the carrying value of the asset is written down through the use of an allowance account, and a charge made to the surplus or deficit on the provision of services.
East Riding of Yorkshire Council 27 Statement of Accounts 2017/18 ACCOUNTING POLICIES Any gains and losses that arise on derecognition 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. Where fair value of an equity instrument cannot be measured reliably, it is carried at cost (less any impairment losses).
XXIV. FINANCIAL LIABILITIES Financial liabilities 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 Authority has, this means that the amount presented in the balance sheet is the outstanding principal repayable 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. Where premiums and discounts have been charged to the comprehensive income and expenditure statement, regulations allow the impact on the general fund balance to be spread over future years. The Authority has a policy of spreading 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 Authority 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 Authority’s own income and expenditure are included in its main financial statements. The collection fund account covers all local taxation collected by the Authority on behalf of itself, other local authorities and the government.
XXVIII. ACCOUNTING FOR SCHOOLS The Authority 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 Authority’s accounts. Non-current assets are recognised in the balance sheet where the Authority 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 Authority and are, therefore, recognised on the balance sheet.
East Riding of Yorkshire Council 28 Statement of Accounts 2017/18 ACCOUNTING POLICIES All the Authority’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 Authority’s balance sheet. Where ownership of the assets lies with the school/governing body they are recognised on the Authority’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 2018 but not yet adopted by the Code relate to: • IFRS 9 Financial Instruments - which introduces extensive changes to the classification and measurement of financial assets, and a new “expected credit loss” model for impairing financial assets. • IFRS 15 Revenue from Contracts with Customers - presents new requirements for the recognition of revenue, based on a control-based revenue recognition model. Neither of the above will necessitate the publication of a third balance sheet.
XXX. SIGNIFICANT JUDGEMENTS IN APPLYING ACCOUNTING POLICIES In applying the accounting policies set out above, the Authority has had to make certain judgements about complex transactions or those involving uncertainty about future events. • The Authority 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 Authority’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 Authority 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 (valued at £46.870m) are recognised as property, plant and equipment on the Authority’s balance sheet. This judgement was made by the Authority’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 Authority 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 Authority has to decide whether land and buildings owned by the Authority are investment properties. The Authority’s valuers and accountants make judgements in accordance with IAS 40 Investment Property. It has been determined that the Authority 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 Authority has to decide whether the Authority’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 Authority’s accountants, solicitors and departmental officers based on their detailed knowledge of the circumstances, assessed using a contingent liability decision tree. • The Authority has to decide whether there is a group relationship between the Authority and other entities. The accountants assess each relationship that exists between the Authority 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 2017/18. • The Authority 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 Authority does not have control of the company and it is not a subsidiary of the Authority. As the fair value of the shares cannot be determined due to the restrictions of the contract and it does not have a quoted market price in an active market, the investment is carried at cost as a proxy for fair value. • The Authority 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 authorities fully paid up shares at 31 March 2018 is £16,145.40. The Authority was granted 1,792,522 deferred shares (47% shareholding) recognised at nil value. It has been determined that the Authority does not have control of the company and it is not a subsidiary of the Authority. 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
East Riding of Yorkshire Council 29 Statement of Accounts 2017/18 ACCOUNTING POLICIES 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 Authority has an investment of 1 ordinary share in Nite Direct Limited which represents a 100% shareholding; this is a wholly owned subsidiary of the Authority. Further disclosures are included in the related party transactions Note 57. • The Authority has an investment of 1 ordinary share in Border to Coast Pension Partnership which represents a 8.33% shareholding. It has been determined that the Authority does not have control of the company and it is not a subsidiary of the Authority. As the fair value of the shares cannot be determined due to the restrictions of the contract and it does not have a quoted market price in an active market, the investment is carried at cost as a proxy for fair value. • All local Authority maintained schools are considered to be entities controlled by the Authority. 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 • 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 Authority’s single entity statements. The Authority’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 Authority 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 Authority completed an assessment of the schools to determine the arrangements in place and the accounting treatment required: Community schools are owned by the Authority 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 Authority’s balance sheet. Where ownership of the assets lies with the school/governing body they are recognised on the Authority’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 Authority. The assets are therefore included in the Authority’s balance sheet. Disclosures relating to the Authority’s interests in schools can be found at Note 59. • When a school that is held on the Authority’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. • Judgement is required to determine whether the Authority 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 Authority’s balance sheet. The Authority 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 Authority’s property assets from the current carrying values on the balance sheet at 31 March 2017. 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.
East Riding of Yorkshire Council 30 Statement of Accounts 2017/18 ACCOUNTING POLICIES
• Judgement is required in determining the significant components of property, plant and equipment assets and their related useful lives for accurate depreciation purposes. The Authority’s quantity surveyors, valuers and accountants work together to determine this. It has been judged that the useful lives of the Authority’s council dwellings as they currently stand provide a depreciation charge that is an accurate proxy for component accounting purposes. • The calculation of the Authority’s net pension liability consists of a number of complex judgements. Professional actuarial firm Hymans Robertson are contracted by the Authority to calculate this net liability. The judgements used by the firm as detailed in Note 32f.
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 Authority 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 Authority’s balance sheet at 31 March 2018 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 Authority 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 32. During 2017/18 the Authority’s actuary has advised that the net pensions liability is £325.675m. b) Accruals and provisions The accounts of the Authority are prepared on an accruals basis meaning that the sums due to or from the Authority 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 Authority 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 Authority’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. Details of the provisions, totalling £8.204m at 31 March 2018 are given in Note 30. 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 47. 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 Authority's quantity surveyors based on the Authority's current maintenance and investment policies. The present pressure on public sector expenditure could potentially have implications for the useful economic lives of the Authority'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.
East Riding of Yorkshire Council 31 Statement of Accounts 2017/18 ACCOUNTING POLICIES 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 £48.959m and net revaluation losses charged were £12.733m in 2017/18. 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). Where possible, the inputs to these valuation techniques are based on observable data, but where this is not possible the Authority 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 Authority’s assets and liabilities. Information about the valuation techniques and inputs used in determining the fair value of the Authority’s assets and liabilities is disclosed in Notes 21 and 48.
East Riding of Yorkshire Council 32 Statement of Accounts 2017/18 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 Authority (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 Authority’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.
2017/18 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 850 -1 849 38 887 Corporate Resources 23,008 1 23,009 2,581 25,590 Corporate Strategy & Commissioning 82,478 0 82,478 6,405 88,883 Children, Family & Schools (exc. Schools) 44,472 0 44,472 4,028 48,500 Environment & Neighbourhood Services 35,976 1,873 37,849 15,489 53,338 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 2017 -155,641 Add Surplus on General Fund and HRA Balance in Year -12,714 Closing General Fund & HRA Balance at 31 March 2018* -168,355
*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.
East Riding of Yorkshire Council 33 Statement of Accounts 2017/18 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
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.
2016/17 Prior 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 880 0 880 2 882 Corporate Resources 26,417 99 26,516 -6,066 20,450 Corporate Strategy & Commissioning 84,782 0 84,782 3,131 87,913 Children, Family & Schools (exc. Schools) 46,421 0 46,421 92 46,513 Environment & Neighbourhood Services 35,797 2,165 37,962 10,741 48,703 Planning & Economic Regeneration 30,818 955 31,773 14,879 46,652 Local Authority Housing (HRA) 3,444 -35,364 -31,920 -74,285 -106,205 Children, Family & Schools (Schools Budget) 4,819 -3,961 858 17,508 18,366
Net Cost of Services 233,378 -36,106 197,272 -33,998 163,274
Other Income & Expenditure -236,563 37,607 -198,956 -23,846 -222,802
Surplus (-) or Deficit on the Provision of Services -1,684 -57,844 1,501 -3,185 -59,528
Opening General Fund & HRA Balance at 31 March 2016 -153,957 Add Surplus on General Fund and HRA Balance in Year -1,684 Closing General Fund & HRA Balance at 31 March 2017 -155,641
East Riding of Yorkshire Council 34 Statement of Accounts 2017/18 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
2016/17 2017/18 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 Differences Adjustments Charged to the General Fund and HRA Differences Accounts Outturn Differences Adjustments £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 0 0 0 0 0 Chief Executive 0 0 0 -1 -1 0 0 0 99 99 Corporate Resources 0 0 0 1 1 0 0 0 0 0 Corporate Strategy & Commissioning 0 0 0 0 0 0 0 0 0 0 Children, Family & Schools (exc. Schools) 0 0 0 0 0 0 1,403 0 762 2,165 Environment & Neighbourhood Services 0 1,146 0 727 1,873 0 -347 1,000 302 955 Planning & Economic Regeneration 0 -177 0 302 125 -35,364 0 0 0 -35,364 Local Authority Housing (HRA) -30,438 0 0 0 -30,438 0 0 0 -3,961 -3,961 Children, Family & Schools (Schools Budget) 0 0 0 -1,266 -1,266
-35,364 1,056 1,000 -2,798 -36,106 Net Cost of Services -30,438 969 0 -237 -29,706 35,364 -1,056 501 2,798 37,607 Other Income and Expenditure 30,438 -969 -9,078 47 20,438
0 0 1,501 0 1,501 Difference between Outturn and General Fund Surplus or Deficit 0 0 -9,078 -190 -9,268
• 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 £9.1m 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 35 Statement of Accounts 2017/18 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
2016/17 2017/18 Net Change for Net Change for Adjustments for the Pensions Other Total Adjustments from General Fund to arrive at the Comp rehensive Adjustments for the Pensions Other Total Capital Purposes Adjustment Differences Adjustments Income & Expenditure Statement amounts Capital Purposes Adjustment Differences Adjustments £000 £000 £000 £000 £000 £000 £000 £000 0 0 2 2 Chief Executive 0 37 1 38 391 -6,436 -21 -6,066 Corporate Resources 7,605 -5,028 4 2,581 1,390 1,825 -84 3,131 Corporate Strategy & Commissioning 1,428 4,936 41 6,405 464 -329 -43 92 Children, Family & Schools (exc. Schools) 526 3,473 29 4,028 8,378 2,473 -110 10,741 Environment & Neighbourhood Services 8,293 6,855 341 15,489 14,046 864 -31 14,879 Planning & Economic Regeneration 12,266 2,310 7 14,583 -74,456 180 -9 -74,285 Local Authority Housing (HRA) 17,668 670 2 18,340 11,840 4,510 1,158 17,508 Children, Family & Schools (Schools Budget) 13,558 10,507 -1,790 22,275
-37,947 3,087 862 -33,998 Net Cost of Services 61,344 23,760 -1,365 83,739 -40,775 13,149 3,780 -23,846 Other Income and Expenditure -62,463 11,934 1,311 -49,218
Difference between General Fund Surplus or Deficit and Comprehensive -78,722 16,236 4,642 -57,844 Income and Expenditure Statement Surplus or Deficit -1,119 35,694 -54 34,521
• Adjustments for Capital Purposes – include the charge to services for depreciation, 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 authority 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 36 Statement of Accounts 2017/18 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 33.
2016/17 2017/18 £000 £000
-10 Chief Executive -19 -1,617 Corporate Resources -1,721 -29,874 Corporate Strategy & Commissioning -30,921 -729 Children, Family & Schools (exc. Schools) -781 -20,870 Environment & Neighbourhood Services -22,030 -9,585 Planning & Economic Regeneration -10,079 -49,606 Local Authority Housing (HRA) -49,177 -8,546 Children, Family & Schools (Schools Budget) -7,298
-120,837 Revenues from External Customers -122,026
East Riding of Yorkshire Council 37 Statement of Accounts 2017/18 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 Authority in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Authority to meet future capital and revenue expenditure.
Capital General Housing Earmarked Major Usable Grant Total Fund Revenue General Fund Repairs Capital Unapplied Usable Unusable 2017/18 Balance Account Reserves Reserve Receipts Account Reserves Reserves £000 £000 £000 £000 £000 £000 £000 £000 Adjustments involving the Capital Adjustment Account Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement Charge for depreciation -33,107 -8,709 0 0 0 0 -41,816 41,816 Charge for impairment -6,461 -48 0 0 0 0 -6,509 6,509 Revaluation losses on Property, Plant and Equipment -4,770 -16,634 0 0 0 0 -21,404 21,404 Reversal of past impairment and revaluation losses 918 7,753 0 0 0 0 8,671 -8,671 Amortisation of intangible assets -604 -30 0 0 0 0 -634 634 Capital grants and contributions applied from in-year income 51,552 1,662 0 0 0 0 53,214 -53,214 Donated asset 69 0 0 0 0 0 69 -69 Non-current asset written out in gain or loss on disposal/sale of non-current assets -35,664 -3,459 0 0 0 0 -39,123 39,123 Revenue expenditure funded from capital under statu te -7,885 0 0 0 0 0 -7,885 7,885 Grant funded revenue expenditure funded from capital understatute 7,164 0 0 0 0 0 7,164 -7,164 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 11,211 -11,211 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 19,520 -19,520 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 1,431 -1,431 Contribution from Capital Receipts Reserve towards administrative costs of non-current asset disposals 0 -88 0 0 88 0 0 0 Contribution from Capital Receipts Reserve to finance the payments to the Government Capital Receipt Pool -1,312 0 0 0 1,312 0 0 0 New Finance Lease Out within year 0 0 0 0 0 0 0 0 Other Income 202 24 0 0 -226 0 0 0 Sub-total of adjustment to carry forward to next page -6,835 -6,175 0 0 -3,081 0 -16,091 16,091
East Riding of Yorkshire Council 38 Statement of Accounts 2017/18 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 Balance Account Reserves Reserve Receipts Account Reserves Reserves £000 £000 £000 £000 £000 £000 £000 £000 Adjustment carried over from previous page -6,835 -6,175 0 0 -3,081 0 -16,091 16,091
Adjustments involving the Major Repairs Reserve Additional transfer to MRR in excess of depreciation 0 5,390 0 -5,390 0 0 0 0 Reversal of the Major Repairs Allowance credited to HRA 0 0 0 0 0 0 0 0 Use of the Major Repairs Reserve to finance new capital expenditure 0 0 11,838 0 0 11,838 -11,838 Repayment of Self-Financing Debt 0 0 0 0 0 0 0 0 Additional transfer to the MRR (to be credited with HRA depreciation) 0 8,738 0 -8,738 0 0 0 0
Adjustments involving the Capital Grants Unapplied Account Reserve Capital grants and contributions unapplied credited to CI&ES 0 0 0 0 0 0 0 0 Application of grants and contributions to capital financing 0 0 0 0 0 34 34 -34
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 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 -64,824 64,824 the comprehensive income and expenditure account Employer's contributions payable to the East Riding Pension Fund 28,523 607 0 0 0 0 29,130 -29,130
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 -1,326 1,326 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 -285 285 Deferred capital receipts received - transferred to Usable Capital Receipts 0 0 0 0 -3 0 -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 0 0 0 0 1,662 -1,662
Total adjustments between accounting basis and funding basis -41,581 7,060 0 -2,290 -3,084 34 -39,861 39,861 under regulations Transfer between reserves - Voluntary 12,024 0 -12,024 0 0 0 0 0 Total Adjustments between accounting basis and funding -29,557 7,060 -12,024 -2,290 -3,084 34 -39,861 39,861
East Riding of Yorkshire Council 39 Statement of Accounts 2017/18 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
Capital General Housing Earmarked Major Usable Grant Total Fund Revenue General Fund Repairs Capital Unapplied Usable Unusable 2016/17 Comparatives Balance Account Reserves Reserve Receipts Account Reserves Reserves £000 £000 £000 £000 £000 £000 £000 £000 Adjustments involving the Capital Adjustment Account Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement Charge for depreciation -32,641 -8,592 0 0 0 0 -41,233 41,233 Charge for impairment -1,918 0 0 0 0 0 -1,918 1,918 Revaluation losses on Property, Plant and Equipment -815 -8,238 0 0 0 0 -9,053 9,053 Reversal of past impairment and revaluation losses 939 91,320 0 0 0 0 92,259 -92,259 Amortisation of intangible assets -481 -33 0 0 0 0 - 514 514 Capital grants and contributions applied from in-year income 36,521 630 0 0 0 0 37,151 -37,151 Non-current asset written out in gain or loss on disposal/sale of non-current assets -47,984 -3,056 0 0 0 0 -51,040 51,040 Revenue expenditure funded from capital under statute -9,485 0 0 0 0 0 -9,485 9,485 Grant funded revenue expenditure funded from capital understatute 7,117 0 0 0 0 0 7,117 -7,117
Additions of items not debited or credited to the Comprehensive Income and Expenditure Statement Provision for repayment of debt 11,007 0 0 0 0 0 11,007 -11,007 Contribution to provision for repayment of debt -1,943 0 0 0 1,943 0 0 0 Capital expenditure charged to General Fund and HRA balance 11,073 9,718 0 0 0 0 20,791 -20,791
Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of disposal/sale of non-current assets 4,247 4,170 0 0 -8,417 0 0 0 Usable Capital Receipts financing new capital expenditure 0 0 0 0 810 0 810 - 8 10 Contribution from Capital Receipts Reserve towards administrative costs of non-current asset disposals 0 -98 0 0 98 0 0 0 Contribution from Capital Receipts Reserve to finance the payments to the Government Capital Receipt Pool -1,325 0 0 0 1,325 0 0 0 New Finance Lease Out within year 0 0 0 0 138 0 138 - 1 38 Other Income 422 15 0 0 -437 0 0 0 Sub-total of adjustment to carry forward to next page -25,266 85,836 0 0 -4,540 0 56,030 -56,030
East Riding of Yorkshire Council 40 Statement of Accounts 2017/18 NOTES TO THE MOVEMENT IN RESERVES STATEMENT
Capital General Housing Earmarked Major Usable Grant Total Fund Revenue General Fund Repairs Capital Unapplied Usable Unusable 2016/17 Comparatives Balance Account Reserves Reserve Receipts Account Reserves Reserves £000 £000 £000 £000 £000 £000 £000 £000 Adjustment carried over from previous page -25,266 85,836 0 0 -4,540 0 56,030 -56,030
Adjustments involving the Major Repairs Reserve Additional transfer to MRR in excess of depreciation 0 9,527 0 -9,527 0 0 0 0 Reversal of the Major Repairs Allowance credited to HRA 0 0 0 0 0 0 0 0 Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 13,395 0 0 13,395 -13,395 Repayment of Self-Financing Debt 0 0 0 10,500 0 0 10,500 -10,500 Additional transfer to the MRR (to be credited with HRA depreciation) 0 8,625 0 -8,625 0 0 0 0
Adjustments involving the Capital Grants Unapplied Account Reserve Capital grants and contributions unapplied credited to CI&ES 0 0 0 0 0 0 0 0 Application of grants and contributions to capital financing 0 0 0 0 0 76 76 -76
Adjustments involving the Financial Instrument Adjustment Account Replacing soft loan effective interest with actual interest 3 0 0 0 0 0 3 -3 Soft loan fair value adjustments 0 0 0 0 0 0 0 0
Adjustments involving the Pensions Reserve Reversal of items relating to retirement benefits debited or credited to -47,218 -1,071 0 0 0 0 -48,289 48,289 the comprehensive income and expenditure account Employer's contributions payable to the East Riding Pension Fund 31,429 625 0 0 0 0 32,054 -32,054
Adjustments involving the Collection Fund Adjustment Account Amount by which council tax and non-domestic rating income credited -4,172 0 0 0 0 0 -4,172 4,172 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 -11 0 0 0 0 0 -11 11 Deferred capital receipts received - transferred to Usable Capital Receipts 0 0 0 0 -40 0 -40 40
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 -812 9 0 0 0 0 - 80 3 803
Adjustments between accounting basis and funding basis -46,047 103,551 0 5,743 -4,580 76 58,743 -58,743 under regulations Transfer between reserves - Voluntary 8,548 0 -8,208 0 0 - 3 40 0 0 Total Adjustments between accounting basis and funding -37,499 103,551 -8,208 5,743 -4,580 - 2 64 58,743 -58,743
East Riding of Yorkshire Council 41 Statement of Accounts 2017/18 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.
2016/17 2017/18 £000 £000
-128,820 Fees, charges and other service income -130,031 -1,564 Interest and investment income -879 -204,327 Income from council tax and non-domestic rates -206,271 -379,275 Government grants -382,297 -52,855 Other grants, reimbursements and contributions -52,068 0 Gain on disposal of fixed assets 0 -253 Payments due from academies -384 -30,866 Interest income on plan assets -28,150 -797,960 Total Income -800,080
302,820 Employee benefit expenses 315,302 365,458 Other service expenses 353,267 -39,460 Depreciation, amortisation and impairment 61,693 74 Other capital charges 39 42,773 Loss on disposal of fixed assets 31,709 13,716 Interest payments 12,788 6,933 Precepts and Levies 7,407 1,325 Payments to housing capital receipts pool 1,312 1,507 Payments to academies 176 43,286 Pension interest cost 38,194 738,432 Total Expenditure 821,887
-59,528 Surplus or Deficit on the Provision of Services 21,807
East Riding of Yorkshire Council 42 Statement of Accounts 2017/18 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
7. COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT LINE NOTES a) Other operating expenditure
2016/17 Note 2017/18 £000 £000
6,933 Precepts and levies 57 7,407 1,325 Amounts payable into the housing capital receipts pool 1,312 -437 Other income -226 671 Gains (-) and losses on disposal of non current assets 15 -447 42,102 Loss on transfer of schools assets to academies * 15 32,156 50,594 40,202
*Following the Academies Act 2010, the following schools formerly under the control of the Authority, converted to academy status during 2017/18:
Gilberdyke Primary School – converted 1 June 2017 Wolfreton School – converted 1 September 2017 Cottingham Croxby Primary School – converted 1 October 2017
Sproatley Endowed CE Primary School, a voluntary controlled school, also converted on 1 June 2017.
The following treatment was applied to the academy conversions in 2017/18:
Convertor academies are regarded as ‘continuing’ schools therefore they retain any surplus/deficit balance on their conversion. The Authority 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 Authority – they are effectively subsidiaries of the Authority. Transactions and balances owned and controlled by the schools are deemed to be Financing Investment Income and Expenditure – see note 7b below. For 2017/18, the balances transferred totalled £0.208m (2016/17 £1.254m). This balance is comprised of £0.176m owed to academies and £0.384m owed from academies to the Authority on conversion.
The transfer of the property, plant and equipment owned by the Authority 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 2017/18, a total of £32.156m of property, plant and equipment was transferred to the new academies listed above.
Net expenditure of £29.597m for the schools that converted to academies in 2017/18 was included in the Comprehensive Income and Expenditure Statement - Children, Family and Schools (Schools Budget) line in 2016/17, and £4.256m in 2017/18 up to the point of conversion. b) Financing and Investment Income and Expenditure
2016/17 Note 2017/18 £000 £000
12,420 Net interest on the net defined benefit liability (asset) 32b 10,044 13,505 Interest payable on PWLB borrowing 52 12,620 211 Other interest payable and similar charges 52 168 -43 Deficit / (Surplus) of trading operations not allocated back to services 1,834 -1,564 Interest and investment income 52 -879 Payments relating to academy school conversions: 1,507 Balances paid to schools converting to academy status * 176 -253 Balances received from schools converting to academy status * -384 25,783 23,579
*See Note 7a narrative. East Riding of Yorkshire Council 43 Statement of Accounts 2017/18 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT c) Taxation and Non-Specific Grant Income and Expenditure
2016/17 Note 2017/18 £000 £000
145,671 Precept demanded from the Collection Fund Page 115 155,779 55,144 Retained Business Rates Page 115 49,118 General Government Grants 32,173 Revenue Support Grant 20,177
6,247 New Homes Bonus 4,731 5,882 Business Rate Top-Up 13,450 3,505 Education Services Grant 953 2,878 S.31 Business Rate Re-imbursement Grants 5,545 1,854 Rural Services Delivery Grant 1,497 989 Housing and Council Tax Benefit Subsidy Administration Grant 915 972 Independent Living Grant 940 829 Troubled Families Grant 819 753 Transition Grant 760 0 Adult Social Care Grant 1,452 1,619 Other General Government Grants 1,605
Capital Grants and Contributions 19,470 Local Transport Scheme Funding 26,622 5,227 Coastal Protection and Flood Alleviation funding 11,760 8,729 Department for Education Capital Grants 7,160 1,194 Brough Relief Road Contributions 3,981 579 Homes & Communities Agency 1,662 1,020 Regional and Local Growth Funds 741 700 Central Heating Fund 0 232 Other Capital Grants and Contributions 1,288 0 Donated Assets 69 3,045 Transfer from the Collection Fund in respect of surpluses/deficit (-) Council Tax 3,122 467 Transfer from the Collection Fund in respect of surpluses/deficit (-) Business Rates -1,748 299,179 312,398
East Riding of Yorkshire Council 44 Statement of Accounts 2017/18 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 31.
2016/17 2017/18 £000 £000 £000 Department for Work and Pensions (DWP) Grants for Benefits 35,495 Rent allowances 34,288 27,512 HRA Rent Rebates 26,442 60,730 Other Government Grants 172,482 Dedicated Schools Grant (including Academy adjustment) 161,167 11,322 Public Health Grant 11,043 8,497 Pupil Premium Grant 7,998 7,064 Sixth Form Grant 4,534 3,260 Universal Infant Free School Meals Grant 3,270 4,335 Regional Growth Fund 5,763 1,654 Support for Adult Education 1,509 1,328 Disabled Facilities Grant 1,330 1,213 Bridlington Schools Private Finance Initiative * 1,275 1,066 Primary & PE Sports Grant 1,534 931 EFA - Schools Capital (was Standards Fund Grant ) 859 2,286 Coastal Protection Grant 255 0 Improved Better Care Fund 5,907 514 Bus Service Operator Department of Transport Grant 514 666 Springboard Grant 225 1,480 Broadband Delivery Grant 2,403 3,320 Other Revenue Government Grants 5,838 215,424 Other Grants and Contributions 34,074 Section 256 CCG Contributions 34,631 2,111 Contributions from other Local Authorities & Other Public Bodies 1,762 714 Education Music Tuition & other Parental Contributions 1,097 810 Other Education Grants 797 1,426 Other Grants and Contributions 1,699 39,986
323,560 Total Grants & Contributions credited to Cost of Services 316,140
* An additional £1.382m relating to Bridlington PFI grant is included within Financing and Investment Income and Expenditure and £0.093m within Adjustments between accounting basis and funding basis under regulations in accordance with the Code accounting requirements for PFI schemes (Note 22).
East Riding of Yorkshire Council 45 Statement of Accounts 2017/18 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 2017/18 year of account.
2016/17 2017/18 £000 £000 138 External audit services 138 11 Certification of grant claims and returns 14 15 Other services provided 7 0 Rebate for fee reductions -21
165 138
10. BUILDING CONTROL ACCOUNT The following note identifies the financial performance of the building control account as required by The Building (Local Authority Charges) Regulations 2010 section 6. The role of Building Control is principally to ensure the health and safety of people in and about buildings. The service handles approximately 2,500 fee-paying applications every year from small domestic extensions to large-scale major projects such as power stations and hospitals.
2016/17 2017/18 Turnover Expenditure Surplus (-) Turnover Expenditure Surplus (-) / Deficit / Deficit £000 £000 £000 £000 £000 £000 -457 498 41 Building Control -485 549 64
11. SIGNIFICANT ITEMS There is one item of significance in the Comprehensive Income and Expenditure Statement. The size of the revaluation loss on HRA assets at £8.617m (2016/17 £-83.509m) is 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.
12. OPERATING LEASES (a) Authority as lessor The Authority 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 46 Statement of Accounts 2017/18 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
The Authority has future minimum lease payments receivable under non-cancellable operating leases as set out below. The Authority leases out property but not vehicles, plant, furniture and equipment under operating leases.
31 March 2017 31 March 2018 £000 £000 Minimum lease rentals receivable: 1,280 Within one year 1,320 2,800 One to five years 2,706 11,132 After five years 9,396 15,212 13,422
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 2017/18 £0.493m contingent rentals were receivable by the Authority (2016/17 £0.481m). An element of the minimum lease rental receivable relates to subleases of which further details are given in note (b).
(b) Authority as lessee The Authority has commitments for future minimum lease payments under non-cancellable operating leases as set out below:
31 March 2017 31 March 2018 Vehicles, plant, Vehicles, plant, Land and furniture and Land and furniture and buildings equipment buildings equipment £000 £000 £000 £000 Minimum lease rentals payable: 133 194 Within one year 84 156 309 221 One to five years 223 150 2,866 0 After five years 2,689 0 3,308 415 2,996 306
The 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. The Authority has sub-let some of the land and buildings held under operating leases. At 31 March 2018, the minimum payments expected to be received under non-cancellable sub-leases was £0.103m. This amount is also included within the minimum lease rental receivable in note (a). Payments charged to service revenue accounts during the year in respect of operating leases comprised:
31 March 2017 31 March 2018 Vehicles, plant, Vehicles, plant, Land and furniture and Land and furniture and buildings equipment buildings equipment £000 £000 £000 £000 237 316 Minimum lease payments 133 233 81 0 Contingent rentals 39 0 -55 0 Sublease payments receivable -70 0 263 316 102 233
13. MEMBERS’ ALLOWANCES Information on Members’ remuneration is published on the Authority’s website.
East Riding of Yorkshire Council 47 Statement of Accounts 2017/18 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
14. OFFICERS’ REMUNERATION AND EXIT PACKAGES 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. The Chief Executive and members of the Corporate Management Team are not included in the analysis as their remuneration is disclosed separately in Note 14c.
2016/17 (Restated) 2017/18 Teachers Other Total Teachers Other Total Employees Employees Remuneration Band 48 43 91 £50,000 to £54,999 46 39 85 39 10 49 £55,000 to £59,999 33 18 51 35 4 39 £60,000 to £64,999 31 6 37 23 1 24 £65,000 to £69,999 16 4 20 8 1 9 £70,000 to £74,999 7 3 10 4 6 10 £75,000 to £79,999 0 6 6 1 1 2 £80,000 to £84,999 3 3 6 4 0 4 £85,000 to £89,999 5 0 5 2 10 12 £90,000 to £94,999 3 6 9 0 1 1 £95,000 to £99,999 0 0 0 0 0 0 £100,000 to £104,999 0 1 1 0 1 1 £105,000 to £109,999 0 1 1 2 0 2 £110,000 to £114,999 0 0 0 166 78 244 144 87 231
2016/17 has been restated following re-analysis of the cost elements included.
Individuals employed at Voluntary Aided and Foundation Schools are not employees of the Authority, but of the governing body of the school. However, for group accounts purposes the transactions relating to these schools are included in the Authority’s Comprehensive Income and Expenditure Account. Employees at these schools are as follows:
2016/17 2017/18 Teachers Other Total Teachers Other Total Employees Employees Remuneration Band 0 0 0 £50,000 to £54,999 1 0 1 4 0 4 £55,000 to £59,999 2 0 2 2 0 2 £60,000 to £64,999 3 0 3 1 0 1 £65,000 to £69,999 1 0 1 7 0 7 7 0 7
East Riding of Yorkshire Council 48 Statement of Accounts 2017/18 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT b) Exit packages and termination benefits The numbers of exit packages with total cost per band and total cost of the compulsory and other departures are set out in the table below. The total cost of £1.031m for 2017/18 includes exit packages that have been agreed, accrued for and charged to the Authority’s Comprehensive Income and Expenditure Statement in the current year. Other departures include exit packages such as voluntary redundancies and retirements. Ill health retirement costs are not included in this disclosure as these are met by the East Riding Pension Fund, not the Authority.
2016/17 2017/18 Number of Number of Total Total Number of Number of Total Total Compulsory Other Number of Cost of Compulsory Other Number of Cost of Redundancies Departures Exit Exit Redundancies Departures Exit Exit Packages Packages Packages Packages £000 Exit Package Cost Band £000 87 46 133 688 £0 to £20,000 80 39 119 578 14 4 18 486 £20,001 to £40,000 7 6 13 334 0 0 0 0 £40,001 to £60,000 2 0 2 119 101 50 151 1,174 Total 89 45 134 1,031
760 414 1,174 Total Cost (£000) 599 432 1,031
c) 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 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. In the case of the Authority this comprises the Chief Executive and members of the Corporate Management Team.
Total Remuneration Salary, Compensation excluding Employers' Fees & Expense for Loss of Benefits Pension Pension Total 2017/18 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 (designated Deputy Chief Executive 132 5 0 0 137 0 137 from 01/04/2017) Corporate Resources 119 4 0 0 123 18 141 Environment and Neighbourhood Services - started 10/05/2017 106 3 0 0 109 16 125 Environment and 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 Corporate Strategy & Commissioning 119 5 0 0 124 18 142 Total 913 26 21 5 965 112 1,077
Total Remuneration Salary, Compensation excluding Employers' Fees & Expense for Loss of Benefits Pension Pension Total 2016/17 Allowances Allowances Employment in Kind Contributions Contributions Remuneration £000 £000 £000 £000 £000 £000 £000 Chief Executive Nigel Pearson 172 6 0 0 178 0 178 Director of Planning and Economic Regeneration 126 5 0 0 131 0 131 Corporate Resources 118 5 0 0 123 18 141 Environment and Neighbourhood Services 118 5 0 0 123 0 123 Public Health 115 0 0 0 115 16 131 Children, Family & Schools 122 0 0 4 126 19 145 Corporate Strategy & Commissioning 118 5 0 0 123 18 141 Total 889 26 0 4 919 71 990
East Riding of Yorkshire Council 49 Statement of Accounts 2017/18 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT
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.
15. 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 £31.709m (2016/17 £42.773m loss). This comprised a £1.617m gain for disposals from Assets Held for Sale (2016/17 £0.908m gain), a ‘loss’ for the transfer of Academy assets from the Authority to the individual schools of £32.156m (2016/17 £42.102m loss) and £1.170m loss for the disposal of other property, plant and equipment.
East Riding of Yorkshire Council 50 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
16. 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.
2017/18 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 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 0 0 0 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 2017/18
NOTES TO THE BALANCE SHEET
2016/17 Movement of property, plant and equipment
2016/17 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 2016 326,133 774,903 32,076 371,872 349 8,718 53,616 1,567,667 Additions / Enhancement 17,130 11,147 5,852 28,600 0 320 14,707 77,756 Donated / Other Additions 0 0 0 0 0 0 0 0 Revaluation increases / (decreases) to RR 339 16,914 0 0 0 4,137 0 21,390 Revaluation losses to SDPS -7,801 -657 0 0 0 -325 0 -8,783 Revaluation loss reversals to SDPS 91,310 855 0 0 0 94 0 92,259 Derecognition - Disposals 0 -1,743 -118 0 0 0 0 -1,861 Derecognition - Academy Transfers 0 -46,973 0 0 0 0 0 -46,973 Derecognition - Other 0 -436 -2,044 -1,132 0 -3 -1,126 -4,741 Reclassification (to) / from Held for Sale -3,167 -165 0 0 0 -6,773 0 -10,105 Other movements 7,318 32,067 0 348 0 4,728 -44,461 0 At 31 March 2017 431,262 785,912 35,766 399,688 349 10,896 22,736 1,686,609 Depreciation and Impairment 1 April 2016 6,163 58,715 15,560 82,399 0 0 16,779 179,616 Charge for the year 8,244 18,591 4,621 9,763 0 14 0 41,233 Depreciation written out to the RR -6,208 -6,152 0 0 0 -86 0 -12,446 Depreciation written out to the SDPS 0 0 0 0 0 0 0 0 Impairment losses to RR -14 -7,769 0 0 0 -946 0 -8,729 Impairment losses to SDPS 0 228 0 0 0 0 1,690 1,918 Impairment losses reversed to SDPS 0 0 0 0 0 0 0 0 Derecognition - Disposals 0 -290 -78 0 0 0 0 -368 Derecognition - Academy Transfers 0 -4,881 0 0 0 0 0 -4,881 Derecognition - Other 0 -410 -1,977 -1,132 0 0 -1,126 -4,645 Reclassification (to) / from Held for Sale 0 0 0 0 0 0 0 0 Other movements 13 9,117 0 0 0 1,018 -10,148 0 At 31 March 2017 8,198 67,149 18,126 91,030 0 0 7,195 191,698 Net Book Value At 1 April 2016 319,970 716,188 16,516 289,473 349 8,718 36,837 1,388,051 At 31 March 2017 423,064 718,763 17,640 308,658 349 10,896 15,541 1,494,911
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, £0.352m was charged in relation to Assets Held for Sale, giving a total revaluation loss charge of £9.135m
East Riding of Yorkshire Council 52 Statement of Accounts 2017/18
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 2018 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 0 698,699 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
31 March 2017 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 0 715,179 17,635 307,933 349 10,724 12,965 1,064,785 HRA 423,064 3,584 5 725 0 172 2,576 430,126 Total 423,064 718,763 17,640 308,658 349 10,896 15,541 1,494,911
The Authority 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 53 Statement of Accounts 2017/18
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:
2017/18 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 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 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 0 0 0 0
At 31 March 2018 404 1,265 58,386 1,656,359 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 0 0 1 1 At 31 March 2018 112 1,265 5,222 193,979 200,578
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 2017/18
NOTES TO THE BALANCE SHEET
2016/17 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 2016 1,109 1,885 53,873 1,510,800 1,567,667 Additions / Enhancement 0 0 144 77,612 77,756 Donated / Other Additions 0 0 0 0 0 Revaluation increases / (decreases) to RR 0 0 0 21,390 21,390 Revaluation losses to SDPS 0 0 0 -8,783 -8,783 Revaluation losses reversals to SDPS 0 0 0 92,259 92,259 Derecognition - Disposals 0 0 0 -1,861 -1,861 Derecognition - Academy Transfers 0 0 0 -46,973 -46,973 Derecognition - Other -350 -555 0 -3,836 -4,741 Reclassification (to) / from Held for Sale 0 0 0 -10,105 -10,105 Other movements -355 0 0 355 0
At 31 March 2017 404 1,330 54,017 1,630,858 1,686,609 Depreciation and Impairment 1 April 2016 185 1,603 4,725 173,103 179,616 Charge for the year 27 170 1,214 39,822 41,233 Depreciation written out to the RR 0 0 0 -12,446 -12,446 Depreciation written out to the SDPS 0 0 0 0 0 Impairment losses to RR 0 0 0 -8,729 -8,729 Impairment losses to SDPS 0 0 0 1,918 1,918 Impairment losses reversed to SDPS 0 0 0 0 0 Derecognition - Disposals 0 0 0 -368 -368 Derecognition - Academy Transfers 0 0 0 -4,881 -4,881 Derecognition - Other -122 -555 0 -3,968 -4,645 Reclassification (to) / from Held for Sale 0 0 0 0 0 Other movements 0 0 0 0 0
At 31 March 2017 90 1,218 5,939 184,451 191,698
Net Book Value At 1 April 2016 924 282 49,148 1,337,697 1,388,051 At 31 March 2017 314 112 48,078 1,446,407 1,494,911
RR = Revaluation Reserve SDPS = Surplus or Deficit on the Provision of Services
East Riding of Yorkshire Council 55 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
17. 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 equipment 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
Council Other Vehicles, Infra- Comm- Surplus Assets under Total Dwellings land and plant, structure unity assets construction buildings furniture and assets assets equipment 2016/17 £000 £000 £000 £000 £000 £000 £000 £000 Year of revaluation: 2016/17 423,064 130,596 0 0 0 10,896 0 564,556 2015/16 0 267,913 0 0 0 0 0 267,913 2014/15 0 91,081 0 0 0 0 0 91,081 2013/14 0 74,414 0 0 0 0 0 74,414 2012/13 0 154,616 0 0 0 0 0 154,616 Valued at historical cost 0 143 17,640 308,658 349 0 15,541 342,331 Total 423,064 718,763 17,640 308,658 349 10,896 15,541 1,494,911
18. HERITAGE ASSETS
New works of art were added in 2017/18 (Heritage on the High Street - A Celebration of Hornsea Pottery). As heritage assets are carried at cost, the following table shows the historical cost position:
2016/17 2017/18 Works of Art & Civic Works of Art & Civic Museum Exhibits Regalia Total Museum Exhibits Regalia Total £000 £000 £000 £000 £000 £000 Cost 687 166 853 At 1 April 701 166 867 14 0 14 Additions 7 0 7
701 166 867 At 31 March 708 166 874
East Riding of Yorkshire Council 56 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
19. INFORMATION ON ASSETS HELD Property, plant and equipment held on the Authority’s balance sheet includes the following:
31 March 2017 31 March 2018 Number of Assets Number of Assets Intangible Assets 11 Purchased Software 9 6 Internally Generated 5 Council Dwellings 11,345 Operational 11,349 Other Land and Buildings 5 Adult Education Centres 3 8 Cemeteries 8 18 Children's Centres 16 4 Corporate Offices and Accomodation Buildings 4 9 Customer Service Centres and Citizen Links 8 10 Depots 10 3 Gypsy Sites 3 10 Household Waste Recycling Sites 10 282 HRA - non-dwellings 300 206 Industrial and Commercial Units 196 12 Libraries 11 7 Multi Service Centres 8 5 Museums 5 33 Public Conveniences 32 8 Registrars Offices 8 89 Schools 82 7 School Houses 6 10 Sports and Leisure Centres 11 17 Social Services Establishments 16 65 Surface Car Parks 65 138 Smallholding Leases 138 0 Youth Centres and External Youth Organisations 0 22 Other Offices 19 117 Other 106 98 Assets Under Construction 179 21 Surplus 32 Vehicles, Plant and Equipment 37 IT Equipment 35 630 Vehicles and Plant 675 Infrastructure Assets 940 Bridges 940 3,547 Highways (km) 3,551 Community Assets 4 Parks and Open Spaces 4 Heritage Assets 11 Civic Regalia (items) 11 52 Works of Art (items) 52
East Riding of Yorkshire Council 57 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
20. 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 Authority 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 Authority’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 Authority’s valuers, assets are assessed under the Authority’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 58 Statement of Accounts 2017/18
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 Authority’s Valuation & Estates department across all categories of the Authority’s property assets. This is to ascertain whether there were any material differences in asset values at 31 March 2018 from those stated on the Balance Sheet, due to general economic/market factors or specific impairment.
East Riding of Yorkshire Council 59 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
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 Authority’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 Authority holds have generally remained stable with no significant or abnormal movements in value. 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 Authority’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 Authority’s property assets from the current carrying values on the Balance Sheet.
21. 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 Authority's surplus assets and information about the fair value hierarchy are as follows:
Significant Other significant unobservable 2017/18 observable inputs inputs Fair Value as at Recurring fair value measurements (Level 2) (Level 3) 31 March 2018 using: £000 £000 £000
Redevelopment Land 17,877 0 17,877 Other Property 370 0 370 Other Land 0 0 0 Bridlington Regeneration Properties 837 0 837
19,084 0 19,084
Significant Other significant unobservable 2016/17 observable inputs inputs Fair Value as at Recurring fair value measurements (Level 2) (Level 3) 31 March 2017 using: £000 £000 £000
Redevelopment Land 10,320 0 10,320 Other Property 216 0 216 Other Land 0 0 0 Bridlington Regeneration Properties 360 0 360
10,896 0 10,896
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.
East Riding of Yorkshire Council 60 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
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 Authority 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. d) Highest and Best Use In estimating the fair value of the Authority’s surplus assets, the highest and best use of the assets is: • Redevelopment Land - 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, except for a former builder’s yard which is valued having regard to its development potential as part of a mixed commercial redevelopment scheme. 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 Authority’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 Authority’s valuation experts work closely with finance officers reporting directly to the chief financial officer.
22. 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 Authority’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 Authority’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 Authority. The next value testing exercise is due in 2018/19. 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 Authority 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.
East Riding of Yorkshire Council 61 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
The Project Agreement sets out the rights of the Authority, 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 Authority’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 Authority 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. In 2014/15 Quay Primary, one of the schools covered by the PFI agreement, converted to an academy. The Authority continues to manage the PFI agreement on behalf of the academy and therefore the liability still remains with the Authority. The receipts from Quay Primary during 2017/18 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 16c. An analysis of the movement in the value of the liability for the scheme is shown below.
2016/17 2017/18 £000 £000 15,149 Opening liability 1 April 14,364 0 New Assets 0 -785 Principal Repaid -818 14,364 Closing Liability 31 March 13,546
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.
East Riding of Yorkshire Council 62 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
31 March 2017 31 March 2018 £000 £000 Principal Repayable: 818 Within one year 868 3,755 In two to five years 4,187 7,975 In six to ten years 8,309 1,816 In eleven to fifteen years 182 14,364 13,546
Interest Repayable: 1,382 Within one year 1,299 4,663 In two to five years 4,273 3,015 In six to ten years 2,213 108 In eleven to fifteen years 2 9,168 7,787
Service Charges Payable: 3,140 Within one year 3,308 12,836 In two to five years 13,382 15,696 In six to ten years 16,783 3,879 In eleven to fifteen years 247 35,551 33,720
Total Amount payable: 5,340 Within one year 5,475 21,254 In two to five years 21,842 26,686 In six to ten years 27,305 5,803 In eleven to fifteen years 431 59,083 55,053
The principal liability payable within one year of £0.868m 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 29 as this shows long term liabilities only.
East Riding of Yorkshire Council 63 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
23. 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.
2016/17 2017/18 £000 Note £000 486,965 Opening Capital Financing Requirement 474,206 Capital Investment 77,770 Property, Plant and Equipment 16a 93,514 915 Intangible Assets 733 9,485 REFCUS 7,885 -82 HRA non-dwellings revaluation not reversed out 0
Sources of Finance -810 Capital Receipts 36 -1,431 -44,344 Government Grants and Other Contributions 43 -60,413 Sums set aside from revenue: -14,013 Direct Revenue Contributions 43 -12,234 -20,173 Earmarked Reserves 43 -19,123 -21,507 Minimum Revenue Provision (MRP) 43 -11,211
474,206 Closing Capital Financing Requirement 471,926
-12,759 Movement in Capital Financing Requirement -2,280
Explanation of Movements in Year -5,057 Increase / Decrease (-) in Supported Borrowing -4,931 -7,620 Increase in Unsupported Borrowing 2,651 -82 HRA non-dwellings revaluation not reversed out 0
-12,759 Decrease in Capital Financing Requirement -2,280
24. CAPITAL COMMITMENTS The Authority has entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment in 2017/18 and future years. Approximately two thirds of these commitments will be discharged in 2018/19 with the remainder continuing into 2019/20. The major commitments are:
£000
Cottingham and Orchard Park Flood Alleviation Scheme 2,818 Anlaby & East Ella Flood Alleviation Scheme 3,034 South Cave Affordable Housing Shared Ownership 1,444 Section 106 Affordable Housing Purchases 8,378 Riverside School Extension 1,819 Modification & Redevelopment of K Block in County Hall 1,724
There are no contractual commitments for the acquisition of Intangible Assets.
East Riding of Yorkshire Council 64 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
25. SHORT-TERM DEBTORS
The debtors have been disclosed by type of debt and debtor. Under FRS 26, an impairment allowance is provided for, based on objective evidence of non-collectability of debts at 31 March.
31 March 2017 31 March 2018 £000 £000 £000
Collection Fund 7,395 Council Tax 7,778 -2,414 Impairment allowance for Council Tax -2,743 1,877 Business Rates 1,610 -935 Impairment allowance for Business Rates -899 5,746 Other Debtors 17,137 Sundry debtors 19,336 8,304 Grant applied in advance 10,861 4,600 Payment in advance 6,556 8,413 Year-end accruals 6,980 5,073 HM Revenue and Customs 2,628 4,035 Housing benefits 3,664 -577 Impairment allowance for housing benefits -464 2,052 Housing rents 2,097 -1,245 Impairment allowance for housing rents -1,491 220 Car loans 245 -2,589 Impairment of other loans & receivables -2,752 47,660
51,346 53,406
31 March 2017 31 March 2018 £000 £000
38,292 Bodies External to Government 39,556 11,003 Central Government Bodies 11,486 8,698 NHS Bodies 9,518 1,089 Other Local Authorities 1,181 24 Public Corporations and Trading Funds 14 -7,760 Impairment of Loans and Receivables -8,349
51,346 53,406
East Riding of Yorkshire Council 65 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
26. SHORT-TERM INVESTMENTS
31 March 2017 31 March 2018 £000 £000
5,045 Certificates of deposit greater than 3 months 10,019 113,470 Fixed maturity greater than 3 months 97,317 118,515 107,336
27. SHORT-TERM CREDITORS & GRANT RECEIPTS IN ADVANCE
The creditors have been disclosed by the different types of amounts the Authority owes and by creditor classifications of who it owes the amounts to.
31 March 2017 Note 31 March 2018 £000 £000 £000
42,050 Year-end accruals 42,949 10,360 Sundry creditors 15,146 4,974 Collection Fund 5,592 4,630 HM Revenue & Customs 4,619 3,002 Cash received in advance 4,007 834 Finance lease and PFI liabilities 880 73,193
Revenue Grants Receipts in Advance: 12,902 Other Grants Received in Advance 31 17,232 6,207 Earmarked Developer Contributions 31 7,875 25,107
84,959 98,300
14,040 Capital Grant Receipts in Advance 31 16,619
98,999 Total Creditors 114,919
31 March 2017 31 March 2018 £000 £000
53,089 Bodies External to Government 66,285 33,590 Central Government Bodies 40,002 11,199 Other Local Authorities 7,949 1,121 NHS Bodies 683 0 Public Corporations and Trading Funds 0
98,999 114,919
East Riding of Yorkshire Council 66 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
28. LONG-TERM CREDITORS
31 March 2017 Note 31 March 2018 £000 £000 £000
120 Cash received in advance 121 15 Former Authorities 15 136
Revenue Grants and Contributions 9,070 Other Grants Received in Advance 31 0 1,276 Earmarked Developer Contributions 31 1,651 1,651 10,481 1,787
Capital Grants and Contributions 114 Receipts in Advance 31 114
10,595 Total Long Term Creditors 1,901
29. DEFERRED LIABILITIES
Deferred liabilities relate to the finance lease elements of the PFI arrangements (Note 22), finance leased Property, Plant and Equipment, and CPO monies held.
31 March 2017 31 March 2018 £000 £000
13,547 PFI service concession arrangement 12,679 0 CPO monies held 284 81 Finance lease outstanding obligation 78
13,628 13,041
30. PROVISIONS
The provisions at the balance sheet date are required to be split between those that are likely to be payable within twelve months, recognised in the Balance Sheet as current liabilities, and those payable after twelve months from the balance sheet date, recognised as long term liabilities. The following note analyses the movement in those categories of provisions.
a) Current Provisions
Provision From Long 31 March Provided in Written Provision Term 31 March 2017 Year Back Utilised Liabilities 2018 £000 £000 £000 £000 £000 £000 Provisions Business Ratepayer Appeals 2,094 2,732 0 -1,608 0 3,218 Self Insurance 1,318 718 0 -1,344 0 692 Highways Remedial Work 321 0 0 0 0 321 CRC Allowance 313 310 0 -262 41 402 Municipal Mutual Insurance 0 0 0 0 0 0 Contaminated Land 47 0 0 0 0 47 High Street Fund 45 0 -19 -20 0 6 Local Grant Fund 2 0 0 0 0 2 Taxi Livery 10 0 0 0 0 10 Total Provisions 4,150 3,760 -19 -3,234 41 4,698
East Riding of Yorkshire Council 67 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
b) Long-term Provisions
Provision 31 March Provided in Written Provision To Current 31 March 2017 Year Back Utilised Liabilities 2018 £000 £000 £000 £000 £000 £000 Provisions Self Insurance 1,410 688 0 -337 0 1,761 Highways Remedial Work 0 425 0 0 0 425 Adult Services 565 200 0 0 0 765 CRC Allowances 41 0 0 0 -41 0 Contaminated Land 428 20 0 0 0 448 Taxi Livery 40 0 0 0 0 40 Municipal Mutual Insurance 15 58 0 -6 0 67 Total Provisions 2,499 1,391 0 -343 -41 3,506
Self Insurance The Authority self-funds a proportion of liability, property and motor claims. The provision is for known liabilities where the Authority’s independent claims handlers have been in a position to assess the value of the claims. Final settlements for these claims will be made over a number of years. Municipal Mutual Insurance Municipal Mutual Insurance (MMI) is an insurance company limited by guarantee and without share capital, which was established by a group of local authorities and incorporated under the Companies Acts 1862 to 1900 on 13 March 1903. The Company suffered substantial losses between 1990 and 1992. These losses reduced MMI's net assets to a level below the minimum regulatory solvency requirement. In September 1992, MMI ceased to write new, or to renew, general insurance business. MMI were the insurers of the former Humberside County Council and the four district councils within the East Riding area prior to 1996. On 21 January 1994, all the former authorities within the East Riding of Yorkshire area entered into a Scheme of Arrangement under s.425 of the Companies Act 1985 with Municipal Mutual (MMI) whereby each may be required to reimburse MMI a proportion of claims paid by MMI since 1 October 1993. As a successor authority, the Council is required to continue with this arrangement in respect of the constituent district councils (Beverley Borough Council, East Yorkshire Borough Council and Holderness Borough Council). In respect of the risk for the former Humberside County Council and the former Boothferry District Council, the Council is responsible for its share of any claims where the incident occurs prior to 31 March 1996. The scheme of arrangement has been triggered as MMI cannot foresee a solvent run off. Administrators have been appointed and a levy was made in 2013/14 as the company’s liabilities exceeded it assets. The initial levy made was 15% on all past and future claims though this could rise to 28% depending upon how many future claims are received and the settlement figure of all claims. A further levy of 10% was made in 2015/16, which was paid in 2016/17. A provision of £0.067m has been made based on a percentage of the value of claims outstanding for which the Authority is required to contribute. Detailed claims information is used enabling claims to be allocated to the relevant authority based on the geographic location of the claim. The administrators have indicated that there is a potential for further costs up to 28% of claims paid and outstanding, further details are provided in Note 47 – Contingent Liabilities. Carbon Reduction Commitment (CRC) Allowances A provision of £0.402m has been calculated based on an estimate of the amount of energy the Council has used during 2017/18 and a charge has been made to services. The Council has purchased £0.402m worth of allowances prospectively to offset this charge and are holding these allowances as an intangible current asset on the balance sheet. During 2018/19, the allowances purchased will be utilised to discharge the actual liability.
East Riding of Yorkshire Council 68 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
Adult Services This provision comprises: • a provision of £0.370m for repayments to clients incorrectly charged under s117 of the Mental Health Act 1983. Payments from this provision are made on a case by case basis making the use of this provision difficult to predict. At the present time, it is not anticipated that any payments will be made before March 2019. • a provision, £0.395m at 31 March 2018, for the cost of a 53 week benefit year which is set by the Department of Work & Pensions and occurs approximately once every seven years, the last year being 2015/16. Highways Remedial Work A provision totalling £0.745m as at 31 March 2018 has been made for estimated costs of remedial work required on a number of highways treatments. £0.320m is expected to be utilised within 2018/19. However, the true cost of each treatment cannot be valued until the remedial works commence. Contaminated Land The provision was made to cover potential future obligations to carry out a sampling programme, investigating areas of potential contaminated land. It is anticipated that the programme will commence in 2018/19. Business rates 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 business rates came into effect on 1 April 2013. The Council as a Billing authority acts as agents on behalf of Humberside Fire and Rescue Services (1%), Central Government (50%) and ourselves (49%). The Council is required to make a provision for refunding ratepayers who are ultimately successful in their appeal against the rateable value of their properties on the rating list. The Council has estimated the total provision for appeals in the Collection Fund to be £4.273m and this Council’s share of these appeals at 49% is £2.094m. Appeals received by the Valuation Office on or after 1 April 2017 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. There is, therefore, potential for further costs to be incurred. A contingent liability has been included at Note 47. Local Grant Fund The Local Grant Fund is a grant scheme established by the Council for Town and Parish Councils to support community projects. Applications are evaluated and awarded by the Local Grant Fund Panel. Grants are paid retrospectively on receipt of a claim form and evidence of expenditure. The provision has been made for grants awarded in 2016/17 but not paid, based on the maximum grant awarded by the Local Grant Fund Panel. High Street Fund The High Street Fund is a grant scheme established by the Council to revitalise and sustain the high street in towns across the East Riding. East Riding business groups, community groups and Town and Parish Councils working in partnership can apply for grants up to £5,000 (£10,000 for organisations working in partnership). Applications are evaluated and awarded by the High Street Fund Panel. Grants are paid retrospectively on receipt of a claim form and evidence of expenditure. The provision has been made for grants awarded in 2014/15, 2015/16 and 2016/17 but not paid, based on the maximum grant awarded by the High Street Fund Panel. Taxi Livery In 2016/17, the Authority approved a contribution towards the implementation of an East Riding branded taxi livery, to provide extra safeguards to the general public using the night time economy. A provision of £0.050m has been set aside, with drawdown of funds beginning 2018/19, as and when Hackney Carriage drivers are ready to replace their vehicles.
East Riding of Yorkshire Council 69 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET 31. GRANT AND CONTRIBUTION RECEIPTS IN ADVANCE
The Authority 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.
2016/17 Note 2017/18 £000 £000 Current Liabilities Capital Grants 2,754 Schools Capital Grants 4,192 4,268 Coast Protection Grant 1,699 2,864 LTP Settlement 4,091 2,043 Community Housing Fund 1,980 2,111 Other Grants & Contributions Unapplied 4,657 14,040 27 16,619 Revenue Grants 7,471 Regional Growth Fund 10,117 6,207 Developer Contributions (including S106) 7,875 261 Central Heating Fund Grant 7 167 Springboard Young Persons Programme 78 1,041 Department of Work and Pensions Benefits Grant 1,137 359 Schools Capital Grants (REFCUS) 421 954 Coast Protection Grant 651 2,649 Other Grants & Contributions Unapplied 4,821 19,109 27 25,107 Long Term Liabilities Capital Grants 114 Other Developers Contributions 114 0 Other Grants and Contributions 0 114 28 114 Revenue Grants 9,070 Regional Growth Fund 0 1,276 Other Developers Contributions 1,651 10,346 28 1,651
43,609 43,491
32. PENSION ASSETS AND LIABILITIES a) Scheme Details As part of the terms and conditions of employment of its officers and other employees, the Authority offers retirement benefits. Although these will not actually be payable until employees retire, the Authority has a commitment to make the payments, and this needs to be disclosed at the time that employees earn their future entitlement. The Authority participates in three pension schemes: • The Local Government Pension Scheme (LGPS) - this is a funded defined benefits scheme, meaning that the Authority 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 Authority administers on behalf of 245 employers and 55 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 Authority 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 70 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
The arrangements for the teachers’ scheme mean that liabilities for these benefits cannot be identified to the Authority. 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 Authority 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 Authority. The scheme is not the responsibility of the Authority 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 Authority 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 authority 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.
Seven schools which converted to academies were transferred out of the scheme during 2017/18 (Beverley High School, Cottingham Croxby Primary School, Gilberdyke Primary School, Longcroft Secondary School, Market Weighton Secondary School, Sproatley Endowed Primary School and Wolfreton School and Sixth Form College). In addition, a small number of staff transferred out of the scheme from Howden Secondary School to Compass Contract Services Ltd and from the Council to Humberside NHS Foundation Trust.
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 Authority 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 71 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
Transactions within the Comprehensive Income and Expenditure Statement
2016/17 2017/18 £000 £000
37,636 Current service cost 58,175 270 Past service cost (including curtailments) 271 -2,037 (Gain)/loss from settlements -3,666 35,869 Total Service Cost 54,780
Financing and Investment Income and Expenditure -30,866 Interest income on plan assets -28,150 43,286 Interest cost on defined benefit obligation 38,194 12,420 Net interest on the net defined benefit liability (asset) 10,044 Total Post-employment Benefits charged to the Surplus or Deficit 48,289 on the Provision of Services 64,824
Remeasurement of the net defined benefit liability comprising -186,317 Return on plan assets (excluding the amount included in net interest -7,186 expense) -22,666 Actuarial (gains)/losses arising from changes in 0 demographic assumptions 216,619 Actuarial (gains)/losses arising from changes in -28,849 financial assumptions -11,942 Other (if applicable) 668 -4,306 Total remeasurements recognised in Other Comprehensive Income -35,367
Total Post-Employment Benefits charged to the Comprehensive 43,983 Income and Expenditure Statement 29,457
Movement in Reserves Statement -48,289 Reversal of net charges made to the Surplus or Deficit on the -64,824 Provision of Services for post employment benefits 32,054 Employers' Contributions Payable to the Scheme 29,130
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 impact of the full three years contributions.
The remeasurement of the net defined liability reflects the change in market conditions since 31 March 2017. As at the end of March 2018, the net discount rate is 2.7%, a small increase of 0.1% 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 Authority’s obligation in respect of its defined benefit plans is as follows:
East Riding of Yorkshire Council 72 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
31 March 2017 31 March 2018 £000 £000
1,097,086 Fair value of plan assets (LGPS) 1,164,835 -1,427,341 Present value of defined benefit obligation (LGPS) -1,457,462 -34,237 Present value of unfunded liabilities (LGPS & Teachers) -33,048 -364,492 Net Pension Liability -325,675
The Authority’s Balance Sheet includes a pension liability and pension reserve of £325,675m as at 31 March 2018 (£364.492m 31 March 2017). 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 decreased by £38.817m since last year. This is principally due to the fact that the plan obligation has increased by £30.121m and plan assets have also increased by £67.749m.
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):
2016/17 2017/18 £000 £000
882,333 Opening fair value of scheme assets as at 1 April 1,097,086 30,866 Interest income 28,150 Remeasurement gain/(loss): 186,317 The return on plan assets (excluding the amount 7,186 included in net interest expense) Other (if applicable) 32,054 Contributions from employer 68,274 8,743 Contributions from employees 8,731 -38,716 Benefits paid -37,426 -4,419 Effect of Settlements -7,171 0 Effect of business combinations and disposals 0 -92 Other (if applicable) 5
1,097,086 Balance as at 31 March 1,164,835
Reconciliation of present value of the scheme liabilities (defined benefit obligation):
East Riding of Yorkshire Council 73 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
2016/17 2017/18 £000 £000
1,234,896 Opening fair value of scheme liabilities as at 1 April 1,461,578 37,636 Current Service Cost 58,175 43,286 Interest Cost 38,194 8,743 Contributions from scheme participants 8,731 Remeasurement gain/(loss): -22,666 Actuarial (gains)/losses arising from changes in 0 demographic assumptions 216,619 Actuarial (gains)/losses arising from changes in -28,849 financial assumptions -12,034 Other (if applicable) 673 270 Past Service Cost 271 -38,716 Benefits paid -37,426 -6,456 Effect of settlements -10,837 0 Effect of business combinations and disposals 0 1,461,578 Balance as at 31 March 1,490,510
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, 79.59% of the assets are quoted in an active market and 20.41% 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 £237.727m –20.41% (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.
East Riding of Yorkshire Council 74 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
31 March 2017 Asset Type Quoted in an Unquoted 31 March 2018 £000 Active market £000
Equity Securities 107,622.2 Consumer 110,580.4 0.0 110,580.4 59,724.8 Manufacturing 64,822.6 0.0 64,822.6 61,823.6 Energy & Utilities 61,356.2 0.0 61,356.2 68,098.0 Financial Institutions 51,182.8 0.0 51,182.8 64,109.7 Health & Care 62,754.0 0.0 62,754.0 42,014.9 Information Technology 44,035.7 0.0 44,035.7 382 Other 0.0 0.0 0.0 403,775.3 394,731.7 0.0 394,731.7 Debt Securities 16,992.9 Corporate Bonds (Investment Grade) 15,861.3 0.0 15,861.3 32,279.6 Corporate Bonds (Non -Investment 16,996.8 45,407.5 62,404.3 Grade) 32,522.8 UK Government 45,589.0 0.0 45,589.0 33,751.9 Other 29,832.0 0.0 29,832.0 115,547.2 108,279.1 45,407.5 153,686.6 Private Equity 51,280.1 All 23,166.1 28,884.7 52,050.8
Real Estate 128,345.1 UK Property 38,379.6 93,409.1 131,788.7
Investment Funds and Unit Trusts 254,953.2 Equities 302,657.0 0.0 302,657.0 39,836.2 Infrastructure 10,468.1 35,981.7 46,449.8 71,295.8 Other 16,485.6 34,043.5 50,529.1 366,085.2 329,610.7 70,025.2 399,635.9
32,053.1 Cash and Cash Equivalents 32,941.3 0.0 32,941.3
1,097,086.0 927,108.5 237,726.5 1,164,835.0
The Authority 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.
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’. East Riding of Yorkshire Council 75 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
The approach to setting the recommended discount rate as at 31 March 2018 follows the same principles to those adopted at 31 March 2017. 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 Authority 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 2017 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 2017 31 March 2018 % 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) 2.4 2.6 Rate of increase in salaries 2.6 2.6 Rate for discounting scheme liabilities 2.7 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 76 Statement of Accounts 2017/18 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 10 150,445 1 year increase in member life expectancy 3-5 0.5% increase in the Salary Increase Rate 2 23,027 0.5% increase in the Pension Increase Rate 8 125,453
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 -0.08%. 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 8%.
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 Authority’s Cash flows
One of the main objectives of the scheme is to maintain a relatively stable employer contribution rate. The Authority’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 East Riding of Yorkshire Council 77 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
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 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 Authority in the year to 31 March 2019 is £30.3m. 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 Authority 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 Authority 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 Authority 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 2017/18, the Authority’s own contributions equate to 16.48% (16.48% in 2016/17). In 2017/18, the Authority paid £10.581m (£12.000m in 2016/17) to the Teachers Pensions Agency. A balance of contributions of £0.859m is owed to the Teachers Pension Agency as at 31 March 2018. The contributions expected to be paid in the next financial year are £8.893m. The Authority 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 2016/17 or 2017/18.
2016/17 2017/18 £000 £000
Teachers 12,000 Employer primary contributions 10,581 1,486 Discretionary pensions funded on an ongoing basis 1,482
The NHS Pension Scheme (NHSPS) The Authority 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.
East Riding of Yorkshire Council 78 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
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 2017/18, the Authority’s own contributions equate to 14.38%. In 2017/18 the Authority paid £0.062m to the NHSPS. There are contributions remaining payable to the NHSPS of £0.010m as at 31 March 2018 which relate to 2017/18. The contributions expected to be paid in the next financial year are £0.062m. The Authority 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 2016/17 or 2017/18.
33. USABLE RESERVES
The Authority 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 Authority 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 2016 in-year 2017 in-year 2018 of Movements £000 £000 £000 £000 £000 Usable Reserves
17,909 -3,079 General Fund 14,830 346 15,176 MiRS page 19 7,388 -3,444 Housing Revenue Account 3,944 341 4,285 MiRS page 19 446 264 Capital Grant Unapplied Account 710 -34 676 Note 34 below 128,660 8,207 Earmarked Reserves 136,867 12,027 148,894 Note 35 below 10,015 4,580 Usable Capital Receipts 14,595 3,084 17,679 Note 36 below 47,405 -5,743 Major Repairs Reserve 41,662 2,290 43,952 HRA note 7c
211,823 785 212,608 18,054 230,662
34. 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 79 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
35. EARMARKED REVENUE RESERVES
31 March Movement 31 March Movement 31 March 2016 in-year 2017 in-year 2018 £000 £000 £000 £000 £000 14,483 -632 Adult Services Reserve 13,851 2,277 16,128 1,410 328 PFI-Bridlington Schools Reserve 1,738 208 1,946 1,831 2,300 Business Rates Reserve 4,131 1,000 5,131 91 -26 Calibration Test Centre Reserve 65 -27 38 5,663 -536 Capital Investment Fund 5,127 990 6,117 5,699 -339 Children's Services Reserve 5,360 -1,462 3,898 500 -304 City of Culture Reserve 196 -148 48 235 -41 Corporate Property Systems Development Reserve 194 -7 187 765 0 Debt Management Reserve 765 1,000 1,765 148 263 Development Control Reserve 411 92 503 34,106 7,448 Economic Development & Bridlington Regeneration Reserve 41,554 3,541 45,095 294 -56 Employment, Education & Skills 238 53 291 10,489 4,688 Efficiency Fund 15,177 -379 14,798 687 0 Election Reserve 687 0 687 68 13 Emergency Planning Reserve 81 6 87 26 -4 Extended Schools Reserve 22 -13 9 999 -10 Finance Services Reserve 989 0 989 191 -191 Home to School Transport Reserve 0 0 0 1,613 773 Highways Flood Reserve 2,386 707 3,093 2,579 -999 ICT Replacement & Investment Fund 1,580 3,118 4,698 13,965 -5,128 Individual Schools Budget * 8,837 -752 8,085 280 0 Local Plan Preparation and Evidence Base Reserve 280 0 280 218 0 Local Public Service Agreeement (LPSA) Reserve 218 0 218 265 0 Procure to Pay Reserve 265 0 265 216 82 Procurement and Supplies Reserve 298 0 298 7,612 1,964 Property Services Reserve 9,576 -921 8,655 1,653 21 Public Health Reserve 1,674 355 2,029 240 -240 Refurbishment Reserve 0 120 120 113 -13 Regional Growth Fund 100 -22 78 3,415 -618 Revenue Grant and Contributions Unapplied Reserves 2,797 -255 2,542 1,739 -1,470 Safety Camera Reserve 269 0 269 1,143 209 School Improvement Reserve 1,352 -441 911 9,366 0 Self Insurance Reserve 9,366 2 9,368 1,205 -129 Service Development and Renewals Reserve 1,076 430 1,506 1,694 307 Contact 360 Reserve 2,001 -226 1,775 185 96 Vehicle Maintenance Reserve 281 262 543 0 382 Vehicle Replacement Reserve 382 2,207 2,589 3,398 0 Waste Management Reserve 3,398 158 3,556 76 69 Yorhub Reserve 145 154 299 128,660 8,207 136,867 12,027 148,894 * Individual Schools Budget consists of: 14,048 -1,934 Unspent schools' budget 12,114 -1,210 10,904 -2,018 -1,844 Overspent schools' balances -3,862 868 -2,994 1,935 -1,350 Centrally managed services 585 -410 175 13,965 -5,128 8,837 -752 8,085
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. PFI Bridlington Schools 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. 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.
East Riding of Yorkshire Council 80 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
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. 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 is planned to be used in 2018/19 to balance the Children’s Services budget to the budget targets in the financial plan. 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. City of Culture Reserve - this reserve is used to set aside funding earmarked to support Hull UK City of Culture 2017 project. The remaining balance will be used to fund legacy projects in the East Riding. Community Legal Advice Reserve - this reserve was established to fund the base budget for the Community Legal Advice Network for 2014/15 and 2015/16. Corporate Property Systems Development Reserve - this reserve holds planned savings on revenue budgets set- aside to fund capital and revenue spend on planned investment, land and property systems development. 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 Authority 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. Finance Services 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 Authority and the effective stewardship of public funds. Highways Flood Reserve - this reserve has been established to meet a clear public priority to fund spend in this service area. 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. 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.
East Riding of Yorkshire Council 81 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
Local Plan Preparation and Evidence Base Reserve - this reserve provides funding for the anticipated extraordinary one-off costs of plan preparation over and above the base budget provision, including taking both the Local Plan Strategy document and the Allocation Document through public examination. Local Public Service Agreement (LPSA) Reserve - this reserve holds 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 is 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. Procure To Pay Reserve - this reserve was created to fund ongoing project commitments to the Authority’s Procure to Pay system. This will facilitate compatibility with electronic development and associated efficiency savings. 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 Authority 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 assessment in the event of 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 Authority 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. Contact 360 Reserve - this reserve is earmarked to fund a programme of work to develop and implement new and innovative models of service delivery across all Council services to improve the customer experience. Transforming East Riding will focus on delivering new models and approaches through a better understanding of customer demand, introducing self-service channels, improving the efficiency of back office processes and maximising and embracing new technology with the aim of delivering significant budget savings. Vehicle Maintenance Reserve - this reserve is used to support the vehicle maintenance unit’s budget and enables them to stabilise the charges made to service users for the life of the vehicle. Vehicle Replacement 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.
East Riding of Yorkshire Council 82 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
Yorhub Reserve - this reserve has been set up to hold the Authority’s element of the YorHub partnership balance, as at 31 March 2018. 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 2018, including the re-procurement of the YORbuild and YORcivils framework and the YORhub Shared Apprentice Programme.
36. 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.
2016/17 2017/18 £000 Note £000 Movements in Realised Capital Resources (Usable Capital Receipts) 5 8,757 Amounts received 7,786 -810 Amounts applied to finance new capital investment -1,431 -1,325 Contribution of housing capital receipts to government pool -1,312 -1,944 Receipts set-aside to repay debt -1,870 -98 To fund disposal costs -88 4,580 Total Increase in Realised Capital Resources in Year 3,085
10,015 Balance as at 1 April 14,595 4,580 In year activity 3,085 14,595 Balance as at 31 March 33 17,680
37. UNUSABLE RESERVES
Unusable reserves are those that the Authority 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 1 Net Balance 1 Net Balance April Movement April Movement 31 March Further Detail 2016 in-year 2017 in-year 2018 of Movements £000 £000 £000 £000 £000 Unusable Reserves
-62 3 Financial Instruments -59 6 -53 Note 38 below Adjustment Account 256,974 23,589 Revaluation Reserve 280,563 1,296 281,859 Note 39 below -5,624 -803 Accumulated Absences Account -6,427 1,662 -4,765 Note 40 below -1 4 Available-for-sale Reserve 3 -15 -12 Note 41 below -352,563 -11,929 Pensions Reserve -364,492 -327 -364,819 Note 42 below 647,059 98,840 Capital Adjustment Account 745,899 23,601 769,500 Note 43 below 7,075 -4,172 Collection Fund Adjustment 2,903 -1,325 1,578 Note 44 below Account 1,159 86 Deferred Capital Receipts Reserve 1,245 -288 957 Note 45 below 554,017 105,618 659,635 24,610 684,245
East Riding of Yorkshire Council 83 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
38. 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 Authority 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.
39. 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.
2016/17 2017/18 £000 Note £000 £000 256,974 Balance as at 1 April 280,563 149,774 Upward revaluation of non-current assets 42,302 Downward revaluation and impairment losses not charged to the -107,208 Surplus/Deficit on the Provision of Services -13,186 Surplus or Deficit (-) on revaluation of non-current assets posted 42,566 to the Comprehensive Income and Expenditure Statement Pg 18 29,116 -3,917 Difference between fair value depreciation and historical cost depreciation 43 -4,028 -15,060 Balance of reserve removed for assets sold or scrapped 43 -23,792 -18,977 Amount written off to the Capital Adjustment Account -27,820 23,589 Total Movement in Year 1,296 280,563 Balance as at 31 March 37 281,859
East Riding of Yorkshire Council 84 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
40. ACCUMULATED ABSENCES ACCOUNT
The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account.
2016/17 2017/18 £000 Note £000 £000 5,624 Balance as at 1 April 6,427 Settlement or cancellation of accrual made at the end of the -5,624 preceeding year -6,427 6,427 Amounts accrued at the end of the current year 4,765 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 803 statutory requirements 5 -1,662 6,427 Balance as at 31 March 37 4,765
41. AVAILABLE-FOR-SALE RESERVE
The Available-for-Sale Reserve manages the revaluation of Available-for-Sale financial instruments to fair value each 31 March. The Authority has two types of Available-for-Sale instruments. Money Market Funds are classified as Available-for-Sale assets but their carrying value is always fair value so there is no revaluation to account for through the Reserve. The Council uses both Certificates of Deposit which are a fixed interest instrument, and Floating Rate Notes which are a variable rate interest instrument. These are tradeable investments that the Authority intends to hold to maturity. However as they can be sold at any time, the Code requires that, at the balance sheet date, any unrealised gain or loss that would be realised if they were sold on that date must be calculated using the prevailing market interest rate and recognised in the Available for Sale Reserve until the instrument is actually derecognised.
Money Market Funds are classed as cash equivalents for the purposes of disclosure in the Balance Sheet and the Cash Flow Statements. They are disclosed as Available-for-Sale assets for the Financial Instrument disclosure notes 48 to 53. Similarly Certificates of Deposit for over three months are classed as short term investments for the purposes of disclosure in the balance Sheet but are disclosed as Available for Sale in the Financial Instrument disclosure notes.
42. 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 Authority 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 Authority 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 Authority 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 two years remaining of the payment made to the Pension Fund of £39.144m.
East Riding of Yorkshire Council 85 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
2016/17 2017/18 £000 Note £000
-352,563 Balance as at 1 April -364,492
4,306 Actuarial gains and losses on pension assets and liabilities Page 18 35,367 Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive -48,289 Income and Expenditure Statement 5 / 32b -64,824 Employer's pension contributions and direct payments to pensions 32,054 payable in the year 5 / 32b 29,130 -11,929 Total Increase in the account in year -327 -364,492 Balance as at 31 March 37 -364,819
East Riding of Yorkshire Council 86 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
43. 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 Authority 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 Authority 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 4 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.
2016/17 2017/18 £000 Note £000 £000 647,059 Balance as at 1 April 745,899 Reversal of items relating to capital expenditure either debited or credited to the Comprehensive Income and Expenditure Statement -9,485 Revenue expenditure funded from capital under statute 5 -7,885 -8,625 Housing Revenue Account depreciation / amortisation and impairment -8,787 -35,040 General Fund depreciation / amortisation and impairment -40,172 -9,053 Revaluation losses on Property, Plant & Equipment -21,404 92,259 Reversal of past impairment and revaluation losses 8,671 Donated assets received 69 Amounts of non-current assets written off on sale or scrapped as part of the -51,040 gain/loss on disposal in the Comprehensive Income and Expenditure Statement -39,123 -20,984 -108,631 Amounts written off from the Revaluation Reserve 39 3,917 Additional depreciation for revaluation above historic cost 4,028 15,060 Transfer from Revaluation Reserve for disposals 23,792 18,977 27,820 -2,007 Net amount written out of the cost of non current assets consumed in the year -80,811
Capital financing applied in the year 23 / 5 810 Usable receipts applied 1,431 14,013 Capital expenditure financed from revenue 12,234 6,778 Capital expenditure financed from earmarked reserves 7,286 13,395 Capital expenditure financed from Major Repairs Allowance 11,838 Capital grants and contributions credited to the Comprehensive Income 37,151 and Expenditure Statement that have been applied to capital financing 53,214 Application of grants to capital financing from the Capital Grants 76 Unapplied Account 34 7,117 Grant funded revenue expenditure funded from capital under statute 7,164 Provision for financing of capital investment charged against the 11,007 General Fund (MRP) 11,211 10,500 Repayment of HRA self-financing debt 0
100,847 104,412 98,840 Total in-year activity 23,601 745,899 Balance as at 31 March 37 769,500
East Riding of Yorkshire Council 87 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
44. 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.
45. 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 Authority 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.
46. CONTINGENT ASSETS The Court of Justice of the European Union found, in the case of the London Borough of Ealing (Case C 633/15), that the UK had incorrectly excluded local authorities from the exemption for the provision of sporting facilities. Local authorities had been excluded from the exemption to ensure that there was no distortion of competition. However, the court decided that any restriction on those grounds had to be applied to both public bodies as well as private non-profit-making bodies providing sporting facilities. It followed that the local authorities were entitled to claim direct effect and therefore to treat those supplies as exempt from VAT provided that they did so on a consistent basis. HMRC has accepted the decision. HMRC now intends to process outstanding claims made by local authorities making supplies of services closely related to sport where: • the local authorities concerned have asserted their right to direct effect of the sporting exemption on the basis of London Borough of Ealing (Case C 633/15) on a consistent basis • subject to satisfactory verification of the amounts claimed The exact amounts of any backdated payments or reduction in the annual VAT liability will not be known until a claim is agreed with HMRC.
47. 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 authority 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 £6.568m and this Council’s share of these appeals at 49% is £3.218m. 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. There is therefore potential for further costs to be incurred. (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. (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. Currently the value of the further payments cannot be predicted with any certainty. 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.
East Riding of Yorkshire Council 88 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
(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.
East Riding of Yorkshire Council 89 Statement of Accounts 2017/18 NOTES TO THE BALANCE SHEET
The following notes 48 to 53 comply with International Accounting Standards IAS 32 and 39 and International Financial Reporting Standards IFRS 7 and 13 concerning financial instruments. 48. 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.
31 March 2017 31 March 2018 Total Total Total Total Long Carrying Fair Long Carrying Fair term Current Value Value Note term Current Value Value £000 £000 £000 £000 £000 £000 £000 £000 Category of Financial Instrument 204 0 204 204 Investment loans and receivables 171 0 171 171 16 0 16 16 Unquoted equity investment at cost 16 0 16 16 220 0 220 220 Total Included in Long-Term Investments 187 0 187 187
1,061 0 1,061 1,094 Soft loans 1,271 0 1,271 1,488 514 0 514 514 Finance lease receivable 297 0 297 297 260 0 260 260 Other loans and receivables 133 0 133 133 1,835 0 1,835 1,868 Total Included in Long-Term Debtors 1,701 0 1,701 1,918 0 113,438 113,438 113,438 Investment loans and receivables 0 97,285 97,285 97,285 0 30,791 30,791 30,791 Available-for-sale assets 0 24,263 24,263 24,263 0 0 0 0 Soft loans 0 186 186 186 0 49 49 49 Finance lease receiveables 0 21 21 21 0 29,165 29,165 29,165 Loans and receivables 0 24,774 24,774 24,774 0 173,443 173,443 173,443 Total Included in Current Assets 0 146,529 146,529 146,529
-328,458 -12,003 -340,461 -350,126 Financial liabilities at amortised cost Page 17 -318,375 -10,421 -328,796 -358,164 -328,458 -12,003 -340,461 -350,126 Total Borrowings -318,375 -10,421 -328,796 -358,164
0 -834 -834 -834 PFI and Finance Lease Liabilities 0 -879 -879 -879 0 -24,847 -24,847 -24,847 Financial liabilities carried at contract amount 0 -26,976 -26,976 -26,976 0 -25,681 -25,681 -25,681 Total included in Current Liabilities 0 -27,855 -27,855 -27,855
-13,628 0 -13,628 -12,201 PFI and Finance Lease Liabilities 29 -12,757 0 -12,757 -11,218 -13,628 0 -13,628 -12,201 Total included in Deferred Liabilites -12,757 0 -12,757 -11,218
-135 0 -135 -135 Financial liabilities carried at contract amounts 28 -136 0 -136 -136 -135 0 -135 -135 Total included in Long Term Liabilities -136 0 -136 -136
-340,166 135,759 -204,407 -212,612 Total Financial Instruments -329,380 108,253 -221,127 -248,739 1,076,650 Non-financial Instrument Assets and Liabilities 1,136,034
872,243 Net Assets less Total Liabilities Page 17 914,907
East Riding of Yorkshire Council 89 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
Fair Value Financial liabilities and financial assets represented by loans and receivables 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
Input level in fair Valuation technique used As at As at Recurring fair Value measurements value hierarchy to measure fair value 31/03/2017 31/03/2018 £000 £000
Unquoted equity investment at cost Level 3 At cost, method described below 16 16
Unadjusted quoted prices in active markets Available-for-sale assets Level 1 for identical financial instruments 30,791 24,263
Total 30,807 24,279
Financial assets classified as Available-for-Sale must be carried at fair value on the Balance Sheet, with revaluation to fair value each 31 March taken to the Available-for-Sale Reserve, except for impairment, which is taken to the Comprehensive Income and Expenditure Statement. The Authority held Money Market Funds and Certificates of Deposit as Available-for-Sale assets at 31 March 2018. These classes of asset have been valued using openly quoted market prices in their respective active markets. Equity instruments that do not have a quoted market price
The Authority has four investments in equity instruments that do not have a quoted market price in an active market, for two of these fair value cannot be measured reliably: • 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 Authority has no intention of disposing of the shares in the near future. • 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 31/3/17 is £16,145.40. The Authority 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. The Authority 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 2017 show a loss of £0.008m and net liabilities of £0.007m. Management accounts as at 31 December 2017 currently show a deficit of £0.011m and net liabilities of £0.018m. It is expected that the company will break even and net assets will be nil at 30 June 2018. Therefore the fair value of the shares are deemed to be £1. The Authority has no intention of disposing of the shares in the near future. • An investment of 1 ordinary share, representing an 8.3% shareholding in Border to Coast Pensions Partnership Ltd a private limited company wholly owned by the administering authorities of 12 Local Government Pensions Scheme funds. As at 31 March 2017 the company had not commenced trading, but was recruiting and seeking FCA authorisation. The fair value of the shares cannot be determined as they do not have a quoted
East Riding of Yorkshire Council 90 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET price in an active market. The investment is carried at cost as a proxy for fair value. The Authority has no intention of disposing of the shares in the near future.
Transfers Between Levels Of The Fair Value Hierarchy
There were no transfers between input levels during the year.
Changes in Valuation Technique
There has been no change in the valuation technique used during the year for the financial instruments.
Fair Values of Financial Assets and Liabilities Not Measured at Fair Value
Input level in fair Valuation technique used 31 March 2017 Fair Carrying31 March 2018 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 1,061 1,094 1,271 1,488
Total 1,061 1,094 1,271 1,488
Financial Liabilities Financial liabilities at amortised cost PWLB Loans Level 2 Discounted cash flow -340,461 -350,126 -328,797 -358,164 PFI and Liabilities Level 2 Discounted cash flow -14,364 -12,201 -13,636 -12,097
Total -354,825 -362,327 -342,433 -370,261
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 authority’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 fair value of £1.488m is higher than the carrying amount because the amount repayable, in one case, is dependent upon the value of assets when they are sold, which is more than its value when the loan was made and on which amortised cost is calculated. The fair value of Public Works Loan Board (PWLB) loans of £358.164m 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 authority 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 1.78% and 2.88%. The range of interest rates at 31 March 2018 for PWLB loans was between 2.40% and 9.25%. However, the Authority 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 authority 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 £328.797m would be valued at £371.976m. But, if the authority 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 £409.754m. The fair value of the Authority’s PFI scheme of £12.008m 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 authority 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.
49. MOVEMENTS IN INVESTMENTS AND BORROWINGS
There has been no reclassification or derecognition of financial assets.
50. DEFAULTS AND BREACHES
There have been no defaults of loans payable as at 31 March 2018.
East Riding of Yorkshire Council 91 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
51. COLLATERAL
(a) Collateral pledged
The Authority has not pledged any financial assets as collateral for liabilities or contingent liabilities in 2017/18 as this is not permitted under Section 13 of the Local Government Act 2003.
(b) Collateral held
Where the Authority 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 £14.185m (2016/17 £13.995m), including £8.703m for Right-to-Buy discounts and £1.871m 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 Authority 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 Authority, and general credit debts. The Authority 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 Authority has not taken possession of any collateral during this accounting period.
East Riding of Yorkshire Council 92 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
52. 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:
Financial Liabilities Financial Assets Liabilities Balances Held Available- Total Measured at Finance on Behalf of Loans and for-sale Note Amortised Cost Leases 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 7b 12,620 -29 148 -750 -80 11,909 Other Comprehensive Income and Expenditure Gains on revaluation 0 0 Losses on revaluation 12 12 Amounts recycled to the surplus or deficit on the provision of services after impairment 0 0 Net (Gain)/Losses for the Year 12,672 -19 148 -124 -59 12,618
Financial Liabilities Financial Assets Total Liabilities Balances Held Available- Measured at Finance on Behalf of Loans and for-sale Note Amortised Cost Leases Others Receivables Assets At 31 March 2017 (contracted amounts) £000 £000 £000 £000 £000 £000 Net Cost of Services Impairment losses 0 0 0 974 0 974 Fee expenses 42 32 0 73 12 159 42 32 0 1,047 12 1,133 Financing and Investment Income and Expenditure Interest payable on PWLB borrowing 13,505 0 0 0 0 13,505 Interest payable on other borrowing 0 0 0 0 0 0 Other interest payable 0 9 202 0 0 211 Total Interest Payable 13,716 Interest and investment income 0 -39 -21 -1,306 -198 -1,564 Net Interest and Investment Income 8b 13,505 -30 181 -1,306 -198 12,152 Other Comprehensive Income and Expenditure Gains on revaluation -3 -3 Losses on revaluation 0 0 Amounts reecycled to the surplus or deficit on the provision of services after impairment 0 0 Net (Gain)/Losses for the Year 13,547 2 181 -259 -189 13,282
East Riding of Yorkshire Council 93 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
53. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The Authority 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 Authority may hold substantial assets and liabilities. The Authority 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 Authority has not used any derivative financial instruments. The Authority 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 Authority 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 Authority’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 Authority has limited exposure to those instruments.
(a) Credit risk Credit risk is the probability that other parties might fail to pay amounts due to the Authority. Appropriate credit limits have been established by the Authority for individual counterparties for treasury management purposes. As a statutory service provider, the Authority is not able to apply normal commercial principles to credit risk for all its counterparties. The Authority’s Treasury Management Policy specifies the following framework for credit limits:
Actual at Maximum Actual at 31/03/17 Limit 31/03/18 £000 £000 £000 Specified Investments (limit per counterparty) 7,340 Institutions or funds with a minimum rating of AAA/A1 20,000 8,300 10,000 Institutions with a minimum rating of AA-/A2 15,000 5,000 10,000 Institutions with a minimum rating of A-/A2 10,000 10,000 3,000 Local Authorities 20,000 5,000
Non-Specified Investments (limit per counterparty) 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 2,299 Other non-specified investments 5,000 197 0 Investments with any institution for more than 365 days 5,000 0
Other Limits (on day of investment) 10,000 10% of the portfolio with a single institution 10,000 10,000 15,000 15% of the portfolio with a group with common ownership 18,223 14,000 40,000 25% of the portfolio in Asia 30,372 5,000 5,000 25% of the portfolio in Australia & New Zealand 30,372 10,000 19,090 25% of the portfolio in non-UK Europe 30,372 25,050 0 25% of the portfolio in Middle East 30,372 0 15,000 25% of the portfolio in North America (including Canada) 30,372 10,000 7,340 20% of the portfolio with individual funds 24,297 8,300 2,299 Aggregate value of Non-specified Investments 30,000 197
East Riding of Yorkshire Council 94 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
The aggregate of non-specified investments will not exceed £30 million at any one time. There was one such investment: a £0.203 million loan to Nite Direct Marketing Ltd. at 31 March 2018 (£0.229m at 31 March 2017).
The above table shows the maximum credit risk associated with an individual counterparty, rather than separate investments. Investments with the Authority’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 Authority makes use of Money Market Funds which are instant access funds whose objectives match those of the Authority, being security of principal and diversification of investments .
Total credit risk associated with all investments, including accrued interest, is as follows:
Actual at Actual at 31/03/17 31/03/18 £000 £000 Specified Investments 25,746 Institutions or funds with a minimum rating of AAA/A1 14,243 34,232 Institutions with a minimum rating of AA-/A2 25,141 85,338 Institutions with a minimum rating of A-/A2 59,182 3,004 Local Authorities 23,031
Non-Specified Investments 0 Building Societies - assets greater than £5,000 million 0 0 Building Socieites - assets greater than £1,000 million 0 0 Building Societies - assets greater than £250 million 0 2,306 Other non-specified investments 203 0 Investments with any institution for more than 365 days 0 150,626 121,800
East Riding of Yorkshire Council 95 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
(b) Liquidity risk Liquidity risk is the risk that the Authority is not able to meet its financial obligations as they fall due or can do so only at an excessive cost. The Authority’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 2018 months months 1 -5 years 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
Not more More No than 3 3 - 12 than 5 specific At 31 March 2017 months months 1 -5 years years maturity Total Note £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,494,992 1,494,992 17 Cash & cash equivalents 30,632 0 0 0 0 30,632 54 Other assets 144,666 27,870 1,129 773 7,306 181,744 Total Assets 175,298 27,870 1,129 773 1,502,298 1,707,368 Page 14
Liabilities Borrowing 0 12,003 59,816 268,642 0 340,461 49 Other liabilities 84,979 17,602 15,702 374,728 1,653 494,663 Usable reserves 191 3,698 0 0 208,719 212,608 33 Unusable reserves -6,423 4 0 -363,302 1,029,356 659,636 38 Total Liabilities 78,747 33,307 75,518 280,068 1,239,728 1,707,368 Page 14
Liquidity Surplus/(Gap) 96,551 -5,437 -74,389 -279,295 262,570 0
East Riding of Yorkshire Council 96 Statement of Accounts 2017/18
NOTES TO THE BALANCE SHEET
(c) Interest Rate risk The Authority 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 Authority 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 2018. 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 2018 months months 1 -5 years 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
Not more More than 3 3 - 12 than 5 Non- At 31 March 2017 months months 1 -5 years years Interest Total Note £000 £000 £000 £000 £000 £000 Assets Property, plant & equipment 0 0 0 0 1,494,992 1,494,992 17 Cash & cash equivalents 26,987 0 0 0 3,645 30,632 55 Other assets 93,464 26,062 496 928 60,794 181,744 Total Assets 120,451 26,062 496 928 1,559,431 1,707,368 Page 14
Liabilities Borrowing 0 12,003 59,816 268,642 0 340,461 49 Other liabilities 17,016 1,828 0 13,628 462,192 494,664 Usable reserves 0 48,025 0 0 164,583 212,608 34 Unusable reserves 3 4 0 -364,492 1,024,120 659,635 38 Total Liabilities 17,019 61,860 59,816 -82,222 1,650,895 1,707,368 Page 14
Interest Rate Surplus/(Gap) 103,432 -35,798 -59,320 83,150 -91,464 0
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 £0.697m, comprising £0.697m 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 £0.697m. 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 97 Statement of Accounts 2017/18
NOTES TO THE CASH FLOW STATEMENT
54. CASH AND CASH EQUIVALENTS
The balance of cash and cash equivalents is made up of the following elements:
2016/17 2017/18 £000 £000 3,578 School bank balances 3,001 28 Petty cash imprest accounts 26 38 Cash floats 40 31,907 Cash equivalents 14,294 -4,919 Bank overdraft -803 30,632 Cash and cash equivalents Page 14 16,558
55. ADJUSTMENT TO NET SURPLUS OR DEFICIT ON THE PROVISION OF SERVICES FOR NON CASH MOVEMENTS
2016/17 2017/18 £000 Note £000
-41,233 Depreciation 5 -41,816 81,206 Impairment and downwards valuation 5 -19,242 -514 Amortisation 5 -634 0 Increase (-) / decrease in impairment provision for bad debts 0 2,009 Increase (-) / decrease in creditors -195 -1,790 Increase / decrease (-) in debtors 40,768 497 Increase / decrease (-) in inventories 1,053 -16,235 Pension liability 5 -35,694 -51,040 Carrying amount of non-current assets (and those held for sale) sold 5 -39,123 901 Other non-cash items charged to the Surplus or Deficit -1,482 -26,199 Total non-cash movements in surplus or deficit on the provision of services -96,365
56. 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
2016/17 2017/18 £000 £000
8,786 Proceeds from non current assets sold 7,698 37,149 Capital grants credited to surplus or deficit on the provision of services 53,214 45,935 Investing and Financing Activities included in net surplus or deficit on 60,912 the provision of services -1,988 Interest received -1,236 13,752 Interest paid 12,819 11,764 Items included in operating activities 11,583
East Riding of Yorkshire Council 98 Statement of Accounts 2017/18 OTHER NOTES TO THE FINANCIAL STATEMENTS
57. RELATED PARTY TRANSACTIONS The Authority is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Authority or to be controlled or influenced by the Authority. Disclosure of these transactions allows readers to assess the extent to which the Authority might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Authority. a) Central Government UK Central government has significant influence over the general operations of the Authority – it is responsible for providing the statutory framework within which the Authority operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Authority 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 31. Transactions outstanding at 31 March 2018 are shown in Notes 27 and 28. b) Members Members of the Council have direct control over the Authority’s financial and operating policies. Information on Members’ remuneration is published on the Authority’s website. Many of the Authority’s Councillors are Town and Parish Councillors and sit on Internal Drainage Boards. However the Authority 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 Authority. The contract was entered into in full compliance with the Authority’s Standing Orders and payments totalled £0.373m in 2017/18 (£0.227m for 2016/17.) A close relative of Councillor Green is a director of a local solicitors firm. During 2017/18, the Authority paid £0.096m to the firm (£0.069m for 2016/17). The Members’ Register of Interest is open to public inspection at County Hall during office hours or on the Authority’s website (address shown on page 1). c) Officers Officers that might be in a position to influence significantly the policies of the Authority are considered to be members of the Corporate Management Team as disclosed in Note 14c. There were no declarable transactions between any of these officers and the Authority 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 Authority 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 117 including a list of admitted bodies many of which are subject to the same common control as the Authority by central government. The key management personnel of the Pension Fund for 2017/18 were the Interim Director of Corporate Resources and the Head of Finance. Details regarding the remuneration of the Director of Corporate Resources are included in Note 14c. e) Assisted Organisations The Public Health Service provides financial assistance for the Alcohol & Drug Service and other services provide financial assistance for the Sobriety Project. These are classed as assisted organisations because the funding is either for services commissioned for a specific purpose which constrains the organisation being assisted, or the funding is provided by way of a grant which also constrains the organisation being assisted. f) Group relationships The Authority is the major shareholder in Correct Compliance Limited, a company formed between this Authority, 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 Authority but is dormant and there were no transactions between the Company and the Authority during 2017/18 (2016/17 £nil).
East Riding of Yorkshire Council 99 Statement of Accounts 2017/18 OTHER NOTES TO THE FINANCIAL STATEMENTS
The Authority also owns Nite Direct Limited a wholly owned subsidiary of the Authority. The directors of the company are the Chief Executive, Director of Planning and Economic Regeneration and Councillor Margaret Chadwick, with the Head of Legal & Democratic Services appointed as Co Secretary (as at 31 March 2018). During the year 2017/18 the Authority received £0.034m (2016/17 £0.056m) and paid out £0.070m (2016/17 £0.097m) to the company. The Authority granted a loan to the company of £0.300m, to be repaid over 10 years of which £0.197m remains outstanding at the 31 March 2018. Information in respect of material transactions with related parties, not disclosed elsewhere in this Statement of Accounts, is presented below.
Precepts 2017/18 and Other Levies Payments Receipts Debtors Creditors Levying & Precepting Bodies £000 £000 £000 £000 £000 Humberside Police & Crime Commissioner 21,627 3,782 1,305 24 3,994 Humberside Fire and Rescue Service 9,254 990 242 86 135 30,881 Town & Parish Councils 5,464 234 337 24 - Internal Drainage Boards 1,463 118 32 - - North Eastern Inshore Fisheries and Conservation Authority 258 55 73 61 5 Environment Agency - Yorkshire & Severn Trent Region 188 6 1,360 3,252 2,153 Hull & Goole Port Health Authority 34 34 - 17 - 7,407 Assisted Organisations Alcohol & Drug Service 26 2 - - The Sobriety Project 1 5 1 -
Payments Receipts Debtors Creditors Other Organisations £000 £000 £000 £000 NHS East Riding of Yorkshire CCG 1,347 33,701 8,585 527 East Riding College 359 83 11 - University of Hull - Court 427 474 - 30 York, North Yorkshire and East Riding Enterprise Partnership - 5,813 - - Bishop Burton College 187 17 1 - Humber Local Enterprise Partnership 100 5,918 8 - Local Government Association 69 - - - Humber & Wolds Rural Community Council 45 - - - Brough Manor Care Home 156 2 - - Graham & Rosen 13 9 - - Hull & East Yorkshire Mind 167 5 - - Hull & East Yorkshire Hospital Trust 2 209 - - The Old Vicarage 159 2 - -
East Riding of Yorkshire Council 100 Statement of Accounts 2017/18 OTHER NOTES TO THE FINANCIAL STATEMENTS
58. DISCLOSURE OF DEPLOYMENT OF DEDICATED SCHOOLS GRANT The Authority'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 Finance (England) Regulations 2011. The Schools Budget includes elements for a range of educational services provided on an authority-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 2017/18 are as follows:
Central Individual Expenditure Schools Budget Total £000 £000 £000
Final DSG for 2017/18 before Academy recoupment 214,273 Less Academy figure recouped for 2017/18 -52,599 Total DSG after Academy recoupment for 2017/18 161,674
Plus Brought Forward from 2016/17 585 Less Carry Forward to 2018/19 agreed in advance 0 Agreed initial budgeted distribution in 2017/18 22,555 139,704 162,259
In year adjustments 0 -507 -507 Final budgeted distribution for 2017/18 22,555 139,197 161,752
Less Actual Central Expenditure -22,380 -22,380 Less Actual ISB deployed to schools -139,197 -139,197
Plus Local Authority contribution for 2017/18 0 Carry Forward to 2018/19 175 0 175
The actual carry forward reported on the Dedicated Schools Grant note is a surplus of £0.175m. This relates purely to the balance of central expenditure (surplus of £0.176m) less a shortfall in DSG of £0.001m. The ISB as funded through DSG has an over spend in 2017/18 of £0.343m and cumulative carry forward of £7.909m, which is reported separately under schools reserves.
59. DISCLOSURE OF INTERESTS IN SCHOOLS All local authority maintained schools are considered to be entities controlled by the Authority. Their income, expenditure, assets (excepting some non-current assets), liabilities, reserves and cash flows are required to be recognised in the Authority’s single entity statements. The Authority’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 Authority’s accounting policies on accounting for schools and the judgements made in applying the policy are on page 28. 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:
2016/17 2017/18 Secondary Primary Special Total Secondary Primary Special Total 9 66 3 78 Community Schools 8 64 3 75 1 36 0 37 Voluntary Controlled 1 35 0 36 0 7 0 7 Voluntary Aided 0 7 0 7 0 4 0 4 Foundation 0 4 0 4 10 113 3 126 9 110 3 122
The reduction in schools in 2017/18 is as a result of four schools converting to an academy.
East Riding of Yorkshire Council 101 Statement of Accounts 2017/18 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 Authority’s balance sheet. The table below shows the income and expenditure and the resulting surplus or deficit for each category of school:
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
2016/17 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 59,681 - 58,575 - 1,106 73,708 - 73,053 - 655 7,708 - 7,746 38 Voluntary Controlled 6,707 -6,496 - 211 27,504 - 27,454 - 50 0 0 0 Voluntary Aided 0 0 0 4,633 - 4,665 32 0 0 0 Foundation 0 0 0 2,509 - 2,488 - 21 0 0 0 66,388 - 65,071 - 1,317 108,354 - 107,660 - 694 7,708 - 7,746 38
Note 7a includes the financial consequences of the transfer of schools to academy status. In 2017/18 three primary schools and one secondary school transferred to an academy.
60. 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 2018.
At the date of signing there has been one non-adjusting event after the reporting period:
Following the introduction of the Local Government Pension Scheme Investment Regulations 2016, requiring LGPS fund’s to pool their assets in order to achieve cost savings whilst maintaining investment performance, East Riding of Yorkshire Council as administering authority of the East Riding Pension Fund (ERPF), became a member of the Border to Coast Pension Partnership with 11 other pension funds. During the financial year 2018/19, the phased transition of investment assets from the ERPF to the Border to Coast Pension Partnership began, however, some investment assets will continue to be managed by the current Internal and External managers. The Pensions Committee will retain responsibility for determining the Pension Fund’s strategic and tactical asset allocation, and pension administration responsibilities will remain with East Riding of Yorkshire Council.
East Riding of Yorkshire Council 102 Statement of Accounts 2017/18 OTHER NOTES TO THE FINANCIAL STATEMENTS
61. 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 Authority 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 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
Spend from the Pooled Budget 2016/17 ERYCCG VoYCCG ERYC Total £000 £000 £000 £000 Contributions to the Pooled Budget: East Riding of Yorkshire Clinical Commissioning Group (ERYCCG) 12,798 0 6,314 19,112 Vale of York Clinical Commissioning Group (VoYCCG) 0 815 428 1,243 East Riding of Yorkshire Council (ERYC) 0 0 2,127 2,127 12,798 815 8,869 22,482
East Riding of Yorkshire Council 103 Statement of Accounts 2017/18 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.
2016/17 Note 2017/18 £000 £000 Expenditure Supervision and management 5,892 General 5,936 2,677 Special 2,831 218 Rents, rates, taxes and other charges 318 8,367 Repairs and maintenance 9,307 182 Contribution to Supporting People - Transitional Protection 176 479 Increase in provision for bad / doubtful debts 529 -83,509 Revaluation loss on council dwellings 5c 8,617 82 Revaluation loss on non-dwellings 5c 195 8,244 Depreciation on council dwellings 5c 8,356 0 Impairment on council dwellings 5c 48 381 Depreciation on non-dwellings 5c 377 73 Debt management costs 80 -56,914 Total Expenditure 36,770 Income -47,194 Dwelling rents -46,899 -564 Non-dwelling rents -428 -259 Charges for services and facilities -205 -117 Contributions towards expenditure -116 -1,264 Contributions towards welfare warden service -1,298 -343 Photovoltaic cells income -359 -49,741 Total income -49,305 -106,655 Net Cost of HRA Services as included in the whole authority -12,535 Comprehensive Income and Expenditure Statement 22 Service share of Corporate and Democratic Core 22 Service share of Non Distributed Costs (NDC) 427 Non-operational revaluation loss on Assets Held for Sale/Surplus 70 1 Non-operational depreciation on non-dwellings 5 -106,205 Net Expenditure of HRA Services -12,438 HRA share of the operating income and expenditure included in the whole authority Comprehensive Income and Expenditure Statement 3,153 Gain on sale of HRA non current assets 3,547 -4,170 Usable capital receipts - sale proceeds 7b -4,490 266 Net interest on the net defined benefit liability (asset) 8 220 7,927 Interest payable on positive credit ceiling 7,723 -433 Interest receivable 6 -277 -15 Other Income (Right To Buy (RTB) Discounts repaid) 7b -24 -630 Capital grants and contributions relating to fixed assets 7a -1,662 -100,107 Surplus (-) / deficit for the Year on HRA services -7,401
East Riding of Yorkshire Council 104 Statement of Accounts 2017/18
NOTES TO THE HOUSING REVENUE ACCOUNT
MOVEMENT ON THE HOUSING REVENUE ACCOUNT STATEMENT
2016/17 Note 2017/18 £000 £000 7,388 Balance at 1 April brought forward 3,944 Movement in reserves during 2017/18 100,107 Surplus / deficit (-) on HRA Income and Expenditure Statement 7,401 Adjustments between accounting basis and funding basis under -103,551 the legislative framework 2 -7,061 -3,444 Net Increase / (Decrease) before Transfers to / from Reserves 340 0 Transfers to / (from) Earmarked Reserves 0 -3,444 Increase / (decrease) in year on the HRA 340 3,944 Balance at 31 March carried forward 4,284
1. HOUSING REVENUE ACCOUNT RECONCILIATION The decrease for the year on the Statutory HRA balance was £7.061m less than the HRA Income and Expenditure Account surplus. 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 Authority 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 Authority 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 Authority’s operating financial performance for the year for HRA services. The statutory surplus or deficit on the Statutory HRA indicates whether the Authority 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 Authority 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 105 Statement of Accounts 2017/18
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 2017/18 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 -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 7a 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 7b 4,490 0 0 -4,490 0 0 Contribution from Capital Receipts Reserve towards administrative costs of non current asset disposals 7b -88 0 0 88 0 0 Other income (RTB Discounts) 7b 24 0 0 -24 0 0 Deferred capital receipts received (Mortgage repayments) 7b 0 0 0 -1 -1 1 Adjustments involving the Major Repairs Reserve Additional transfer to MRR for Depreciation 7c 8,738 -8,738 0 0 0 0 Additional transfer to MRR in excess of depreciation 7c 0 0 0 0 0 0 Use of the Major Repairs Reserve to finance new capital expenditure 7c 0 11,838 0 0 11,838 -11,838 Use of the Major Repairs Reserve to repay debt 7c 0 0 0 0 0 0 Transfer to MRR - Debt Repayment 5,390 -5,390 0 0 0 0 Transfer to MRR - New Build 0 0 0 0 0 0 Adjustments involving the Pensions Reserve Net charges made for retirement benefits in accordance with IAS 19 8 -1,498 0 0 0 -1,498 1,498 Employer's contributions payable to the East Riding Pension Fund 8 607 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 0 0 0 0 0 0 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 106 Statement of Accounts 2017/18
NOTES TO THE HOUSING REVENUE ACCOUNT
Housing Major Earmarked Usable Total Revenue Repairs Revenue Capital Usable Unusable 2016/17 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 -8,238 0 0 0 -8,238 8,238 Item 8 determination to reverse impairment losses (previous year adjustments) 91,320 0 0 0 91,320 -91,320 Non-current asset written out in gain or loss on disposal/sale of non-current assets -3,056 0 0 0 -3,056 3,056 Capital grant/contributions to finance fixed assets from in-year income 630 0 0 0 630 -630 Reverse depreciation to CAA -8,625 0 0 0 -8,625 8,625 Addition of items not debited or credited to the HRA Income and Expenditure Statement Capital expenditure charged to HRA balance 9,718 0 0 0 9,718 -9,718 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of disposal/sale of non-current assets 4,170 0 0 -4,170 0 0 Contribution from Capital Receipts Reserve towards administrative costs of non current asset disposals -98 0 0 98 0 0 Other income (RTB Discounts) 15 0 0 -15 0 0 Deferred capital receipts received (Mortgage repayments) 0 0 0 -2 -2 2 Adjustments involving the Major Repairs Reserve Additional transfer to MRR for Depreciation 8,625 -8,625 0 0 0 0 Additional transfer of MRR in excess of depreciation 0 0 0 0 0 0 Use of the Major Repairs Reserve to finance new capital expenditure 0 13,395 0 0 13,395 -13,395 Use of the Major Repairs Reserve to repay debt 0 10,500 0 0 10,500 -10,500 Transfer to MRR - Debt Repayment 5,344 -5,344 0 0 0 0 Transfer to MRR - New Build 4,183 -4,183 0 0 0 0 Adjustments involving the Pensions Reserve Net charges made for retirement benefits in accordance with IAS 19 -1,071 0 0 0 -1,071 1,071 Employer's contributions payable to the East Riding Pension Fund 625 0 0 0 625 -625 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 9 0 0 0 9 -9 Total adjustments between accounting basis and funding basis under regulations 103,551 5,743 0 -4,089 105,205 -105,205 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 103,551 5,743 0 -4,089 105,205 -105,205
East Riding of Yorkshire Council 107 Statement of Accounts 2017/18
NOTES TO THE HOUSING REVENUE ACCOUNT
3. SUMMARY OF 2017/18 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 Authority 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 £7.401m. After applying the Movement on the HRA Statement, the net increase to the HRA was £0.340m, giving a balance on the account to be carried forward of £4.283m. The 2017/18 surplus of £0.340m was £0.371m underspent against the £0.031m budgeted deficit, this being predominantly due to a £0.134m underspend against Repairs and Maintenance to existing dwellings and an underspend of £0.144m in Housing Management. Overall, all HRA reserves stand at £48.235m, which includes the general reserve and monies set aside for debt repayment and investment in new stock and repairs (Note 7c).
4. RENT ACCOUNT The specific provision for the possible non-collection of all rent related charges at 31 March is £1.491m, which represents 71% 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
2016/17 2017/18 £000 £000 Arrears by tenant 1,086 Current tenants 1,193 966 Former tenants 904 2,052 Total arrears 2,097
Assistance towards payment of rent is available under the Housing Benefits Scheme for those on low incomes. In 2017/18 £26.614m (56%) of the £47.681m gross rent was rebated and 56.15% of the Authority’s tenants receive some help with the cost of their rent, resulting in an average rent rebate caseload in 2017/18 of 6,646.
East Riding of Yorkshire Council 108 Statement of Accounts 2017/18
NOTES TO THE HOUSING REVENUE ACCOUNT
5. HOUSING ASSETS
(a) Housing Stock The Authority was responsible for managing the following operational dwellings in 2017/18. 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 Authority, 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 Authority. Two supported housing hostels, comprising 22 one-bedroom units, for homeless and vulnerable people, were transferred to a Housing Association on a 5-year lease and as such are no longer included within the HRA. The in-year movements are categorised below:
2016/17 2017/18 Houses Flats Total Operational Dwellings 11,345 As at 1 April 7,623 3,722 11,345 -75 Sales -63 -6 -69 65 Acquisitions 86 9 95 26 Newly built dwellings 0 0 0 -17 Surplus to requirements -1 -2 -3 1 Reclassification 1 -20 -19 11,345 As at 31 March 7,646 3,703 11,349 Leasehold Dwellings 222 As at 1 April 0 229 229 10 Additions 0 6 6 -3 Removal* 0 -8 -8 229 As at 31 March 0 227 227
*five leasehold dwellings have been repurchased and brought back into the HRA as operational dwellings, whilst following the sale of an asset, the freehold of three leasehold dwellings was transferred to new owner.
(b) The Vacant Possession Value of Council Dwellings In accordance with Government guidance, the basis of valuation for the Authority’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 2017, following revaluation, this value was £1,002.9m. 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 2017 this was £411.2m.
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 109 Statement of Accounts 2017/18
NOTES TO THE HOUSING REVENUE ACCOUNT
(c) Movement of Property, Plant & Equipment
2017/18 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 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 110 Statement of Accounts 2017/18
NOTES TO THE HOUSING REVENUE ACCOUNT
2016/17 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 2016 326,133 3,946 12 682 0 1,211 331,984 Additions / Enhancement 17,130 3 5 175 0 9,260 26,573 Revaluation increases / (decreases) to RR 339 37 0 0 67 0 443 Revaluation increases / (decreases) to SDPS -7,801 -85 0 0 -140 0 -8,026 Revaluation loss reversal to SDPS 91,310 3 0 0 10 0 91,323 Derecognition - Other 0 -95 -12 0 0 0 -107 Reclassification (to) / from Held for Sale -3,167 0 0 0 -710 0 -3,877 Other movements 7,318 -79 0 50 945 -7,895 339 At 31 March 2017 431,262 3,730 5 907 172 2,576 438,652 Depreciation and Impairment 1 April 2016 6,163 530 12 163 0 28 6,896 Charge for the year 8,244 76 0 19 1 0 8,340 Depreciation written out to the RR -6,208 -376 0 0 -16 0 -6,600 Impairment losses to RR -14 0 0 0 0 0 -14 Impairment losses to SDPS 0 0 0 0 0 0 0 Derecognition - Other 0 -95 -12 0 0 0 -107 Reclassification (to) / from Held for Sale 0 0 0 0 0 0 0 Other movements 13 11 0 0 15 -28 11 At 31 March 2017 8,198 146 0 182 0 0 8,526 Net Book Value At 1 April 2016 319,970 3,416 0 519 0 1,183 325,088 At 31 March 2017 423,064 3,584 5 725 172 2,576 430,126
SDPS = Surplus or Deficit on the Provision of Services RR = Revaluation Reserve
The £7.801m revaluation loss on Council Dwellings includes a £1.612m loss on the 26 new build dwellings and £2.262m on the 65 dwellings acquired.
In addition to the revaluation loss shown in the above table, the HRA was also charged £0.297m in relation to the revaluation of Council Dwellings reclassified to Current Assets Held for Sale.
The £91.310m revaluation loss reversal on Council Dwellings is due to the increase in the regional adjustment factor from 31% to 41%.
The HRA was also charged £0.033m amortisation in relation to an intangible asset and £0.252m depreciation for the use of fleet vehicles/equipment (these are non-HRA assets).
In addition to the £26.573m spend shown above (which includes general fund spend on HRA assets of £0.001m), the HRA also incurred further capital expenditure of £0.016m on intangibles, resulting in total capital expenditure of £26.588m (see note 7(a)).
East Riding of Yorkshire Council 111 Statement of Accounts 2017/18
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). The impairment accounting adjustment reverses out the costs of impairment on dwellings only.
2016/17 2017/18 £000 £000 £000 Revaluation loss / Impairment -83,509 Council dwellings 8,665 509 Other HRA assets / NDCs 264 8,929 0 Revenue expenditure funded from capital under statute (REFCUS) 0 Depreciation 8,244 Council dwellings 8,356 381 Other HRA assets / NDCs 382 8,738 -74,375 17,667 73 Debt management expenses 80
0 Capital asset charge accounting adjustment (REFCUS) 0 Transfer to the MRR 0 - amounts in excess of depreciation 0 4,183 - investment in new major schemes 0 5,344 - loan debt repayment provision 5,390 5,390 7,927 Interest on loans 7,723 -56,848 Item 8 Debit 30,860
-433 Interest on cash balances -277 0 Mortgage interest 0 -277 83,082 Reversal of impairment on dwellings -8,930 Transfer from the MRR -10,500 - self financing debt repayment 0 72,149 Item 8 Credit -9,207 15,301 Net Debit 21,653
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.
2016/17 2017/18 Vehicles, Land & Infra- Plant & Assets under Total Dwellings Buildings structure Equipment construction Intangibles Total £000 Capital Investment £000 £000 £000 £000 £000 £000 £000 26,588 Non-current assets 14,910 690 385 0 8,437 0 24,422 0 REFCUS 0 0 0 0 0 0 0
26,588 Total Capital Expenditure 14,910 690 385 0 8,437 0 24,422 Financing 461 Capital Receipts 0 239 0 0 177 0 416 630 Grants/contributions 222 140 0 0 1,300 0 1,662 9,718 Revenue contributions 8,470 1 385 0 8 0 8,864 4,770 Investment Reserve 0 0 0 0 3,100 0 3,100 8,625 Major Repairs Reserve 6,218 219 0 0 2,301 0 8,738 2,384 Borrowing 0 91 0 0 1,551 0 1,642 26,588 14,910 690 385 0 8,437 0 24,422
East Riding of Yorkshire Council 112 Statement of Accounts 2017/18
NOTES TO THE HOUSING REVENUE ACCOUNT (b) Capital Receipts Capital receipts in respect of the HRA received during the year are as follows:
2016/17 2017/18 Council Land/ Total Dwellings Other Total £000 £000 £000 £000 4,170 Sales proceeds* 4,487 3 4,490 -98 Less administrative costs -88 0 -88 4,072 Net proceeds 4,399 3 4,402 15 Right to buy discount repaid 24 0 24 2 Mortgage principal repaid 1 0 1 4,089 4,424 3 4,427
*includes six surplus dwellings and three leasehold dwellings at £0.560m in 2017/18.
(c) Major Repairs Reserve The following is an analysis of the movement on the Major Repairs Reserve.
2016/17 2017/18 £000 £000 47,405 As at 1 April 41,662
Improvements to Existing Stock Amount transferred from HRA to reserve during the year 8,625 Depreciation 8,738 0 Additional transfer in excess of Depreciation 0
Amount transferred from reserve during the year -8,625 Capital expenditure on existing stock -8,738
Amount transferred between reserves during the year 0 Transfer to Investment in New Build Reserve 0
Investment in New Build Programmes 4,183 Transfer from HRA to reserve during the year 0 0 Transfer from Improvements to Existing Stock Reserve 0 -4,770 Capital Expenditure Funded from reserve -3,100
Debt Repayment 5,344 Transfer from HRA to reserve during the year 5,390 -10,500 Used to Repay Debt 0 41,662 As at 31 March 43,952
Balances on each reserve at 31 March
0 Improvements to existing stock 0 29,270 Investment in New Build Programmes 26,170 12,392 Debt Repayment 17,782 41,662 43,952
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 authority will determine stock investment and major maintenance priorities as part of its business planning process.
East Riding of Yorkshire Council 113 Statement of Accounts 2017/18
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.
2016/17 2017/18 £000 £000 805 Current service cost 1,278 0 Past service cost 805 Operating Charges 1,278 266 Interest on pension scheme liabilities 220 266 Amount Debited to Other Operating Costs 220 1,071 Net Housing Revenue Account Cost 1,498 -625 Employer contributions -607 446 Appropriation from the Pension Reserve 891
East Riding of Yorkshire Council 114 Statement of Accounts 2017/18
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.
2016/17 2017/18 Business Council Business Council Rates Tax Total Rates Tax Total £000 £000 £000 £000 Income -179,138 -179,138 Council taxpayers -190,764 -190,764 -109,898 -109,898 Business ratepayers -105,653 -105,653 -109,898 -179,138 -289,036 Total Income -105,653 -190,764 -296,417 Expenditure Apportionment of previous years surplus/ deficit 2,008 2,008 Central Government -835 -835 1,968 4,150 6,118 East Riding of Yorkshire Council -819 2,916 2,097 593 593 Humberside Police and Crime Commissioner 409 409 40 257 297 Humberside Fire and Rescue Service -17 176 159 4,016 5,000 9,016 -1,671 3,501 1,830 Precepts 52,858 52,858 Central Government 45,339 45,339 55,144 145,671 200,815 East Riding of Yorkshire Council 49,118 155,779 204,897 20,421 20,421 Humberside Police & Crime Commissioner 21,218 21,218 1,061 8,771 9,832 Humberside Fire and Rescue Service 911 9,078 9,989 109,063 174,863 283,926 95,368 186,075 281,443 Charges to Collection Fund 446 446 Costs of Collection 432 432 108 108 Transitional protection payments payable 10,402 10,402 602 602 Renewables and Enterprize zones balance -71 -71 539 167 706 Increase / Decrease (-) in Bad Debt Provision 650 377 1,027 0 451 451 Write-offs of uncollectable amounts 0 582 582 -584 -584 Increase / Decrease (-) in Provision for Appeals 2,294 2,294
1,111 618 1,729 13,707 959 14,666
114,190 180,481 294,671 Total Expenditure 107,404 190,535 297,939
4,292 1,343 5,635 Surplus (-)/Deficit arising during the Year 1,751 -229 1,522
2,941 4,902 7,843 Surplus / Deficit (-) b/fwd 1st April -1,351 3,559 2,208 -4,292 -1,343 -5,635 Surplus / Deficit (-) for the Year -1,751 229 -1,522 -1,351 3,559 2,208 Surplus / Deficit (-) c/fwd 31st March -3,102 3,788 686
East Riding of Yorkshire Council 115 Statement of Accounts 2017/18
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:
2016/17 2017/18 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 £ £ 25,932 17,288 1,048.49 A (6/9) 26,877 17,918 1,095.21 28,274 21,991 1,223.23 B (7/9) 28,871 22,456 1,277.75 25,546 22,708 1,397.98 C (8/9) 26,014 23,124 1,460.28 21,351 21,351 1,572.73 D (9/9) 21,625 21,625 1,642.82 13,704 16,749 1,922.23 E (11/9) 13,927 17,022 2,007.89 6,153 8,887 2,271.72 F (13/9) 6,313 9,119 2,372.96 2,794 4,656 2,621.22 G (15/9) 2,873 4,788 2,738.03 197 394 3,145.46 H (18/9) 203 406 3,285.64 123,951 114,024 Total 126,703 116,458 -2,839 Adjustment* -3,192 111,185 Council Tax Base 113,266 * 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 2017/18 was £186.075m (2016/17 £174.863m) 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 2017/18 is £190.764m (2016/17 £179.138m), 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 authority. 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 2018 was £250,040,975 (2016/17 £258,206,066), of which £29,932,209 (2016/17 £24,573,720) related to small businesses. The poundage for 2017/18 was 47.9p (2016/17 49.7p) and 46.6p for small businesses (2016/17 48.4p). This gives a gross collectable figure at 31 March 2018 of £119,380,508 (£128,008,956 at 31 March 2017). 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 116 Statement of Accounts 2017/18
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 2018 the Fund was valued at £4,786m, having paid out £166.3m during the year for the benefit of Scheme members. This is an increase in the Fund value of £251m from 31 March 2017, due to some capital appreciation in all the major equity markets following the confirmation of a major tax reform package in the United States, ongoing strength in economic data and corporate earnings and a further improvement in investor risk sentiment. Private equity and Infrastructure returns were strong as investor appetite for Limited Partnerships enabled managers to complete fund raising in relatively short order. However, sterling returns from overseas investments were lower due to the appreciation (+11%) of the currency during the year. Concerns over the terms of the exit from the European Union remain and there may be further volatility in financial markets in the medium term. The Fund continues to benefit from the strong performance of its internal and external investment managers. At 31 March 2018 the number of employers in the Fund was 300 (31 March 2017: 256). 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 55 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 2018 the total membership records administered by the East Riding Pension Fund was 112,882, an increase of 2.9% in the year (2017: 109,685). 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 1.4% to 40,043 (2017: 39,475). 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 3.4% to 29,611 (2017: 28,625). 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 £4,798.26 per annum, equivalent to a weekly payment of £92.02. The Fund generated a return of 3.9% for the year to 31 March 2018 compared to the strategic benchmark return of 3.3%. Over the three years to 31 March 2018 the Fund returned 8.1% per annum, compared to the strategic benchmark return of 7.4% 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 0.09% (2017: 0.09%) of funds under management. The key challenges for the Fund in the year ahead are maintaining strong investment performance in an increasingly volatile and rising interest rate environment, and participating in the continuing preparations for the evolution of Border to Coast Pensions Partnership, the Fund’s chosen entity to satisfy the Government’s requirement for pooling. The Fund is fully engaged in the pooling process and will strive to ensure that any changes will be communicated to both scheme members and employers.
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 Interim Director of Corporate Resources, the external manager and the independent advisor. The Committee also met on a three further occasions to consider pension administration issues and to receive training as part of the member training programme.
East Riding of Yorkshire Council 117 Statement of Accounts 2017/18 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 2016/2017; • 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 2016/2017 financial year and approved the budget for the 2017/2018 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 2013 actuarial valuation; • Received training as part of the Member training programme; • Received a number of reports on the development of the Border to Coast Pension Partnership (BCPP), 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 the Border to Coast Pension Partnership (BCPP). For the year ended 31 March 2018, the Fund generated a return of 3.9%, compared to the strategic benchmark return of 3.6% and the Retail Price Index, which was 3.3% over the period. Significant capital appreciation in the majority of equity markets and strong stock selection from the Fund’s investment managers in the majority of asset classes were the main contributors to performance. Over the three years to 31 March 2018, the Fund has generated a return of 8.1% per annum, compared to the strategic benchmark return of 7.4% 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 Pension Partnership (BCPP), a pool of 12 LGPS funds with c. £43bn in assets. BCPP is currently developing the governance, investment and operational arrangements for the partnership. 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 118 Statement of Accounts 2017/18
PENSION FUND
4. FUND MEMBERSHIP The 300 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 (244)
Adelaide Primary Academy Francis Askew Primary School Ainthorpe Primary Academy Franklin College Alderman Cogan Primary Academy Ganton School Anlaby Common Parish Council Gilberdyke Academy Appleton Primary Academy Goole High School Archbishop Sentamu Academy Goole Town Council Ashwell Academy Great Coates Primary Academy Aspire Academy Griffin Primary Academy Barrow upon Humber Parish Council Grimsby Institute of Further & Higher Education Barton upon Humber Town Council Hall Road Academy Beacon Academy Havelock Academy Beverley and North Holderness Internal Drainage Board Healing Primary School Bellfield Academy Healing Science Academy Limited Beverley Grammar School Hedon Town Council Beverley Town Council Hessle Community Academy Biggin Hill Primary Academy Hessle High School Bishop Burton College Hessle Penshurst Primary School Bottesford Town Council Hessle Town Council Bricknell Primary Academy Hibaldstow Academy Bridgeview School Highlands Primary Academy Bridlington Town Council Holy Family Catholic Academy Brigg Town Council Hornsea Town Council Broughton Town Council Hull College Buckingham Primary Academy Hull Culture and Leisure Limited Bude Park Primary Academy Hull Trinity House Academy Bursar Primary Academy Humber Bridge Board Burton upon Stather Parish Council Humber University Technical College Cambridge Park Academy Humberside Fire Authority Canon Peter Hall Academy Humberside Magistrates’ Courts Committee Chiltern Primary School Humberston Academy Christopher Pickering Primary School Humberston Cloverfields Academy Cleethorpes Academy Humberston Park Academy Cleeve Primary Academy Hunsley Primary School Clifton Primary School Huntcliff Academy Collingwood Academy ICT 4 Collaboration Coritani Academy Immingham Town Council Cottingham Croxby Primary Academy Ings Primary School Cottingham High School John Leggott College Craven Primary Academy John Whitgift Academy Crowle Academy Kelvin Hall School Dorchester Primary Academy Kingston upon Hull City Council Driffield School Kingstown Works Limited Driffield Town Council Kingswood Academy Dunswell Primary Academy Kingswood Parks Primary Academy Easington CE Primary Academy Kirk Ella and West Ella Parish Council East Ravendale Academy Kirton in Lindsey Town Council East Riding College Laceby Acres Eastfield Primary Academy (Immingham) Lisle Marsden Academy Eastfield Academy (Hull) Littlecoates Primary Academy Edward Heneage Academy Longhill Primary Academy Elliston Primary Academy Macaulay Academy Elloughton cum Brough Parish Council Malet Lambert Academy Emergency Services Fleet Management (Humberside) Limited Marfleet Primary Academy Endike Primary School Market Weighton Town Council Endsleigh Holy Child VC Academy Maybury Primary Academy Enfield Academy of New Waltham Melior Community College Academy Epworth Academy Mersey Academy Epworth Town Council Middlethorpe Academy Estcourt Primary Academy Mountbatten Academy Fairfield Academy Neasden Primary Academy
East Riding of Yorkshire Council 120 Statement of Accounts 2017/18 PENSION FUND
New Waltham Academy South Hunsley School and Sixth Form College Newbald Parish Council Southcoates Primary Academy Newington Academy Spring Cottage Academy Newland St John’s CE Academy Springfield Primary Academy North Cave Parish Council Sproatley Endowed Primary Academy North East Lincolnshire Council Stamford Bridge School North Eastern Inshore Fisheries and Conservation Authority Stepney Primary Academy North Ferriby Parish Council Stockwell Academy North Lincolnshire Council Stoneferry Primary School North Lindsey College Strand Academy Oasis Academy Henderson Avenue Sullivan Centre Oasis Academy Immingham Sutton Park Primary Academy Oasis Academy Nunsthorpe Swanland Parish Council Oasis Academy Parkwood Swanland Primary School Academy Trust Oasis Academy Wintringham Thanet Primary Academy Old Clee Primary Academy The Axholme Academy Ormiston Maritime Academy The Boulevard Academy Ormiston South Parade Academy The Boulevard Centre Ouse and Humber Drainage Board The Chief Constable of Humberside Police Outwood Academy Brumby The Green Way Academy Outwood Academy Foxhills The Marvell College Paisley Primary Academy The Parks Academy Parkstone Primary Academy The Police and Crime Commissioner for Humberside Patrington CE Primary Academy The St. Lawrence Academy Pearson Primary School The Snaith School PHASE The Vale Academy Phoenix House PRU Thoresby Academy Pilgrim Academy Thorpepark Academy Pocklington Junior School Thrunscoe Primary Academy Priory Primary Academy Tollbar Academy Limited Quay Academy Tweendykes Academy Reynolds Primary Academy Ulceby St Nicholas Primary School Rise Academy University of Lincoln Rokeby Park Academy Waltham Leas Primary Academy Ron Dearing UTC Wansbeck Academy Rowley Parish Council Weelsby Primary Academy St Anthonys Primary Academy Welholme Primary Academy St Augustine Webster Academy Welton Parish Council St Bede’s Academy Westcott Primary Academy St Bernadette’s Academy Westwoodside Academy St Charles RC Primary Academy Wheeler Academy St George’s Primary Academy Whitehouse Pupil Referral Unit St James’ CE Academy Wilberforce College St Joseph’s Academy William Barcroft Junior Academy St Mary Queen of Martyrs VC Academy Willoughby Road Primary Academy St Mary’s Academy Willows Academy St Mary’s Catholic Academy Winifred Holtby Academy St Nicholas Primary Academy Winterton Academy St Norbert’s Academy Winterton Town Council St Peter’s CE Primary Academy Withernsea Primary Academy St Richards RC Primary School Withernsea Town Council St Thomas More Academy Wold Academy St Vincents VC Academy Woldgate School and Sixth Form College Scartho Junior Academy Wolfreton School and Sixth Form College Scawby Academy Woodland Primary Academy Sevenhills Academy Woodlands Primary Academy Sigglesthorne Primary Academy Workforce Skills Limited Signhills Academy Worlaby Academy Signhills Infants Academy Wybers Wood Academy Sirius Academy North Wyke College Sirius Academy West Yarborough Primary Academy South Axholme Academy Yorkshire and Humberside Grid for Learning
East Riding of Yorkshire Council 121 Statement of Accounts 2017/18 PENSION FUND c) Admission Bodies (55)
Aspens Services Ltd (Pilgrim Tollbar) Independent Cleaning Services Limited (Wolfreton) Aspens Services Ltd (Tollbar MAT) Interserve (Facilities Management) Ltd Barnardo’s ISS Facility Services PFI 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) Limited (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) Pocklington School Compass Contract Services (UK) Limited (The Vale) Robertson Facilities Management Limited Compass Contract Services UK Ltd (Wolds Learning Partnership) Robertsons Facilities Management Limited PFI Compass Contract Services UK Ltd (Wolfreton) Sewell Facilities Management Limited ENGIE Services Limited Shoreline Housing Partnership Limited Havelok Housing Association Limited Sodexo Limited Hull and Goole Port Health Authority Sodexo Limited Nunsthorpe Hull Charterhouse Trustees Sodexo Limited (Oasis Community Learning) 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 The Deep (EMIH) Limited Humberside Independent Care Association The Riverside Group Limited Independent Cleaning Services Limited (Chiltern) University of Lincoln Students’ Union Independent Cleaning Services Limited (Driffield) University of York Independent Cleaning Services Ltd (Hessle Trust)
East Riding of Yorkshire Council 122 Statement of Accounts 2017/18 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 120 to 122. Teachers, Police Officers and Firefighters are excluded from the LGPS, as they are members of separate statutory pension schemes. 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 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://www.erpf.org.uk/local-pension-board-information/.
East Riding of Yorkshire Council 123 Statement of Accounts 2017/18 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 124 Statement of Accounts 2017/18 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 125 Statement of Accounts 2017/18 PENSION FUND
The key financial assumptions adopted for th e 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 ar e as follows:
Females Males Current Pensioners 24.2 21.7 Future Pensioners * 26.4 23.7
* currently aged 45 Copies of the 2016 valuati on 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 p lacing a higher value on the liabilities and there have been strong asset returns, particularly during 2016/17. Both events are of broadly similar magnitude with regards to the impact on the funding position. The next actuarial valuation will be carried ou t 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 20 April 2018
East Riding of Yorkshire Council 126 Statemtement of Accounts 2017/18 PENSION FUND
8. FUND ACCOUNT
2016/17 Note 2017/18 £000 £000 £000 Dealings with Members and Employers Contributions 168,123 Contributions 253,789 4,970 Augmentation 3,150 173,093 Contributions receivable 10g 256,939 2,103 Individual transfer values receivable 9,927 524 Group transfer values receivable 524 10,451 175,720 267,390 Benefits -144,115 Benefits payable 10h -150,459 -6,309 Payment to and on account of leavers 10i -15,814 25,296 Net Additions/Reductions (-) with Members 101,117 Returns on Investments 141,798 Investment income 10k 165,655 -627 Taxes on income 10l -693 659,609 Profit and losses on disposal of investment and 10m -8,546 changes in the market value of investments -5,573 Management expenses 10j -6,350 795,207 Net Return on Investments 150,066
Net Increase in the Net Assets Available 820,503 for Benefits during the Year 251,183
2016/17 2017/18 £000 £000 Net Assets of the Fund 3,714,119 Opening Net Assets as at 1 April 4,534,622 820,503 Surplus on the pension fund for the year 251,183 4,534,622 Closing Net Assets as at 31 March 4,785,805
East Riding of Yorkshire Council 127 Statement of Accounts 2017/18 PENSION FUND
9. NET ASSETS STATEMENT
Restated 31 March 2017 Note 31 March 2018 £000 £000 £000 Investment Assets 10m Bonds 122,066 UK Public Sector 125,491 54,113 UK Other quoted 59,254 74,990 Overseas Public Sector 67,240 45,198 Overseas Corporate 43,102 74,275 Multi Asset Credit - quoted 70,217 142,710 Multi Asset Credit - unquoted 197,246 562,550 Equities 1,421,788 United Kingdom 1,411,721 473,485 Overseas 507,856 1,919,577 Derivatives 0 UK Treasury 58,975 0 Cash 6,000 0 Derivative Option - UK Equities 6,598 71,573 Index-Linked Bonds 18,580 UK Public Sector 15,294 4,865 UK Corporate 6,702 11,032 Overseas Public Sector 11,888 33,884 Pooled Investment Vehicles 848,194 Managed Funds 885,484 109,546 Property - quoted 159,656 389,921 Property - unquoted 384,242 97,921 Private Equity - quoted 97,700 106,207 Private Equity - unquoted 122,154 42,178 Infrastructure - quoted 41,542 122,987 Infrastructure - unquoted 152,610 66,755 Other investments - quoted 71,497 148,797 Other investments - unquoted 132,503 2,047,388 Cash 122,629 Temporary investments 10m 117,808 190 Internal manager 3,312 6,375 External manager 8,610 129,730 Other Investment Balances 327 Accrued interest on temporary investments 434 1,798 Unsettled sales 650 1,561 Income held by Custodian 2,686 11,364 Accrued dividends 10,038 13,808 4,519,852 Total Investment Assets 4,778,510 Investment Liabilities -33 Cash with internal manager -277 -2,748 Unsettled purchases -403 0 Devrivative Option - US Equities -4,174 -56 Tax on accrued dividends -20 -97 Liabilities with Custodian -2,054 -2,934 Total Investment Liabilities -6,928 20,736 Current assets 10n 16,731 -3,032 Current liabilities 10o -2,508 17,704 Net Current Assets 14,223 Net Assets of the Scheme Available to Fund 4,534,622 Benefits at 31 March 4,785,805
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 and Funding Strategy Statement. East Riding of Yorkshire Council 128 Statement of Accounts 2017/18 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 2017/18 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. 2. Changes in Accounting Policies 2.1 The 2017/2018 Code does not require any changes to accounting policies for 2017/2018, although some changes to disclosures are required. Also, the requirement to produce audited and published accounts by the statutory deadline of 31 July 2018 (unaudited by 31 May 2018) may require the introduction of estimation techniques for some areas of income and expenditure. 2.2 Previously, the Code required the disclosure of any single investment exceeding 5% of the total value of the investment’s asset class. This is no longer a requirement. The requirement to report any single investment asset exceeding 5% of the total net asset value of the Fund continues. 2.3 During the 2017/18 financial year the Fund purchased a derivative investment and this will require disclosure within the accounts in accordance with the Code (see accounting policy 17 page 132). 2.4 The 2017/18 Code formalises the requirement to disclose transaction costs previously included as a recommendation. 2.5 Although not a change in accounting policy, the fund has reclassified some investment assets in 2017/18 to a more appropriate asset class to more accurately reflect the underlying investments. This change is reflected in the Net Asset Statement and Note M, Reconciliation of Movement in Investments. Prior year comparators have been restated to ensure they are reported consistently with 2017/18 disclosures. 3. Income a) Contributions income Contributions receivable are included in the Accounts in the year to which they relate. Any amounts due but not received are shown in the Net Asset Statement as a current asset. 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 xxx to xxx 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 129 Statement of Accounts 2017/18 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. 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 market value at the date of the Statement, with the exception of unquoted investments, which are shown 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 2018. 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. Investments held in foreign currencies are translated in the Accounts by the application of the appropriate rate of exchange ruling at 31 March 2018. Note (t) lists the exchange rates applied to investments held as quoted in the Financial Times. 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 124 to 126 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 130 Statement of Accounts 2017/18 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 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 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. 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 2018 to arrive at sterling values in the Net Asset Statement. 12. Additional Voluntary Contributions An additional voluntary contribution (AVC) scheme is provided for 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 2017 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. 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 125 and 126. Unquoted Investments 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, otherwise unquoted investments are valued at fair value. 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 financial statements, the Fund will consider writing down the value of the investment.
East Riding of Yorkshire Council 131 Statement of Accounts 2017/18 PENSION FUND 15. Assumptions Made About the 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. 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.
16. 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
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
17. 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
East Riding of Yorkshire Council 132 Statement of Accounts 2017/18 PENSION FUND d) Concentration of Investments The SORP and Code require disclosure where there is a concentration of investment which exceeds 5% of the total value of the net assets of the scheme.
2016/17 2017/18 % of Number Value Net Number of Value % of Net of Units £000 Assets Units £000 Assets
27,310,836.209 342,901 7.6 Schroder North American Equity Fund 28,868,024.470 343,667 7.2
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 2018 stock lending income of £0.550m (2017 £0.422m) was raised against expenditure for the activity of £0.162m (2017 £0.127m). At 31 March 2018 the total value of securities on loan was £200.7m (2017 £185.9m) and are analysed by asset class as follows:
31 March 2017 31 March 2018 £000 £000
70,469 Equities - UK 87,225 84,664 UK Bonds - Public Sector 83,857 22,638 Equities - Overseas 22,001 8,168 Overseas Bonds - Public Sector 7,650 185,939 200,733
Against the stock on loan the Fund held collateral at 31 March 2018 of £211.6m (2017 £195.0m) analysed by asset class as follows:
31 March 2017 31 March 2018 £000 £000
75,298 Equities - UK 93,815 87,193 UK Bonds - Public Sector 86,250 24,138 Equities - Overseas 23,459 8,332 Overseas Bonds - Public Sector 8,072 194,961 211,596
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.
East Riding of Yorkshire Council 133 Statement of Accounts 2017/18 PENSION FUND The movement in the value of the derivative can be seen in note m, Reconciliation of Movements in Investments. At 31 March 2018 the value of the derivative holding was as follows:
Equity Option: Value at Counterparty Maturity Date Notional 31 March 2018 £m Barclays 16 June 2020 £125m 2.61 Goldman Sachs 20 July 2020 £125m 2.83 Investec 20 July 2020 £50m 1.15 Investec 10 August 2020 $130m -4.17 2.42 Collateral: UK Bonds 58.98 Cash 6.00 64.98
67.40
g) Contributions Receivable
2016/17 2017/18 £000 £000 £000 Employers 107,786 Primary 209,557 30,850 Additional 10,552 220,109 Employees 33,943 Primary 35,916 514 Additional 914 36,830 173,093 256,939 From 38,012 Administering Authority 74,379 127,734 Scheme Employers 173,257 7,347 Transferee Admission Bodies 9,303 173,093 256,939
Contributions relating to deficit funding payments amounted to £155,443,181 (2017 £38,176,193) during the year. h) Benefits Payable
2016/17 2017/18 £000 £000 114,214 Pensions 119,510 26,412 Commutations, compounded and lump sum retirement benefits 27,373 3,489 Lump sum death benefits 3,576 144,115 150,459 Paid to 24,265 Administering Authority 26,536 109,157 Scheme Employers 112,471 10,693 Transferee Admission Bodies 11,452 144,115 150,459
East Riding of Yorkshire Council 134 Statement of Accounts 2017/18 PENSION FUND i) Payments to and on account of leavers
2016/17 2017/18 £000 £000 375 Refunds to Members leaving service 398 5,481 Individual transfer values payable 15,416 453 Group transfer values payable 0 6,309 15,814
j) Pension, Investment Management and Oversight and Governance Expenses Administration expenses, including fees paid to advisers are charged to the Fund, as provided in the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016. Central, Finance and IT costs are apportioned to the Fund on the basis of time spent on Fund work by East Riding of Yorkshire Council staff. The external manager’s 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. Internal management costs are based on actual costs.
2016/17 2017/18 £000 £000
1,745 Pensions Administration 1,796 3,279 Investment Management 3,919 549 Oversight and Governance 635 5,573 6,350
Of the investment management expenses in 2017/18, a total of £0.061m was in respect of performance related fees paid to the Fund’s internal investment manager (2016/17 £0.056m).
Of the Oversight and Governance expenses in 2017/18, a total of £0.032m was in respect of audit fees (2016/17 £0.033m).
For quoted equity investments worldwide, both internal and external managers pay a commission fee on the gross value of both purchases and sales in addition to a bid offer spread. For certain investments, predominantly fixed interest and index-linked securities, the bid offer spread covers all the cost of investment. Investments purchased on the basis of Net Asset Value (NAV) include an element within the NAV for the cost of purchase.
Cash is administered by both the internal and external manager to achieve the best interest return. No commission is paid to any money broker for this activity.
Investment Funds Under Total Costs Management Commission Paid Total Costs Management as % FUM 2016/17 2017/18 2016/17 2017/182016/17 2017/18 2016/17 2017/18 2016/17 2017/18 £000 £000 £000 £000£000 £000 £000 £000
Internal Fund 1,240 1,648 748 125 1,988 1,773 3,490,274 3,687,409 0.06 0.05 External Fund 2,039 2,271 219 155 2,258 2,426 1,044,348 1,098,396 0.22 0.22
Total Fund 3,279 3,919 967 280 4,246 4,199 4,534,622 4,785,805 0.09 0.09
The CIPFA guidance "Accounting for LGPS Management Costs" recommends the disclosure of management fees for pooled investments that are not included in the investment management costs disclosed in the above table with a corresponding adjustment to the Fund Account and the Net Assets Statement. These management costs have been obtained using financial information available for each of the Fund's unquoted pooled investments and in 2017/18 amounted to £15.177m, split between management fees (£13.305m) and performance fees (£1.872m) (2016/17 £14.238m, split between management fees of £12.455m and performance fees of £1.783m). However, it should be noted that the accounting periods of these investments may differ from the Fund's accounting period and, therefore, the costs incurred may not be directly comparable. As a result, it has been deemed prudent to show these costs in a disclosure note rather than adjust the Fund Account and the Net Assets Statement as per the recommended guidance.
East Riding of Yorkshire Council 135 Statement of Accounts 2017/18 PENSION FUND Externally managed funds are managed by Schroder Investment Management Ltd.
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. k) Investment Income
Restated 2016/17 2017/18 £000 £000 £000
Bonds 2,365 United Kingdom 2,239 1,782 Overseas 1,828 1,206 Corporate 748 1,908 Multi Asset Credit - quoted 1,362 7,660 Multi Asset Credit - unquoted 9,791 15,968 Index-Linked 12 United Kingdom 12 14 Overseas 21 38 Corporate 53 86 Equities 39,992 United Kingdom 48,574 10,213 Overseas 11,948 60,522 Managed Funds 28,535 Equities 31,056 4,368 Property - quoted 5,161 12,598 Property - unquoted 17,238 1,487 Private equity - quoted 8,464 121 Private equity - unquoted 233 1,898 Infrastructure - quoted 2,114 3,338 Infrastructure - unquoted 4,115 3,611 Other investments - quoted 3,909 5,384 Other investments - unquoted 4,689 76,979 0 Derivatives 709 11,364 Accrued interest on Ex-dividend Investments 10,038 254 Underwriting 10 2,518 Currency Loss (-) / gain -192 422 Stock lending 550 708 Cash deposits 985 2 Class actions 0 141,798 165,655
l) Taxes on Income
2016/17 2017/18 £000 £000
Withholding Tax 627 Overseas Equities 693 627 693
East Riding of Yorkshire Council 136 Statement of Accounts 2017/18 PENSION FUND m) Reconciliation of Movements in Investments
Value at Reclassified Restated Value Purchases at Sales Change in Value at 2017/18 01/04/2017 01/04/17 01/04/17 Cost Proceeds Market 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 Current Assets 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
During the financial year some investments were reclassified to a more appropriate asset class to more accurately reflect the underlying investments. Prior year numbers (page 138) have been restated from those in 2016/17 accounts to reflect a more consistent disclosure with the reclassification in 2017/18.
East Riding of Yorkshire Council 137 Statement of Accounts 2017/18 PENSION FUND
Fair Value Value at Revaluation Purchases at Sales Change in Value at 2016/17 01/04/2016 01/04/16 Cost Proceeds Market Value 31/03/2017
Investment Assets £000 £000 £000 £000 £000 £000
Bonds UK - Public Sector 102,083 0 30,807 -14,561 3,737 122,066 UK - Other Quoted 59,620 0 30,061 -38,882 3,314 54,113 Overseas - Public Sector 73,073 0 10,975 -15,851 6,793 74,990 Overseas - Corporate 27,061 0 27,445 -11,590 2,282 45,198 Global High Yield - quoted 35,836 0 0 0 9,399 45,235 Global High Yield - unquoted 52,370 0 34,094 -2,817 5,029 88,676 Emerging Market Government 19,968 0 0 -9,360 3,651 14,259 370,011 0 133,382 -93,061 34,205 444,537
Equities UK 1,172,291 0 118,018 -93,844 225,323 1,421,788 Overseas 366,748 0 191,268 -183,401 98,870 473,485 1,539,039 0 309,286 -277,245 324,193 1,895,273
Index-Linked Bonds UK - Public Sector 10,053 0 6,659 0 1,868 18,580 UK Corporate 4,392 0 0 0 473 4,865 Overseas - Public Sector 9,472 0 0 0 1,560 11,032 23,917 0 6,659 0 3,901 34,477
Pooled Investment Vehicles Managed Funds 667,007 0 19,089 -39,829 201,927 848,194 Property - Quoted 90,102 0 23,162 -8,339 4,621 109,546 Property - Unquoted 332,358 0 83,315 -23,643 -2,109 389,921 Private Equity - Quoted 77,497 0 652 -5,984 25,756 97,921 Private Equity - Unquoted 96,896 0 22,355 -22,939 9,895 106,207 Infrastructure - Quoted 37,196 0 2,306 -546 3,222 42,178 Infrastructure - Unquoted 78,689 0 40,219 -12,350 16,429 122,987 Other Investments - Quoted 75,584 0 38 -1,837 7,751 81,536 Other Investments - Unquoted 164,907 0 28,816 -20,684 29,792 202,831 1,620,236 0 219,952 -136,151 297,284 2,001,321
3,553,203 0 669,279 -506,457 659,583 4,375,608 Current Assets Sterling 109,643 0 878,239 -865,259 0 122,623 Euros 759 0 12,724 -13,471 -6 6 US Dollar 7,618 0 42,313 -49,963 32 0 118,020 0 933,276 -928,693 26 122,629
3,671,223 0 1,602,555 -1,435,150 659,609 4,498,237
East Riding of Yorkshire Council 138 Statement of Accounts 2017/18 PENSION FUND n) Current Assets
31 March 2017 31 March 2018 £000 £000 £000 Current Assets Contributions due 7,025 Employers 5,402 2,856 Employees 2,018 7,420 869 Recharge of Pensions increase and 719 supplementary allowance 8,217 East Riding of Yorkshire Council 6,786 1,769 Other Debtors 1,806 20,736 16,731
Current Assets by Government Body
31 March 2017 31 March 2018 £000 £000
742 Central government bodies -188 14,297 Other local authorities 11,921 33 NHS Bodies 38 0 Public corporations and trading funds 0 5,664 Bodies external to government 4,960 20,736 16,731
o) Current Liabilities
31 March 2017 31 March 2018 £000 £000 Current Liabilities 1,194 East Riding of Yorkshire Council 1,116 1,126 Overdaim of Recharges 860 712 Other creditors 532 3,032 2,508
Current Liabilities by Government Body
31 March 2017 31 March 2018 £000 £000
1,290 Central government bodies 460 1,602 Other local authorities 1,569 0 NHS Bodies 0 0 Public corporations and trading funds 0 140 Bodies external to government 479 3,032 2,508
East Riding of Yorkshire Council 139 Statement of Accounts 2017/18 PENSION FUND p) Managerial Arrangements of Assets
31 March 2017 31 March 2018 £000 % £000 % 3,490,274 77 Internally managed 3,687,409 77 1,044,348 23 Externally managed (Schroder Investment Management Limited) 1,098,396 23 4,534,622 100 4,785,805 100
q) Contingent Liabilities and Contractual Commitments At 31 March 2018 the Fund had commitments to the purchase of investments of £506,079,471 (2017 £502,092,058) analysed as follows:
2016/17 2017/18 Foreign Foreign Currency £ Currency £
0 220,361,004 Sterling Denominated ( £ ) 0 200,770,418 235,979,536 188,708,146 US Dollar Denominated ( $ ) 294,552,893 209,974,974 108,753,082 93,022,908 Euro Denominated ( € ) 108,738,051 95,334,079 502,092,058 506,079,471
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. 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 £6.350m (2017 £5.573m) comprising pensions administration costs of £1.796m (2017 £1.745m), investment management costs of £3.919m (2017 £3.279m) and oversight and governance costs of £0.635m (2017 £0.549m). 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 £74.036m to the Fund (2017 £38.495m). £8.697m of this total sum is in respect of contributions paid by members of the Pension Fund. As at 31 March 2018 the Council was a net debtor to the Fund of £5.782m (2017 £7.023m). • 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 2017/18 was £40,650.
East Riding of Yorkshire Council 140 Statement of Accounts 2017/18 PENSION FUND 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 2018 to arrive at the sterling values in the Net Assets Statement. The exchange rates used per £1 sterling were:
Australian Dollar 1.8288 Canadian Dollar 1.8086 Danish Krone 8.5022 Euro 1.1406 Japanese Yen 149.1878 New Zealand Dollar 1.9445 Norwegian Krona 11.0133 Swedish Krona 11.7482 Swiss Franc 1.3433 US Dollar 1.4028
u) Additional Voluntary Contributions The Fund’s approved Additional Voluntary Contribution (AVC) provider is Prudential and during the year to 31 March 2018 scheme members made contributions to this facility of £1,584,011 (2017 £1,677,963). The total value of the funds invested by Prudential on behalf of members of the East Riding Pension Fund at 31 March 2018 is £19,095,333 (2017 £20,312,216). 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 17 March 2017, 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 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 2018 was £6.264bn (31 March 2017 £6.127bn). 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. x) Disclosure Relating to Financial Instruments The items in the Net Asset Statement are made up of the following categories of financial instrument.
East Riding of Yorkshire Council 141 Statement of Accounts 2017/18 PENSION FUND
31 March 2017 31 March 2018 £000 £000 £000 Financial Assets at fair value through profit or loss 444,537 Bonds 562,550 1,895,273 Equities 1,919,577 34,477 Index-Linked Bonds 33,884 2,001,321 Pooled Investment Vehicles 2,047,388 0 Derivatives 71,573 6 Foreign Currency 1,474 15,050 Other Investment Balances 13,808 4,390,664 Total Financial Assets 4,650,254
Loans and Receivables 129,188 Cash Deposits - Sterling 128,256 20,736 Current Assets 16,731 149,924 Total Loans and Receivables 144,987
Financial Liabilities at fair value through profit or loss -2,934 Other Investment Balances -6,928
Financial Liabilities at Amortised Cost -3,032 Current liabilities -2,508
4,534,622 Net Financial Assets 4,785,805
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
East Riding of Yorkshire Council 142 Statement of Accounts 2017/18 PENSION FUND 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.
The Fund has determined that the following movements in market price risk are possible for the 2017/18 reporting period:
Potential market movements (+/-) Asset Type % Bonds 3.8 Index Linked Bonds 7.8 UK Equities 9.6 Overseas Equities 10.2 Pooled Property Investments 1.9 Other Pooled Ivestments 2.9 Private Equity 2.9 Cash 0.7
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 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 143 Statement of Accounts 2017/18 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 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 1 Level 2 Level 3 Total Values at 31 March 2017 £000 £000 £000 £000
Financial Assets 2,275,050 1,285,356 830,258 4,390,664 Loans and Receivables 149,924 0 0 149,924 2,424,974 1,285,356 830,258 4,540,588
Financial Liabilities 5,966 0 0 5,966 5,966 0 0 5,966
2,419,008 1,285,356 830,258 4,534,622
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
Level 3 Analysis Value at Change Value at 01/04/16 Purchases at Cost Sales Proceeds Market Value 31/03/17 £000 £000 £000 £000 £000
646,545 198,058 -76,574 62,229 830,258
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 144 Statement of Accounts 2017/18 PENSION FUND 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 2017 Maximum 31 March 2018 Actual Limit Actual £000 £000 £000
0 UK Government No Limit 0 15,000 Institutions or Funds with a minimum rating of AAA/A2 25,000 22,000 10,000 Institutions with a minimum rating of AA/A2 20,000 15,000 10,000 Institutions with a minimum rating of A/A2 15,000 5,000 10,000 Local Authorities 10,000 10,000 10,000 Building Societies - top 15 ranked by asset value 10,000 5,000
The investment balances at the end of the financial year were:
31 March 2017 31 March 2018 £000 £000
0 UK Government 0 28,457 Institutions or Funds with a minimum rating of AAA/A2 41,287 25,000 Institutions with a minimum rating of AA/A2 35,000 35,172 Institutions with a minimum rating of A/A2 3,521 12,000 Local Authorities 33,000 22,000 Building Societies - top 15 ranked by asset value 5,000 122,629 117,808
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.
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.
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 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
East Riding of Yorkshire Council 145 Statement of Accounts 2017/18 PENSION FUND
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 2017 Assets Cash 37,000 55,000 0 0 37,194 129,194 Investments 0 0 47,720 283,124 4,044,764 4,375,608 Other investment balances 15,050 0 0 0 0 15,050 Current assets 20,736 0 0 0 0 20,736
Total assets 72,786 55,000 47,720 283,124 4,081,958 4,540,588
Liabilities Other investment balances 2,934 0 0 0 0 2,934 Current liabilities 3,032 0 0 0 0 3,032
Total liabilities 5,966 0 0 0 0 5,966
Liquidity Surplus 66,820 55,000 47,720 283,124 4,081,958 4,534,622
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 2017 31 March 2018 £000 £000 Asset Type Cash and cash equivalents 37,194 41,808 Fixed interest securities 479,014 596,434
516,208 638,242
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 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
East Riding of Yorkshire Council 146 Statement of Accounts 2017/18 PENSION FUND 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 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 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 0 0 0 0 0 0 0 0 0 0 Emerging Market Government 0 0 0 0 0 0 0 0 0 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
East Riding of Yorkshire Council 147 Statement of Accounts 2017/18 PENSION FUND 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 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
USD EUR JPY CHF SEK DKK NOK AUD CAD Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Restated As at 31 March 2017 Bonds Overseas Public Sector 28,934 17,915 19,425 0 1,784 0 0 3,669 3,263 74,990 Multi Asset Credit - quoted 46,339 0 0 0 0 0 0 0 0 46,339 Multi Asset Credit - unquoted 37,612 73,105 0 0 0 0 0 0 0 110,717 Global High Yield 0 0 0 0 0 0 0 0 0 0 Emerging Market Government 0 0 0 0 0 0 0 0 0 0 Overseas Corporate 25,522 0 0 0 0 0 0 0 0 25,522 Equities Overseas 0 216,340 173,830 51,715 12,779 13,293 5,528 0 0 473,485 Index-Linked Bonds Overseas Public Sector 11,032 0 0 0 0 0 0 0 0 11,032 Pooled Investment Vehicles Managed Funds 554,730 21,737 0 0 0 0 0 0 0 576,467 Property - unquoted 19,866 28,766 0 0 0 0 0 0 0 48,632 Private Equity - quoted 21,899 0 0 0 0 0 0 0 0 21,899 Private Equity - unquoted 34,220 49,785 0 0 0 0 0 0 0 84,005 Infrastructure - unquoted 21,326 34,375 0 0 0 0 0 0 0 55,701 Other investments - unquoted 108,709 24,742 0 0 0 0 0 0 0 133,451 910,189 466,765 193,255 51,715 14,563 13,293 5,528 3,669 3,263 1,662,240
y) Contingent assets As at 31 March 2018 the Fund had submitted claims totalling £8.19m 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 £0.67m. z) Accounting standards that have been issued but not yet adopted Accounting standards that have been issued before 1 January 2018 but not yet adopted by the Code relate to: • IFRS 9 Financial Instruments - which introduces extensive changes to the classification and measurement of financial assets, and a new “expected credit loss” model for impairing financial assets. • IFRS 15 Revenue from Contracts with Customers - presents new requirements for the recognition of revenue, based on a control-based revenue recognition model. Neither of the above will necessitate the publication of a third balance sheet.
East Riding of Yorkshire Council 148 Statement of Accounts 2017/18 PENSION FUND aa) Events after Balance Sheet Date
Following the introduction of the Local Government Pension Scheme Investment Regulations 2016, requiring LGPS fund’s to pool their assets in order to achieve cost savings whilst maintaining investment performance, East Riding of Yorkshire Council as administering authority of the East Riding Pension Fund (ERPF), became a member of the Border to Coast Pension Partnership with 11 other pension funds. During the financial year 2018/19, the phased transition of investment assets from the ERPF to the Border to Coast Pension Partnership began, however, some investment assets will continue to be managed by the current Internal and External managers. The Pensions Committee will retain responsibility for determining the Pension Fund’s strategic and tactical asset allocation, and pension administration responsibilities will remain with East Riding of Yorkshire Council. 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.
East Riding of Yorkshire Council 149 Statement of Accounts 2017/18 GLOSSARY OF TERMS
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 150 Statement of Accounts 2017/18 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.
East Riding of Yorkshire Council 151 Statement of Accounts 2017/18 GLOSSARY OF TERMS
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.
East Riding of Yorkshire Council 152 Statement of Accounts 2017/18 GLOSSARY OF TERMS
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.
East Riding of Yorkshire Council 153 Statement of Accounts 2017/18 GLOSSARY OF TERMS
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.
An entity that performs construction work pursuant to a CONTRACTOR 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.
East Riding of Yorkshire Council 154 Statement of Accounts 2017/18 GLOSSARY OF TERMS
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.
East Riding of Yorkshire Council 155 Statement of Accounts 2017/18 GLOSSARY OF TERMS
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.
East Riding of Yorkshire Council 156 Statement of Accounts 2017/18 GLOSSARY OF TERMS EXPENDITURE AND FUNDING The Expenditure and Funding Analysis takes the net expenditure 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.
EXPENSES Decreases in economic benefits or service potential during the 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 157 Statement of Accounts 2017/18 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.
East Riding of Yorkshire Council 158 Statement of Accounts 2017/18 GLOSSARY OF TERMS
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.
East Riding of Yorkshire Council 1 59 Statement of Accounts 2017/18 GLOSSARY OF TERMS
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 160 Statement of Accounts 2017/18 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 (oth er than state plans) that: a) pool the assets contributed by various entities that are not under
East Riding of Yorkshire Council 161 Statement of Accounts 2017/18 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 162 Statement of Accounts 2017/18 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 163 Statement of Accounts 2017/18 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 164 Statement of Accounts 2017/18 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 165 Statement of Accounts 2017/18 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 166 Statement of Accounts 2017/18 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 167 Statement of Accounts 2017/18 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 168 Statement of Accounts 2017/18 GLOSSARY OF TERMS UNDERSTANDABILITY Cl assifying 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 169 Statement of Accounts 2017/18 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 170 Statement of Accounts 2017/18
A Housing Revenue Account…………………………………….…….. 104 HRA - Capital Expenditure and Financing..…………….. 112 Accounting Policies………………………………...…………...…..21 HRA - Capital Financing Charges…………………………..112 Accumulating Absences Account………...…………...…………….85 HRA - Pension Costs………………..………………………….114 Analysis of Adjustments between Accounting basis and Funding basis under Regulations…………………….....………...…………..38 I Analysis of Adjustments within the Expenditure and Funding Analysis……...…………...…………….……….……….35 Information on Assets Held………………….....…...……………………57 Audit Fees……………………………...………………………….46 Interests in Schools….………………….....…...…………………… 101 Auditors' Report………………………...…………………………..13 Available-for-sale Reserve……………………………………………..85 L
B Levies…………………………………….…………………………… 100 Long-term Creditors……………..…………………………………….. 67 Balance Sheet…………………………………………………………..17 Building Control Account…………………………………….. 46 M
C Major Repairs Reserve…………………..………...………….………….113 Members' Allowances…………….…………………….…….…….…….47 Capital Movement in Reserves Statement………………...……………………. 19 Expenditure and Financing…………………………………64 Movement in Property, Plant and Equipment…………...…...………………51 Adjustment Account……………………………………….86 Grants Unapplied Account Reserve…………………………79 N Commitments…………………………………… 64 Cash and Cash Equivalents……………………………………. 98 Narrative Report………...………….………….………...………….…… 2 Cash Flow Statement……………………………………………. 20 Nature of Expenses……….………...………….…………….…….……42 Collection Fund………………………………………………. 115 Net Surplus or Deficit on the Provision of Services Cash Flow Note… 98 Collection Fund Adjustment Account………………..……….. 87 Non-Domestic Rates………………………………………………….. 116 Comprehensive Income and Expenditure Statement………….. 18 Comprehensive Income and Expenditure Line Notes…………. 43 O Contingent Assets / Liabilities………………………………… 87 Council Tax………………………………………………………116 Officers' Remuneration………………………………………………… 48 Operating / Finance Leases……………………………………………. 46 D P Debtors……………………………………………………….. 65 Dedicated Schools Grant………………………………………. 101 Pension Fund…………………………………………………………. 117 Deferred Capital Receipts………………………………………. 87 Pension Assets and Liabilities…………………………………………. 70 Deferred Liabilities……………………………………………… 67 Pension Reserve………………………………………………………. 85 Pooled Budgets for Health and Social Care……………………………. 103 E Precepts……………………………………………………………….. 100 Private Finance Initiative and Similar Contracts……………………….. 61 Earmarked Revenue Reserves…………….…………………….. 80 Property, Plant and Equipment - Valuation…………………………….. 58 Events After the Reporting Period………………………………102 Provisions………………………………………………………………. 67 Exit Packages…………………………………………………… 49 Expenditure and Funding Analysis…………………………………33 R
F Related Party Transactions…………………………………………….. 99 Revaluation Reserve……………………………………………………. 84 Fair Value of Surplus Assets………………………………………………60 Financial Instruments Adjustment Account…………………… 84 S Financial Instruments Disclosure Note………………………… 89 Segmental Income…………………………………………………… 37 G Short Term Creditors and Grant Receipts in Advance………………. 66 Short Term Investments…………………………………………… 66 Gains and Losses on Assets Held for Sale or Sold…….………. 50 Statement of Responsibilities for the Statement of Accounts………… 16 Glossary of Terms and Abbreviations…………………...……. 150 Significant Items……………………………………………………… 46 Government Grants, Contributions and Donated Assets………. 45 Grant and Contribution Receipts in Advance……………………. 70 T
H Taxation and Non-Specific Grant Income…………….……………………44 …
Heritage Assets………………………………………………… 56 U Housing Assets………………………………………………… 109 Housing Rent Arrears………………………………………….. 108 Usable Capital Receipts…………………………………………………. 83 Unusable Reserves………………………………………………………83 Usable Reserves………………………………………………………… 79
East Riding of Yorkshire Council 171 Statement of Accounts 2017/18